Sunday Open House

This afternoon, I'll be holding the second open house at my new listing on Russet Drive in Old Orchard. I especially enjoy holding a property open in this tract, because I have been "farming" (sending out a monthly newsletter) in this area for thirty years, and I usually have several neighbors who come over when they see my signs.
The groups that arrive at the door are an interesting mix of families that are interested in moving up to a larger home...this is a four bedroom house...to first time buyers, to "lookie-loos." They are all welcome. Even people who are not in the market now often have friends or business associates who are.
Many of the potential buyers are sent over by their agents, who are either not available, or are holding other properties open. Real estate is a numbers game, and the more possible buyers who are able to see a house, the more likely it is to sell quickly. We have set tomorrow evening as a time to present offers. It will be interesting to see if our strong market "Oasis" is still hot!

Great Free Help for the Home Remodeler

A week or so ago, I was listening to the consumer guy on talk radio as I drove to an appointment. His guest had just added a room and remodeled a kitchen. He was talking about a new free online service called, Floor Planner. Later in the day, I checked it out.
Whether you are buying a new home, rearranging a room, or adding on to your present home, this is a fun and efficient way to do your planning, and share it with friends.
They make creating interactive floor plans easy by using point-and-click, drag-and-drop tools. You can design your floor plan in minutes, and rearrange it as often as you want. Then you can save, send, and print your designs to share them, or place them on your own website....all for free, and no extra downloads needed!
They do have a reasonably priced "plus" program for professional designers and developers, called Floorplanner PRO, but the free program is perfect for the home remodeler. Give it a try.

We'll Miss Bob Bruss

Bob Bruss died earlier this week at the age of 67. We've read his columns in the local papers and in Inman News for 23 years, and he managed to answer even the most difficult real estate questions in a way that was easy to understand. We had two reasons to trust his expertise: He was both a lawyer and a real estate broker.
There were so many times over the years that I read his column and then had a ready reply when my clients came up with the same questions that he had just answered.
How very strange and poignant, that his last column concerned death.

DEAR BOB: A friend of mine was going to purchase a house. She signed a contract agreeing to move forward with the closing procedures. She had put $500 down and had a professional home inspection completed. Her mother was battling cancer and died. She then contacted the Realtor and backed out of buying the house. Now the seller and his Realtor are threatening to sue her for not buying the house. Is it true she can be sued? --Jenna B.

DEAR JENNA: Yes. When you sign a contract to buy real estate that agreement is binding on both the seller and buyer. If the seller had changed his mind about selling, your buyer friend could have sued for specific performance of the sales contract to force the seller to deliver the deed.
But the seller is unlikely to sue the buyer for specific performance to force the buyer to buy. Instead, the seller might sue the defaulting buyer for breach-of-contract damages, namely the monetary loss the seller takes if the house is sold to another buyer for less money.
The buyer's personal problem with her mother's illness and death is not a valid reason to cancel the purchase contract. She should consult a local real estate attorney.

Those of us "in the business" will miss common sense and his invaluable advice.

Shouldn't Realtor and Service Mean the Same Thing?

Last night, I baked a batch of my famous brownies. This morning, I woke up early so that I could go to the Realtors' Tour Meeting for the Sunnyvale, Cupertino and Santa Clara areas. The speakers were five of the candidates for Sunnyvale City Council...great information for my clients about what's happening in the city.
With 32 newly listed homes on tour this morning, only 4 Realtors were there to talk about their listings. I personally invited the local Realtors to come by my open house this morning and to enjoy a homemade treat. When the agents came through, I made sure that I was at the door to greet them and answer any questions they might have.
Is any of this difficult? Yet a surprising number of salespeople send a representative to hold their homes open on tour, or never look up from their book or cell phone when potential buyers' agents come through the house that they have listed.
Bernice Ross, a noted sales trainer, says in her blog:
"As I travel across the country, I hear the same theme. The top agents who provide stellar service and have stellar skills are doing great. Those who lack the skills or do not provide the service are being forced out of the business.
Bottom line--there's a shake up going on--in fact it's an earthquake. Sellers and buyers expect their agents to use the latest technology tools, provide the utmost of service, and have the negotiation skills to handle mortgage rate increases, jittery buyers, and a host of other problems. In my opinion, advertising alone is no longer enough."

