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Buyers

The end of the summer buying season shows a traditional slowdown in the market but doesn’t detract from the fact that U.S. home prices have risen in October by the most in 6 years.

Record low mortgage rates, rising rents and renewed confidence boosted demand in the once battered housing market.  At the same time, the number of available homes is at the lowest level in 10 years according to the National Association of Realtors.  The resulting combination of low inventory and rising demand pushes up prices.

The Spring market in Santa Clara County took off in early March this year.  It will be interesting to see how it fares in the coming season.

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How’s the housing market? Is your company hiring?

by Gail Thomson on September 12, 2012

in Blog,Buyers,Sellers

Real estate agents are often asked where we think the housing market is headed by people we meet.  By way of response I often reply with a question “How’s your company doing?   Are you hiring?

Here in Silicon Valley we definitely see a direct correlation between the hiring patterns of local companies and the health of the real estate market.    When job reqs disappear so do home buyers and when companies are fighting for new employees, we’re fighting to get offers accepted in a bidding war.   There’s good reason to expect this correlation to continue; the Bay area has limited space and there’s not much room to expand beyond our current boundaries.

When we try to predict the future of our housing market we can look to job growth predictions as a point of reference.   While not an exact science it’s probably the best indicator we have of future housing demand in our area.   According to a recent independent study looking at Bay Area job growth through 2040, by far the largest percentage of job growth in the US is expected in areas that are all key components of the Bay Area economic base.   That’s good news for our local economy as well as our real estate investments.

Obviously many things factor into the creation of a healthy housing market; interest rates, economy, affordability, desirability, election cycles; but if the job growth predictions are accurate it looks like we have sustained demand for housing in our mid to long term future.  Excuse me while I go buy some investment property…. :)

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Los Gatos schools have come out ahead again, with most schools and districts gaining ground from 2010′s already stellar performance.

Scores are based on testing administered to students in grades K-12 in the previous academic year. The excellent API results add yet another reason to the lengthy list that makes Los Gatos such a desirable area.

An API score is something that typical Los Gatos home buyers hold in high regard. With numbers in the 900s Los Gatos continues to excel in this area.

 

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It’s Deja Vu all over again

by Gail Thomson on May 3, 2012

in Blog,Buyers,Sellers

I feel like I should be watching reruns of Lost – Season 1 and listening to Boulevard of Broken Dreams on my playlist (except I didn’t have a playlist back then). It’s like 2005 all over again, with buyers bidding 10 and even 20 percent over asking, zero contingencies and multi-million dollar cash offers all over the place.

Do we have a county wide state of amnesia? Does anyone remember 2006, 2007 or even last month? You know, a time when the buyer was paying a price that the market could easily support because they already had comps to prove it, not one they hoped would just get them the house and they’d worry about paying for it later.

Appraisals in rising marketsBuyers and sellers are inclined to act emotionally where their home is involved. I’ve always held the belief that the agents, lenders and appraisers are the necessary voice of reason, keeping offers in check and making sure buyers are truly “qualified”. How does that play out in today’s world of high demand and low supply, particularly when it comes to appraisals? How does an appraiser bring in a value when all the recent comps have closed significantly lower but there were 5 offers over asking within the first week? Perhaps the question really is SHOULD an appraiser be able to bring in a significantly higher value in that situation? Let me be clear, I think a 2 or 3 % increase is easily justifiable, I’m talking about 10 and 20 % increases here.

According to one appraiser I talked to they use the simple fact that so many people ARE bidding over asking for the property as an indicator of where the market is. Hmm, how do lenders feel about that? After all, buyers are emotional and in my opinion it’s easier to over-bid for a property when you’re in competition, there’s nothing else out there and it’s only another $100 per month on your mortgage payment in order to get into a home now.

If we’re to avoid another crisis like the last one wouldn’t it be more prudent for the appraisers to have some stricter guidelines about how much a “changing market” can affect the appraisal value? If the appraisal comes in at a lower value based on recent sales then a buyer is more than welcome to bring in their own cash to close the deal. If they are neither able nor willing to do that then perhaps they’re not REALLY qualified to buy this house or the supportable market value (as opposed to the anticipated market value) hasn’t quite got there yet. Either way, appraising a house at a value way higher simply because there’s no inventory competing with the house “at this precise time” seems to me to be a sure sign of history repeating itself.

What do you think?

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Locking in Peace of Mind

by Gail Thomson on April 13, 2012

in Blog,Buyers

With historically low loan rates starting to inch up borrowers should consider rate lock agreements in their home purchase and refinance activities. Locking in an interest rate freezes the terms of the loan while it’s being processed; particularly important if an increase in rates would impact your ability to qualify and/or pay for the loan.

Lenders will typically offer a rate lock agreement to borrowers with an existing purchase agreement. Most will offer a free lock for 30 days, others will charge points on the loan, occasionally refundable at close. You may also be able to lock for 45 or 60 days, but again, the lender will likely charge for this.

If you are unsure when your home purchase will close you may want to delay locking. Knowing when and how long to lock in a rate requires a clear picture of the loan process and a good estimate from your lender on how long it will take to approve your loan and complete all associated paperwork.

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I set out this morning to see how my home town of Los Gatos was faring in the property market compared to the rest of the Bay Area.  I started, as I often do, by running some basic calculations on median list price and median price per square foot to see where we are compared to the peak of late 2006 thru 2007.

As the graphs indicate, Los Gatos overall is currently standing at about 16% below it’s peak.  Prices here have rebounded a little but when you look at the data, they actually didn’t fall that much either (Note: theses are averages and medians, your mileage may vary!).    For homeowners no decline in value is ideal of course, but it’s certainly not the bloodbath other areas have experienced.

