Posts Tagged ‘California’

SANTA CLARA MARKET STABILITY

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Ohlone/Chynoweth–Almaden (VTA)

Ohlone/Chynoweth–Almaden (VTA) (Photo credit: Wikipedia)

 

 

For about 3 years we have suffered through the craziest Real Estate Market I have seen in the 25 years I been a Broker here in Silicon Valley. During much of this period properties would be Listed Wed, Open House Sat and Sun, offers accepted Tue/Wed and Sold by Thu, after an average of 24 offers (the record I know of  was 79 offers on a nice 3 bed, 2 bath in South San Jose). This drove prices up a a ridiculous rate.

This was the inevitable result of a wave of overseas investors stocking up on “Cheap” California Real Estate, a surge of well qualified 1st time buyers, and historically low interest rates.

This excess of Buyers (DEMAND) led to a shortage of properties for sale (SUPPLY)

There are 3 significant results of this great Sellers Market:

1. The virtual disappearance of SHORT SALES, and REO (Foreclosure) properties for sale. The rising prices have rescued many homeowners from the UPSIDE DOWN (Negative Equity) situation they had fallen into.

2. A restoration of the Laws of SUPPLY and DEMAND. Over the past 7 years many people were forced to postpone their retirements when most of their Home Equity vanished, and they had to hunker down till the market improved. The rising prices are  allowing them to restart their long term plans to retire and move out of the area.

3. A significant number of MOVE UP BUYERS who got stuck in small houses despite the arrival of small children are now able to get prices which allow them to move up to a more suitable house. They are selling to  buyers who are helped by the huge number of special FIRST TIME BUYER PROGRAMS now available from  City, County, State, and Federal sources. These are greatly enhanced by the fantastic interest rates.

Now here we are in early 2015 and things have returned to something close to normality with inventory for sale, and ready and qualified Buyers pretty much in balance in most of the valley. The exception to this is in those areas with the top rated schools where the boom times are still hot although on a lesser scale.

 

CALIFORNIA IS NOT SILICON VALLEY

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English: This is one of the huge welcoming sig...

English: This is one of the huge welcoming signs for Google plex in the silicon valley. (Photo credit: Wikipedia)

CALIFORNIA IS NOT SILICON VALLEY

The Market Statistics fiasco

I’m continually answering client’s questions about mass media, or on line reports (Case Schiller etc) which claim to give “information” about the California Real Estate Market and which contradict the information I give them.

Here’s the reality:

REAL ESTATE IS LOCAL

Data covering the whole of California is totally useless to anyone considering Buying or Selling property in Silicon Valley.

To get useful information about a specific area why not go to a source which deals ONLY with that area, and has ACCURATE and RELEVANT information on it.

A competent and tech savvy Realtor has direct access to all relevant data bases and can easily provide accurate and current data for individual homes, neighborhoods, Cities, and Counties within minutes, at  no cost to a Client.

Much of this data is either not available to the general public, or costs inordinate time and money to an individual.

GOODBYE API

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Say farewell to the API as you know it. Welcome to new era of accountability, with at least a couple years of confusion in between. English: San Elijo Hills Middle School

 

The release Thursday of the results on the state’s Academic Performance Index marks the end of a decade of judging student performance based on test scores alone. Within three years, California will have moved to a very different system in which scores on the newly introduced Common Core assessments and other state standardized tests will be but one spectrum in the prism for evaluating schools and districts. 

 

There will be new, multiple measures that could include high school and middle school graduation rates, rates of absenteeism, reclassification of English learners, passage on Advanced Placement exams or a mix of other indicators.

 

How these measures will fit together, and whether the can even be combined into a single index, will be the State Board of Educations challenge.

 

The law gives them till Oct 2015 to have it in place. 

 

 

 

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THANKS TO BARBARA BOXER

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Barbara Boxer, United States Senator from Cali...

Barbara Boxer, United States Senator from California (Photo credit: Wikipedia)

As of Dec 1st both the IRS and Franchise Tax Board have put in writing that they no longer consider “Debt Forgiveness” resulting from a Short Sale to be taxable income under either State or Federal tax laws.

