November 18, 2009
• UNEXPECTED DROP IN HOUSING STARTS, NOT FROM THIS LETTER!
• MIXED MESSAGES ON HOUSING
• US$ CONTINUES TO BE WEAK, CHINA REFUSES TO RE-EVALUATE THE ASIAN TIGERS ALL APPEAL FOR STRONGER US$
• $ FOR CAUKERS NEXT?
• % RATES UP BEFORE THE ELECTION IN 2009 OR 2012?
• INVENTORY DECLINING, PENDINGS DECLINING, SALES DECLINING, CANCELLED/EXPIREDS/WITHDRAWNS REMAIN UNCHANGED
Gold continues to move higher as it stands at $1144.60 per troy ounce today. India has purchased 200 metric tons for their reserves and other Asian Tigers have informed the International Monetary Fund they plan to purchase at present and future auctions. Cotton has more than doubled from $38.71 to $72.55. Copper is higher up over 7% for the week at 313.35, which is from a 52 week low of 125.00. Finally, the other builder need, Lumber is at 233.90 from the 52 week low of 137.90. Of course, let’s not forget Crude Oil at 80.33 and a 52 week low of 32.40!
I saw a paving contractor I recommended for a project in 2003. I asked if he remembered the project and the price he bid. “Sure do”, he said, “that project at $58,000 would cost about $150,000 today”. “Oil and labor benefits are the reason for the higher price”, he said.
Should housing starts be unexpectedly low when cost of construction is rising and the inventory of short sales and foreclosures and REO weigh in on the market? I don’t know where the newspaper people are getting their forecasts from, I do know common sense tells me unless builders work for no profit housing starts will be low.
That leads us to existing home sales. With the tax credit ending 2010 ( sign by April and close by June 2010), will home prices begin a slide back down, remain the same or slowly inch up? Oh Boy, where is Merlin now? Let’s try and take that apart.
With the tax credit gone will the benefit for buying lessen? That really depends on interest rates. Bernanke has said he will not raise rates. The rally we have in the stock market has been on profits by US Corporations based upon their ability to cut back, lay off rather than increase revenue. So that means we need employment to increase. The Congressmen are already looking at the November 2010 election. Congress knows that if unemployment remains high and is not declining their job is on the line. Do you want a job Mr. congressman, get employment moving. Are the Congressmen up for election intent on passing a universal medical coverage or moving on the employment issue? My common sense tells me jobs will replace health care issues. At present the expectation is that unemployment will move to 11% next quarter and then down to 10% by end of 2010. That is not going to help the Democrat “Blue” majority! The GOP, “Red”, is already aiming at employment.
Adding to the unemployment question is the Household Creation question. 2008 was the first time in years that household creation fell. Household creation was a major motivator of home buying along with employment numbers. It has since flattened with a pent up of demand of the household created in 2008 and 2009 laying to the question of how long will they rent? Many economists are optimistic on this pent up demand bursting into the housing sector. If you add the potential of employment declining, we could very well see a stronger market in 2010. The National Association of Realtors expects home prices to increase 4% in 2010 with sales hitting 5.7 million units slightly above the 2007 level.
Of course the key to this will also be interest rates. Bernanke says rates will remain the same as we have no inflation, economist look at rates increasing by the 4th quarter of next year. Other economists see flat rates for 2 more years or 2012. The “4th economists” of the national poll think the employment numbers will be declining, job creation expanding and most probable is the household creation log jam busts and renters become buyers. On the “other side economists”, the forecast is for a weaker economy, weaker dollar and increased unemployment. With all pressure on the US$, I put my money with Congressman wanting their jobs and job creation as the major focus of the remaining 2009 and into 2010. What does your common sense tell you?
Obama got the message from China, no on revaluation of the Yuan! The U.S. will only hurt the rest of the world who use the US$ as a reserve currency by keeping the US$ low or falling. This will only drive the 3rd world and maybe other allies into the China Circle. Let’s get back to basics. We can drop the price of commodity prices and control inflation at the same time we raise interest rates and strengthen the US$. Does that make sense? What I am saying is that commodity prices are rising only because they are a store of value versus owning the US$. The rises in commodity prices were and are not from supply and demand for end product use. The Chinese are supposedly buying for their stock pile. Where they, or was it to put further pressure on the US and the populace. Their citizens are subsidized to a great extent. Individual rights are not a subject for discussion China told Obama. OK, Obama back to the drawing boards. IF and that is an IF, the economy picks up production begins to increase, inventories accumulate and interest rates increase what happens to the speculator and investor who bought commodities for a hedge. The answer is they sell. Gold is ONLY a store of value. If the US$ strengthens the move is from GOLD which cost to hold to the US$, Treasury Bills and Bonds which pay interest!
So where is the new wave of stimulus that will help in job creation come from? How about a new twist to an old success story: Cash for Clunkers becomes Cash for Caulkers. One highly successful program was Cash for Clunkers. It would not have induced a boom without it! John Doerr of Silicon Valley and former President Bill Clinton have suggested Cash for Caulkers and it has one of the top things Obama is looking at per Rahm Emanuel Obama’s Chief of Staff. Doerr’s plan would cost $23 billion over 2 years and most for incentive payments of $2000-$4000 for weatherization projects. The homeowner would pay half the costs. $3 billion would be allocated to retailers and contractors to promote the program. Bill Clinton points to the Houston program that pays about $1000 to winterize a home. It worked because homes need other improvements and the cost is bore from the stimulus. Not bad thinking!
Oh yes, watch out for a correction in the stock market if this all comes out. Commodity driven companies will be liquidated, the bond market will go down and we could see another bubble burst. So go out and take some profits before the end of the year!
The key to the buyer is VALUE! Oh yes, a new chart with more information. Let me know if you want other cities added.
Tuesday, December 8, 2009
Wednesday, November 11, 2009
Market Commentary
November 2, 2009
Last week I wrote about the disparity between “New Home Sales” versus “Existing Home Sales”. My commentary rationalized the disparity to the cost of construction and the escalating price of commodities due to the weakness in the US$ and the accumulation of US$ by developing nations, most notable to that being China.
This last week New Home Sales fell 3.6%, while big order ticket items such as cars, washing machines and the like increased 1%, and economists forecasted a 3% GDP growth for the 3rd quarter 2009. Add this to the thought process; “remodeling prices” are down an average of 5%-10% across the U.S. With the cost of construction being material and labor it tells me that the labor part is being discounted to accommodate for the rise in material costs. With “New Homes” sales being down, new home contractors are competing for remodeling jobs. This is a great combination for the reason for increasing existing home sales. The competition from the new homes sector could be increased competition from laid of Commercial builders. The SF Chronicle states commercial vacancy rates are now at 14% and 70 projects for new home construction remain on the drawing boards. The S&P/Case-Shiller home price index composite of 20 cities rose 1.2% in August from July 2009. The best performing areas were Minneapolis at 3.2% and San Francisco at 2.8%.
Last week I wrote about the disparity between “New Home Sales” versus “Existing Home Sales”. My commentary rationalized the disparity to the cost of construction and the escalating price of commodities due to the weakness in the US$ and the accumulation of US$ by developing nations, most notable to that being China.
This last week New Home Sales fell 3.6%, while big order ticket items such as cars, washing machines and the like increased 1%, and economists forecasted a 3% GDP growth for the 3rd quarter 2009. Add this to the thought process; “remodeling prices” are down an average of 5%-10% across the U.S. With the cost of construction being material and labor it tells me that the labor part is being discounted to accommodate for the rise in material costs. With “New Homes” sales being down, new home contractors are competing for remodeling jobs. This is a great combination for the reason for increasing existing home sales. The competition from the new homes sector could be increased competition from laid of Commercial builders. The SF Chronicle states commercial vacancy rates are now at 14% and 70 projects for new home construction remain on the drawing boards. The S&P/Case-Shiller home price index composite of 20 cities rose 1.2% in August from July 2009. The best performing areas were Minneapolis at 3.2% and San Francisco at 2.8%.
Thursday, October 29, 2009
And The Story Goes...
OCTOBER 27, 2009
· SEPTEMBER EXISTING HOME SALES ROSE 9.4%
· COMMODITY PRICES CONTINUE TO HIT HISTORIC HIGHS
· CHINA BEGINS A DIVERSIFICATION OF ASSETS
· HOW TO PRICE YOUR HOME PURCHASE
By all appearances, LOCALLY, it looks like a bottom was hit in our real estate market. From our local statistics foreclosures sales have dropped substantially; although, there continues to be an increasing number in the amount of default notices.
Copper has hit a 30-year high and Cocoa has hit a 28-year high, Oil over $80 while gas has not followed suit and natural gas remains bogged down a historically low prices. Other basic commodities continue to move up toward their historic highs seen in the 70’s. Interest rates for convention 30-year bonds have moved up as Chairman Bernanke has stated the economy has improved and interest rates may move up.
With all the indications that the economy is improving, employment has not improved and forecasts are that there will be a 10% unemployment rate in the first quarter of 2010. The consumer is not spending and the main theme of getting the consumer to spend is VALUE.
VALUE is also the word when looking to purchase real estate. Frankly, value should always motivate any investment. When “FEAR” and “GREED” motivate the real estate transaction is either over valued or under valued. So, how do you evaluate the real estate in a transaction?
The evaluation is part of the statistics that are given each month; it is NEW HOMES SOLD, which still is unimpressive. Why is that so, it is cheaper, to buy than to build is the sole answer. Whenever an economy comes out of a recession there is a recovery phase. During that phase you will notice that Companies are active buying other companies. Why is that, it is cheaper to buy than build. The price of the company being acquired is a function of the stock price of that company. Acquisition companies, like Oracle, use their cash reserves and their balance sheet to purchase other related companies who are weaker, smaller; or just under-priced. So is the case in real estate.
As an example let us look at a home from what they are built of. From my last letter I referenced the cost of oil and commodity prices being a part of the construction of a home. There was a time when West Menlo Homes sold at $1000 per square foot; they since have fallen to $750 or less.
Take apart the cost of a home and break down into land and improved costs. It is not that difficult to find a tear down and use the sale price as a cost of land. You can also look at title of a recent sale and find out what the County Tax Records has for land and improvements. With the County records you will know what a 10,000 square foot lot in West Menlo Park, or a lot in wherever you are looking is worth.
With that price in you can now look at the difference between the asking price of the home you are considering and the latest comp in the area land value. Now divide the square foot of the home into the difference of list and land. What is the result? Take that number and determine what will be the costs of improvements to update or cure the ills of the property. Now you have a new price, divide it by the square foot of the property. What is the resultant? Now look at a newly built property, do the same. Now you know the comparative value. The seller’s are both vulnerable. Here is how you proceed.
Which home do you like? If it is the older home make the offer less the cost of improvements and the cure of the ills. If it is the newly built house use the older house as leverage against the seller. The seller of a newly built home is not in a strong position. The seller is usually a contractor or speculative builder. The seller has bank money invested in the property and has pressure to sell the property either due to the cost of carry and or lender pressure. The seller of the older home may be in a strong position or may not. You need to find out more about the seller. Is it an estate sale, does it need court approval. Are the owners long-term owners and why are they selling.
This is what I do for my clients before they even make an offer on a home. If they are listing a property I look at what is needed to make the home competitive and tell them how many days on the market they must look at in today’s new market place. All of what I have written about is what an appraiser looks at and the lender looks at. It is called “comparative market analysis”.
You can go one option further and that is to contact a builder and find out what is the average construction costs are for a typical size home you are considering purchasing. Find out what the contractor mark up is and then the cost of permits and architectural fees. Once you have that you can make a cost comparison on the “Cost Basis”
Sound complicated, that is what you pay a realtor for, not only to know the market; but how to evaluate the market. Just because the realtor spends money to advertise in the local papers and magazines does not mean they are cost or comparison analysts. They may be simply great sales persons!
Now on to what is causing the increase in commodity prices in a major recession. It’s all about the US$. A strong US$ created growth in the world economies. After WWII the US was the sole economy and country that was not devastated by the war. The strong currency was the US$. The world was building back and their currencies were weak. Weak currency means competitive prices on the world market for goods and services. Since WWII the US has subsidized the growth of all the world’s economies by having a strong dollar. It makes sense, does it not, to look at providing goods and services at a cheaper rate than the same goods and services provided in the US. Therefore, we saw large accumulation of dollars in a country like Japan. Japan has kept its currency weak and they accumulated US$ and provided competitive goods; sometimes at the expense of US companies. Now we have China, but in this case the US$ is weak. The currencies and countries of the world have grown up. It is now time for the US to get back its competitive edge; ergo, a weak dollar. China and many of the world economies have accumulated dollar holding is the form of US Treasury Bonds. These bonds are the countries’ reserves. Too many weak US$ coming in means they must diversify. They cannot sell the bonds they hold dominated in a weak currency of the US$ or the value of those bonds and their reserves would collapse. What decision do they make? How do they offset the loss in value due to a weak US$? The decision was made to accumulate commodities with the excess dollars and offset their reserves with Gold, Copper. These commodities when then be available for their economies. Remember this, China and the Asian Tigers are still controlled economies and subsidized by the State. Mao maybe dead and there is a Western Look to Beijing, but his creation is still there
To me this is a slam-dunk formula for high housing prices and a revival in the Real Estate market and the US economy. Excess reserves, higher construction costs and the off shore buyers come in to acquire homes in the safest government in the world; the foreign buyers did it in the last recession of 1974, they are doing it now.
