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Especially in the summer, you want to keep your refrigerator running smoothly, so you have plenty of

cool drinks ready to enjoy! 

Here are a couple quicks tips to keep the refrigerator operating at its best.

Is your refrigerator door shutting tightly? To test it, close the refrigerator door on a dollar bill at

various places along the door, and pull lightly. If you can pull the bill out, you may need to adjust your

door or replace the gasket. Doing so will save energy, reduce your utility bill, and lengthen the life of

the compressor.

Have you cleaned the coils? To keep your refrigerator operating efficiently and cooling properly,

it is very important to clean the condenser coils at least twice a year. The purpose of these coils,

which are generally located at the bottom of the refrigerator (behind the kick plate), is to disperse

heat from inside the refrigerator out into the room with the aid of a fan.

To clean the coils, first unplug the refrigerator or turn off it's circuit breaker. Next, remove the

cover panel beneath the door to reveal the coils. With a long, narrow nozzle on your vacuum, clean

out all of the dust and debris. You can also buy a special long-handled brush that looks somewhat

like a bottlebrush for this job. The last step is to replace the cover, and restore the electricity.

Remember, cleaning the condenser coils at least twice a year is the best way to lengthen the life

of your refrigerator.

Again this week sales are up and inventory is down!  Last week data showed 3542 homes on the market

with 2790 pending.  This week inventory is down to 3450 and sales are up to 2900!!! Now 9 weeks in a

rowthe trend has continued and some areas are selling so quickly, with multiple offers that I began to

wonder if prices have started to increase a bit.

So I pulled the data for some areas to see what it tells us.  I pulled MLSListings statistics for single

family homes in Evergreen, Cambrian, Blossom Valley and Santa Teresa since these are the areas

that have now for months been on fire.  The data is below and a chart can be found here to

download.

It appears that prices have gone up slightly in Evergreen and Santa Teresa when comparing March

to April, but all areas are down in median price since January.  Cambrian had a little increase in

March, which was corrected in April.  Blossom Valley has been fairly flat the last 3 months as I

would expect with the increased demand in that area.

Check out more statistics about the local areas in Santa Clara county by searching by the

"market update" category above.

First off let me get some vocabulary straight.  A banked-owned home is very commonly called an REO (Real Estate Owned, the bank's vocabulary since it is real estate they own).  These words are often used interchangeably and that is ok.  You may also hear these properties called "foreclosures".  All these terms are referring to the same thing.  A "pre"-foreclosure may be on the market as a short sale.

How does a home get foreclosed on?  Read about the foreclosure process here if you are interested since this post will not be cover the process of how a seller gets there.

There are several differences an experienced home buyer will note with an REO compared to a standard sale.  There is also additional risks that are taken with the idea that the overall payoff or reward is to get the home at better than market value.  I cover both these topics below.

First let's talk about how an REO purchase is different from a standard sale. 

1.     When you first drive-up to an REO you will note that the home is likely suffering from some deferred maintenance, this includes landscaping (maybe even something as simple as watering the yard) through major subfloor damage due to leaking pipes or bathroom joints.  There can be a large variety, but it is almost guarantee there is some deferred maintenance.  To correct this deferred maintenance, it may require $10,000 to get the home "habitable".  Don't have this cash after buying the home, there is a special loan option.

2.     The home is not "Staged" or prepared for sale.  If you like walking through "pretty" houses, then foreclosure home-buying may not be to your liking.  It is typical for the home to not be very clean and in some cases it can be very dirty. 

3.     Some REOs have odd additions or home-owner fixes that might not be permitted or even to building code.

4.     Depending on the asset manager, the Close of escrow may be longer than you want or expect, possibly 45 days, but there are also cases where if you have cash, you can close in 10 days!

5.     The escrow company is very likely to be out of the area which means it is more difficult for you and your agent to get ahold of and deal with them.  This also means you will have to sign loan paperwork and other escrow documents with a notary who is not familiar with the particular transaction.

6.     Lastly, be aware that in Santa Clara County, many low-end REOs (those under $500,000) are multiple offers and so you as a buyer have competition to worry about too.

What additional risks does a buyer take?

1.     The home must be purchased as-is.  Therefore your initial offer price must reflect the work to be done. 

2.     Banks do not renegotiate once in contract, so if anything new and expensive is discovered, your likely option is to deal with it or back out of the contract.

3.     There are most likely no inspections completed upfront, so not only do you have to pay for these, but you must base your offer price on minimal information.

With all the listed differences, remember the goal of buying an REO is to get a good price on bay area real estate.  So depending on your personal goals, a REO could be worth the extra steps and risks.

Have you had an REO experience that is not covered in the list above?  Are there any other areas your have questions about?

With Foreclosure moratoriums lifted, more foreclosures are sure to hit the market in the coming months.

I was invited to an exclusive Intero agent meeting with the Bank of America West Coast REO manager, Ivan, a few weeks ago.  In this meeting, Ivan said "6 months ago there were 60,000 REOs" nation-wide in the Bank of America/Countrywide portfolio alone.  Today Ivan said there are only about 45,000 due to the moratorium.  But now that these moratoriums have been released by law-makers, the Bank of America REO manager says he expects 70,000 REOs to be active come July and August 2009.

It is obvious when shopping with buyers, that the low-end is flooded with distressed properties (REO and Short sale), so here are the real numbers to truly depict the situation.  Also I wanted to set a baseline for Santa Clara County and understand how large the REO market is here and then be able to use this to watch how these numbers change monthly. 

I have pulled data for the entire Santa Clara county and have broken down the analysis by single family (SFR) and then by condominiums.  I also broke down the SFR analysis to under $500,000 to understand the low-end market alone.

Single Family Residences (SFR):

1.       3507 Total active homes on the market

2.       943 active homes (SFR under $500,000)

a.       198 REO - 20.9%

b.      572 Short Sale - 60.6%

c.       Total distressed sales - 81.6%

3.       1034 homes SOLD in last 1 month timeframe (mid April to Mid May),

a.       455 REO - 44.0%

b.      125 Short sale - 12.1%

c.       Total distressed sales - 56.1%

CONDOMINIUM

1.       1188 active on the market

a.       121 REO - 46.7%

b.      362 Short sale - 30.6%

c.       Total distressed sales - 40.6%

2.       319 Sales within last month

a.       149 REO - 46.7%

b.      42 short sales - 13.1%

c.       Total distressed sales - 59.9%

Of key distinction is that the SFR market under $500,000 is what is largely suffering from the REO and short sale markets as the data showed 81.6% of all active homes on the market in this price range are distressed sales.  There is a large difference when compared to just 32% of the county wide inventory. 

It is also interesting to note that even though only 32% of the market today is distressed, the sales are 56% distressed.  I interpret this to mean that a larger proportion of distressed sales are selling in this county. The same trend is noticed with condominiums though not as large of a change from inventory to sold, only 40.6% inventory versus 59.9% of sales.

I will keep this data as a baseline and revisit in one month to see how things have changed. 

Any other thoughts as to how I should look at the data?

Lemon is a versatile fruit with a wonderful fragrance, great in food and beverages, but also very handy for multiple purposes around the home!

Lemons are high in vitamin C, have an anti-bacterial effect and are thought to possess antioxidant and anti-carcinogenic properties. The juice consists of about 5% acid, which also makes them useful for a variety of household purposes.

Pouring lemon juice around areas that ants frequent is said to repel them.

An equal amount of lemon juice and water added to an atomizer will create a wonderful synthetic chemical-free green air freshener for your home.

Read more tips on this month's tip or what other readers have to say about it at greenlivingtips.com.

For more of Theresa's Green Tips, search the Blog for posts categorized as "green tips".

My backyard is an area I have to be careful.  I don't like using harsh chemicals to kill insects because I have a 2 year old who loves to play in the dirt and a very curious black Labrador.

I picked up on a trick from a gardening catalogue to use beer to attract and kill snails and I must say with experience, it REALLY works.  They even make attractive containers for you to store the beer (so your 2 year old or dog doesn't drink it!) and to hide the ugly pile of snail shells, check out this decorative mushroom trap.