A Sensible Decision by the County Supervisors

I had an email yesterday from a recent client who has just put through her Proposition 60 paperwork. She is delighted to know that her reasonable property taxes will stay the same. She probably would have been trapped downstairs in a two story townhouse...bad knees...if opponents had won their recent effort to repeal this county measure.
This week, the same group tried to overturn another offshoot of Proposition 13, Prop 90, which allows a tax savings for seniors who are moving to Santa Clara County from other areas of the state. Remember, this is a one-time savings for the homeowners, and cannot be used to buy a more expensive home. Very few counties in the state have higher housing costs than we do, so the savings is almost always used when buyers are moving to a smaller home to be closer to medical facilities or their families. Yet opponents of the measure cited a single example of a couple who are selling a multi-million dollar property in San Mateo County and buying here, to make it seem as though wealthy property owners are using Prop 90 as a loophole to beat the system.
So few senior homebuyers use the tax savings that the net loss of revenue to the county is $200,000...a tiny portion of the $200 million annual county budget.
Anyway, the Santa Clara County Board of Supervisors voted unanimously to remain one of the seven counties that allow this break for buyers over 55. Good for them!

Great New Changes for FHA?

We've been waiting for this.
The U.S. House of Representatives passed H.R.1852, the Expanding American Homeownership Act of 2007 last week by a vote of 348 to 72. The bill will reform the FHA mortgage insurance program in an effort to allow it to compete in today’s housing market. Included in the bill is an amendment to increase the FHA loan limit to 125% of an area’s median home price capped at $729,750. H.R. 1852 was introduced by California Congresswoman Maxine Waters and the amendment to increase the loan limit was sponsored by Congressmen Gary Miller and Dennis Cardoza of California, along with Barney Frank of Massachusetts.
Other changes to the FHA program included in the bill are:
Extending the mortgage term length from 35 to 40 years, allowing FHA to insure zero-down mortgages in certain circumstances, allowing FHA to use risk-based pricing when setting their mortgage insurance premiums, increasing mortgage counseling for homebuyers to help them utilize the program, better educate them and help avoid foreclosure, and increasing the number of reverse mortgages lenders may do.
Our state and national Realtor groups, C.A.R. and NAR, have worked to pass FHA reform for a long time, and will now focus on getting this vital piece of legislation through the Senate.

Two Extreme Opinions on California Real Estate

OK, so I think that Gary Watts has been overly optimistic in his forecast that California Real Estate will bounce back in just a few months. On the other hand, I disagree strongly with Chuck Ponzi's devastating look at the future in his blog: Southern Real Estate Bubble Crash, where he predicts that Gary Watts will burn in hell! Chuck says "driving a car by looking out the back window is an accident waiting to happen. The past is a terrible predictor of the future; the future is an excellent predictor of the future. If you can see the future you can do better with your career and money than real estate. Current trends and analyzing outside forces are the best way to predict the future of real-estate."
Alan Greenspan, in his new book, "The Age of Turbulence," disagrees with him. He says," To what extent can we anticipate what lies ahead? Fortunately for policymakers, there is a degree of historical continuity in the way democratic societies and market economies function. There is much that we can infer about the U.S. economy and the world at large in the decades ahead, especially if we adopt Winston Churchill's insight: "The further backward you look, the further forward you can see." I think the opinions of Greenspan and Churchill trump those of Watts and Ponzi any day!

More Real Estate History from Gary Watts

Here's the rest of the California R.E. market history, from Gary Watts' talk on Friday:

1980-1990

♦ In the early ‘80s, inflation hit 21.5% and home loans were reaching 18%!
♦ A recession was taking place and job losses were increasing – leading to home foreclosures.
♦ In 1984, California home prices had their first decline since the Depression – they declined 0.10%!
“The golden-age of risk free run-ups in home prices is gone.” – Money Magazine – 1985
♦ The savings and loan scandal hit the financial markets but the government bailed them out in 1988.
♦ By the end of the decade, interest rates had decreased to single-digit (9.5%) rates.
♦ From ‘86 to ‘89, California home prices rose 46% and ended the decade with a yearly return of 7.95%!