This Monday I drove to San Francisco to deliver a packet for a listing we have in Portola Valley, 5070 Alpine Road, to an attorney representing a Hong Kong conglomerate of buyers. San Francisco was like a Sunday when I lived there. Parking in the Sutter parking center was readily available on the 4th floor when normally I would be required to go to 7 or 8. As I walked along Kearny and Sutter Streets, I notice parking spots available. What, parking spots available on a weekday in San Francisco? The stores along the way were snack shops and fast food stores. The clothing stores were not open or having big sales. When I returned I asked the girl at the shoeshine spot in the parking lot main floor why it was so slow. She said that it was always that way now. Stores are closing and the restaurants are losing business to the cheaper fast food outlet. That was not the case in Menlo Park and Palo Alto when I returned back from San Francisco. Like they say in Hawaii, “lucky you live Hawaii”, now it is lucky you live in the Peninsula!
From now on you will have charts and graphs to look at. The year-end is usually the best time for buyers to get “value”.
Click the link below for the charts:
· SEPTEMBER EXISTING HOME SALES ROSE 9.4%
· COMMODITY PRICES CONTINUE TO HIT HISTORIC HIGHS
· CHINA BEGINS A DIVERSIFICATION OF ASSETS
· HOW TO PRICE YOUR HOME PURCHASE
By all appearances, LOCALLY, it looks like a bottom was hit in our real estate market. From our local statistics foreclosures sales have dropped substantially; although, there continues to be an increasing number in the amount of default notices.
Copper has hit a 30-year high and Cocoa has hit a 28-year high, Oil over $80 while gas has not followed suit and natural gas remains bogged down a historically low prices. Other basic commodities continue to move up toward their historic highs seen in the 70’s. Interest rates for convention 30-year bonds have moved up as Chairman Bernanke has stated the economy has improved and interest rates may move up.
With all the indications that the economy is improving, employment has not improved and forecasts are that there will be a 10% unemployment rate in the first quarter of 2010. The consumer is not spending and the main theme of getting the consumer to spend is VALUE.
VALUE is also the word when looking to purchase real estate. Frankly, value should always motivate any investment. When “FEAR” and “GREED” motivate the real estate transaction is either over valued or under valued. So, how do you evaluate the real estate in a transaction?
The evaluation is part of the statistics that are given each month; it is NEW HOMES SOLD, which still is unimpressive. Why is that so, it is cheaper, to buy than to build is the sole answer. Whenever an economy comes out of a recession there is a recovery phase. During that phase you will notice that Companies are active buying other companies. Why is that, it is cheaper to buy than build. The price of the company being acquired is a function of the stock price of that company. Acquisition companies, like Oracle, use their cash reserves and their balance sheet to purchase other related companies who are weaker, smaller; or just under-priced. So is the case in real estate.
As an example let us look at a home from what they are built of. From my last letter I referenced the cost of oil and commodity prices being a part of the construction of a home. There was a time when West Menlo Homes sold at $1000 per square foot; they since have fallen to $750 or less.
Take apart the cost of a home and break down into land and improved costs. It is not that difficult to find a tear down and use the sale price as a cost of land. You can also look at title of a recent sale and find out what the County Tax Records has for land and improvements. With the County records you will know what a 10,000 square foot lot in West Menlo Park, or a lot in wherever you are looking is worth.
With that price in you can now look at the difference between the asking price of the home you are considering and the latest comp in the area land value. Now divide the square foot of the home into the difference of list and land. What is the result? Take that number and determine what will be the costs of improvements to update or cure the ills of the property. Now you have a new price, divide it by the square foot of the property. What is the resultant? Now look at a newly built property, do the same. Now you know the comparative value. The seller’s are both vulnerable. Here is how you proceed.
Which home do you like? If it is the older home make the offer less the cost of improvements and the cure of the ills. If it is the newly built house use the older house as leverage against the seller. The seller of a newly built home is not in a strong position. The seller is usually a contractor or speculative builder. The seller has bank money invested in the property and has pressure to sell the property either due to the cost of carry and or lender pressure. The seller of the older home may be in a strong position or may not. You need to find out more about the seller. Is it an estate sale, does it need court approval. Are the owners long-term owners and why are they selling.
This is what I do for my clients before they even make an offer on a home. If they are listing a property I look at what is needed to make the home competitive and tell them how many days on the market they must look at in today’s new market place. All of what I have written about is what an appraiser looks at and the lender looks at. It is called “comparative market analysis”.
You can go one option further and that is to contact a builder and find out what is the average construction costs are for a typical size home you are considering purchasing. Find out what the contractor mark up is and then the cost of permits and architectural fees. Once you have that you can make a cost comparison on the “Cost Basis”
Sound complicated, that is what you pay a realtor for, not only to know the market; but how to evaluate the market. Just because the realtor spends money to advertise in the local papers and magazines does not mean they are cost or comparison analysts. They may be simply great sales persons!
Now on to what is causing the increase in commodity prices in a major recession. It’s all about the US$. A strong US$ created growth in the world economies. After WWII the US was the sole economy and country that was not devastated by the war. The strong currency was the US$. The world was building back and their currencies were weak. Weak currency means competitive prices on the world market for goods and services. Since WWII the US has subsidized the growth of all the world’s economies by having a strong dollar. It makes sense, does it not, to look at providing goods and services at a cheaper rate than the same goods and services provided in the US. Therefore, we saw large accumulation of dollars in a country like Japan. Japan has kept its currency weak and they accumulated US$ and provided competitive goods; sometimes at the expense of US companies. Now we have China, but in this case the US$ is weak. The currencies and countries of the world have grown up. It is now time for the US to get back its competitive edge; ergo, a weak dollar. China and many of the world economies have accumulated dollar holding is the form of US Treasury Bonds. These bonds are the countries’ reserves. Too many weak US$ coming in means they must diversify. They cannot sell the bonds they hold dominated in a weak currency of the US$ or the value of those bonds and their reserves would collapse. What decision do they make? How do they offset the loss in value due to a weak US$? The decision was made to accumulate commodities with the excess dollars and offset their reserves with Gold, Copper. These commodities when then be available for their economies. Remember this, China and the Asian Tigers are still controlled economies and subsidized by the State. Mao maybe dead and there is a Western Look to Beijing, but his creation is still there
To me this is a slam-dunk formula for high housing prices and a revival in the Real Estate market and the US economy. Excess reserves, higher construction costs and the off shore buyers come in to acquire homes in the safest government in the world; the foreign buyers did it in the last recession of 1974, they are doing it now.
This Monday I drove to San Francisco to deliver a packet for a listing we have in Portola Valley, 5070 Alpine Road, to an attorney representing a Hong Kong conglomerate of buyers. San Francisco was like a Sunday when I lived there. Parking in the Sutter parking center was readily available on the 4th floor when normally I would be required to go to 7 or 8. As I walked along Kearny and Sutter Streets, I notice parking spots available. What, parking spots available on a weekday in San Francisco? The stores along the way were snack shops and fast food stores. The clothing stores were not open or having big sales. When I returned I asked the girl at the shoeshine spot in the parking lot main floor why it was so slow. She said that it was always that way now. Stores are closing and the restaurants are losing business to the cheaper fast food outlet. That was not the case in Menlo Park and Palo Alto when I returned back from San Francisco. Like they say in Hawaii, “lucky you live Hawaii”, now it is lucky you live in the Peninsula!
From now on you will have charts and graphs to look at. The year-end is usually the best time for buyers to get “value”.
Click the link below for the charts:
"Use Your Common Sense"
October 13, 2009 - SF Bay Area (Peninsula)
1)Commodity Prices Rise
2)International Economies Rebound
3)Dollar Still Weak
4)Where is the Growth Coming From
Australian is “Commodity Currency Country”. What that means is that Australia relies on commodities; such as grain, metal ore and the like to prosper. In fact; all Natural Resource Countries have had a rebound in their economies and their currency. The demand from China for raw resources has returned and the world economy has bounced back. So why has not the U.S. I think the major reason is we lost our competitiveness because we kept a strong US $. The strong $ allowed the developing nations a favorable spin against our businesses. You all know the fact about the person in Silicon Valley who was laid off and replaced with a worker in India or another developing nation, simply to save money for the parent corporation. A strong $US did that. With a weak dollar the situation will change. Sooner or later the developing country employee becomes more expensive than the domestic employee. Our goods become competitive to foreign competitor’s goods and the tide will swing and the balance of payments will become positive.
The next wave is the present wave, foreign investors and residents will look for a secure environment to raise their families and protect their newly accumulated wealth. Where else but the United States? They will use their strong currency to purchase weak currency US$ assets. Stocks are necessary a stable asset that can be bought on a discounted level, but at present real estate is a discounted US asset.
I recently attended a “Angel Venture Capital” investor forum for Keiretsu Forum in August and September. I was interested in the subject of the August Forum and the venture capital investment Keiretsu would introduce to their members. The August forum was in San Francisco and dealt with depressed real estate. It was STANDING ROOM ONLY! I am not talking about small investors. I am talking about institutional investors and investors with a minimum net worth of $5 million net of home. In fact, a venture capital investor will take 20 or more positions on the basis of not all working. With a minimum of $1 million per investment we are talking about investors with $20 million of speculative money to invest and that speculative money is roughly 5% of their net worth. What I am talking about are big time investors!
The September Forum had 5 investment 3 were real estate oriented and two were funds to purchase real estate.
This group of venture capital investors invests for a 5-year time frame. If they think real estate is the place to look, where should you be?
As the only hard asset that has not participated in the commodity boom; as gold, silver, oil and other natural resources, physiological forces not real forces have kept down real estate.
Let me explain that comment, what is asphalt’s major component? Oil is it not? What about copper prices? They have increased along with other metals. What are pipes and home wiring made of? What about the circuit boards in the electrical panels? The roofing is wood or a composite made from, oil. There is not one part of a home that is not a natural resource commodity. The trucks that bring equipment to the employees and the material; they are all natural resource driven. What country has the greatest source of natural resources? You got it, the United States. Would we purchase high priced foreign resources with low priced US $? Of course not is the logical answer.
Where do we go now? We touched upon natural resource value and the weak dollar; but who will drive our future growth?
Immigration is the answer. I have retired my designation as a certified financial analyst and investment advisor, but I still keep up to date with many of the publications. Martin Barnes wrote one of the publications that I kept in my files in 2004. It is titled “Global Demographics: An Economic and Geopolitical Time Bomb. WOW! I will attach it here or a link to it for those of you who wish to read the article in full.
http://isvr.net/usr/1024408819/CustomPages/Gobal_Time_Bomb.pdf
The basis is this, the baby boom generations of the post WW II years are retiring and moving out of the work force and are no longer the age of Conspicuous Consumption. That goes for the US, Britain, France, Germany, Japan, Russia, Australia and Italy. Only the US will have a positive growth in population. In fact, the US growth projected for 2000-50 will be # 1 at +123.7%. Where elsewhere will there be growth: Yemen +66.4%, Afghanistan +48.1%, Iran +39.1%, Iraq +34.7%, and Saudi Arabia +32.6%.
If the US is losing the greatest generation, the Baby Boomers, where will growth come from? Immigration. The projected fertility rate is 2.05 for 1995-2000 in the US; in Mexico it was 2.75, India 3.45, Egypt 3.51, Saudi Arabia 5.09, Pakistan 5.48, Nigeria 5.92 and Yemen at 7.30.
Based upon those statistics will real estate prices remain at their present levels? I must say that my father told me as a very young boy, 8 or 9, to use your common sense when I made a mistake. When we will all do the same? Sooner or later the inventory of homes will decline, sooner or later the news commentaries will talk about the escalating cost of home construction, repair and remodeling and sooner or later home values will increase. Sooner or later a solid form of lending will occur and a change from the old system will be accepted. When that all occurs home prices will increase. How far away is that? I use the venture capitalist time fame, 5 years or more. 10 years from today people will brag about buying in Woodside, Atherton, Menlo Park, Portola Valley and Palo Alto at the depressed levels of the Great Recession of 2009. Will you be one of them?
I added a new column to the statistical page below, it is “expired, cancelled and withdrawn” homes. I decided to add this page since I sent out letters to this group every 14 days. The average number is usually about 39 or more. We have dropped sharply. What does that mean? My guess is that sellers are staying pat with their listings. The seller has realized that it may talk longer to sell a home, but it will sell at or near their listing price. Sooner or later the buyer realizes that the price will not decline any further and they will make their offer.
October 13, 2009
City
Active
Pending
Pending 2
Sold
Exp/Cxl/WD
Atherton
43
5
8
0
1
Menlo Park
75
19
10
10
10
Portola Valley
28
4
4
3
3
Woodside
53
9
3
0
1
Palo Alto
103
22
33
12
9
September 24, 2009
Inventory
Pending
Pending contingencies removed
Sold
Menlo Park
85
14
12
16
Portola Valley
28
2
8
4
Woodside
54
5
1
4
Atherton
39
5
6
11
Palo Alto
114
22
28
36
September 2, 2009
City
Inventory
Pending
Pending contingencies removed
Sold
Menlo Park
72
12
11
17
Portola Valley
27
2
6
5
Woodside
52
2
1
5
Atherton
40
5
6
6
Palo Alto
93
21
28
28
July 28th report as a comparison
Cities
Active
Pending
Pending Do Not Show
Sold
Menlo Park
90
10
13
58
Portola Valley
33
5
1
6
Woodside
57
2
5
3
Atherton
37
3
10
7
Palo Alto
117
13
25
27
1)Commodity Prices Rise
2)International Economies Rebound
3)Dollar Still Weak
4)Where is the Growth Coming From
Australian is “Commodity Currency Country”. What that means is that Australia relies on commodities; such as grain, metal ore and the like to prosper. In fact; all Natural Resource Countries have had a rebound in their economies and their currency. The demand from China for raw resources has returned and the world economy has bounced back. So why has not the U.S. I think the major reason is we lost our competitiveness because we kept a strong US $. The strong $ allowed the developing nations a favorable spin against our businesses. You all know the fact about the person in Silicon Valley who was laid off and replaced with a worker in India or another developing nation, simply to save money for the parent corporation. A strong $US did that. With a weak dollar the situation will change. Sooner or later the developing country employee becomes more expensive than the domestic employee. Our goods become competitive to foreign competitor’s goods and the tide will swing and the balance of payments will become positive.