Wonder what other tips is beer handy for?  Read on a greenlivingtips.com and see what other readers have to say about it too.

For more of Theresa's Green Tips, search the Blog for posts categorized as "green tips".

Wikipedia defines a short sale as "sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold."

In understandable terms, short sale means a real estate transaction where the seller owes money in order to sell the house, so as a result the homeowner's bank must get involved.  The seller's bank will review the financial assets and income levels of the seller and decide if they are in financial hardship.  If the seller's bank determines the homeowners are in hardship, then the bank will excuse the debt and allow the sale.  When the bank "excuses" the debt, they are not necessarily letting you walk free.  The bank could also not-approve the sale and in this case the homeowner has to come up with the money owed to close escrow, keep their home and pay their mortgage current, or allow the bank to foreclose.

Impact to Homeowner of a Short Sale

When a seller succeeds with a short sale, they might walk away with several different results which are reported on their credit history.  Due to the financial impact that these items might have on a seller's credit report, all sellers in this potential situation should consult an attorney and CPA.

Credit report to say:

1.      "Settled, account legally paid in full for less than full balance" - bank has forgiven the debt

2.     "charge off" - Bank has let the seller go with the right to pursue the seller for the amount indicated if in the future should the seller come upon a large sum of money.

3.     "Promissory note"- bank lets the homeowner sell the home, but will require the seller to pay back the amount specified. 

Sellers typically get into this position when the market value has dropped significantly since the homeowner purchased the property.  Ideally a homeowner would pay their mortgage and wait until the market values increase before selling their home.  But in many cases such as today, homeowners have lost their job and cannot make their payments or the homeowner had an adjustable loan that reset to a high interest rate making the payments for the seller too high.  In these cases, sellers are in financial stress and will have to short sale the home or let the bank take the home away through foreclosure.

Another possibly for a short sale to occur is that the homeowner took out a second mortgage or a home equity line of credit (HELOC) when the appraised value of their property was high.  In this case 2 banks will likely be involved with approving the short sale, which means more time for the buyer to wait and less likelihood of the sale being approved.

What does a short sale mean to the buyer?

When a buyer is trying to purchase a short sale property, there are a few differences from a "normal" real estate transaction.

1.     The buyer must submit an additional form called a short sale addendum to account for details during the time the bank will take to approve the sale.

2.     The buyer must be willing to wait on the bank to work through all their approval steps.  This can take anywhere for 30days to 6 months for the necessary approval letter to be put in the buyer's hand.  Once this approval letter is received, the sale continues as written in the contract.

a.     Buyer must be aware that in the time that the bank is approving the sale, the purchase price and all other terms of the contract are fixed.  This means if the buyer is purchasing in a downward market, then they must anticipate their offer to be fair value when the sale is approved.  It is common however for buyer's not to expect the approval process to take so long and hence to back out of the contract. 

b.     In some instances, buyers may be able to find an "Approved short sale" on the market.  This means that the first buyer walked away from the contract, but the seller is willing to sell at this original contract price.   The new buyer can submit their offer at the approved price and expect less than 30 days turn-around time.  This of course will only happen if the new buyer agrees with the approved purchase price.

Please share your experiences that differ from the explanation given above.

Again this week the trend continues...sales increased and inventory decreased across the county for Single Family Homes.  Last week inventory was 3672 with pending sales at 2690 homes.   This week inventory decreased to 3542, and pending units again increased to 2790.

Have we hit bottom? 

I think in some areas we might have such as Evergreen, Alum Rock, Santa Teresa, Blossom Valley, Berryessa and Cambrian based on data talked about below.  Things could change in some of these areas when the backlog of new foreclosures hit the market, but only time will tell this.

Here is the data of sales by area, comparing single family homes by MLS area, from April 14^th to today May 13^th.

Looking through this data, several areas stick out.  Alum Rock, Berryessa, Campbell, Central San Jose (area 9), Evergreen and Santa Teresa all had significant inventory drops AND sales increases.  These areas are driving the county data reported in the opening paragraph.  All of these areas, except Campbell have more pending sales than inventory left.  More sales than inventory says that deals are hot and happening in these areas!  Since this trend has continued in the above listed areas, these areas (Alum Rock, Berryessa, Central San Jose (area 9), Evergreen and Santa Teresa) are likely hitting bottom or at least coming to a stabilization period.

If you are thinking of buying but have not quite jumped 100% into the search, I truly believe you should make a move now, whether the market is at the exact bottom or not. Here's why: Interest rates are phenomenal and as the economy begins to improve the Federal Reserve will likely increase the rate meaning interest rates could go up and rates have a tendency to move quickly, ask any home buyer.  This likely interest rate change can make more of a monthly impact to your pocketbook than another slight home price decrease.  How is that?  Read on...

Did you know that today's Jumbo-conforming loan (upto $729,000) can be locked at 4.875% which would give you a $3857/month payment.  If interest rates just go up to 6% (they were higher than this in just October 08-just 7 months ago), then your payment would be $4370, a $512 difference!  This interest rate change can happen pretty quickly which is why I say now is the time to buy.   Prices are great (maybe they drop a bit more or maybe they don't), interest rates are at all time lows, what a better combination of factors can you have?

These two factors together give you extra buying power, so take advantage now.

Do you feel now is the time to buy too?

Some say yes, others not yet. 

What I can tell you is the decline is for sure slowing and Santa Clara county real estate sales are doing very well in most areas.  There are many factors to the state of the economy right now, the banks and how they are recovering, real estate sales, and unemployment to mention just some of the factors at play.

Federal Reserve Chairman Ben Bernanke updated Congress this week and according to Inman News, Bernanke said the housing market is beginning to stabilize and the recession looks to be on track to end in late 2009.  Bernanke mentioned it is key that the banks improve during this time or all the headway we have made so far will be lost.

Carole Rodoni, a recognized bay area industry expert on the economy, breaks down what the government is doing and the pluses and minuses to the economy today, read her May report for more information and opinions.

What do you think is the state of the economy?

The nation's leading mortgage lenders have lifted their recent foreclosure suspensions and begun to move those borrowers that are ineligible for federal programs on through the property repossession process.  These foreclosures will soon hit the market, 3-4 months from now.

Where are these foreclosures coming from?

According to a Wall Street Journal report, many major banks, including J.P. Morgan Chase, Wells Fargo, Fannie Mae, and Freddie Mac all have increased foreclosure activity over the past few weeks. There was a temporary halt in foreclosure proceedings due to foreclosure moratoriums that were instituted at the urging of lawmakers and regulators when Obama came into office.  The intent was to give homeowners time to see if they were eligible for any Obama Administration mortgage relief plans.

This moratorium suspended 10s of thousands of homeowners from the foreclosure process.  Now that moratoriums have been released, there is a built-up of foreclosures that need to work through the system, meaning they will eventually hit the real estate market.

According to Alexis McGee, president of the foreclosure tracking company ForeclosureS.com, these delayed foreclosures from lenders' moratoriums, coupled with rising unemployment, could distress the housing market's recovery.

McGee said, "Hopefully, this is a short-term surge caused by months of delayed foreclosures. This is a very troubling turn after seeing some bright spots earlier this year."

According to ForeclosureS.com's March report, 175,199 U.S. homes were lost to foreclosure last month - a new monthly record and up 44 percent from the record high set in February - reflecting lenders' renewed foreclosure activities. The company's data shows a 76 percent increase over repossessions in the first quarter of 2008, nearly 370,000 properties.

And there's more to come - ForeclosureS.com reported that pre-foreclosure filings during the first three months of 2009 topped 600,000, their highest quarterly level since the foreclosure crisis began.

Investors be on guard as the foreclosure properties available to be purchased may soon increase, providing some good options for long term investing.

some content from DSNews

What impact do you think this foreclosure increase will have on the local real estate market?

Again this week the trend continues...sales increased and inventory decreased across the county for Single Family Homes.  Last week inventory was 3828 with 2611 pending sales and this week inventory (data taken 5/4/09) dropped to 3672 with pending sales increasing to 2690 homes. 