This removes a huge potential problem from anyone going through a short sale. Until now It has been common to receive a tax bill in the tens of thousands of dollars many months after the property has been sold.

Thanks are due to Barbara Boxer for her part in fighting this battle for us.

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THE MUTIPLE OFFER PROBLEM

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THE MUTIPLE OFFER PROBLEM

To Bid or Not to Bid?

In Silicon Valley we are now about 12 months into the latest outbreak of “Multiple Offer Syndrome”.

English: This is one of the huge welcoming sig...

English: This is one of the huge welcoming signs for Google plex in the silicon valley. (Photo credit: Wikipedia)

A large majority of homes are currently being listed on Wed, hold Open Houses Sat and Sun, schedule offers for mid week, and are sold to the best of multiple offers by Friday.

The reason for this is very simple.

There are too many Buyers chasing too few houses. This is a direct result of historically low interest rates which will not start rising till early 1014 at the soonest.

As any Economist will tell you, in a free market the solution to this is equally simple. The law of Supply and Demand will automatically correct the problem.

If there is a shortage of any product more of that product will be brought to market.

In this case where there is a shortage of Houses for Sale, prices will be driven up. As this happens more homeowners will decide to sell, and Builders will accelerate getting new homes into the market. Obviously these things do not happen quickly so you can be sure the current price escalation will continue for at least 12 months and then probably just slow down to the historical norm for Silicon Valley i.e. 5% per year.

 

Looking west over northern San Jose (downtown ...

Looking west over northern San Jose (downtown is at far left) and other parts of Silicon Valley (Photo credit: Wikipedia)

If you are a Buyer who has several times lost out to higher bids you might wonder if it’s better to hold off till the market turns.

Consider the following:

Demand will not slow down for at least 12 months.

Each new sale sets a higher price for the next one in the same area.

In 12 months time it’s a near certainty that interest rates will be higher.

When things slow down and you decide to come back into the market you will be paying 12% to 15% more than today. (Based on price increases over the past 18 months in Silicon Valley.

In the meantime you are paying close to cost of a mortgage (which has major tax benefits) for rent which gives those same tax benefits to a Landlord.

Think carefully before holding off.

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FHA BONUS

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Interest Rates

Interest Rates (Photo credit: 401(K) 2013)

FHA loans with a 3.5% minimum down payment are often the only choice for 1st time buyers.
They get a lot of bad publicity from uninformed sources who compare them wrongly to conforming loans needing much higher down payments.

The reality is that the FHA loan is neither designed, nor sensible, for high down payment buyers.

However it does have one very powerful advantage over the traditional conforming loans; FHA LOANS ARE ASSUMABLE at the same interest rate as they started at.
In future years this may be a very valuable feature when selling the property.

First let’s understand that 1st time buyers in California typically sell that 1st house after approx 5 years.

Now let’s consider what level mortgage interest rates will be at that time, and compare with todays. We will assume a $400,000 FHA mortgage

CURRENT (historically low) 3.5% = $1,796/ month.

FUTURE (5 years)(20 year average) 6.0% =$2,398/month.

SAVING = $602/Month.
Now in 5 years time you are selling your home and have a smart buyer trying to decide which of 2 similar houses is the best deal might they well prefer the one where you can:
1. Buy and take over the existing mortgage which is $602/month cheaper for all time
OR
2. Go through all the hassle of getting a much more expensive mortgage for as long as you own it.
Assuming they sell after a typical 5 year period there is a difference of $36,120!!!.

MAYBE IT’s WORTH FINDING OUT WHICH IS THE BEST MORTGAGE FOR YOU, Not for the loan Agent who did not take the time to explain ALL your options, and the long term implications of each one.