The next wave is the present wave, foreign investors and residents will look for a secure environment to raise their families and protect their newly accumulated wealth. Where else but the United States? They will use their strong currency to purchase weak currency US$ assets. Stocks are necessary a stable asset that can be bought on a discounted level, but at present real estate is a discounted US asset.
I recently attended a “Angel Venture Capital” investor forum for Keiretsu Forum in August and September. I was interested in the subject of the August Forum and the venture capital investment Keiretsu would introduce to their members. The August forum was in San Francisco and dealt with depressed real estate. It was STANDING ROOM ONLY! I am not talking about small investors. I am talking about institutional investors and investors with a minimum net worth of $5 million net of home. In fact, a venture capital investor will take 20 or more positions on the basis of not all working. With a minimum of $1 million per investment we are talking about investors with $20 million of speculative money to invest and that speculative money is roughly 5% of their net worth. What I am talking about are big time investors!
The September Forum had 5 investment 3 were real estate oriented and two were funds to purchase real estate.
This group of venture capital investors invests for a 5-year time frame. If they think real estate is the place to look, where should you be?
As the only hard asset that has not participated in the commodity boom; as gold, silver, oil and other natural resources, physiological forces not real forces have kept down real estate.
Let me explain that comment, what is asphalt’s major component? Oil is it not? What about copper prices? They have increased along with other metals. What are pipes and home wiring made of? What about the circuit boards in the electrical panels? The roofing is wood or a composite made from, oil. There is not one part of a home that is not a natural resource commodity. The trucks that bring equipment to the employees and the material; they are all natural resource driven. What country has the greatest source of natural resources? You got it, the United States. Would we purchase high priced foreign resources with low priced US $? Of course not is the logical answer.
Where do we go now? We touched upon natural resource value and the weak dollar; but who will drive our future growth?
Immigration is the answer. I have retired my designation as a certified financial analyst and investment advisor, but I still keep up to date with many of the publications. Martin Barnes wrote one of the publications that I kept in my files in 2004. It is titled “Global Demographics: An Economic and Geopolitical Time Bomb. WOW! I will attach it here or a link to it for those of you who wish to read the article in full.
http://isvr.net/usr/1024408819/CustomPages/Gobal_Time_Bomb.pdf
The basis is this, the baby boom generations of the post WW II years are retiring and moving out of the work force and are no longer the age of Conspicuous Consumption. That goes for the US, Britain, France, Germany, Japan, Russia, Australia and Italy. Only the US will have a positive growth in population. In fact, the US growth projected for 2000-50 will be # 1 at +123.7%. Where elsewhere will there be growth: Yemen +66.4%, Afghanistan +48.1%, Iran +39.1%, Iraq +34.7%, and Saudi Arabia +32.6%.
If the US is losing the greatest generation, the Baby Boomers, where will growth come from? Immigration. The projected fertility rate is 2.05 for 1995-2000 in the US; in Mexico it was 2.75, India 3.45, Egypt 3.51, Saudi Arabia 5.09, Pakistan 5.48, Nigeria 5.92 and Yemen at 7.30.
Based upon those statistics will real estate prices remain at their present levels? I must say that my father told me as a very young boy, 8 or 9, to use your common sense when I made a mistake. When we will all do the same? Sooner or later the inventory of homes will decline, sooner or later the news commentaries will talk about the escalating cost of home construction, repair and remodeling and sooner or later home values will increase. Sooner or later a solid form of lending will occur and a change from the old system will be accepted. When that all occurs home prices will increase. How far away is that? I use the venture capitalist time fame, 5 years or more. 10 years from today people will brag about buying in Woodside, Atherton, Menlo Park, Portola Valley and Palo Alto at the depressed levels of the Great Recession of 2009. Will you be one of them?
I added a new column to the statistical page below, it is “expired, cancelled and withdrawn” homes. I decided to add this page since I sent out letters to this group every 14 days. The average number is usually about 39 or more. We have dropped sharply. What does that mean? My guess is that sellers are staying pat with their listings. The seller has realized that it may talk longer to sell a home, but it will sell at or near their listing price. Sooner or later the buyer realizes that the price will not decline any further and they will make their offer.
October 13, 2009
City
Active
Pending
Pending 2
Sold
Exp/Cxl/WD
Atherton
43
5
8
0
1
Menlo Park
75
19
10
10
10
Portola Valley
28
4
4
3
3
Woodside
53
9
3
0
1
Palo Alto
103
22
33
12
9
September 24, 2009
Inventory
Pending
Pending contingencies removed
Sold
Menlo Park
85
14
12
16
Portola Valley
28
2
8
4
Woodside
54
5
1
4
Atherton
39
5
6
11
Palo Alto
114
22
28
36
September 2, 2009
City
Inventory
Pending
Pending contingencies removed
Sold
Menlo Park
72
12
11
17
Portola Valley
27
2
6
5
Woodside
52
2
1
5
Atherton
40
5
6
6
Palo Alto
93
21
28
28
July 28th report as a comparison
Cities
Active
Pending
Pending Do Not Show
Sold
Menlo Park
90
10
13
58
Portola Valley
33
5
1
6
Woodside
57
2
5
3
Atherton
37
3
10
7
Palo Alto
117
13
25
27
Has The Real Estate Market Bottomed?? Part 2
SEPTEMBER 24, 2009
· Real Average hourly earnings up 4.5% over the year
· CPI, Consumer Price Index up .4% in August, unchanged July, less food and energy up .1%.
· CPI for SF, Oakland and San Jose +. 2% 12 months ended August 2009 and 0.0% for past 2 months.
· Housing prices were forth art do thee go?
· Interest rates in the crystal ball
· Local market performance
By the look of the economic reports we are still looking for the end of the tunnel. I still go by my forecast that it will take us 10 years plus before we surpass the highs of 2007-8. Inflation is lacking; irrespective of what the investment gurus tell you about Gold, precious metal, commodities and the inflationary impact of the bond-selling binge of the
US Government. The key item here is to remember that the US wants inflation. The US want risk to come back into the investor mentality. We have inflation and we have risk again and we will have low unemployment and a growing economy with increased tax receipts and healthy banks and consumers. We do not have that now, that is why the US is feeding the economy with $$$$$.
I know we hear about gold and commodities, but did anyone notice the Real Estate indexes all had dramatic move upward in the stock market? For investors real estate was just as popular as precious metals and gold.
The stock market is up over 50% for the year. Is that not confidence in the future. At least in my experience and training the stock market is the forecaster of the future. Things will be better in the future says the stock market.
It is too soon for our economy to be moving in its old fashion. The old economy was built upon poor foundations of synthetic securities and over seen by blind watch dogs. We need the consumer protection agency in force, a new-invigorated SEC and FTC. Too big to fail means just simply TOO BIG, and they should be dismantled for the betterment of our society. Risk need to return and that can be seen by a yield curve that returns back to normal with a normal range between government, corporate debt. Investors need to be buying mortgage-backed securities, not the Federal Reserve System. This will all take time. Housing prices will stabilize, move up in some areas and stop declining in others. Foreclosures will end, and a new mortgage environment will emerge from the ashes of the old.
Where will interest rates go in the future? I say they remain flat for the near term into the first quarter of 2010. The FED has agreed to expand and continue its mortgage purchase program. This will keep rates down, increase affordability of homes and diminish the inventory of homes. Mortgages will be changed and banks will no longer be sellers of real estate. It will take time. Don’t expect the turn around to be noticeable. It will slowly occur in areas that will slip by you.
Sort of like grass growing, you don’t see the blade rising, but one day you look at the grass and say to yourself, “it needs to be cut”. That is how the real estate market will treat you.
To me the indications are in the high-end market. Buyers of Atherton and Woodside do not need mortgages because they are all cash buyers. When I created the report below, I looked at the homes that sold and the homes that are pending in Atherton and Woodside. The prices were from $3 up to $12 million and a few were not quoted in the sales price but listed ion the $6 million range. The homes had been on the market beyond 6 months and some over a year. Was there price sensitivity, yes some; but not a knock down and drag out kicking and screaming to the Title and Escrow Company.
On the other hand, the areas or towns that grew in the past boom like Menlo Park and Palo Alto are not the darlings of the past, they are seeing the inventories increase, but no matching increase in pending and sold properties. None of the high end home dominates the sold and pending list.
It is a time for value hunting, a time to buy rather than build new, a time for re-modeling, a time for paying down debt and saving and a time for buying real estate as an investment NOT A SPECULATION!
Gold, precious metals and commodities do not shelter you from the cold, rain and wind. They cost money to carry. They do not give you the satisfaction of hosting friends and family for the holiday. They do not store you precious belongings and remembrances that give you comfort during times of loss, sickness and death.
It is time we all get back to basics and realize that real estate is a home not a savings account to draw upon for fun and excitement.
For the buyers out there, get in touch before the end of the year. I see many places of opportunistic buying. For the sellers, don’t rely upon the past for your sales price. Remember you can’t work and play as you did ten years ago and you can’t expect the prices of a year or two ago to be good this year.
Rental properties should be considered for those of you who do not want to take on the risk of the stock market. Values are returning and the rents to debt coverage ratios are now coming back to a point there is positive carry in California Real Estate.
To the sellers, remember if you are down sizing or moving to another area, you are getting the same deal you are giving. We called it “Same Day Substitution” in my stock market days.
Don’t let your ego; greed and fear dictate your actions. Evaluate and ask questions, like busses and elevators; there is always another one coming along.
· Real Average hourly earnings up 4.5% over the year
· CPI, Consumer Price Index up .4% in August, unchanged July, less food and energy up .1%.
· CPI for SF, Oakland and San Jose +. 2% 12 months ended August 2009 and 0.0% for past 2 months.
· Housing prices were forth art do thee go?
· Interest rates in the crystal ball
· Local market performance
By the look of the economic reports we are still looking for the end of the tunnel. I still go by my forecast that it will take us 10 years plus before we surpass the highs of 2007-8. Inflation is lacking; irrespective of what the investment gurus tell you about Gold, precious metal, commodities and the inflationary impact of the bond-selling binge of the
US Government. The key item here is to remember that the US wants inflation. The US want risk to come back into the investor mentality. We have inflation and we have risk again and we will have low unemployment and a growing economy with increased tax receipts and healthy banks and consumers. We do not have that now, that is why the US is feeding the economy with $$$$$.
I know we hear about gold and commodities, but did anyone notice the Real Estate indexes all had dramatic move upward in the stock market? For investors real estate was just as popular as precious metals and gold.
The stock market is up over 50% for the year. Is that not confidence in the future. At least in my experience and training the stock market is the forecaster of the future. Things will be better in the future says the stock market.
It is too soon for our economy to be moving in its old fashion. The old economy was built upon poor foundations of synthetic securities and over seen by blind watch dogs. We need the consumer protection agency in force, a new-invigorated SEC and FTC. Too big to fail means just simply TOO BIG, and they should be dismantled for the betterment of our society. Risk need to return and that can be seen by a yield curve that returns back to normal with a normal range between government, corporate debt. Investors need to be buying mortgage-backed securities, not the Federal Reserve System. This will all take time. Housing prices will stabilize, move up in some areas and stop declining in others. Foreclosures will end, and a new mortgage environment will emerge from the ashes of the old.
Where will interest rates go in the future? I say they remain flat for the near term into the first quarter of 2010. The FED has agreed to expand and continue its mortgage purchase program. This will keep rates down, increase affordability of homes and diminish the inventory of homes. Mortgages will be changed and banks will no longer be sellers of real estate. It will take time. Don’t expect the turn around to be noticeable. It will slowly occur in areas that will slip by you.
Sort of like grass growing, you don’t see the blade rising, but one day you look at the grass and say to yourself, “it needs to be cut”. That is how the real estate market will treat you.
To me the indications are in the high-end market. Buyers of Atherton and Woodside do not need mortgages because they are all cash buyers. When I created the report below, I looked at the homes that sold and the homes that are pending in Atherton and Woodside. The prices were from $3 up to $12 million and a few were not quoted in the sales price but listed ion the $6 million range. The homes had been on the market beyond 6 months and some over a year. Was there price sensitivity, yes some; but not a knock down and drag out kicking and screaming to the Title and Escrow Company.
On the other hand, the areas or towns that grew in the past boom like Menlo Park and Palo Alto are not the darlings of the past, they are seeing the inventories increase, but no matching increase in pending and sold properties. None of the high end home dominates the sold and pending list.
It is a time for value hunting, a time to buy rather than build new, a time for re-modeling, a time for paying down debt and saving and a time for buying real estate as an investment NOT A SPECULATION!
Gold, precious metals and commodities do not shelter you from the cold, rain and wind. They cost money to carry. They do not give you the satisfaction of hosting friends and family for the holiday. They do not store you precious belongings and remembrances that give you comfort during times of loss, sickness and death.
It is time we all get back to basics and realize that real estate is a home not a savings account to draw upon for fun and excitement.
For the buyers out there, get in touch before the end of the year. I see many places of opportunistic buying. For the sellers, don’t rely upon the past for your sales price. Remember you can’t work and play as you did ten years ago and you can’t expect the prices of a year or two ago to be good this year.
Rental properties should be considered for those of you who do not want to take on the risk of the stock market. Values are returning and the rents to debt coverage ratios are now coming back to a point there is positive carry in California Real Estate.