1990 to 2000:

♦ On Nov.11, 1989 the Berlin Wall came down and, by January of 1990, Congress cut the defense budget.
♦ In a short period of time, a lot of highly-paid workers in defense and manufacturing had lost their jobs.
♦ California home prices declined from 1990 to 1996 by less than 2% annually, for a total of 12%.
“A home is where the bad investment is.” San Francisco Examiner - 1996
♦ In the following 3 years, California home prices rose 19.7%, wiping out all the losses of the early ‘90s and ending the decade with a net gain of 9.35%.
♦ From 1995 to 1999, the Bay Area’s median home prices rose a whooping 25%.
♦ The median price of a home in California has not declined since 1996, and the 38 year average rate of appreciation for homes in California is 7.75%!

Source: Researches by QTVN (regarding interest rates), U.S. Dept. of Commerce, CAR

A Historical Perspective on Local Real Estate

Gary Watts, a noted Real Estate Economist, spoke to us yesterday about "The State of Real Estate." I thought that it would be helpful to share some of his opinions in the next few posts.
He said that we are in the 24th month of the current housing downturn. Historically, housing downturns average 27 months so he thinks that we may be near the end. Although there has been a significant decline in sales volume, the Bay Area’s home prices have continued to show small amounts of appreciation – excluding the Napa, Solano, and Sonoma areas. With the Fed cutting interest rates in the near future and the financial markets calming down, money should begin to flow back into mortgage securities. Here's a little history of real estate cycles.

1970 to 1980:

“The goal of owning a home seems to be getting beyond the reach of more and more Americans. The typical new house today costs about $28,000.” - Business Week - 1969

♦ In 1972, interest rates were 7%, but these rates would not be seen again for over 24 years.
♦ In 1973, OPEC doubled the price of oil, banks had a run on deposits and, for approximately 8 months, there were no lenders who were in a position to make loans to any home buyers. (I used that time to get my Brokers license!)
♦ By the late ‘70s, both interest rates and the inflation rate were exceeding double digit numbers.
♦ By the end of the decade, California home prices experienced a yearly return in excess of 11.5%!

“The median price of a home today is approaching $50,000 . . . housing experts predict price rises in the future won’t be that great.” – National Business - 1977

More tomorrow....

Apartments are Hot!

When first time buyers are locked out of the market by the unavailability of most low-down payment loans and tightening requirements, we start to see an increased demand for rentals. Apartment rental prices dropped sharply in 2001, had very little movement for several years, and have been gradually moving up over the past two years, while vacancy rates moved lower. Big apartment complexes are suddenly being sought by investors, and of the ten largest construction projects in Santa Clara County last year, six were apartment buildings.
Job growth and high salaries in the valley are key factors in the demand for high-end rentals. For complexes with 100 units or more, vacancy rates have fallen year-over-year from 4% to 3.2%, while average rents have gone from $1,647 to $1,788. While this type of investment has its risks, vacancy rates, unlike those in office and R&D buildings, almost never reach zero. No wonder these investments look appealing!

Do Realtors Set Prices?

I have to comment on a second letter to the editor in today's Mercury News. This one came from Nick Koske in San Jose, responding to one published yesterday from Phil Mahoney of Cornish and Carey Commercial Realtors. Nick makes a valid point...that the figures on home sales and median prices do not necessarily correlate, because a few expensive homes sold in a short period can skew the statistics.
What angered me in his letter was the implication that there is a self-interest in the Realtor community to inflate real estate prices.
I hear this opinion frequently...that we in the real estate industry force the prices higher, so that we can collect higher commissions. If you think about it, does it make sense for Realtors to raise the price on a house $100,000 and "price out" another segment of the buying public, their future clients, just to collect an average of $2000 more in their paychecks? Price increases (and decreases) come from supply and demand, and homes overpriced for the market will never sell.

Letter to the Editor

Phil Mahoney, Executive V.P. at Cornish and Carey had a letter to the editor in today's Mercury News, in which he objected to the negative headline in a recent issue, "Slumping home sales hit 15 year low for August."
Realtors have run into this problem before, and it has been explained to us by Sue McAllister of the Mercury staff that the headline writers, who lean toward sensationalism, are in a different department from tha real estate reporters. This explains, in part, why the second paragraph in the same article stated that the median home price was up over 11% from a year ago in Santa Clara County, and 9.4% in San Mateo County.
I agree with Mr. Mahoney that more balance in headlines would be helpful, but I think that he is not facing reality when he says, "There is no subprime mess here. This is not Southern California."
Leslie Appleton Young, economist for the California Association of Realtors, estimates that Santa Clara County will be 'low-end-challenged' for more than a year, and even into 2008, when the interest rates of many loans made earlier will jump.