Where are those sales concentrated?  I wondered this too as I've seen areas in the county selling with multiple offers and other areas with lots of inventory just sitting.  Real estate is very localized and so for statistics I've broken it down into MLS areas.

The data below shows Almaden Valley had a large jump in sales for April.  Almaden valley was one the areas talked about in past posts that was experiencing a lack of sales until April hit; obviously the increase in sales observed in  mid-April continued.  April's sales are almost exactly like 2008 April sales, so this data demonstrates that this market is settling out and hopefully prices will soon stabilize.

Cupertino is another area that had a significant increase in sales this past month, showing a 60% increase from March.  April sales this year compared to last year the same month are significantly higher.  Cupertino is in alignment with the country trend showing 2009 is a year of much more sales than recent years.

Saratoga also showed a slight breakthrough in April, but it still has not reached the 2008 April sales levels.  Buyers are being picky out there when shopping and are focused on value that they believe will be supported for 8-12 months from now, so Saratoga be ready for a little more price decline before your market settles down and prices stabilize since inventory is so large and sales are not at normal levels.

Santa Teresa and Morgan Hill ended up on the bottom of the list for sales changes seen in April.   These areas did show slight increases in sales though.  Not one MLS area had a decline in sales demonstrating the spring buying frenzy has begun, but is focused on key areas.

Another conclusion that can be drawn from this data is that the majority of sales are still focused in key areas, Alum Rock, Evergreen, Morgan Hill/Gilroy, and South San Jose (MLS Area 11).  All of these areas were hit very hard with prices from 2007 to 2008 and therefore are showing up as deals in the eyes of buyers.

Do you have any further questions or thoughts about this data?

As I transition my green tips to my blog, I want to be sure and not lose some of the valuableinformation I have collected over time.  So here are last of my quick links to topics discussed in 2008.

Got Fluorescent?: Save energy with Compact Fluorescent Light bulbs (CFLs)

Get Hot Water Now: Instantaneous Water Heater

Take a Deep Breath: Indoor Air Quality

Lighten Up!: Tips on Daylighting

Bamboo, an Earth-Friendly Material: Bamboo floors

Did you know one simple energy-saving task you can do is to change all your light bulbs out with Compact Fluorescent Light bulbs (CFLs)?

Energy Star qualified CFLs:

• use approximately 75% less energy than standard incandescent bulbs, read how they work
• last up to 10 times longer than standard incandescent bulbs
• save about $30 or more in electricity costs over each bulb's lifetime
• produce about 75% less heat, making them safer to operate
• are available in sizes and shapes to fit almost any fixture, indoors or out.

The Energy Star website also provides tips on the following:

• How to Choose and Where to Use CFLs
• How to Choose the Right Shade of Light
• CFL Disposal

If every American home replaced just one light bulb with an Energy Star qualified bulb, it would save enough energy to light more than 3 million homes for a year, save more than $600 million in annual energy costs, and prevent greenhouse gases equivalent to the emissions of more than 800,000 cars.

This and further information is available on the Energy Star^® website at: http://energystar.gov
Please familiarize yourself with this valuable energy and cost-saving information. YOU can make a difference!

There is now a great loan product out there just for this purpose, to finance the work needed on a distressed home such as an REO, banked-owned property.  Wouldn't it be great to buy a distressed home in a good area and be able to finance the improvements you make on it?

Well this is the product for this situation!

Some other uses for this great new FHA product are for fixing up a home suffering from lack of maintenance before you sell it.  I can see this option being used in trust and probate sales in order to maximize the equity that can be generated by the sale.

The highlights of this FHA rehab loan (203k) are listed below.

1.       The home must be made inhabitable within 1 month from Close of escrow, other work can be completed within 6 months.  An inspector will be out to verify occupancy clearance and this is a hard date so you must be sure your contractor does the items required to make the home habitable first.

2.       The following money is available as part of this FHA 203K loan

*   $35,000 for rehab of the property such as putting in a new kitchen, fixing up bathrooms or repairing the roof

*   $8,000 more can be obtained for energy efficient rehabilitation such as dual-paned windows, insulation, solar upgrades (for questions or examples of other types of upgrades visit the FHA FAQs)

*   $2,000 more is available for weatherization such as weather sealing of doors

A few requirements are the property must be owner-occupied, no investors can qualify for this.  Also the property must be a 1-4 unit residence, and condos do apply.  Read more about it on FHA's website.

Spring has arrived here in California! The ideas below will help you prepare your home for a hassle-free and enjoyable summer.

1.    Clean showerheads and faucet aerators.  A quick, cheap and effective way is to soak these fixtures in white vinegar (put 1-2 cups in a plastic bag and attach to faucet/shower with rubber bands, let soak in vinegar for a couple hours).

2.    Clean and seal tile grout in kitchens and bathrooms.

3.    Clean the clothes dryer exhaust duct and space under the dryer. This prevents lint from accumulating and reduces the risk of fire.  You can call AAA Furnace here in the Santa Clara County to do this for you...they do a great job.  Also consider cleaning furnace ducts as this job is in low demand as weather warms up, AAA will give you a discount if you clean both dryer vent and furnace together.

4.    Inspect washing machine hoses and replace when they show signs of wear or leakage.

5.    Inspect deck or patio for deterioration and safety hazards. Repair loose boards, protruding nails or other safety issues.  Consider replacing nails with screws for longer life and less future maintenance.

6.    Check that your multi-purpose fire extinguisher is up-to-date, handy and ready for use.   If you don't have one, get one and install accessible to kitchen.

7.    Wash the exterior of your house using ordinary garden hose pressure and a mild detergent.  Let the exterior dry a few days and then patch all cracks or joints.

8.    Caulk exterior joints around all windows and doors for energy conservation.

9.    Change air conditioner filters.

10. Have a certified chimney sweep inspect and clean your chimneys.

Happy Spring Cleaning!

Per the Wall Street Journal on April 23rd, "With mortgage rates at historic lows, homeowners eager to lower their payments are rushing to refinance. The average contract interest rate for 30-year, fixed-rate mortgages stood at 4.73%, down from more than 6% a year earlier. About 80% of all mortgage applications are for refinancing." 

Buyers this means you can get these historically low rates too!  Homeowners already know how great they are, so time for you to jump in.  The loan officers I work with and saying what a great time to lock your rate! 

Not only are interest rates in favor of buying, but the Federal government is also giving first-time homebuyers tax credits to jump in the market now.  This $8000 can sure help when making the stretch to buy your first home...especially in the bay area!

Do these incentives and great interest rates, make you want to buy?  If not, what is holding you back?

Wow, can sales really continue to increase this much when inventory is dropping?  Or really the question is, can values continue to be so great if the demand is so high?

Time will for sure tell.  The trend does continue again this past week with the pending to Active ratio now at 68% county-wide.  The trend started in this direction Mid-March and has not carried on 6 weeks.

Buyers this is a sure sign that there are good properties and values out there to buy!  So why wait?   Jump in before the summer when everyone else will likely wake up to the deals because supply and demand will control prices and soon values might not be as great!

As I transition my green tips to my blog, I want to be sure and not lose some of the valuable information I have collected over time.  So here are some quick links to topics discussed in the past.

What is an EcoBroker?

Energy Efficient Windows - What's Your R-Value?

Shade Trees - Plant Trees for your Benefit (and the earth too!), also visit http://www.ourcityforest.org/

Energy Efficient Appliances - Upgrade and Save $$

Energy Efficient Mortgages - Spend Someone Else's Money!!!

Improve your homes insulation and your pocketbook - Bulk up and Save $$

For more of Theresa's Green Tips, search the Blog for posts categorized as "green tips".

In several of my past postings, I have mentioned Saratoga is the slowest area for sales in the county right now.  Since this area has proven to be the last to feel the impact of the housing downturn, I thought I would do a quick look at just this MLS area (17) and see what I can pull from this information.

The data below is as reported per MLS on 4/22/09.  The criteria used for the search is Single Family Residence, MLS Area 17 (Saratoga).