To the sellers, remember if you are down sizing or moving to another area, you are getting the same deal you are giving. We called it “Same Day Substitution” in my stock market days.
Don’t let your ego; greed and fear dictate your actions. Evaluate and ask questions, like busses and elevators; there is always another one coming along.
Sunday, September 27, 2009
Has The Real Estate Market Bottomed...Part 2
• Real Average hourly earnings up 4.5% over the year
• CPI, Consumer Price Index up .4% in August, unchanged July, less food and energy up .1%.
• CPI for SF, Oakland and San Jose +. 2% 12 months ended August 2009 and 0.0% for past 2 months.
• Housing prices were forth art do thee go?
• Interest rates in the crystal ball
• Local market performance
By the look of the economic reports we are still looking for the end of the tunnel. I still go by my forecast that it will take us 10 years plus before we surpass the highs of 2007-8. Inflation is lacking; irrespective of what the investment gurus tell you about Gold, precious metal, commodities and the inflationary impact of the bond-selling binge of the
US Government. The key item here is to remember that the US wants inflation. The US want risk to come back into the investor mentality. We have inflation and we have risk again and we will have low unemployment and a growing economy with increased tax receipts and healthy banks and consumers. We do not have that now, that is why the US is feeding the economy with $$$$$.
I know we hear about gold and commodities, but did anyone notice the Real Estate indexes all had dramatic move upward in the stock market? For investors real estate was just as popular as precious metals and gold.
The stock market is up over 50% for the year. Is that not confidence in the future? At least in my experience and training the stock market is the forecaster of the future. Things will be better in the future says the stock market.
It is too soon for our economy to be moving in its old fashion. The old economy was built upon poor foundations of synthetic securities and over seen by blind watch dogs. We need the consumer protection agency in force, a new-invigorated SEC and FTC. Too big to fail means just simply TOO BIG, and they should be dismantled for the betterment of our society. Risk need to return and that can be seen by a yield curve that returns back to normal with a normal range between government, corporate debt. Investors need to be buying mortgage-backed securities, not the Federal Reserve System. This will all take time. Housing prices will stabilize, move up in some areas and stop declining in others. Foreclosures will end, and a new mortgage environment will emerge from the ashes of the old.
Where will interest rates go in the future? I say they remain flat for the near term into the first quarter of 2010. The FED has agreed to expand and continue its mortgage purchase program. This will keep rates down, increase affordability of homes and diminish the inventory of homes. Mortgages will be changed and banks will no longer be sellers of real estate. It will take time. Don’t expect the turn around to be noticeable. It will slowly occur in areas that will slip by you.
Sort of like grass growing, you don’t see the blade rising, but one day you look at the grass and say to yourself, “it needs to be cut”. That is how the real estate market will treat you.
To me the indications are in the high-end market. Buyers of Atherton and Woodside do not need mortgages because they are all cash buyers. When I created the report below, I looked at the homes that sold and the homes that are pending in Atherton and Woodside. The prices were from $3 up to $12 million and a few were not quoted in the sales price but listed ion the $6 million range. The homes had been on the market beyond 6 months and some over a year. Was there price sensitivity, yes some; but not a knock down and drag out kicking and screaming to the Title and Escrow Company.
On the other hand, the areas or towns that grew in the past boom like Menlo Park and Palo Alto are not the darlings of the past, they are seeing the inventories increase, but no matching increase in pending and sold properties. None of the high end home dominates the sold and pending list.
It is a time for value hunting, a time to buy rather than build new, a time for re-modeling, a time for paying down debt and saving and a time for buying real estate as an investment NOT A SPECULATION!
Gold, precious metals and commodities do not shelter you from the cold, rain and wind. They cost money to carry. They do not give you the satisfaction of hosting friends and family for the holiday. They do not store you precious belongings and remembrances that give you comfort during times of loss, sickness and death.
It is time we all get back to basics and realize that real estate is a home not a savings account to draw upon for fun and excitement.
For the buyers out there, get in touch before the end of the year. I see many places of opportunistic buying. For the sellers, don’t rely upon the past for your sales price. Remember you can’t work and play as you did ten years ago and you can’t expect the prices of a year or two ago to be good this year.
Rental properties should be considered for those of you who do not want to take on the risk of the stock market. Values are returning and the rents to debt coverage ratios are now coming back to a point there is positive carry in California Real Estate.
To the sellers, remember if you are down sizing or moving to another area, you are getting the same deal you are giving. We called it “Same Day Substitution” in my stock market days.
Don’t let your ego; greed and fear dictate your actions. Evaluate and ask questions, like busses and elevators; there is always another one coming along.
Inventory: I, Pending: P, Pending Contingencies Removed: PCR, Sold: S
Sept. 24, 2009...
Menlo Park:
I: 85...P: 14...PCR: 12...S: 16
Portola Valley:
I: 28...P: 2...PCR: 8...S: 4
Woodside:
I: 54...P: 5...PCR: 5...S: 22
Atherton:
I: 39...P: 5...PCR: 6...S: 11
Palo Alto:
I: 114...P: 22...PCR: 28...S: 36
July 28th Comparison...
Menlo Park:
I: 90...P: 10...PCR: 13...S: 58
Portola Valley:
I: 33...P: 5...PCR: 1...S:6
Woodside:
I: 57...P: 2...PCR: 5...S: 3
Atherton:
I: 37...P: 3...PCR: 10...S: 7
Palo Alto:
I: 117...P: 13...PCR: 25...S: 27
• CPI, Consumer Price Index up .4% in August, unchanged July, less food and energy up .1%.
• CPI for SF, Oakland and San Jose +. 2% 12 months ended August 2009 and 0.0% for past 2 months.
• Housing prices were forth art do thee go?
• Interest rates in the crystal ball
• Local market performance
By the look of the economic reports we are still looking for the end of the tunnel. I still go by my forecast that it will take us 10 years plus before we surpass the highs of 2007-8. Inflation is lacking; irrespective of what the investment gurus tell you about Gold, precious metal, commodities and the inflationary impact of the bond-selling binge of the
US Government. The key item here is to remember that the US wants inflation. The US want risk to come back into the investor mentality. We have inflation and we have risk again and we will have low unemployment and a growing economy with increased tax receipts and healthy banks and consumers. We do not have that now, that is why the US is feeding the economy with $$$$$.
I know we hear about gold and commodities, but did anyone notice the Real Estate indexes all had dramatic move upward in the stock market? For investors real estate was just as popular as precious metals and gold.
The stock market is up over 50% for the year. Is that not confidence in the future? At least in my experience and training the stock market is the forecaster of the future. Things will be better in the future says the stock market.
It is too soon for our economy to be moving in its old fashion. The old economy was built upon poor foundations of synthetic securities and over seen by blind watch dogs. We need the consumer protection agency in force, a new-invigorated SEC and FTC. Too big to fail means just simply TOO BIG, and they should be dismantled for the betterment of our society. Risk need to return and that can be seen by a yield curve that returns back to normal with a normal range between government, corporate debt. Investors need to be buying mortgage-backed securities, not the Federal Reserve System. This will all take time. Housing prices will stabilize, move up in some areas and stop declining in others. Foreclosures will end, and a new mortgage environment will emerge from the ashes of the old.
Where will interest rates go in the future? I say they remain flat for the near term into the first quarter of 2010. The FED has agreed to expand and continue its mortgage purchase program. This will keep rates down, increase affordability of homes and diminish the inventory of homes. Mortgages will be changed and banks will no longer be sellers of real estate. It will take time. Don’t expect the turn around to be noticeable. It will slowly occur in areas that will slip by you.
Sort of like grass growing, you don’t see the blade rising, but one day you look at the grass and say to yourself, “it needs to be cut”. That is how the real estate market will treat you.
To me the indications are in the high-end market. Buyers of Atherton and Woodside do not need mortgages because they are all cash buyers. When I created the report below, I looked at the homes that sold and the homes that are pending in Atherton and Woodside. The prices were from $3 up to $12 million and a few were not quoted in the sales price but listed ion the $6 million range. The homes had been on the market beyond 6 months and some over a year. Was there price sensitivity, yes some; but not a knock down and drag out kicking and screaming to the Title and Escrow Company.
On the other hand, the areas or towns that grew in the past boom like Menlo Park and Palo Alto are not the darlings of the past, they are seeing the inventories increase, but no matching increase in pending and sold properties. None of the high end home dominates the sold and pending list.
It is a time for value hunting, a time to buy rather than build new, a time for re-modeling, a time for paying down debt and saving and a time for buying real estate as an investment NOT A SPECULATION!
Gold, precious metals and commodities do not shelter you from the cold, rain and wind. They cost money to carry. They do not give you the satisfaction of hosting friends and family for the holiday. They do not store you precious belongings and remembrances that give you comfort during times of loss, sickness and death.
It is time we all get back to basics and realize that real estate is a home not a savings account to draw upon for fun and excitement.
For the buyers out there, get in touch before the end of the year. I see many places of opportunistic buying. For the sellers, don’t rely upon the past for your sales price. Remember you can’t work and play as you did ten years ago and you can’t expect the prices of a year or two ago to be good this year.
Rental properties should be considered for those of you who do not want to take on the risk of the stock market. Values are returning and the rents to debt coverage ratios are now coming back to a point there is positive carry in California Real Estate.
To the sellers, remember if you are down sizing or moving to another area, you are getting the same deal you are giving. We called it “Same Day Substitution” in my stock market days.
Don’t let your ego; greed and fear dictate your actions. Evaluate and ask questions, like busses and elevators; there is always another one coming along.
Inventory: I, Pending: P, Pending Contingencies Removed: PCR, Sold: S
Sept. 24, 2009...
Menlo Park:
I: 85...P: 14...PCR: 12...S: 16
Portola Valley:
I: 28...P: 2...PCR: 8...S: 4
Woodside:
I: 54...P: 5...PCR: 5...S: 22
Atherton:
I: 39...P: 5...PCR: 6...S: 11
Palo Alto:
I: 114...P: 22...PCR: 28...S: 36
July 28th Comparison...
Menlo Park:
I: 90...P: 10...PCR: 13...S: 58
Portola Valley:
I: 33...P: 5...PCR: 1...S:6
Woodside:
I: 57...P: 2...PCR: 5...S: 3
Atherton:
I: 37...P: 3...PCR: 10...S: 7
Palo Alto:
I: 117...P: 13...PCR: 25...S: 27
Tuesday, September 22, 2009
Has the Real Estate Market Bottomed?
• New home sales in nation jump 11%
• Existing Home Sales increase 7.2% the 1st time in 5 years existing home sales have increased 4 months in a row!
• Silicon Valley unemployment rates edges lower at 11.8%
• Inventory of homes decline in past 30 days
It seems as if the newspapers have finally gotten the message that people started to buy homes. I was beginning to think that the only thing that could be reported was what was being franchised in the New York Times or other out of the area news organizations. We began to see the log jam of inventory bust in March and continue through until May and June. Thos sellers who were holding on since October and November 2008 finally threw in the towel and dropped their listing prices. Buyers stepped up and many of them cash buyers or at least those with great credit and substantial balance sheets.
On quarter does not make a year. Very much like the stock market where “give ups” were registered with prices dropping below intrinsic value, or book value, there is a rebound. Right now will that rebound be tempered with new selling or walk away to watch attitude.
The key element her is UNEMPOLYMENT. While I read about how the Golden State and our area will grow in population over the next 10-20 years, which does not help today. On the long term home prices will appreciate from demand. But more people are worried about home prices dropping further. I think that attitude needs to be addressed.
A home is a not something that you trade around at the local market. For some reason too many people became enamored with real estate as a wealth generator. That is certainly the case in income property and probably is a stronger case today than ever before. Too many used their home as a savings account. They drew on it like it was their stock portfolio and or a money market account. It is not! Wall Street and bankers alike convinced us that it was easy to get a HELOC with a credit card and don’t worry, we will refinance you later at a better rate. This attitude caused many over extensions in debt and over extension in housing suitability. The result is a clean out. Just like the stock market when values drop below book value other companies come in to buy the weaker and the vulnerable, so is the case in real estate. The unfortunate fact is that too many people bought into the song that really was taken. It did not matter if they were immigrants, English as a second language or middle to low class citizens; the high end and the well educated were taken too! How can you argue with a Wharton School of Business, Harvard MBA, and Stanford MBA when they tell you the statistical probability of the event in highly improbable. That only a Black Swan will cause such an event. HUH?? Black Swan? Highly improbable? What are they talking about? The average Joe relies on the educated and those in power to lead them right. They were lead wrong! Lies, unrealistic estimates, a system based upon return above all were the down fall of what has occurred. How long will it take to cure? I still go by 10 years before we return to where we were in 2007.
Will that make real estate a bad investment? It is like saying having children will be a good investment. The average child will cost the parent $250,000 per my wife and her news station. That is not an investment that is a life decision based upon giving, love and understanding. That what a home is, love, life style and sharing.
I believe you can buy at less than list and I believe that homes can be bought below appraised value. Why, because I recently helped families to so. My Partner Jim Massey and I are proud to help families in Silicon Valley find the Family Home they can raise a family in. We are proud to help those families negotiate the difficulties of financing, architects and builders.
What happened the past 30 days in our area?
Menlo Park:
Inventory: 72
Pending:12
Pending contingencies removed:11
Sold: 17
Portola Valley:
Inventory: 27
Pending:2
Pending contingencies removed:6
Sold: 5
Woodside:
Inventory: 52
Pending:2
Pending contingencies removed:1
Sold: 5
Atherton:
Inventory: 40
Pending:5
Pending contingencies removed:6
Sold: 6
Palo Alto:
Inventory: 93
Pending:21
Pending contingencies removed:28
Sold: 28
July 28th report as a comparison...