...and What do Seniors Want?

In the NAR survey that I wrote about in yesterday's post, the top requirements of home buyers were mentioned. But what do seniors have on their lists, and are their needs different?
Older buyers placed a higher priority on energy efficiency than did younger buyers – 63 percent of buyers 75 and older said it was very important, but only 32 percent of buyers who were 18-24 agreed.
In fact, age was the biggest differentiation in what buyers were looking for in a home. Buyers 75 years old and older wanted a single-level home (74 percent) that was less than 10 years old (43 percent) with a walk-in closet in the master bedroom (74 percent). Most buyers between the ages of 25-34 wanted a backyard or play area (60 percent). More than half of buyers over 65 wanted a separate shower enclosure in the master bathroom, compared to only one-fourth of buyers ages 25-34.
No big surprises here, but as a Seniors Real Estate Specialist, it's important for me to be aware of these differences.

Who Cares if Gas Prices are High!

Home buyers in increasing numbers want garages with two or more spaces in their homes, according to the 2007 Profile of Buyers’ Home Feature Preferences, released this week by the National Association of Realtors®.The survey reports responses from buyers who purchased homes in 2006. Home buyers were asked about 75 features and room types to assess the importance of each.
Since the last survey in 2004, oversize garages saw the biggest growth in terms of what recent buyers considered very important in a home, gaining 16 percentage points to 57 percent. Among buyers who purchased homes without this feature, 56 percent of them said they would have paid more for an oversize garage, compared to only 6 percent in the 2004 survey.
Other priorities for today’s home buyers include air conditioning, with three out of every four ranking this as “very important,” and a walk-in closet in the master bedroom, which was very important to 53 percent of respondents. Hardwood floors and granite counter tops each gained 7 percentage points, with 28 percent and 23 percent, respectively, of buyers viewing these features as “very important.”
I see hundreds of homes for buyers every year, and agree that these features are among the most requested, but every buyer is different, and every wish-list is important.

Flip this House

Today's Home section in the San Jose Mercury News had an article about the future of the growing segment of house flipping shows on TV. Will these tales of easy money disappear now that the market has changed?
I spent last evening with an associate who has been a close friend for a long time. Her pattern of investing over the years has been buying and flipping local properties, usually with a partner, and also taking private second mortgages at a generous interest rate. I would watch with fascination as she handled the complexities of remodeling and staging these houses...an exhausting, but invariably profitable enterprise. The time constraints were enormous, but she seemed to thrive on the pressure. I sat back, with my savings in safe but boring stock and bond funds, and watched with jealousy and admiration.
Last night, it seemed as though the "house of cards" might be wobbling. One of her properties is in foreclosure, and several borrowers are months behind in their payments. The Mercury News says it's all in the timing, but for the flippers, it looks as though times are changing.

The 7 Deadly Mistakes Most Homeowners Make

During the "summer doldrums,"I've been watching quite a few of the House and Garden TV shows. Many of these involve staging a previously unsalable house or townhouse to make it buyer-ready, and often adjusting a price that is unrealistic for today's market. I recently ran across the following list in a online newsletter, and think that it says it all:
The 7 Deadly Mistakes Most Homeowners Make
1. Failing to analyze why they are selling.
2. Not preparing their home for the buyer’s eye.
3. Pricing their homes incorrectly.
4. Selling too hard during showing.
5. Signing a long-term listing agreement without a written performance
guarantee.
6. Making it difficult for buyers to get information on their homes.
7. Failing to obtain a pre-approved mortgage for one’s next home.