There are currently 165 active homes on the Saratoga market and only 23 pending.  This is a 13.9% ratio of pending to active homes, still very low compared to all other areas in Santa Clara county.   The positive news is that of these 23 sales pending, 20 of them went into contract since April 1^st.

Really though, closed sales are what buyers and sellers want to see as a comparison when they analyze whether to jump into the market; so taking a look at the history of closed sales, a trend in the positive direction is apparent.  In January, only 2 sales in Saratoga (MLS area 17) closed.  In February 5 sales closed and in March 14.  So far in April 10 sales have closed but with just over a week left in the month and most sales closing late month, there is definite promise that April closings will exceed March's record of 2009 thus far.

So what does this mean?  Saratoga seems to be on a slow path to recovery.  The test will be one of time as April usually starts a seasonal inventory increase and any significant inventory increase could outweigh the slight increase in sales.  To ultimately get Saratoga in alignment with sales in the rest of the county, list prices need to align with buyer's expectations.  Once prices are right, buyers will jump and start a real recovery in Saratoga.  

We'll see how long it takes Saratoga sellers to realize that the market downturn has hit Saratoga too.  The area comparative data shows that buyers are not going to pay more than they think real estate is worth, especially in today's cautious economic environment.

How much do you think prices in Saratoga still need to adjust?

With another week past, it is again evident that buyers are out in force and the market is showing signs of improvement.  Pending sales again increased this past week, while inventory across the county decreased.    The above observations apply for both single family homes and condos.

Download a chart of the data from 2004 to present and you yourself can see that it is obvious 2009 is not a normal year.  Active and pending home trend lines are converging, already in April when we typically do not see this until late summer, if at all.  Also to note from this data is 2009 sales are much higher than they have been looking all the way back to 2004!  

Inventory is also lower than it was at anytime in 2008 and lower than the peak of summer sales in 2007.  Again as I mentioned last week, these are all promising signs that the market is changing and it hopefully means this county is already recovering from the housing slump. 

I am seeing signs of the change out in the market place with buyers.  Many homes under $500,000 are experiencing multiple offers and buyers are already being more forgiving of faults in properties common in banked-owned, REO homes.

Can you pull any other conclusions or thoughts from this data?

Ants perform an important role in the environment, cleaning up dead insects and animals and aerating the soil. They aren't so adorable when they infest our houses though!

Here are some environmentally friendly ways of deterring ants:

Instead of using really nasty chemicals to rid your garden of noxious weeds, where possible just try using water.

Yes, water :)

Would you sprinkle fossil fuels such as gas or oil on your vegetable patch? Would you rip up a beautiful landscape elsewhere for the sake of adding a few nutrients to your front garden? Likely not, but without even knowing it, often that's what we do with our gardens and crops when buying fertilizer.

By overusing fertilizer of any type, natural or synthetic, it's quite possible to kill the plants you're trying to care for by burning their roots or making them totally dependent on your intervention for their survival.

Peat and peat moss is sought after by gardeners for adding nutrients to poor soil and to assist with water retention. The wetlands where peat is formed are unique ecosystems, so when it is dug up, those ecosystems are disrupted. As peat can take anywhere from a couple of hundred to thousands of years to form, the wetlands are pretty much irreversibly damaged.

For the gardener, there's some good and economical alternatives to peat and peat moss.

The most popular choice is coconut coir, which is just a waste-product from coconut processing. A replacement for peat itself is simple with compost. Compost is made from your kitchen refuse, bark chips or leaves are a good replacement.

Another alternative mulch material is cocoa-shell, which is a waste product from the production of chocolate.

Read more tips on how to replace peat moss or what other readers have to say about this at greenlivingtips.com!

For more of Theresa's Green Tips, search the Blog for posts categorized as "green tips".

Haven't you always wanted to just enjoy your dinner outside without the nuisance of flies, hornets and mosquitoes?  Those yucky stinky candles add some ambiance, but they kill the smell of a nice dinner and who knows what breathing those chemicals does to you.  So why not try the eco-friendly way?

Did you know that most insects hate the oil in orange peel?  Use this to your advantage and just zest an orange or two.  Place small piles or bowls of zest around your outdoor dining table and enjoy  the pleasant scent of orange along with your bug-free dinner!

Read more tips on what you can do with orange peel or what other readers have to say about this at greenlivingtips.com

For more of Theresa's Green Tips, search the Blog for posts categorized as "green tips".

In past posts I discussed how 2009 Spring sales compare to 2008 and also what areas are the hottest as of April 14^th, 2009.  Today I thought it would be interesting to compare these two data sets and see which areas are just now experiencing a change.

A key parameter I have been using to talk about local markets is the pending to inventory ratio.  I pulled these ratios for March 2009 and April 14^th, 2009 and put them in a table below.  As in the previous posts linked above, the data is by MLS Area, for single family homes only. 

(Also note that due to how MLSlistings posts older data, these 2 columns are not apple-to-apple comparisons, so in answering the question of this post, I am really looking for very large changes when analyzing the data.  The data from end of March counts inventory as a wider bracket than I consider it in my week by week analysis.  This is a new change for MLSlistings that I am inquiring about, but in the meantime we must use this data.  In the future, I will avoid this comparison as it is not true.)

Wow, it is apparent that several areas really had some changes the first couple weeks of April...the spring buying season for sure is upon us!  The extreme changes are noted in Alum Rock, Berryessa, Blossom Valley, Cambrian, Evergreen, and South San Jose.  Looking into these areas a bit more .

1.        Alum Rock: There was an increase of 69 net sales in the 2 week timeframe in review! 

2.       Berryessa: 30 sales happened in these first 2 weeks

3.       Blossom Valley: 25 sales

4.       Cambrian: 24 sales

5.       Evergreen: 38 sales

8.       South San Jose: 37 sales

From this data it is obvious that sales were increasing a lot in many areas across the county. But looking purely on sales,  Alum Rock takes the cake on this one with 69 sales in the first 2 weeks of April!!!

California was been hit hard by the housing bust.  There have been foreclosures after foreclosures which led to huge price declines.  According to the California Association of Realtors (CAR), the median price of a single family home state-wide dropped 41%!  As discussed in previous posts, Santa Clara County has seen some areas decline about 40% over the past year too.

The good news is sales numbers are increasing and inventory is decreasing, sure signs that the market is improving.  Statewide 600,000 homes were purchased in February, 80% more than 2 years ago in February 2007.  Most of this activity is in the areas where prices were hit the hardest.

As mentioned in the CNNMoney article, analysts are predicting further price declines in California, according to Nicholas Retsinas, director of Harvard's Joint Center for Housing Studies. "But [there'll be] a slowing of that decline, which portends the end of price drops."

Statewide the inventory is down to 6.5 months when it was 15 months just a year ago. "Typically, I would describe a normal market as having a six to seven month supply of homes," said Appleton-Young. "We have that now."

One thing to keep our eyes on is the bank’s inventory of foreclosed homes that are not yet on the market.
"Banks are spoon feeding them out very slowly so they don't overload the market," said Whitehead. But, he added, if they release a lot of properties during the heavy spring buying season, they "will be eaten right up by buyers."

We’ll watch and see if this happens, let’s hope it does.

More information and full article can be found on cnnmoney.com

As previously mentioned, real estate operates in very local markets.  For this reason I have broken the data looked at yesterday at the county level into MLS areas so see specifically where the market has heated up.

Particular areas are moving much faster than others.  The highlighted rows all have over 80% pending to inventory ratios and therefore buyers are gobbling up these homes: Santa Teresa, Evergreen, Alum Rock, Berryessa, Milpitas, South San Jose, Blossom Valley, and Cambrian.  If you are familiar with these areas, you would probably also note that these are the lower-end prices of the SCC market.  These areas also were the hardest hit in 2008 so prices are very attractive right now.  I believe these markets have caught fire since investors can cash flow with as little as 25-30% down payment and therefore this new group of buyers in jumping in.

Data is gathered for Single Family Homes, in the listed MLS area, as of April 14^th, 2009.