Menlo Park:
Inventory: 90
Pending:10
Pending contingencies removed:13
Sold: 58
Portola Valley:
Inventory: 33
Pending:5
Pending contingencies removed:1
Sold: 6
Woodside:
Inventory: 57
Pending:2
Pending contingencies removed:5
Sold: 3
Atherton:
Inventory: 37
Pending:3
Pending contingencies removed:10
Sold: 25
Palo Alto:
Inventory: 117
Pending:13
Pending contingencies removed:25
Sold: 27
As you can see from above we had a slow down in Menlo Park in the SOLD category, inventory has declined. Portola Valley is still slow with a slight decline in inventory, probably taking them off the market until later. Woodside is a ditto for Portola Valley. Atherton slowed down, but what was noticeable here the over $5 million kept on going. Good for the high end buyers to note that value can be gotten. Palo Alto has finally slowed down and the sales are dropping off and the inventory pulling back simply from taking off the market. The high end here is dead. Sales of over $3 million are non-existent.
The good news is that jumbo loans are improving. We had two sales that went through very quickly, les than 20 days from removal of contingencies until close of escrow. US Trust and Schwab are the players here. For those of you who are looking for trust worthy jumbo lenders we have referrals for you.
• Existing Home Sales increase 7.2% the 1st time in 5 years existing home sales have increased 4 months in a row!
• Silicon Valley unemployment rates edges lower at 11.8%
• Inventory of homes decline in past 30 days
It seems as if the newspapers have finally gotten the message that people started to buy homes. I was beginning to think that the only thing that could be reported was what was being franchised in the New York Times or other out of the area news organizations. We began to see the log jam of inventory bust in March and continue through until May and June. Thos sellers who were holding on since October and November 2008 finally threw in the towel and dropped their listing prices. Buyers stepped up and many of them cash buyers or at least those with great credit and substantial balance sheets.
On quarter does not make a year. Very much like the stock market where “give ups” were registered with prices dropping below intrinsic value, or book value, there is a rebound. Right now will that rebound be tempered with new selling or walk away to watch attitude.
The key element her is UNEMPOLYMENT. While I read about how the Golden State and our area will grow in population over the next 10-20 years, which does not help today. On the long term home prices will appreciate from demand. But more people are worried about home prices dropping further. I think that attitude needs to be addressed.
A home is a not something that you trade around at the local market. For some reason too many people became enamored with real estate as a wealth generator. That is certainly the case in income property and probably is a stronger case today than ever before. Too many used their home as a savings account. They drew on it like it was their stock portfolio and or a money market account. It is not! Wall Street and bankers alike convinced us that it was easy to get a HELOC with a credit card and don’t worry, we will refinance you later at a better rate. This attitude caused many over extensions in debt and over extension in housing suitability. The result is a clean out. Just like the stock market when values drop below book value other companies come in to buy the weaker and the vulnerable, so is the case in real estate. The unfortunate fact is that too many people bought into the song that really was taken. It did not matter if they were immigrants, English as a second language or middle to low class citizens; the high end and the well educated were taken too! How can you argue with a Wharton School of Business, Harvard MBA, and Stanford MBA when they tell you the statistical probability of the event in highly improbable. That only a Black Swan will cause such an event. HUH?? Black Swan? Highly improbable? What are they talking about? The average Joe relies on the educated and those in power to lead them right. They were lead wrong! Lies, unrealistic estimates, a system based upon return above all were the down fall of what has occurred. How long will it take to cure? I still go by 10 years before we return to where we were in 2007.
Will that make real estate a bad investment? It is like saying having children will be a good investment. The average child will cost the parent $250,000 per my wife and her news station. That is not an investment that is a life decision based upon giving, love and understanding. That what a home is, love, life style and sharing.
I believe you can buy at less than list and I believe that homes can be bought below appraised value. Why, because I recently helped families to so. My Partner Jim Massey and I are proud to help families in Silicon Valley find the Family Home they can raise a family in. We are proud to help those families negotiate the difficulties of financing, architects and builders.
What happened the past 30 days in our area?
Menlo Park:
Inventory: 72
Pending:12
Pending contingencies removed:11
Sold: 17
Portola Valley:
Inventory: 27
Pending:2
Pending contingencies removed:6
Sold: 5
Woodside:
Inventory: 52
Pending:2
Pending contingencies removed:1
Sold: 5
Atherton:
Inventory: 40
Pending:5
Pending contingencies removed:6
Sold: 6
Palo Alto:
Inventory: 93
Pending:21
Pending contingencies removed:28
Sold: 28
July 28th report as a comparison...
Menlo Park:
Inventory: 90
Pending:10
Pending contingencies removed:13
Sold: 58
Portola Valley:
Inventory: 33
Pending:5
Pending contingencies removed:1
Sold: 6
Woodside:
Inventory: 57
Pending:2
Pending contingencies removed:5
Sold: 3
Atherton:
Inventory: 37
Pending:3
Pending contingencies removed:10
Sold: 25
Palo Alto:
Inventory: 117
Pending:13
Pending contingencies removed:25
Sold: 27
As you can see from above we had a slow down in Menlo Park in the SOLD category, inventory has declined. Portola Valley is still slow with a slight decline in inventory, probably taking them off the market until later. Woodside is a ditto for Portola Valley. Atherton slowed down, but what was noticeable here the over $5 million kept on going. Good for the high end buyers to note that value can be gotten. Palo Alto has finally slowed down and the sales are dropping off and the inventory pulling back simply from taking off the market. The high end here is dead. Sales of over $3 million are non-existent.
The good news is that jumbo loans are improving. We had two sales that went through very quickly, les than 20 days from removal of contingencies until close of escrow. US Trust and Schwab are the players here. For those of you who are looking for trust worthy jumbo lenders we have referrals for you.
Wednesday, July 29, 2009
July 28, 2009
• Long Island Tea Circuit
• Market Analysis& Statistics
• New Loan Requirements
One of the annual events of summer for the East Coast/NYC circuit are parties on Long Island. They are usually at a Beach Club or Country Club; and they all have one thing in common (What’s Hot in the Market). Of course the market on the Long Island Sound is Wall Street, Hedge Funds and the Hot Managers. This Saturday it was the annual Keller William Bar-B-Q. I was given the great complement from the newer agent to our group specializing in Commercial Investment Real Estate to be asked: “based upon your experience and training, what is your outlook on the economy, real estate and investments”? Boy what a big subject, my wife then said “are you sure you want to hear it?”
My Response: One of our greatest Generals was George Patten. General Patten believed he was the re-incarnation of military men going back to Sumeria, but could not determine if he was an officer then; but was certain for all the succeeding lives he was an officer. General Patten attributed his success with his tank corps in Europe to studying the battles of Caesar. Patten move so quickly through western Europe against the German’s he went beyond his supply line and was ready to cross the Rhine and take Berlin. Well what does that tell you? History is your greatest teacher. Lord Toynbee said “history repeats itself”.
The last “great recession” we had was the 1973-74 recession. The loss in value to the stock market was greater than the Great Depression as the Dow Jones Industrials declined some 55% from a hair over 1000 in 1971. What followed was a recession, unemployment of 10% and lay offs and slow down and cut backs. The exception was GM and Ford Cadillac and Lincoln Continental division ran 3 shifts. It took 10 years before we once again had steady growth and the Dow Jones went beyond its former high of 1000+.
It will take us over 10 years before the Dow and the various averages you follow to regain and exceed their former highs. The industries to follow and invest in will be “Green”, Biotech, and selective Technologies. Real Estate will stabilize in growth sectors of the US as the “rust belt” and industries de-stabilized from the reorganizations, but don’t expect a return to the growth and real estate market of the past. Value will be gotten from “estate sales”, “divorces” and “relocation”. The residential rental markets will see stable growth in rental income and amortization of principal of mortgages. The commercial area still looks foggy and needs a cleaning out. Expect regulation to return similar to the late 70’s and early 80’s, expect mergers and acquisitions to be the sole sector of growth in companies. To Big to Fail, will be the FTC battle cry as it dismantles Big Business, Banks, Financials, Insurance Companies and sues to stop mergers. Expect tax rates to increase; do not expect interest rates to escalate in the near future. The day of real estate for wealth growth will not be here for quite awhile.
Jeremy Siegel, of Wharton School of Business wrote a paper a number of years ago about the decline of growth and the future of the Western World as the “baby boom” generation mature. Baby Boomers will now be sellers of stocks, real estate and buyers of bonds as they look at retirement. The big homes for families will be sold and the available buyers will be limited. The take up in buyers will come from immigration. Immigration will come from the countries will large population increases such as the mid-east and Latin America. The “baby boomers” will live longer and probably work longer, they will have numerous careers. That means smaller homes, community life styles and inheritance will be further out for their children that it was from their parents, the frugal savers of the Depression Children. Days on the market will increase as it will take longer to sell the more expensive larger home to buy the empty nester smaller home. Don’t expect China to take over as their birth rate is below 2 and they will be importing or out sourcing labor duties to the nearer nations with higher birth rates.
My wife’s elbow in my ribs stopped me there!
This week’s statistics:
Menlo Park
Actives:90
Pending:10
Pending No Shows:13
Sold:58
Portola Valley
Actives:33
Pending:5
Pending No Show:1
Sold:6
Woodside
Actives:57
Pending:2
Pending No Show:5
Sold:3
Atherton
Actives:37
Pending:3
Pending No Show:10
Sold:7
Palo Alto
Actives:117
Pending:13
Pending No Show:25
Sold:27
All markets except Palo Alto had increases in homes sold. A home is sold when it closes escrow. A home remains pending until the contingencies are removed and then it becomes Pending Do Not Show. The active list is a new category for you to review. Every 14 days about 38 properties are either canceled or expire.
The Federal Reserve has put in more regulations for lenders to comply with in the Truth-in-lending area. Here are some items per US Trust Company Bank America.
• At application a “disclosure statement” is sent to applicant.
• If rates change 1/8% from the rate quoted in the disclosure, a new disclosure packet is sent and the applicant has 3 days to review.
• Loan Documents are drawn after 3 day waiting period and approval of loan.
• If applicant changes any of the terms and type of loan and if interest change by 1/8%, a new disclosure packet is sent and new documents written after 3 days and approval of loan.
• There is no 3 day right of recession with a new loan on a purchased property
• There is a 3 day right of recession on a refinance or Home Equity Loan.
• If you have great credit, balance sheet and income a loan could close in 15-20, increases in time line dependent on stable interest rates and no changes in the loan by the applicant.
• What should you look forward to in a loan closing? How about 45-60 days.
• Market Analysis& Statistics
• New Loan Requirements
One of the annual events of summer for the East Coast/NYC circuit are parties on Long Island. They are usually at a Beach Club or Country Club; and they all have one thing in common (What’s Hot in the Market). Of course the market on the Long Island Sound is Wall Street, Hedge Funds and the Hot Managers. This Saturday it was the annual Keller William Bar-B-Q. I was given the great complement from the newer agent to our group specializing in Commercial Investment Real Estate to be asked: “based upon your experience and training, what is your outlook on the economy, real estate and investments”? Boy what a big subject, my wife then said “are you sure you want to hear it?”
My Response: One of our greatest Generals was George Patten. General Patten believed he was the re-incarnation of military men going back to Sumeria, but could not determine if he was an officer then; but was certain for all the succeeding lives he was an officer. General Patten attributed his success with his tank corps in Europe to studying the battles of Caesar. Patten move so quickly through western Europe against the German’s he went beyond his supply line and was ready to cross the Rhine and take Berlin. Well what does that tell you? History is your greatest teacher. Lord Toynbee said “history repeats itself”.
The last “great recession” we had was the 1973-74 recession. The loss in value to the stock market was greater than the Great Depression as the Dow Jones Industrials declined some 55% from a hair over 1000 in 1971. What followed was a recession, unemployment of 10% and lay offs and slow down and cut backs. The exception was GM and Ford Cadillac and Lincoln Continental division ran 3 shifts. It took 10 years before we once again had steady growth and the Dow Jones went beyond its former high of 1000+.
It will take us over 10 years before the Dow and the various averages you follow to regain and exceed their former highs. The industries to follow and invest in will be “Green”, Biotech, and selective Technologies. Real Estate will stabilize in growth sectors of the US as the “rust belt” and industries de-stabilized from the reorganizations, but don’t expect a return to the growth and real estate market of the past. Value will be gotten from “estate sales”, “divorces” and “relocation”. The residential rental markets will see stable growth in rental income and amortization of principal of mortgages. The commercial area still looks foggy and needs a cleaning out. Expect regulation to return similar to the late 70’s and early 80’s, expect mergers and acquisitions to be the sole sector of growth in companies. To Big to Fail, will be the FTC battle cry as it dismantles Big Business, Banks, Financials, Insurance Companies and sues to stop mergers. Expect tax rates to increase; do not expect interest rates to escalate in the near future. The day of real estate for wealth growth will not be here for quite awhile.
Jeremy Siegel, of Wharton School of Business wrote a paper a number of years ago about the decline of growth and the future of the Western World as the “baby boom” generation mature. Baby Boomers will now be sellers of stocks, real estate and buyers of bonds as they look at retirement. The big homes for families will be sold and the available buyers will be limited. The take up in buyers will come from immigration. Immigration will come from the countries will large population increases such as the mid-east and Latin America. The “baby boomers” will live longer and probably work longer, they will have numerous careers. That means smaller homes, community life styles and inheritance will be further out for their children that it was from their parents, the frugal savers of the Depression Children. Days on the market will increase as it will take longer to sell the more expensive larger home to buy the empty nester smaller home. Don’t expect China to take over as their birth rate is below 2 and they will be importing or out sourcing labor duties to the nearer nations with higher birth rates.