The Depressed Housing Market is Just Down the Highway

I had a call a couple of days ago from a potential client who knew that I was a seniors' real estate specialist. He has a house that he needs to sell that is located in Northeast San Jose, and I promised to check out the "state of the market" in his neighborhood. The news wasn't good. A year ago, homes similar to his were moving quickly, and selling slightly over the listed price, in the $700,000 range. These were in good condition, without any real updating.
Now homes in the same tract are selling only if they have have extensive (and expensive) remodeling...granite in the kitchen, new plumbing and roofs, dual pane windows, etc. Even more upsetting are the prices, now in the $625,000 to $650,000 range, and often with credits offered to buyers. Selling time has been three months or more, and several homes have been withdrawn from the market.
The homeowner who called me lives on a fixed income, and is trapped in an interest-only loan with payments he can't handle. His house needs a good deal of work that he can't afford to do. My advice...clean up the landscaping, and clear out excess clutter and oversized furniture to help the house appear as light and open as possible...and keep trying to find renters if he feels he can't afford to sell at these prices.
Economists are estimating that a turnaround won't happen until 2009.

All a First Time Homebuyer Needs to Know

Dreaming of owning a home? If you're ready to say goodbye to renting, Nolo's Essential Guide to Buying Your First Home will help you find the right place to invest in... and have fun doing it.
It is jam-packed with interesting facts and real-life stories, and describes everything you need to select the right house, the right mortgage, the right agent, the right inspections, and more.
Included are stories of over 20 first-time homebuyers, as well as insights from a team of 13 real estate professionals, including brokers, attorneys who specialize in real estate, an inspector, and a mortgage specialist.
This book takes the reader through all the steps, from creating a realistic budget to
successfully closing the deal.
There is even a bonus CD that comes with it called, The Homebuyer's Toolkit, which has all kinds of useful forms.

Is $417,000 a Jumbo Price in the Bay Area?

This morning, representatives from our Realtor Association Political Affairs Committee were at our office meeting. One of the things that they mentioned was that President Bush has on his agenda a raise in the Fannie Mae/Freddie Mac maximums.
Silicon Valley is so expensive, compared to the rest of the country, that "conforming" loans are a rarity...less than a third of area loans. In the fallout from the subprime mortgage crisis, our clients are finding it tougher and more expensive to get so-called Jumbo mortgages of over $417,000.
The strange thing is that only Alaska, Hawaii, Guam and the Virgin Islands are exempt from these maximums. California is not considered a "high price area," even though the resale averages in Sunnyvale and Cupertino alone are nearly a million dollars.
Lifting the conforming loan limits would go a long way towards stabilizing the real estate market and restoring consumer confidence.

Diversity in the Valley

I've often commented on the interesting diversity of our area citizens. Last weekend, at the Mountain View Art and Wine Festival, I passed groups and individuals from many countries who make this a more interesting place to live. All along Castro Street, there were Asian, Indian, Italian and Spanish restaurants and shops of all kinds, but the signs were either in English or bilingual.
Recently, an area of Santa Clara attempted to change its name to "Koreatown." Many of the signs along El Camino Real in that section are in Korean only, and complaints are that this encourages not diversity, but exclusion. In Santa Clara County, 51% of the residents speak English only, as opposed to 81% in the U.S. as a whole.
While I understand that it is more expensive to have signs made in more than one language, even a small, less expensive sign in the window of a shop would make people of other backgrounds feel welcome...and isn't that the whole idea behind owning a business?
When my family came to this country from Europe, the first thing they did after finding jobs and a place to live was to enroll in school to learn English. While I can relate to the need to keep the customs of a family's homeland, I agree with Sam Kumar, a restaurateur in Santa Clara, who said, "What connects us all is English."

Word of Mouth Marketing

I've learned through working extensively with seniors that building a relationship with one Baby Boomer likely connects you to many more. A recent study, "B2F Connections," by Weber Shandwick and KRC Research shows that companies can gain a significant competitive advantage by creating marketing programs that target Baby Boomers' expansive relationship networks.
Here's how. Boomers serve as important information sources for fellow Boomers making purchasing decisions. The study indicates that nearly six out of ten Boomers (57%) give their recommendations on products and services 90 times per year or just under twice a week. In the past year, of those Boomers who were asked by an individual to make a recommendation, the vast majority (89%) advised their friends or fellow Boomers. The study also revealed that B2F communications are circular, with almost all Boomers (93%) identifying their Boomer friends as trusted information sources.
Impressive statistics, but no big surprise. One of my most appreciated services to clients and potential clients is having a handy list of trusted referrals for workmen and household services.

Landing in Hot Water

When I took a new listing today, one of the documents that the sellers signed was an Affiliated Business Arrangement disclosure. Since Coldwell Banker is a large company, and our parent company owns other affiliates, it is important that our clients know that they don't need to choose any of these companies in order to work with us.