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FOREIGN REAL ESTATE BUYERS

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Here in Silicon Valley were hearing a great deal about the Asian Buyers who are fueling the crazy boom market now in full force.
Every new listing is selling with multiple offers within day of hitting the MLS, and often not even getting to the MLS.
Buyers with less than 20% down payment have very little chance of even getting their offers considered, much less accepted.
While this is true it’s not accurate to suggest that any one ethnic group is driving this situation.
If we just consider the 2 States where most outside money is driving the market we find some interesting statistics:
o. 26% of all sales involving out of the country Buyers are happening in Florida.
o. 11% are in California.
o. In both cases 24% of such sales are coming from Canada.
o. 11% are from China.

TIME TO BUY???

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Are you a potential 1st time buyer living in Californias Silicon Valley, and expect to live in your new home for at least 5 years/? YES YES YES.

0. Prices in our Valley have pretty much stabilized.

0 Interest rates are at all time lows.

0 There are multiple 1st Time Buyer programs from Cities, Countys, State, and Federal Governments. These can provide down payment assistance, and significantly reduce the cost of owning.

If your answer to my 1st question is negative then the answer is probably NO NO NO.

If you believe that prices are going to drop further and you plan to wait and buy at the bottom, please let me know how you will be able spot that bottom before it has already happened.

 

 

 

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SILICON VALLEY Real Estate UPDATE

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The real estate crisis has gutted house prices, tipped millions into foreclosure, and rattled the global economy to its core. But for many would-be home buyers, the historic boom and bust have been a blessing in disguise. During the first half of the previous decade, easy credit and speculative excitement worked to make houses increasingly expensive. By the fourth quarter of 2005, median home prices had reached 2.77 times median household incomes. That is sharply higher than the 1.92 average of the 15 years ending in 2003 and too expensive for many families. But the subsequent crash in home prices–values have fallen roughly 30 percent at the national level from their 2006 peaks–has helped restore affordability to this once inflated market. By the third quarter of 2009, the price-to-income ratio–a key measure of housing affordability–had fallen below its 15-year average, to 1.84 for the nation as a whole.

Beginning Jan 2010 Silicon Valley Counties (North Santa Clara and Southern Alameda) sales prices have stabilized and some areas are now seeing small increases.

Apart from this being a normal process indicating the last stages of any financial cycle, it has been significantly driven by 5 major sources:

  1. 1st Time Buyer Tax Credits which ended mid 2010.
  2. Extension of FHA and V/A maximum loan limits for High Priced Zip codes.
  3. Historically low interest rates.
  4. Huge increases in the number of 1st Time Buyer programs from Federal, State, County, City, and Employment specific sources. These continue to increase and improve.
  5. Major reductions in Bank Owned (REO), and Short Sale properties coming to market as Banks have beefed up programs designed to keep people in their homes where possible. This has allowed more normal conditions to have control of sales prices.

NOTE: I’m only describing my local Market here in Silicon Valley. I know conditions in other areas have been, and continue to be hit worse than us.  

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Typical Buyer Questions #1

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Here’s a question from a client who has just had an offer accepted on a bank owned (REO)  property.

Question.

Hi Bill, I was talking to a friend about REO and wanted to get your expertise on the matter.  She mentioned recently there were news about how bank were approving foreclosure while owners were doing a refi and other things, so at the end of the day even the bank didn’t own title to the property.  The loan is sold off to multiple lenders and Title is unclear.  Have you heard about it?

My Answer.

Hi Lisa,   As with many things described as “News” in ourMass Media this is just another Urban Legend. In this case one that shows absolutely no knowledge of reality. What it is talking about is a mixture of different situations based on rumours and hearsay, in all cases relating to either Short Sales, or loan modifications, usually from the 29 States where “mortgage” law is different than in California.

It has nothing to do with REO properties which by definition are fully owned by a Bank. There is no other “Owner”. Title is in the name of the Bank and will be delivered by them to the new owner as in any other purchase. An owners Title Insurance  policy will, as always, be paid for by the current owner (the Bank) and given to the new owner through Escrow. There is nothing different today than when you bought your house.

New questions are allways welcome at bmccord@rwnetwork.com

From: Lisa Ly

Sent: Thursday, December 23, 2010 8:11 AM

To: bmccord@rwnetwork.com

Subject: REO Question

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