My wife’s elbow in my ribs stopped me there!
This week’s statistics:
Menlo Park
Actives:90
Pending:10
Pending No Shows:13
Sold:58
Portola Valley
Actives:33
Pending:5
Pending No Show:1
Sold:6
Woodside
Actives:57
Pending:2
Pending No Show:5
Sold:3
Atherton
Actives:37
Pending:3
Pending No Show:10
Sold:7
Palo Alto
Actives:117
Pending:13
Pending No Show:25
Sold:27
All markets except Palo Alto had increases in homes sold. A home is sold when it closes escrow. A home remains pending until the contingencies are removed and then it becomes Pending Do Not Show. The active list is a new category for you to review. Every 14 days about 38 properties are either canceled or expire.
The Federal Reserve has put in more regulations for lenders to comply with in the Truth-in-lending area. Here are some items per US Trust Company Bank America.
• At application a “disclosure statement” is sent to applicant.
• If rates change 1/8% from the rate quoted in the disclosure, a new disclosure packet is sent and the applicant has 3 days to review.
• Loan Documents are drawn after 3 day waiting period and approval of loan.
• If applicant changes any of the terms and type of loan and if interest change by 1/8%, a new disclosure packet is sent and new documents written after 3 days and approval of loan.
• There is no 3 day right of recession with a new loan on a purchased property
• There is a 3 day right of recession on a refinance or Home Equity Loan.
• If you have great credit, balance sheet and income a loan could close in 15-20, increases in time line dependent on stable interest rates and no changes in the loan by the applicant.
• What should you look forward to in a loan closing? How about 45-60 days.
Friday, July 10, 2009
June 23, 2009
• Market Statistics
• San Carlos is "hot"
• Palo Alto leads list is closings
• Pending's and the risk
• Are we in a bubble?
City Pending/Show Pending/Do not show Sold
Palo Alto 21 43 39
PortolaValley 4 5 0
Woodside 5 3 0
Atherton 4 10 0
Menlo Park 17 19 2
RWC +$800K 16 10 0
San Carlos 23 19 1
The past 3 weeks has seen some notable changes. The pending does not show, or those offers that removed all contingencies, have dramatically increased. We are either to have an avalanche of sold's within the next week or some offers collapsing, and home back on the market. The risk, as I see it, is FINANCING. I am hearing more comments from agents that lenders are asking for another appraisal, increase in deposit, compensating balances, and or more due diligence in closing a transaction.
What started the buying?
1. Commitment letters for financing were based upon rates of 30+ days ago when interest rates were 1% point lower. "Use it or lose it" is the short answer.
2. Pent up demand caused by the dead zone from November 2008 to March 2009. Buyers walked from the market when the financial system tottered.
3. Cash no longer placed in the stock, bond and or hedge fund market saw greater value in real estate.
I have been asked to explain why is our real estate market vibrant when the rest of the world east of 101 and north of San Francisco and south of Los Altos struggling? Cash is king, alternative investments are lacking, and technology still remains to be the driving power of our employment figures. Once the excesses of the past leveraging era are cured, the substance or firm base of our technology base holds our economy together. Let's look at Telsa versus Ford, GM and Chrysler. The former is building plants in our area and will be hiring people; whereas, the later will be closing plants and laying off people. The RUST BELT continues to erode away.
Our residents are not stock market investors, they may own stocks, but they own them from Venture Capital deals and stock options. Investing to our Valley people come in cash in banks, and treasuries, investments in VC partnerships and then the ties of success: cars, homes and education for their children. That is different from the east coast and the mid west. They are stock and bond investors and to some extent hedge funds, usually fund of funds. When the stock market tanks the mid west and east coast feel it hard and their real estate market suffers; because their economy is based on industrial production and finance.
Are we in a bubble, I don't think so. We just have a stronger and more solid economic base. When the crisis hit in November it was not based upon the same economy of the "29" Crash. People had money in banks, money market funds, and various other cash equivalents. The trust had been broken when Lehman was allowed to fail and the short term paper in Lehman failed. The dominoes began to fall and trust disappeared. Then fell the money market funds, the banks began to shutter and the commercial paper market disappeared. Investors went to the safest paper, the US Government paper. The dominoes not only fell in the US they fell all over the world; we are in a global economy.
Where are we now? Cash buyer predominate the over $2 million market. Atherton homes are beginning to close very quickly. Those sellers who had to sell are now gone; whether that be Atherton, Menlo Park, Palo Alto, Woodside and Portola Valley.
The market of under $1 million gets very hot once you drop down in list price. If I give you San Carlos as an example; the price of $500,000 to $800,000 last days once listed.
A client said to me businesses are closing in SF, the news on the economy stinks and I can't buy a home in San Carlos because I can't move fast enough. It is not the economy it is de-leveraging of the financial system and all those who relied on excessive leverage. The excesses will be eliminated and sound base of our economic system will remain. If our economy is in trouble ask yourself who is buying the IPhones in such unprecedented numbers. Or how can a band make $1 million on 99 cent downloads onto an IPhone IF are truly in a recession? Or how many Telsa's sold at $100,000+. I remember the last big recession in 1974. I bought my first Mercedes for $1000 more than a Ford Fairlane for one simple reason, I had cash.
It is unfortunate that some business will fail, that could simply be the fact that they only existed due to unsound leverage.
Use your common sense when making offers. Do not think that because you are a cash buyer you are going to steal a property. There are other cash buyers in the same situation. Some of whom will pay up to get the house they like in the neighborhood they want. If you are listing or selling a house or plan to sell a house, make reasonable expectations. This is not 2006. If you bought in 2006 and must sell, you make take a loss.
In the next several weeks we will see if pending’ do not show become sold’, or if fails occur and homes are back on the market, or if the pending’ continue. Sellers may see a greater risk by canceling an offer rather than working with buyers. My bet is they work with buyers.
Regards To All
• San Carlos is "hot"
• Palo Alto leads list is closings
• Pending's and the risk
• Are we in a bubble?
City Pending/Show Pending/Do not show Sold
Palo Alto 21 43 39
PortolaValley 4 5 0
Woodside 5 3 0
Atherton 4 10 0
Menlo Park 17 19 2
RWC +$800K 16 10 0
San Carlos 23 19 1
The past 3 weeks has seen some notable changes. The pending does not show, or those offers that removed all contingencies, have dramatically increased. We are either to have an avalanche of sold's within the next week or some offers collapsing, and home back on the market. The risk, as I see it, is FINANCING. I am hearing more comments from agents that lenders are asking for another appraisal, increase in deposit, compensating balances, and or more due diligence in closing a transaction.
What started the buying?
1. Commitment letters for financing were based upon rates of 30+ days ago when interest rates were 1% point lower. "Use it or lose it" is the short answer.
2. Pent up demand caused by the dead zone from November 2008 to March 2009. Buyers walked from the market when the financial system tottered.
3. Cash no longer placed in the stock, bond and or hedge fund market saw greater value in real estate.
I have been asked to explain why is our real estate market vibrant when the rest of the world east of 101 and north of San Francisco and south of Los Altos struggling? Cash is king, alternative investments are lacking, and technology still remains to be the driving power of our employment figures. Once the excesses of the past leveraging era are cured, the substance or firm base of our technology base holds our economy together. Let's look at Telsa versus Ford, GM and Chrysler. The former is building plants in our area and will be hiring people; whereas, the later will be closing plants and laying off people. The RUST BELT continues to erode away.
Our residents are not stock market investors, they may own stocks, but they own them from Venture Capital deals and stock options. Investing to our Valley people come in cash in banks, and treasuries, investments in VC partnerships and then the ties of success: cars, homes and education for their children. That is different from the east coast and the mid west. They are stock and bond investors and to some extent hedge funds, usually fund of funds. When the stock market tanks the mid west and east coast feel it hard and their real estate market suffers; because their economy is based on industrial production and finance.
Are we in a bubble, I don't think so. We just have a stronger and more solid economic base. When the crisis hit in November it was not based upon the same economy of the "29" Crash. People had money in banks, money market funds, and various other cash equivalents. The trust had been broken when Lehman was allowed to fail and the short term paper in Lehman failed. The dominoes began to fall and trust disappeared. Then fell the money market funds, the banks began to shutter and the commercial paper market disappeared. Investors went to the safest paper, the US Government paper. The dominoes not only fell in the US they fell all over the world; we are in a global economy.
Where are we now? Cash buyer predominate the over $2 million market. Atherton homes are beginning to close very quickly. Those sellers who had to sell are now gone; whether that be Atherton, Menlo Park, Palo Alto, Woodside and Portola Valley.
The market of under $1 million gets very hot once you drop down in list price. If I give you San Carlos as an example; the price of $500,000 to $800,000 last days once listed.
A client said to me businesses are closing in SF, the news on the economy stinks and I can't buy a home in San Carlos because I can't move fast enough. It is not the economy it is de-leveraging of the financial system and all those who relied on excessive leverage. The excesses will be eliminated and sound base of our economic system will remain. If our economy is in trouble ask yourself who is buying the IPhones in such unprecedented numbers. Or how can a band make $1 million on 99 cent downloads onto an IPhone IF are truly in a recession? Or how many Telsa's sold at $100,000+. I remember the last big recession in 1974. I bought my first Mercedes for $1000 more than a Ford Fairlane for one simple reason, I had cash.
It is unfortunate that some business will fail, that could simply be the fact that they only existed due to unsound leverage.
Use your common sense when making offers. Do not think that because you are a cash buyer you are going to steal a property. There are other cash buyers in the same situation. Some of whom will pay up to get the house they like in the neighborhood they want. If you are listing or selling a house or plan to sell a house, make reasonable expectations. This is not 2006. If you bought in 2006 and must sell, you make take a loss.
In the next several weeks we will see if pending’ do not show become sold’, or if fails occur and homes are back on the market, or if the pending’ continue. Sellers may see a greater risk by canceling an offer rather than working with buyers. My bet is they work with buyers.
Regards To All
June 10, 2009
I am returning to the old form of communications. We have moved offices, the phone lines are in, but not the internet. My laptop at home has a problem accessing the Blog. This will have to do.
Big TWO WEEKS, homes went pending all over the area. Sounds like the return of the past market with those who were waiting for a bottom, or those who could not wait any longer jumping in. The big change was the price per square foot paid. Three weeks and more ago, buyers were getting big discounts for last year. Menlo Park saw the larger homes of 3000+ square feet going down below $600 per square foot. West Menlo and Allied Arts were down to the mid $700 per square foot. And then, pop went the weasel. What caused the pop and what happened?
The big POP was how quickly homes went pending. Multiple offers were not uncommon. In Palo Alto on Middlefield a home went off above list with 7 offers above and one offer below. Multiple offers were not uncommon in Menlo Park. There were over bids too!
What these homes sell at will be the big question on all buyers and their agent's minds.
What caused the run? I think two things caused the run. School ended and those parents who wanted to enroll their children in Oak Knoll and Hillview want in early. From what I have heard form listing agents, the offers were all cash. The other cause could be the jump in mortgage rates in the past two weeks. We saw rates move into the 5.5% to 6% range from the 4.5% to 5% range. If buyers had a locked in rated they jumped in once they rates increased, rather than lose the lowest rates in history.
Here is how the stats run:
Atherton 10 pending
Portola Valley 8 pending
Woodside 11 pending
Menlo Park (west of 101) 42 pending
Palo Alto 60 pending
Redwood City (over $800,000) 32 pending
All it tells me from the statistics and my experience with buyers is that we have seen the end of the wait and see group. New listings are returning to the $900 range in Menlo Park. Palo Alto is picking up along with Menlo Park. Redwood City is seeing great activity outside of the REO, Short Sale, and Foreclosure market.
We have some time to see what the FED will do on interest rates. If home sales/pending sales continue to move along with rates in mid 5's to low 6's. We may not see the FED buying bonds in the after market to drive down rates. If pending and sales slow down, the FED is a buyer and rates will come down.
Buyers have finally gotten smart about price versus rates. If you have a 4.5% loan it is cheaper than have a 5.5% loan and a lower price. Go figure it yourself. $500,000 with a 1% savings is $5000 per month, per year $60,000. Over the life over three times the original mortgage. Waiting for the bell to ring at the bottom will cost you in mortgage rates.
Big TWO WEEKS, homes went pending all over the area. Sounds like the return of the past market with those who were waiting for a bottom, or those who could not wait any longer jumping in. The big change was the price per square foot paid. Three weeks and more ago, buyers were getting big discounts for last year. Menlo Park saw the larger homes of 3000+ square feet going down below $600 per square foot. West Menlo and Allied Arts were down to the mid $700 per square foot. And then, pop went the weasel. What caused the pop and what happened?
The big POP was how quickly homes went pending. Multiple offers were not uncommon. In Palo Alto on Middlefield a home went off above list with 7 offers above and one offer below. Multiple offers were not uncommon in Menlo Park. There were over bids too!
What these homes sell at will be the big question on all buyers and their agent's minds.
What caused the run? I think two things caused the run. School ended and those parents who wanted to enroll their children in Oak Knoll and Hillview want in early. From what I have heard form listing agents, the offers were all cash. The other cause could be the jump in mortgage rates in the past two weeks. We saw rates move into the 5.5% to 6% range from the 4.5% to 5% range. If buyers had a locked in rated they jumped in once they rates increased, rather than lose the lowest rates in history.