RESPA is an abbreviation for the Real Estate Settlement Procedures Act and state insurance commissioners are citing Title companies and brokerages all over the country for violations of this law. Recently, Washington State’s insurance commissioner, Mike Kreidler, issued a notice of hearing to Stewart Title, seeking almost two million dollars for its alleged violations of the insurance law. Kreidler stated that the alleged violations were discovered during an investigation this summer and total thousands of dollars in illegal inducements paid to real estate agents, brokers, and agencies.
State law prohibits title insurers from giving anything in excess of $25 per person, in any 12-month period, as an inducement or reward in connection with the placement of title insurance business.
Among the violations are advertising costs for real estate agents, brokers and agencies, “Desk fees” (These hefty monthly payments to real estate agencies, some exceeding $1,000, are paid ostensibly for renting desk space, that often sits vacant.)real estate agency golf tournament sponsorship, banquet and refreshments expenses, auction donations, and gifts...They are really in hot water!

Be Careful Out There

The National Association of Realtors has announced its fifth annual Realtor Safety Week. From time to time over the more than thirty four years I've been in the business, I've read about Realtors who are attacked or robbed while showing property or holding open houses. Considering the lure of expensive cars and jewelry, it's surprising that this doesn't happen more often.
I've probably been lucky during the course of my career...certainly, there were a few times when I held a vacant house open or showed a country property to relative strangers when I had second thoughts about the personal safety involved.
A friend of mine had a visitor at her open house who was acting in such a weird manner that she went next door (she had previously introduced herself to the neighbors and invited them to come by) and brought the burly neighbor back with her. The open house "guest" left quickly.
Nowadays, we can have cell phones handy, programmed with 911. It's still a good idea to check out the 52 safety tips on the NAR Website.

Empty Real Estate Promises

In the same issue of the Mercury News this morning, two items caught my eye. The first was an article about seniors investing their life savings in overpriced annuities sold through a "free lunch" promotion.
The second was real estate related, but just as much of a scam, in my opinion. This was a huge ad for "creating wealth with real estate." Free seminars are being given all over the Bay Area on how to get rich overnight by buying and selling properties.
Testimonials are included from people who went from owning nothing...even homeless...to millionaires in a short time.
This wouldn't be so sad if I didn't know that rooms full of trusting people were probably investing whatever money they have in the books, tapes, and follow up training that are always offered at these hard-sell sessions.
The logic that they are using is so faulty in these economic times that it's frightening. The implication is that their trainees can buy with little or no money down...and even get money back at closing. (Shades of the subprime horror stories)
Then they promise that you can sell at a huge profit. If it were so easy, why wouldn't the seller himself take this windfall, instead of letting them have it?
Just like the lottery, the losers are those who can least afford it, and are wishing for a magic solution.

The Webcam is Up!

I've been promising to let you know when the web cam is functioning in the downtown development. This is the updated version of peeking through the fence at a construction site...not as much fun, but a lot more convenient.
The camera is mounted just inside the McKinley gate from Mathilda Avenue. By visiting the developer's web page at www.sunnyvaletowncenter.com, and clicking on the web cam link, you'll be able to watch the progress as it happens.
Not too much to see yet, but once the last of the excavated dirt is hauled away, and the actual construction begins, it should be a lot more interesting.
There's still a long way to go, but the planning commission's approval of the first two blocks in the redevelopment plan on August 27 should get things moving toward the Spring, 2009 grand opening.

Preparing for Home Inspections

I just ordered a full property inspection for an upcoming listing. This is common practice in our area. Experienced Realtors usually recommend up-front termite, property and roof inspections, so that minor problems can be handled early and major ones can be discovered before the house goes on the market.
I am always shocked when watching HGTV home sale shows like "Buy This House." (What else would a Realtor do in her spare time?) Sellers invariably wait until the sales contract is in place. The buyers bring out a home inspector, and "Surprise!" the electrical system is faulty, the roof is leaking, or the plumbing is full of holes. Then the buyer either backs out or demands major cash incentives to proceed with the purchase.
There is no chance for the sellers to get more reasonable bids for the work, as they would have been able to do if they were forewarned. Inspections before the sale are always a better idea.