This data is also interesting to compare to March's data reviewed a few days ago. A quick assessment shows that the slower areas of Saratoga, Los Gatos and Almaden have seen some additional sales in these past 2 weeks.  Particularly Almaden is showing positive signs as the pendings have doubled since the end of March! This may be the breakthrough that Almaden needs to catch up to other areas of the SCC market.

My prediction is that the areas with less than 25% pending:active, Los Gatos and Saratoga, can expect a further price adjustment or at least an average list price decrease in the majority of homes to align the prices with the sales that have been recently happening.  What I see looking at homes in these areas is that many, many new listing are coming on the market way out of line of the recent comps as mentioned in my post on "What is Going on with this Real Estate Market".  The higher-end market experienced an almost overnight price drop of 20-25% and sellers have not come to grips with this. Many homes in these higher-priced areas are over-priced, particularly Saratoga, Los Gatos and Almaden.  This is a simple economic matter of supply and demand, so I will be sure to keep a watch and see when these areas actually break free and starting decreasing their inventory.

Buyers out there, are you feeling the same or do you have some observations to add?

Isn't all the real estate market talk overwhelming?  Analysts and forecasters typically talk in generalizations, but what really matters is how you are affected.  Real estate operates in very localized markets as the data below shows. 

Download this chart that I created with information from 1998-2008.  This data is pulled by MLS area.  A highlight of 2007 to 2008 shows that Alum Rock was the area hit 42% in just one year.  South San Jose (area 11) was hit the second hardest at 34%.  Other areas hit pretty hard are Mipitas, Morgan Hill and Gilroy-the lower end or farther out of Silicon Valley, upto 42%.  All raw data I compiled and analyzed can be reviewed at detail link below.

Keep in mind that this data shown above is through December 2008 and some areas have seen additional decline this year already.  The high-end market (over $1million) particularly Saratoga, Los Gatos are just realizing the decline most areas saw last year as jumbo financing (over $625,500 loan amount) is very difficult in today's market.

WHAT DOES THIS MEAN FOR YOU?

Take a look at your area in the data below and see what conclusions you can draw.  Read on to further posts to see if I comment on your specific area or drop a comment and I can make a future post be your answer!

More Details: raw numbers for all county MLS areas

As I talked about last week, sales in the county (SCC) are quickly increasing and inventory is decreasing!  This is contrary to the typical spring trend of both sales and inventory increasing.  The data this week made another significant step in this direction.

The ratio of pending to active is now up to 61%!!!  This means the market is selling quickly and buyers are finding many homes they want to buy. 

This same week last year in 2008 was only 22% pending to active.  The last time we saw anywhere close to today's numbers was in the crazy market days of 2004/2005.  The peak was over 100% pending to active as homes back then were selling so fast they were pending before they were really counted as inventory!

So if you have money to invest or need to buy your own home, do it now before the market becomes one of multiple offers again and the bottom passes you by (actually it is already multiple offers in low-end areas).  Tomorrow I will discuss the sales details by MLS area.

Buyers today are worried about their jobs and therefore many people are waiting to buy a home.  But now is a prime time to buy with many factors in the buyer's favor: record-low interest rates, low homes prices, and large inventory to choose from!  So take advantage of the market opportunity now. 

But wouldn't it be even better if you had peace-of-mind about your mortgage payment too?  Well now there is a program I can offer you just for that. 

As a first-time homebuyer, if you lose your job you could get mortgage assistance for 6mos upto $1500 per month.  This would allow you time to find a new job and not worry about your home being in jeopardy. 

Would all the benefits of buying in today's real estate market combined with this mortgage protection program make you comfortable to buy?  I would love to hear your thoughts.

Read the details of this Mortgage Protection Program

I pulled some data for MLS areas of Saratoga, Los Gatos, Campbell, Cambrian, Cupertino and Almaden. As explained in previous posts, real estate follows very local markets and so it is important to understand your immediate area and how it is performing.

 Let's compare March 2008 to March 2009, Single families, sold and pending units and make some conclusions about how these areas are heating up.

As noted in my "comparisons" column there are distinctly different markets within the county.  Keep in mind when reviewing these conclusions that per my post yesterday on the Santa Clara County (SCC) market, inventory is down and sales are up from 2008, so "hot" markets are the dominant areas in the county right now since they are taking a larger piece of the SCC pie.

Cambrian and Campbell sales show the markets there are hot right now!  Sales are in alignment with last year and pendings are way up.  This can be interpreted as prices have adjusted to values that are very attractive to buyers, so they are jumping in the market in these areas.

Almaden Valley and Saratoga seem to be areas that are still or rather just now feeling the effects of the market downturn.  Sales are down in both areas and pendings are significantly down depicting these markets still have not picked up or prices have not adjusted to the buyer's liking.  In these areas, selling means your pricing must be very aggressive with the competition and focus on immediate sales only.

Cupertino and Los Gatos both show sales that are slightly behind 2008 levels, but pendings that are much higher than last year.  This tells me these markets are heating up faster than typical for this time of year and therefore NOW is the time to make deals.

Please let me know if I can provide some further light on your local neighborhood or answer any questions about other areas. 

Do you agree with these assessments?  How are you feeling out there as a buyer or seller?

This I find is a popular question with buyers out there shopping.  Everyone wants to buy at the bottom.  So let's look at the data as I always like to do.

Looking at Single family homes for all of Santa Clara County, here are the stats for the last week in March.

A few items can be noted from this data:

• 1. Sales are higher now in 2009 than they have been in the past several years, including 2005 and 2006 when the market was "hot".
• 2. Inventory is higher than 2005 and 2006, but not nearly as high as last year in 2008. This larger inventory is what makes seller's feel the market is not so great...they have more competition to compete with.
• 3. The ratio of pending to active is 55%, WOW! This is amazing! A typical healthy market is 25% pending to active, above this the market is very active and homes are selling great. Looking back to 2008, the ratio was 21%. 2007 was 43%, 2006 65%, 2005 was off the charts which is why sellers experienced 20 offers on their one home!

Now let's quickly look at the trend this year in 2009.  Sales have continued to increase week over week and inventory seems to have peaked mid March and since then has continued to decrease.  This reverse in trend is significant, especially for the time of year when sales typically increase, but inventory also increases with the summer selling season on the horizon.

This data tells me that the market is for sure picking up and the bottom may be near.  Of course this data is county-wide so if you concerned about your specific area, please let me know and also stay posted for future postings.

Are you curious where you can get more house for your buck in today's economy?  Well let the data tell you the facts. 

Comparing stats for 3bd, 2ba, 2car garage homes that have closed escrow in the last 6 months, here are the results

CAMPBELL AVERAGES:

42 total sold/6 of those bank-owned = 14% distressed sales

Continuous Days on Market (CDOM) - 39

Square Feet - 1430
Lot Size - 6587
List price - $665,220
Sold price - $644,313

Currently active on market: 53

Sales in last month: 8

CAMBRIAN AVERAGES :

85 total sold/23 bank-owned, 9 Short sales =37% distressed sales

CDOM - 55

Square Feet - 1365
Lot Size - 6409
List price - $551,152
Sold price - $542,441

Currently active on market: 40

Sales in last month: 9

Taking a look at this data, it is apparent that you get more house for your buck in Cambrian as has always been true.  Typically in the past I would see about $50,000 difference, but this data shows ~$100,000 difference.  I would conclude this additional discount is due to the large number of distressed sales in Cambrian.

Also interesting to note is Cambrian seems to be a bit more active market with 22% sales: inventory where Campbell shows a current 15% sales: inventory.  The good news for buyers from this observation is there are probably more desperate sellers in Campbell that would be willing to negotiate and possible save you some of the $100,000 savings observed in Cambrian.

(note: Both areas have some great schools as well some not-so-great schools. I have NOT limited the search by school boundaries.)

Any thoughts you have to share about this info or what you are seeing out there in these areas?

Are you curious if the high-end market of Mountain View or Los Altos is heating up faster and why?  Well I was, so I did some research. 

Also I find buyers (and myself as a homeowner) wondering how are we redefining VALUE with the changed economy?