Here is how the stats run:
Atherton 10 pending
Portola Valley 8 pending
Woodside 11 pending
Menlo Park (west of 101) 42 pending
Palo Alto 60 pending
Redwood City (over $800,000) 32 pending
All it tells me from the statistics and my experience with buyers is that we have seen the end of the wait and see group. New listings are returning to the $900 range in Menlo Park. Palo Alto is picking up along with Menlo Park. Redwood City is seeing great activity outside of the REO, Short Sale, and Foreclosure market.
We have some time to see what the FED will do on interest rates. If home sales/pending sales continue to move along with rates in mid 5's to low 6's. We may not see the FED buying bonds in the after market to drive down rates. If pending and sales slow down, the FED is a buyer and rates will come down.
Buyers have finally gotten smart about price versus rates. If you have a 4.5% loan it is cheaper than have a 5.5% loan and a lower price. Go figure it yourself. $500,000 with a 1% savings is $5000 per month, per year $60,000. Over the life over three times the original mortgage. Waiting for the bell to ring at the bottom will cost you in mortgage rates.
April 16, 2009: Market Update
• Once bitten by Bears, Twice Shy of Bulls?
• FED Bond Buying piddles out the first day
• Outlook on Economy is Brightening, Poll Finds
• SURPRIZE! They made $$$$$$, more than they said they would!
• Intel says we passed the bottom
• Economist react, Housing may finally be near a bottom
• Is Silicon Valley’s housing market leveling off?
• Homes Sales and Homes Pending
• 10 Things Every Remodeling Contract Should Include.
There was a great article in Friday’s Wall Street Journal of April 10th, on the attitude of investors after a Bear Market. For all those of you, who thought shares prices only went up, SURPRIZE! , even the best Bull’s die. Welcome to the new Bear Market. Of course the big question is, have we hit a bottom? Is the rally just a Bear Market Rally and a Bull Trap? What do I do with my 401K and my savings? Back to the article, do investors shun stocks or do they flock back into the in search of reward? A study found that from 1964 to 2004 those who suffered a loss in bear markets were less likely to return quickly. Of course quickly was dependent on age and past experience. You would think that Depression Babies would shun the market, right? But would you believe it that young people with experience in the past 10 years were the most pessimistic! That pessimistic attitude would last 10 to 20 years. History tells me that. I remember the 1974 recession and the enormous losses taken by investors in that bear market. It took until 1983 for the Dow Jones Industrial to break out of the old high! That was 9 years. So this market should have the same effect, a picket fence of highs and lows and no long term trend.
What do you invest in, what did the investors of 1974 invest in? Would you be surprised if I said REAL ESTATE? See is Silicon Valley leveling off below for details. I saw the frustration of investors in 1974. From then on real estate was the chosen medium. Second homes, rentals, condos were all part of the chosen medium. Of course it all went too far as real estate was then bought with negative income, rather than positive income. The rationale was higher prices will pay off. Sooner or later those bull market beliefs all have a lesson to be learned, trees do not grow to the sky!
The FED is buying $300 billion of Treasuries over the next six months. TIPs, or Treasury Inflation Protect securities was the first buy yesterday. $1.5 Billion were purchase by the FED from dealers and $15 Billion tendered….OOPPS! It was not surprise to see US Treasuries sell off today!
Another great paper I have read since my college days was is the New York Times. It is now my favorite in electronic form. April 7, 2009 it was sated that Americans have grown more optimistic about the economy and the direction of the country in the 11 weeks since President Obama was inaugurated. GOSH, I knew that, my phone and in box was turning red form all the requests to see homes. The same people who told me in December that it is getting worst were now looking to buy. It is all about confidence. Bush did not have it, Obama has it. It is not the case that people do not have money. Wrong, there is a great deal of money around, especially here in Silicon Valley. I am sorry for those in the “Rust Belt” or the East Coast who are suffering, but we here have suffered the ups and downs of the technology cycle. It is fast and one day a new technology has workers looking for a new employee. That makes saving very important. They also know that the high flyer of yesterday is not the high flyer of today. Do you know that the Hoover Vacuum Tube was once in the Dow Jones? It is confidence that creates bottoms. I don’t care if it is housing, stocks, bonds, pork Bellies or Gold. If you have confidence you will buy, support and trust. That is where we are today and that is why foreclosures and REO’s are being bought in record numbers and multiple offers.
Banks and financials are making money, more than the experts forecasted. I don’t want to be a party pooper, but let’s face it. If you can borrow money free or almost free and lend it out at 29% on a credit card would you make money? This is Tony Soprano’s game. Steal the money and lend it to someone at usurious rates. Oh, I forgot the law lets the bank do so. Wasn’t that our tax dollars that we gave them at almost no interest? There has to be something done about this game of high interest rates to people who cannot afford them or are not smart enough to understand. I am beginning to think that the KORAN is right, interest is sinful
Otelini of Intel has declared the bottom of our economy, hurray! But more important is that the San Jose Mercury News has the housing market leveling off. More homes changed hands last month than in March of 2008. Is that a sign of lack of confidence? A number of readers and clients have asked me is it a bottom, will it go lower. If that was the case would people be buying in record numbers? Bottoms and recovery are characterized by mixed news, good and bad. The comment is “climbing a wall of worry”
Market Action since April 4, 2009
1. Palo Alto: zero closed escrow and 37 pending + 6
2. La Honda zero closed escrow and 3 pending + 2
3. Portola Valley, zero closed escrow and 11 pending + 1
4. Woodside zero closed escrow and 5 pending
5. Atherton zero closed escrow and 6 pending + 2
6. Menlo Park (east of 101 not included) 1 closed escrow and 27 pending + 4
7. Redwood City (over $800,000) zero closed escrow and 17 pending. - 1
The + and or the – represents the change since April 4, 2009.
• FED Bond Buying piddles out the first day
• Outlook on Economy is Brightening, Poll Finds
• SURPRIZE! They made $$$$$$, more than they said they would!
• Intel says we passed the bottom
• Economist react, Housing may finally be near a bottom
• Is Silicon Valley’s housing market leveling off?
• Homes Sales and Homes Pending
• 10 Things Every Remodeling Contract Should Include.
There was a great article in Friday’s Wall Street Journal of April 10th, on the attitude of investors after a Bear Market. For all those of you, who thought shares prices only went up, SURPRIZE! , even the best Bull’s die. Welcome to the new Bear Market. Of course the big question is, have we hit a bottom? Is the rally just a Bear Market Rally and a Bull Trap? What do I do with my 401K and my savings? Back to the article, do investors shun stocks or do they flock back into the in search of reward? A study found that from 1964 to 2004 those who suffered a loss in bear markets were less likely to return quickly. Of course quickly was dependent on age and past experience. You would think that Depression Babies would shun the market, right? But would you believe it that young people with experience in the past 10 years were the most pessimistic! That pessimistic attitude would last 10 to 20 years. History tells me that. I remember the 1974 recession and the enormous losses taken by investors in that bear market. It took until 1983 for the Dow Jones Industrial to break out of the old high! That was 9 years. So this market should have the same effect, a picket fence of highs and lows and no long term trend.
What do you invest in, what did the investors of 1974 invest in? Would you be surprised if I said REAL ESTATE? See is Silicon Valley leveling off below for details. I saw the frustration of investors in 1974. From then on real estate was the chosen medium. Second homes, rentals, condos were all part of the chosen medium. Of course it all went too far as real estate was then bought with negative income, rather than positive income. The rationale was higher prices will pay off. Sooner or later those bull market beliefs all have a lesson to be learned, trees do not grow to the sky!
The FED is buying $300 billion of Treasuries over the next six months. TIPs, or Treasury Inflation Protect securities was the first buy yesterday. $1.5 Billion were purchase by the FED from dealers and $15 Billion tendered….OOPPS! It was not surprise to see US Treasuries sell off today!
Another great paper I have read since my college days was is the New York Times. It is now my favorite in electronic form. April 7, 2009 it was sated that Americans have grown more optimistic about the economy and the direction of the country in the 11 weeks since President Obama was inaugurated. GOSH, I knew that, my phone and in box was turning red form all the requests to see homes. The same people who told me in December that it is getting worst were now looking to buy. It is all about confidence. Bush did not have it, Obama has it. It is not the case that people do not have money. Wrong, there is a great deal of money around, especially here in Silicon Valley. I am sorry for those in the “Rust Belt” or the East Coast who are suffering, but we here have suffered the ups and downs of the technology cycle. It is fast and one day a new technology has workers looking for a new employee. That makes saving very important. They also know that the high flyer of yesterday is not the high flyer of today. Do you know that the Hoover Vacuum Tube was once in the Dow Jones? It is confidence that creates bottoms. I don’t care if it is housing, stocks, bonds, pork Bellies or Gold. If you have confidence you will buy, support and trust. That is where we are today and that is why foreclosures and REO’s are being bought in record numbers and multiple offers.
Banks and financials are making money, more than the experts forecasted. I don’t want to be a party pooper, but let’s face it. If you can borrow money free or almost free and lend it out at 29% on a credit card would you make money? This is Tony Soprano’s game. Steal the money and lend it to someone at usurious rates. Oh, I forgot the law lets the bank do so. Wasn’t that our tax dollars that we gave them at almost no interest? There has to be something done about this game of high interest rates to people who cannot afford them or are not smart enough to understand. I am beginning to think that the KORAN is right, interest is sinful
Otelini of Intel has declared the bottom of our economy, hurray! But more important is that the San Jose Mercury News has the housing market leveling off. More homes changed hands last month than in March of 2008. Is that a sign of lack of confidence? A number of readers and clients have asked me is it a bottom, will it go lower. If that was the case would people be buying in record numbers? Bottoms and recovery are characterized by mixed news, good and bad. The comment is “climbing a wall of worry”
Market Action since April 4, 2009
1. Palo Alto: zero closed escrow and 37 pending + 6
2. La Honda zero closed escrow and 3 pending + 2
3. Portola Valley, zero closed escrow and 11 pending + 1
4. Woodside zero closed escrow and 5 pending
5. Atherton zero closed escrow and 6 pending + 2
6. Menlo Park (east of 101 not included) 1 closed escrow and 27 pending + 4
7. Redwood City (over $800,000) zero closed escrow and 17 pending. - 1
The + and or the – represents the change since April 4, 2009.
April 4, 2009: Weekly Commentary
• Existing Home Sales up another 5.1% as of March 23, 2009
• Pending Homes Sales up 2.1% nation-wide with West leading
• Market to Market accounting returns ( little) to the past standards
• California Association of Realtors Launches Mortgage Protection Plan
• Bargain Prices bring out Investors and Novice Buyers
• Larry Kudlow of CNBC Declares New Bull Market
• Market Value versus Replacement Cost advantage for buyers Protection notice to owners.
• 5 Home Trends for 2010
• 6 Landscaping Tricks to WOW buyers
• Special Commentary: Does your DNA affect your investing and home/selling attitude?
Sorry for the lapse in a week, as the two notes at the top state Existing Homes Sales were up and Pending were up. That translated into calls, showings and listing presentation for Jim and me.
Amazed aren’t you? With all the Media news on lower home prices, and the poor situation of America, America was out buying what they have faith in before all else REAL ESTATE! Here are our local numbers for the past 14 days:
1. Palo Alto: zero closed escrow and 31 pending
2. La Honda zero closed escrow and one pending for 15+ acre Ranch for $1,399,000 list
3. Portola Valley, zero closed escrow and 10 pending
4. Woodside zero closed escrow and 5 pending
5. Atherton zero closed escrow and 4 pending
6. Menlo Park (east of 101 not included) zero closed escrow and 23 pending
7. Redwood City (over $800,000) zero closed escrow and 18 pending.
A big pick up in sales or offers pending closed occurred in the past 14 days. Is confidence back and the pent up demand beginning to show itself. From my stand point it is. If you are a buyer don’t wait, the tendency of sellers to accept lower offers will stop as the news begins to filter out among the agent community. By the time the media picks it up the opportunities will be over!
To jump out of sequence to my notes above the SF Chronicle featured a story on how investors and novice buyers are active and buying the low end of the market of foreclosures and short sales. There is a good article in the Saturday April 4, 2009 issue of the San Jose Mercury News, Real Estate Section in the “Market Wise” column. “Be Realistic in offers, even in a buyer’s market”. The question given is that the writer has made many offers and are rejected, no response or out bid and don’t even get a counter offer. In short sales and foreclosures the lender’s loss mitigation departments will not give property away. The response is that the buyer and agent will keep writing offers until the market shifts. It further states that the prices reflected in today’s listing prices do reflect the present “market”. Well crafted offers will get the property with experienced agents. ALL WELL SAID! Here is one experienced agent willing to help!
California Association of Realtors (CAR) has launched a Mortgage Protection Plan. It is for 1st Time Home Buyers. It is to give peace of mind when purchasing a home. It will provide six months of payments up to $1500 to meet mortgage payments for 1st Time Home Buyers who lose their jobs. For more information write or call me or see www.car.org/aboutus/hafmainpage/carhafmortgageprotection/
Larry Kudlow you’re the man! If you don’t watch CNBC in the morning it is a good show to give you a pulse of the Financial Markets. This guy puts on quite a show! I enjoy watching and listing on my headset while I work out in the gym at 7:30 am to 9:30 am. Larry has stated that the stock market begins a new bull trend 6 months before and economy bottoms and the recession ends. The Wall Street Journal recently stated that Bear Markets average length is 17 months and we have either seen it or we have 3 months to go. We will see if Larry is right. To back Larry though is Friday’s Wall Street Journal front page “Stocks Leap as Fear Ebb”. It has been happening for some time if you have read my prior letters. This time it was more pronounced. Investors bought globally equities, oil futures, industrial commodities, technology stocks, and junk bonds! These same investments they shunned weeks ago says the article. But if you were watching the slow movements up in the prices of these investments the pros were slowly nibbling weeks ago. What did they sell? “They were selling Treasury Bonds, gold, the US $ and other safe-haven refuges”.