As if reading my mind, the Mercury News ran an article this morning reflecting similar stories across the Bay Area.  Affluent areas fell 10-20%, less affluent areas 50-60%.  Affluent areas are rebounding faster (some even back to peak levels), less affluent areas are still engaged in REO and short sale trench warfare.

Los Gatos market activity patterns often trail a few weeks behind some of the cities further up the peninsula.  According to my colleagues there, Palo Alto, Mountain View etc are experiencing multiple offers and rising prices.  It will be interesting to see what happens here in the next few weeks.

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Real Estate prices are down, interest rates are at record lows, you’ve found your perfect Silicon Valley Dream Home but you still have 1 hurdle to cross;  Financing

Don’t sit on the sidelines assuming you can’t buy because you can’t get a loan.   Here are 5 things the lenders are looking for in order to approve that home loan.

1. The Down Payment.  While 20% down is preferable, don’t count yourself out if you don’t have it.  You can still finance up 95% conventionally and up to 96.5% through FHA loans.  There will be additional cost associated in the form of mortgage insurance but this may still end up being financially better than continuing to rent or stay in your current home.

2. Job History.  Banks want to know that you have the ability to remain in the home and make the payments.  Job History will be vetted carefully looking for career changes and earnings continuity.  Short periods of unemployment shouldn’t affect you too negatively.

3. Debt.  Banks want to know that you can comfortably afford to pay ALL your debts, not just your mortgage.  Debt to income ratios vary but typically your total monthly debt should not exceed 41% of your income.

4. Credit Score. FICO scores range from 300 to 850.  Lenders typically look for 640 and above with higher scores lowering the costs.  FHA will consider borrowers with lower scores.

5. Paperwork.  Gone are the days of the no doc loan frenzy.  Lenders want to see paperwork to support your income and assets.  That means paystubs, tax returns, account statements etc.

Talk to a reputable lender to find out what is available to you.  Contact us for a referral.

Based on an original column by Candice Choi.

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Los Gatos continues to be a great place to buy a home if schools factor into your decision.

The API scores awarded based on statewide tests administered in 2013 were exemplary across the board.

Los Gatos buyers say the schools and the small town community are key factors in their decision to buy here.

Los Gatos is host to several school districts with the majority of the town being served by Los Gatos Union School District and Los Gatos – Saratoga Union High School District.

To the east of the town you can find some great neighborhoods that fall within the Union School District and Campbell Union High School District. To the north at the Campbell and Saratoga borders, homes are served by Campbell Union and Campbell Union High School Districts. Heading south on 17 you will find the small districts of Lakeside and Loma Prieta serving the Mountain communities with children moving on to the Los Gatos – Saratoga District for High School

For 2013 scores refer to the list of all the 2013 API scores for schools serving Los Gatos addresses.

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On broker tour yesterday I visited a beautiful home newly listed by a friend of mine on El Gato in Los Gatos.   Although a modest 2 bedroom home, the owner had spared no expense in remodeling (right down to the $4000 kitchen sink!).  This home and it’s 1 bedroom rental unit in back are the epitome of move-in readiness.  I asked him how traffic had been and had he seen any interest yet.  He proudly showed me the avalanche of realtor cards he had gathered that morning alone, only 1 hour into tour.  He then told me he was already talking with a buyer about a potential all-cash offer.  That’s not all, his previous listing (a Willow Glen home in the $1 million+ range) had also sold to an all-cash buyer.

One of my own recent transactions was also all-cash, though a more modest Campbell town home.  We’re not alone, this is the story I’m hearing up and down the peninsula, with multiple offers and large cash injections being far from unusual.

This morning I found an article from Bloomberg in my intray reporting on exactly this trend in Silicon Valley and attributing it to the recent boom of IPOs creating cash rich buyers.   What’s more one analyst reports this is only the beginning for us.

Take a read and let me know what you think.

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FineHomeMoves - Intero Los Gatos

If you’re planning to buy a home in Silicon Valley this year you need to be aware of changes afoot in the loan business.  As of October 1, 2011, high balance conforming loan limits in the Bay Area are set to be reduced from $729,500 to $650,500 for a single family dwelling for both conventional and FHA mortgages.   That’s a reduction in borrowing power of $79,500.   The loan limit reduction is taking place across the country and will impact all “high balance exception” counties in California, including Santa Clara, San Mateo and Santa Cruz.

Currently, someone buying a home priced at $900,000 in Santa Clara County can put 20% down and not have to take out a jumbo/non-conforming mortgage.  After September 30, 2011, the same home buyer will need to have 28% down payment (an additional $79,500) in order to avoid a jumbo loan scenario with higher interest rates.  A home buyer not wanting to put more than 20% down with a loan amount of the new limit of $650,500 will be able to purchase a home priced around $814,000.

With FHA financing, a home buyer in the Bay Area can currently buy a home priced at $756,000 with a 3.5% down payment.  After September 30, 2011, the same FHA home buyer with 3.5% to put down will be able to buy a home priced at $674,000, a significant reduction in buying power.

Come October, homes in the $814,000 to $900,000 price range may find it harder to sell as previously qualified buyers can no longer afford the home.  It will be interesting to see how that affects prices in that specific segment.
If you’re considering buying or refinancing and plan to make use of non-conforming loan limits don’t wait until August when the banks will already be inundated with the pre-deadline rush.   They may even have cut-off dates much earlier than August in order to avoid having non-conforming loans on their books past the deadline.

 

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