Here are some numbers to compare and I'll comment after the data.

Mountain View vs. Los Altos, Los Altos Hills (1 million plus)

Mountain View

Active: 29

Pending: 7 (5 <$1.3mil)

Sales in last 3 months: 8 (5 <$1.2mil, other 3 >$1.4mil)

Los Altos Los Altos Hills

Active: 170 (79 <$2mil)

Pending: 21 (5 <$1.5mil, 8 $1.5mil-$2mil)

Sales in last 3 months: 26 (13 <$1.6mil)

Based on recent sales, Los Altos is the place to buy high-end real estate.  If you have under $1.3mil you might seriously consider Mountain View, but otherwise Los Altos would be the place to put your money, or at least where most buyers are today if you look at that pending number. 

Now how about value?  Do you think it is being redefined?  I can say with 100% confidence that buyers are more picky than a year ago.  Picky about location of course because they are looking for the long term investment and picky about condition too.  If your property condition is lacking in the high-end expect a big price hit for this.

Why might Los Altos hold hidden opportunities and value for home buyers now more than ever?

Here is what occurs to me: Lot sizes in Mountain View are like HALF the size of lots in Los Altos. With all the inventory in Los Altos that is priced in the low 1 millions, it appears to me that Los Altos is ripe for the picking, and that now would be a very good time to score a home on an awesome lot for a nicely negotiated price.

But another point to consider is with all the inventory under $2million in Los Altos, only 16% is in contract, so there might be some sellers out there ready to negotiate and you could really get a steal. 

As we reevaluate the value of property in the Bay Area, shouldn't land become an even bigger focus? Tell me what you think.

That is the first question I get asked by almost everyone I see.

The last couple of years have been quite a ride.  The fall all started in the low end (under about $700,000) where most of the subprime lending was done...primarily the southern parts of San Jose(Evergreen, Alum Rock and Blossom Valley), South County (Gilroy, Hollister, Morgan Hill), and the East Bay.  Those markets have been absolutely crushed over the last couple of years and seen as much as a 30 to 50 percent price adjustment to the downside...in some of the farther out areas it has been even worse than that. 

The good news is with historically low interest rates (under 5%) and great prices, the low-end markets recently caught fire and we are seeing not only first time home buyers, but investors gobbling up properties...most things are selling with multiple offers. 

The low end definitely appears to have hit a bottom.  Probably a once in a lifetime opportunity to purchase a house in the Bay Area as investment property that will actually positively cash flow with 25% down.  I honestly believe now is probably a once in a generation opportunity to create massive wealth in real estate.  It just takes a lot of courage when most people around you are still freaking out.

Now let's address the high-end; as the low end was tanking over the last couple of years, the $900,000 plus in the Bay Area continued to be bullet proof...primarily Los Gatos, Saratoga, Los Altos, Sunnyvale, Cupertino and to the North up the Peninsula. Then September/October 2008 hit and the high-end came to a screeching halt.  As the stock market crashed, everyone ducked for cover...it was the eye of the storm.  Based on what I am seeing, those core Bay Area markets dropped by 15 to 25 percent overnight...literally less than 60 days.  The good news is it seemed to happen all at once and then hit a hard floor in December...prices seem to have held at that.  There are however quite a few properties on the market in the higher end because most sellers have not come to grips with it yet...they are only pricing their homes 5% to 10% off the peak and consequently they are just sitting, or if they sell, they are selling significantly under the list price. 

So, if you owned a house worth $2 million last summer, it is probably safe to say if you went to sell today, you should figure it is worth about $1.6 million.  The sooner sellers get realistic with pricing the better it is going to be for these markets.  Because if too much inventory builds up on the market, it is going to start to scare buyers and this market may still pull back a bit more...time will tell.

There is a silver lining however...this is one of the best buy up markets ever.  Last summer, if your house was worth $1.5 million and you sold it to purchase a home worth $2.5 million, you'd be making a million dollar jump.  TODAY your house would only be worth $1.2 million, but the good news is that $2.5 million house is now only worth $2 million...only an $800K difference.  Couple this value savings with low interest rates and it creates a great opportunity to move up.  Don't wait though...who knows how long it will last.  In some of the high end markets we have seen 3 to 5 times as many homes sold in March as any month going back to October of last year.  The high end appears to be gaining some traction.

Remember, if you or anyone you know is thinking about doing anything with regard to real estate feel free to give be a buzz before you start for some input and advice...whether it is buying, selling, investing, refinancing, needing a loan modification, REO's, short sales, etc...I have seen it all and am dealing with it everyday.   

If you need to refinance or are purchasing a home give me a call or ping me an email as well...especially if you are looking for a Jumbo loan.  A couple of years ago at Intero we started a mortgage company and we have some of the best loan programs in the industry.  As you are probably painfully aware, there has been very little jumbo loan product this last year or two.  Our mortgage company has been working diligently to procure jumbo money and has recently finalized a portfolio jumbo loan product. 

This product is available and exclusive to Intero Real Estate Services clients.  Contact me and I will set you up with one of my best loan officers.

Features include:

• 5/1 ARM available TODAY!
• Rates starting at 5.125 for 5/1 ARM
• 80% Loan to Value up to $1 million
• 80% Cumulative Loan to Value and 75% Loan to Value up to $1.5 million
• 80% Cumulative Loan to Value and 70% Loan to Value up to $2 million
• No adjustments for cash out, investment properties
• Up to 50% Debt to Income Ratio
• Unlimited cash out up to 50% Loan to Value

Let me know what followup topics or specific areas I can look into for you.

Did you get a chance to see Chairman Ben Bernake speak out on 60 minutes about The Federal Reserve's work to get the US out of this economy slump?  It was a great education on the economy and how the Federal Reserve is working to fix the problem.

The Chairman had great perspective and history to reflect on since Bernake specialized in the Great Depression during his PhD at MIT.  Based on his studies and experience, I think we have the right man in the right place, but as the Chairman himself said "The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We've seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we're not gonna see recovery."

Bernake points out that the "key issue is the banking system and the financial system".  The Chairman ensures America "we do have a plan. We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time."

I most enjoyed his analogy of the situation as it puts things in perspective if you are angry about all the "bail-outs".  Bernake puts it "If you have a neighbor, who smokes in bed. He's a risk to everybody. If suppose he sets fire to his house, and you might say to yourself, you know, 'I'm not gonna call the fire department. Let his house burn down. It's fine with me.' But then, of course, but what if your house is made of wood? And it's right next door to his house? What if the whole town is made of wood? Well, I think we'd all agree that the right thing to do is put out that fire first, and then say, 'What punishment is appropriate? How should we change the fire code? What needs to be done to make sure this doesn't happen in the future? How can we fire proof our houses?' That's where we are now. We have a fire going on."

So since the fire is still burning, we all need to focus on getting the banking system on track and the fire put out first, hence all the bail-outs.  Interfacing with buyers, I am seeing great progress being made out there getting loans and most banks willing to negotiate with short sales rather than foreclosures.  Things are moving and banks seem to be slowly working back into fully functional.

As they say, history repeats itself and we should learn from history.  So Bernake is making his best effort to do just that. The Chairman says we were close to another Depression in October 2008, but he believes we have averted this risk.  What we learned from the Great Depression in 1929 is that the Federal Reserve made two mistakes: 1. The money supply contracted too fast, 2. The Federal Reserve let the banks fail. 

Bernake committed on national TV that the banks ""are not gonna fail." and he is going to do his best to fix this problem and land things gently.  So everyone out there, hang on...and let me know what you are seeing and feeling out there to add to this!  Thanks!

See video of Bernake's interview (13minutes, followup videos available)

What is the current FHA loan limit in Santa Clara county?

The February 2008 Stimulus Package temporarily raised the FHA loan maximum from $417,000 to $729,750 through December 31, 2008.  The intent and result was that higher priced homes (like we have in Santa Clara county), should be easier to finance for those qualified.  What I personally witnessed in the market were homes in the $800,000 range were more likely to close escrow due to these easier, more readily available  and government backed loans.  Properties over this $800,000 price-point either require a significant amount of down payment or the use of a jumbo loan which is very difficult to get in today’s market.  As a result, we have seen an impact in the sales of higher priced homes.  I believe this to be part of the reason for the decline in market values seen in 2008.

