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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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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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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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Carbon Monoxide Detector Law goes into effect

by Gail Thomson on June 27, 2011

in Blog,Sellers

A statewide requirement to have carbon monoxide detectors installed in all California homes goes into effect July 1.

The Carbon Monoxide Poisoning Prevention Act (Senate Bill 183) is a two part law that states the detectors must be installed on or before July 1, 2011, in single-family dwelling units.

The law goes on to state that single family homes with fossil-fuel burning appliances and/or an attached garage MUST have the detectors installed prior to sale. The Transfer Disclosure Statement used in real estate transactions has been updated to state the presence or absence of the detectors.

All other dwelling units, such as apartments or multi-family dwellings, have until July 1, 2013, to comply.

How easy is it to comply with the law? As easy as popping down to your local Home Improvement Store and buying an inexpensive plug-in unit for less than the cost of a night out at the movies.

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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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Top-Tier Homeowners Wait it Out in Los Gatos

by Gail Thomson on February 8, 2011

in Blog,Buyers,Sellers

Spurred by a recent blog from Altos Research suggesting that top end homes are on the market longer but take fewer price reductions I decided to see if this holds true in the Los Gatos market.

Percentage Price Decreased - Los Gatos

Percentage Price Decreased - Los Gatos

Median Days on Market - Los Gatos

Median Days on Market - Los Gatos

As you can see, home prices tell you a lot about the market and in this particular case it would seem Los Gatos is following the same pattern with top tier (top 25%) homes staying on the market longer and taking fewer price reductions than the lower 3 tiers. Price points for the 4 tiers are shown below.

Median Price per quartile - Los Gatos

Median Price per quartile - Los Gatos

Interestingly in looking at the same data for the whole of San Jose the opposite would appear to be true with top tiers selling faster and dropping in price more than the lower tiers. However in looking at individual zipcodes within San Jose it would seem that this is more a symptom of the wide variety of market areas in San Jose than a true reflection of the behavior of price tiers within specific markets.

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Did you only bet the house?

by Gail Thomson on September 2, 2010

in Blog,Sellers

3 years ago I could have asked 100 people if there was any disadvantage to refinancing their home loan to get a better rate and I’m sure at least 99 of them would have told me no.     Fast forward 3 years and the distinction between purchase money loans and non-purchase money loans (refis) has become all too clear for a lot of homeowners.

California foreclosure law prevents lenders from filing a deficiency judgement against homeowners whose homes are in foreclosure if they have a purchase money loan.   In other words, if you never refinanced your loan and the bank foreclose, the only recourse they have is to take your home.  They can’t lay claim to any of your other assets or personal possessions to clear the remaining debt.   However, no such protection currently exists for anyone who has refinanced their loan.  A refinance is not considered a purchase money loan even if it’s done purely to lower the rate on the loan.  So by refinancing you are effectively putting not just your home up as collateral for the loan, but all  your other assets and personal possessions too.

Thankfully relief is on the horizon in the form of State Bill 1178 which was recently passed by the State Assembly.  This bill extends the protection to those who refinanced their home loans up to the amount of their original purchase money loan.   Assuming Governor Schwarzenneger  signs the bill into law it should take effect in June 2011.   Note, however, if you’ve been using your home like an ATM machine to finance new cars, holidays or even home improvements, the additional cash-out value will not be protected by this law.   If the bank forecloses you could still find yourself at risk of losing more than your home.

Let’s hope our Governor gets signing soon so we can take advantage of these historically low rates without risking the shirts on our backs.

UPDATE: Arnie didn’t sign it into law so it’s still a case of “refinancer beware”

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Knowledge is Power

by Stephen Slater on August 26, 2010

in Blog,Buyers,Sellers

Whether you are actively looking to buy or sell your home or just trying to keep up with this adrenalin fueled ride of a market, you need stats and info to clearly understand how the market is moving.

If you look around or jump on google you can find huge amounts of data out there but trying to figure out what it all means is not always easy. We knew there had to be a better way and there is. We found a powerful service that not only reports the market stats but actually interprets what it all means and gives it to you in plain language. Not only that, they do it by zipcode so you can be sure the information really holds true in your market and not the next school district over.

If you’d like to give it a try, sign up below for a comprehensive up-to-the-minute market analysis for some of our key zip codes. We’ll send you the lates report and then follow up weekly as the information is updated. If you’re interested in an area that’s not already listed, let us know and we’ll get the data for you. If you have a thirst for even more in-depth data; no problem – we can get our hands on enough data to make your head spin.

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