What is the new 2009 FHA loan limit for Santa Clara county?

The jumbo-conforming $729,950 loans are able to be locked in by most banks ONLY through November 15^th, 2008…this week!

There has been some question as to whether this loan limit would be extended due to the state of the economy, but today it was confirmed it will not.  The new loan limit effective Jan 1, 2009 is $625,000 for our high-cost Santa Clara county area.  Read the full news release by FHA at:  http://www.hud.gov/news/release.cfm?content=pr08-174.cfm

I anticipate these loan amount changes will further affect our real estate market and not for the better.  As I mentioned above, the $800,000 and below price point has been pretty active since loans were reasonably attainable for qualified buyers.  Now that the loan limit has decreased, I anticipate homes over $700,000 (since 10% on a $700,000 home is about a $625,500 loan amount) will now be much more difficult to sell.  The other possible implication is that today’s $800,000 home will have to drop its price to $700,000 to get a good solid buyer.  

It is unknown at this point what true impact will result, but given the current recession, declining home values and the financial unrest in our nation, the impact is likely to be significant.

Please add your thoughts and comments below...

What are the current loan limits in Silicon Valley?

Today there are three categories of loans: conforming, jumbo-conforming, and jumbo in the Silicon Valley real estate market.  Read more about these types of loans.  Conforming loans are for loan amounts under $417,000.  Today with Jumbo-conforming loans, buyers are able to finance upto $729,950 at a special mid-level interest rate.  Jumbo-conforming loans will be dissolving come December 31, 2008 which means there will soon only be conforming and jumbo loans again as there was prior to the Ecomonic Stimulus Act of 2008 (ESA).

How will these loan limits change?

Starting January 1, 2009, only conforming loans and Jumbo loans will be available since jumbo-conforming rates are ending Dec 31, 2008.  Upon the New Year, buyers will only be left with the choice of standard conforming and jumbo loan options.  In special high-cost areas per the Fannie Mae report dated October 16th (report from Fannie Mae on High Cost Area Limits), special high loan amounts will be allowed upto to $625,500.  

Saratoga real estate and surrounding areas are considered high-costs areas and therefore this new limit will apply.

What is the difference between the new ESA and HERA laws?

There are definitional differences between the two laws that were enacted in 2008 authorizing Fannie Mae to have higher loan limits for high-cost areas. The formulas are as follows:

Economic Stimulus Act-ESA (approved March 6, 2008, effective through Dec 31st, 2008)

This legislation allowed for the higher of $417,000 or 125 percent of the area median home price to be the new jumbo-conforming loan limit.  This law stated that the loan amount is not to exceed 175 percent of $417,000, or $729,750 (applies only for one unit residences, not multi-family).

Housing and Economic Recovery Act (Approved July 30, 2008, into effect after ESA expires)

The Housing and Economic Recovery Act of 2008 (HERA), enacted on July 30, 2008, amends Fannie Mae’s charter by establishing "high-cost" area conforming loan limits in addition to the current "general" conforming loan limits. This new legislation is intended to provide additional liquidity to the housing market.

This HERA legistlation says the loan limits will be the higher of $417,000 or 115 percent of the area median home price—not to exceed 150 percent of $417,000, or $625,500. (applies only for one unit residences, not multi-family)

 What might the loan limit change do to the real estate market?

In today's Silicon Valley real estate market, there are many higher priced homes.  It is common to see a difference in home sales below $1million and above $1million since these are two completely different buyers who would purchase these properties.

What is the affect for homes valued under $1,000,000?

The ESA and HERA legislation most benefits the buyers who are looking to purchase less than $1million homes.  It is a bank requirement today that buyers have a minimum of 10% down in this price point.  To quantify this, a buyer qualifying for a $729,950 loan will be able to puchase an $800,000 property with 10% down.  Therefore as the numbers work out, homes in the $800,000 price point have seen the most benefit with the ESA law. 

With the ESA law changing, homes under the $1million price point will likely see an effect on the sales price, purely due to the ability of buyers to get loans.  $800,000 homes that can be purchased today with a jumbo-conforming loan at $729,950 will soon only be afforded by a $625,500 loan amount.  Assuming the buyer still has $80,000 to put as a down payment, the effective purchase could be decreased to $705,500 from $800,000 given the ability of the buyer.

What is the affect for homes valued OVER $1,000,000?

In the $1million plus market, buyers are typically bringing a large percentage of cash into the property purchase.  There is little to no tax advantage for a buyer to finance over $1.1million therefore most buyers will bring in the cash difference to purchase a $2,000,000 or greater property.   This price point has already seen a large affect as jumbo loans are hard to come by and the cash requirements for a loan amount of $729,951 and above is more like 20-25%.  If the loan amount does exceed $1.5million, then the buyer is required to put down 30-40% cash.

With the dramatic decline in the stock market, buyers' abilities to purchase homes like this one over $1million has become very limited.   Buyers of this type of home typically will put 50-75% down in cash, typically coming from stock investments.  With the decline in the stock values and the increased difficulty of getting a loan, these high-end buyers are holding off from making any purchases so their stock can recover.

  Keep watch for more postings on how these loan amounts changes affect the local Silicon Valley real estate market.

Fear paralyzes the Saratoga CA real estate market with the news of the national  financial crisis

Sales in Santa Clara county (home of Saratoga CA) are down this October to July 2008 levels (1877 pending units) even though there are great deals to be had today in the Saratoga CA and surrounding real estate markets.  With the inventory still up over 5000 (5041 active homes on 10-20-08), there are many sellers who realize the urgency of their situations and are therefore making deals to get their property sold.  I've personally heard sellers say, "if the buyer does not want the pool, I'll have it filled in for them...just bring me a buyer".

What is a good investment today in the Saratoga CA market?

 One interesting statistic that I think is worth looking into as people around the world are in panic mode about the financial crisis is comparing stocks to real estate.  Anyone know what the Dow Jones Industrial Average was 10 years ago on October 1^st, 1998? The answer was 9,181.  Take a guess at where the Dow Jones Industrial Average closed on Friday, October 17^th, 2008.  The answer is 8,852!!!  That means for a 10 year period because of the volatility in the stock market, you would have caught it at just the wrong time and had your portfolio trade sideways or actually for a slight loss.  This is relatively rare for the stock market, but none the less it happened for the past 10 year period.

Saratoga CA real estate is up when looking at a 10 year perspective

 If you look at home prices in 1998 compared to today how are we doing?  The national median home price in October of 1998 was $154,500.  The national median home price in August of 2008 was $221,900.  (In Saratoga CA specifically, the median home price in 1998 was $825,000, today it is $1,678,000, over 2 times the prices 10 years ago!) 

2007 was the first year ever that the national median home price declined.  That phenomenon has happened far more often in the stock market.  You can’t find a 10 year time period since they have been keeping track where real estate prices were down. 

Take advantage of the time and buy real estate!

As a real estate professional, I think it is an amazing opportunity right now for buyers because they have very little competition.  It is rare that rates will be relatively low being below seven percent and even below six in some cases, and yet most people aren’t going out and taking advantage of it.  How often have you seen a buyer’s market and low interest rates at the same time!  Are we at the bottom?  Don’t know for sure, but buying now will allow you to take full advantage of the recovery when it happens.  Again, if you are looking over a 10 year time frame in real estate, there is very little risk and I believe huge opportunity right now! 

So if and when I can be of further service to you, please let me know, theresa@homeownerexperience.com

Words by Rick Soukoulis-Intero Mortgage

Surfers use to say that there would be three waves, each bigger than the previous one, and that it was always the 4^th wave that would be the perfect one to ride in on.

As hard as it might seem to fathom, the $700 billion Rescue Bill might just be the 4th wave that signals the start of calm seas, that all the turbulence or the first three waves has been flushed out to sea.

Using that analogy, let’s look at the financial crisis in terms of waves.

• The First Wave was the sub-prime crisis, a term that almost seems quaint and irrelevant now.  Its last victim was Indy Mac (back on July 11) follow the quick and ferocious failure of mortgage companies across the country.  Shortly thereafter, Bear Stearns failed but was partially bailed out by governmental assistance.

• The Second Wave came later in the summer and early fall. We saw FNMA and Freddie Mac put into conservatorship by the government, Lehman Brothers fail, the BofA announce its intention to take-over Merrill Lynch, and AIG kept afloat with an $85 billion government loan.

• The Third Wave was at the end of the quarter as, within days of each other, Washington Mutual failed and Wachovia sold itself to Citigroup in a desperate effort to avoid bankruptcy.  Wamu was the nation’s largest Savings & Loan and Wachovia was the fourth biggest bank in the country.  Combined, they had over a trillion dollars worth of assets!  That’s a helluva lot of banking assets to essentially fail in one week.

Although we all pretty much know who has been affected, the First Wave had the most immediate impact on the real estate industry.  It clobbered mortgage originators, Realtors, and anyone trying to sell a home or qualify for a mortgage.  This was Main Street getting taken down big-time, and it hurt.

The Second Wave impacted Wall Street more directly, but Middle Class America started getting nervous.  If these giants companies weren’t safe, who was?

By time the Third Wave hit, nervousness turned to fear, with banks failing across Europe and mainstream magazines like Time featuring covers asking if we were headed into another Great Depression.

With mortgages and other debt instruments being the root caused of the current crisis, we can see how the devastation has swept through different communities of interest. 

1. First to be devastated were the people and companies that created and originated these mortgages. 

2. Next to be hit were those who packaged it, securitized it, rated it, insured it and sold it.

3. Finally to feel the impact were those who held it.  These include giant banks and insurance companies, pension funds, and indeed, FNMA and Freddie Mac themselves.

It seems very clear to me that the boil has been lanced with the $700 billion Rescue Plan.  Everyone even remotely involved in the Crisis has felt the pain. The three huge waves described above have taken their toll, and the fever seems to be breaking.

There’s no guarantee that the Rescue Plan will work exactly as promised. But quite obviously a lot of bad things have been flushed out, and calmer seas are very near at hand.

I’m not ready to start singing Happy Days Are Here Again, but I can already hear it softly in the background.

Kitchens are the energy hog of the home, thanks to the refrigerator, which is second only to heating and cooling equipment in energy use. Throw in ovens, cooktops, dishwashers, microwaves and other small appliances, and you can see how a kitchen can cook up most of your energy bill.  Decreasing energy use is not the only way to make your kitchen green. You can also create an ecokitchen by improving indoor air quality; using materials made from recycled or rapidly renewable resources; and by choosing countertops, cabinets, flooring and finishes with low environmental impact.

The easiest way to go green is to boot energy‐gobbling appliances. If you're thinking of renovating, consider complying with green building standards, such as the EPA's Energy Star or the Department of Energy's Building America, which are 30‐70 percent more efficient than regular code. A green kitchen remodel won't bring your entire home up to green standards, but it will noticeably fatten your wallet.

For more of Theresa's Green Tips, search the Blog for posts categorized as "green tips".

Do you always wish someone would tell you when is the right time to buy stock or real estate or for that matter anything that will make you money?  Well here is the official word from a internationally recognized real estate investor... 

Donald Trump: 'Now is the time to buy'

Sunday, October 28, 2007

On his new CNBC show, "The Billionaire Inside," Donald Trump believes this is one of the best times to get into real estate.

Question: With everything going on in real estate right now and the fallout of the subprime market, is this a good time to invest in real estate?"

Trump's answer: It's the best time. Two years ago I would be making speeches and telling people 'don't go into real estate.' People would be paying me lots of money to tell them how good it is and I would be saying don't go in.

I also told people to stay away from those mortgages; I called them 'exploding mortgages' — stay away.

This is the best time. You can make great deals today that you could not have made a year ago, you couldn't have made two years ago. It's funny, there is less interest in real estate now because people have been hurt and this is where there should be more interest. This is the time to really go in, this is the time to really bargain, really chisel away and go in and make some really good deals. You could not have done that a year ago.

From Joyce Conlin-The Loan Source-joyce@theloansource.com

These are truly crazy and historic times. The current financial crisis was unimaginable just a year ago. The government’s financial rescue plan is set to be voted on by the House and Senate today, which will provide much needed liquidity for ailing banks and financial institutions, both nationally and internationally.

In other news, Citigroup has agreed to purchase the troubled bank of Wachovia--one of the nation's largest banks--with the help of FDIC assistance. In addition, a major inflation report came in high this morning, but it is not having the negative impact on Mortgage Rates that would have been expected, since the government's rescue plan is dominating the headlines.

So far, interest rates look to be improving, due to the significant uncertainty in the stock and financial markets. Therefore, I not rushing to lock my clients rates this morning. However, I will monitor the situation carefully and keep you advised of any changes.

There are several factors that make buying before the end of 2008 a great decision, many buyers have already caught on as pending sales are higher this week than they have been since 2005!

Consider these reasons to by now:

1.       Rates are quite low, 30 year fixed in the high 5%-and looking like they will drop more

2.       The president's economic relief package which included special 2008 loans from $417,000 to $729,950 are no longer going to be an option after the new year

3.       There are still many homes on the market at great prices, many are bank-owned/REOs or priced great since they are having to compete with them.

If you are ready to take advantage of these great factors, let me know!

SIMPLE FACT: Researchers have measured the relationships between employee productivity and indoor air quality and found that reduced indoor pollutant levels resulted in reductions in absenteeism. 

WHAT YOU CAN DO: Have a HVAC contractors review your home's air quality and make suggetions for improvement as proper sizing and cleaning of heating, ventilation, and air conditioning (HVAC) systems can actually save money on energy costs and improve indoor air quality.

Read more details at http://green.homeownerexperience.com

 By Rick Soukoulis

Chairman and CEO

Intero Mortgage

9/8/2008 

Doesn’t it seem like more has been written on Fannie Mae and Freddie Mac in the past 48 hours than has been written in the past ten years?  And yes, I agree, that most of it’s terribly confusing. 

Heck, I’ve been in the mortgage business over 27 years, and even I find some of the stuff confusing. 

But let’s get past all the double-talk by the politicians and the Secretary of the Treasury.  There are some very elemental truths to the whole failure of these two giant companies with the strange names. 

Let me start off by saying that for Realtors, homeowners, and borrowers, it’s all very good news. 

Fannie and Freddie only failed in the sense that their shareholders  took a beating.  The government action came in and rescued them and is strengthening them as you sit there reading this. 

Their shareholders were losers. 

The winners are Realtors and people buying homes. 

The morning began with a monster stock market rally on the news of that they were seized.  Well, markets hate uncertainty, and this rally was a reaction to the steps the government has taken. The uncertainty is gone.  Fannie and Freddie will not fail or file for bankruptcy. 

But forget about the stock market. 

What about interest rates? 

The bond markets were more than a bit ecstatic to hear the news about Fannie and Freddie being rescued  They responded with rates falling as much as 3/8^th of a point today. 

This was a strong vote in favor of the stability that will come with a government infusion of capital into Fannie and Freddie. 

It’s also a vote of support for the Federal Reserves statement that they and the Treasury Dept. will now buy mortgage backed securities to help drive down mortgage rates.   

There’s a huge amount of firepower at the Fed and at Treasury, and if they’re in there buying mortgages backed securities, that will cause mortgage rate to fall. 

I could go into much more detail, but let’s save it for a conversation.  I can talk your ear off about this stuff, and I’d be happy to chat with you about it if you want. 

Let’s just get back to some key truths. 

Fannie Mae and Freddie Mac have been rescued and strengthened. and they will only get stronger. 

This is fact. 

Rates have started to come down. 

This is a fact. 

Now is the time for people uncertain about buying a home to get off the fence and just do it. 

And this, too, is a fact. 

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