Market Value versus Replacement Cost drives markets off of recessionary bottoms. Whether it is company shares or home values; it is cheaper to buy than to build is the motto of takeover plays, mergers and acquisitions. We get USAA Magazine, our insurance company. The spring issue had a great article on Market Value versus Replacement Value. It stated that what you buy your house for may actually be lower than the cost of building the same house from scratch. That is important to know if you presently own and are in the process of buying. In many parts of the country home prices have fallen as much as 30%. While Silicon Valley may be protected in some regards there has been a fall off in home prices from 2006 of at least 13% on average. Meanwhile construction costs which include concrete, lumber, steel and labor are ever rising. A tip for the buyer who is looking at buying and fixing up the property, take the purchase price and cost of repairs and add that together and look at another house that needs no work for the same price. You will buy it with a cheap mortgage in historic terms; Home Mortgage Rates have NEVER been this low. Does it really matter cutting off on the sales price and missing a buy when you will have the cheapest mortgage rate ever for the next 30 years?
FIVE HOME TRENDS FOR 1010
1. The Live-in Kitchen
2. Living Within Our Means
3. The Green Kitchen
4. The Wellness Kitchen
5. Cooking for Fun
“For more on this subject write me for details.”
SIX LANDSCAPING TRICKS
1. Add Splashes of Color: iceberg roses, purple salvia, lavender, crape myrtle tree will add color to the seasons.
2. Size trees and shrubs to scale. Don’t block doors, windows and other architectural features on the home’s façade
3. Maintain a perfect lawn. Don’t have brown spots, some rocks, pebbles, boulders, drought tolerant plants and ornamental grasses will generate more kudos, especially in drought times and water conservation times as we may have after our rain season ends.
4. Light up the outside with good illumination, create drama at night. Use low voltage lamps to highlight branches of specimen trees, a front doors, walks, and corners of the house.
5. Let them HEAR THE WATER, nothing is more soothing than the sound of water. Use fountains or create a small stream with rocks to provide pleasant gurgling to block street noise.
6. Use decorative architectural elements, a new mail box, planted window boxes, and a low fence wrapped in potatoes vines ass cachet, particularly in winter months.
Special feature: DOES DNA AFFECT YOUR INVESTING PERSONALITY?
Again a feature in the WSJ (Wall Street Journal), thanks to Jason Zweig, did you buy high, sell low zig when you should have zagged. Maybe it was your ancestors who gave you this trait. Or are you the fortunate that are just never on the wrong side?
25% of people with European ancestry have a gene that dampens their fear circuitry when it comes to making money. 20% of Caucasians have a gene that makes them more responsive to gambles. Some people are 50% more sensitive to fear. Well, does that mean we all go out in swab our mouths and get tested? 20% of the variation in risk taking among individuals is genetically determined; the rest comes from upbringing, experience, education and training. There is always a tug of war inside us all between nature and nurture. Bear Markets and Recessionary Markets give nature the upper hand, it never more important now to stick to disciplines that can over ride your genetic impulses.
Warren Buffet said it perfectly, during time of greed there should be fear, during times of fear there should be greed. Find a seasoned pro and work with them to guide you through the times of nature. I didn’t get this gray hair from a bottle!
Until later…..
• Pending Homes Sales up 2.1% nation-wide with West leading
• Market to Market accounting returns ( little) to the past standards
• California Association of Realtors Launches Mortgage Protection Plan
• Bargain Prices bring out Investors and Novice Buyers
• Larry Kudlow of CNBC Declares New Bull Market
• Market Value versus Replacement Cost advantage for buyers Protection notice to owners.
• 5 Home Trends for 2010
• 6 Landscaping Tricks to WOW buyers
• Special Commentary: Does your DNA affect your investing and home/selling attitude?
Sorry for the lapse in a week, as the two notes at the top state Existing Homes Sales were up and Pending were up. That translated into calls, showings and listing presentation for Jim and me.
Amazed aren’t you? With all the Media news on lower home prices, and the poor situation of America, America was out buying what they have faith in before all else REAL ESTATE! Here are our local numbers for the past 14 days:
1. Palo Alto: zero closed escrow and 31 pending
2. La Honda zero closed escrow and one pending for 15+ acre Ranch for $1,399,000 list
3. Portola Valley, zero closed escrow and 10 pending
4. Woodside zero closed escrow and 5 pending
5. Atherton zero closed escrow and 4 pending
6. Menlo Park (east of 101 not included) zero closed escrow and 23 pending
7. Redwood City (over $800,000) zero closed escrow and 18 pending.
A big pick up in sales or offers pending closed occurred in the past 14 days. Is confidence back and the pent up demand beginning to show itself. From my stand point it is. If you are a buyer don’t wait, the tendency of sellers to accept lower offers will stop as the news begins to filter out among the agent community. By the time the media picks it up the opportunities will be over!
To jump out of sequence to my notes above the SF Chronicle featured a story on how investors and novice buyers are active and buying the low end of the market of foreclosures and short sales. There is a good article in the Saturday April 4, 2009 issue of the San Jose Mercury News, Real Estate Section in the “Market Wise” column. “Be Realistic in offers, even in a buyer’s market”. The question given is that the writer has made many offers and are rejected, no response or out bid and don’t even get a counter offer. In short sales and foreclosures the lender’s loss mitigation departments will not give property away. The response is that the buyer and agent will keep writing offers until the market shifts. It further states that the prices reflected in today’s listing prices do reflect the present “market”. Well crafted offers will get the property with experienced agents. ALL WELL SAID! Here is one experienced agent willing to help!
California Association of Realtors (CAR) has launched a Mortgage Protection Plan. It is for 1st Time Home Buyers. It is to give peace of mind when purchasing a home. It will provide six months of payments up to $1500 to meet mortgage payments for 1st Time Home Buyers who lose their jobs. For more information write or call me or see www.car.org/aboutus/hafmainpage/carhafmortgageprotection/
Larry Kudlow you’re the man! If you don’t watch CNBC in the morning it is a good show to give you a pulse of the Financial Markets. This guy puts on quite a show! I enjoy watching and listing on my headset while I work out in the gym at 7:30 am to 9:30 am. Larry has stated that the stock market begins a new bull trend 6 months before and economy bottoms and the recession ends. The Wall Street Journal recently stated that Bear Markets average length is 17 months and we have either seen it or we have 3 months to go. We will see if Larry is right. To back Larry though is Friday’s Wall Street Journal front page “Stocks Leap as Fear Ebb”. It has been happening for some time if you have read my prior letters. This time it was more pronounced. Investors bought globally equities, oil futures, industrial commodities, technology stocks, and junk bonds! These same investments they shunned weeks ago says the article. But if you were watching the slow movements up in the prices of these investments the pros were slowly nibbling weeks ago. What did they sell? “They were selling Treasury Bonds, gold, the US $ and other safe-haven refuges”.
Market Value versus Replacement Cost drives markets off of recessionary bottoms. Whether it is company shares or home values; it is cheaper to buy than to build is the motto of takeover plays, mergers and acquisitions. We get USAA Magazine, our insurance company. The spring issue had a great article on Market Value versus Replacement Value. It stated that what you buy your house for may actually be lower than the cost of building the same house from scratch. That is important to know if you presently own and are in the process of buying. In many parts of the country home prices have fallen as much as 30%. While Silicon Valley may be protected in some regards there has been a fall off in home prices from 2006 of at least 13% on average. Meanwhile construction costs which include concrete, lumber, steel and labor are ever rising. A tip for the buyer who is looking at buying and fixing up the property, take the purchase price and cost of repairs and add that together and look at another house that needs no work for the same price. You will buy it with a cheap mortgage in historic terms; Home Mortgage Rates have NEVER been this low. Does it really matter cutting off on the sales price and missing a buy when you will have the cheapest mortgage rate ever for the next 30 years?
FIVE HOME TRENDS FOR 1010
1. The Live-in Kitchen
2. Living Within Our Means
3. The Green Kitchen
4. The Wellness Kitchen
5. Cooking for Fun
“For more on this subject write me for details.”
SIX LANDSCAPING TRICKS
1. Add Splashes of Color: iceberg roses, purple salvia, lavender, crape myrtle tree will add color to the seasons.
2. Size trees and shrubs to scale. Don’t block doors, windows and other architectural features on the home’s façade
3. Maintain a perfect lawn. Don’t have brown spots, some rocks, pebbles, boulders, drought tolerant plants and ornamental grasses will generate more kudos, especially in drought times and water conservation times as we may have after our rain season ends.
4. Light up the outside with good illumination, create drama at night. Use low voltage lamps to highlight branches of specimen trees, a front doors, walks, and corners of the house.
5. Let them HEAR THE WATER, nothing is more soothing than the sound of water. Use fountains or create a small stream with rocks to provide pleasant gurgling to block street noise.
6. Use decorative architectural elements, a new mail box, planted window boxes, and a low fence wrapped in potatoes vines ass cachet, particularly in winter months.
Special feature: DOES DNA AFFECT YOUR INVESTING PERSONALITY?
Again a feature in the WSJ (Wall Street Journal), thanks to Jason Zweig, did you buy high, sell low zig when you should have zagged. Maybe it was your ancestors who gave you this trait. Or are you the fortunate that are just never on the wrong side?
25% of people with European ancestry have a gene that dampens their fear circuitry when it comes to making money. 20% of Caucasians have a gene that makes them more responsive to gambles. Some people are 50% more sensitive to fear. Well, does that mean we all go out in swab our mouths and get tested? 20% of the variation in risk taking among individuals is genetically determined; the rest comes from upbringing, experience, education and training. There is always a tug of war inside us all between nature and nurture. Bear Markets and Recessionary Markets give nature the upper hand, it never more important now to stick to disciplines that can over ride your genetic impulses.
Warren Buffet said it perfectly, during time of greed there should be fear, during times of fear there should be greed. Find a seasoned pro and work with them to guide you through the times of nature. I didn’t get this gray hair from a bottle!
Until later…..
March 21, 2009: Commentary and updates
• Federal Reserve announces a Bond Buying Binge!
• Interest rates decline from FED action
• Mortgage rates at 4% level
• Housing Starts Surge 22%
• Multi-Billion Dollar Mergers a way to get money home
• Tax Credits for home purchase and home construction
• Home & Design: Staging on a Budget
FED ANNOUNCESNEW POLICY:
It is called Quantitative Easing, for the record and for those in finance and economic theory. The pro’s and those in the know thought it would not happen, but Professor Bernanke surprised them all. From all I have read Bernanke had studied this strategy long before anyone had any clue it would ever be used.
Before I explain the process and how it could benefit us all, let me start with a lesser known fact. The FED, Federal Reserve System, is the ONLY department of the U. S. Government that positively contributes to the income of the United States. It should it is a legal insider trading department. Just think it over, the FED creates which way interest rates will go, they can buy or sell in the market bonds, inject cash buy gold and virtually anything the FED deems necessary to manage our economy. If they bought bonds before the announcement the FED already has a profit as those bonds are worth more because interest rates declined!
The bond buying binge will put $300 billion in a purchase program of long-term treasury bonds. The FED will also buy mortgage backed securities. All told the FED will buy $1.15 Trillion into the economy in the next 6 months to jump start the HOUSING INDUSTRY and REAL ESTATE.
When I started my career as a floor trader I was told one CARDINAL RULE: DO NOT FIGHT THE FED! If there is any sign you will see our real estate market pick up this is it!
HOUSING STARTS SURGE
Boosted by an 82% increase in construction of apartment buildings housing starts in the U.S. surged 22%.
MORTGAGE RATE BELOW 5%!
(COMPLIMENTS OF MIKE COLYER OF COUNTRYWIDE)
High Conforming Loan Limit at 80%
REFINANCE - 30 year fxd = 4.625 with 1 point
PURHCASE - 30 year fxd = 4.375 with 1 point
417K and under
REFINANCE/PURCHASE - 30 year fxd = 4.375 with 1 point
JUMBO TO 1.5MM to 80%!!!! 3MM to 70%
REFINANCE/PURHCASE - 30 year fxd = 5.75 with 1 point
REFINANCE/PURHCASE - 5fxd Int Only = 5.25 with 1 point
Mike Colyer
Sales Manager
Countrywide Bank, FSB
650-257-7777 Office
650-288-8170 Cell
866-511-9024 Fax 40 Hawthorne Ave
Mail Stop: BR 737
Los Altos, CA 94022
http://www.TheBayAreaLender.com
Mike_Colyer@countrywide.com
ARE PLATFORM COMPANIES BRINGING THEIR OFFSHORE CASH HORDE HOME?
On February 12, 2009 I wrote you about Platform Companies. To review the company definition, A Platform Company has a fractionalized production process, keeping knowledge intensive activities like design and distribution in-house, while outsourcing low-value added physical production. They develop new product, new markets, and new products for new markets. They aggressively invest in foreign countries, they are growth companies like our Silicon Valley Companies, and they are Drug Companies. The amount of potential repatriated $US is estimated at $545 Billion.
1. Roche is buy Genentech for $6 Billion
2. Merck is paying $41.1 Billion for Schering-Plough
3. Pfizer purchase of Wyeth of $68 Billion.
Why is that important? Tax write offs of R&D and Goodwill and merger expenses will allow the potential re-patriot of billions of $US held over seas without a tax potential. Billion of $US here mean more for the U.S. Economy.
Economic growth comes from money. If any of you are history buffs, like me, you will know the Dark Ages did not disappear until Gold was taken from the Aztecs, Incas of the newly discovered America’s and used by the King of Spain and the Pirates of England to jump start the stagnant European Economy. Locally 2001 DOT.COM fueled our real estate and economy just as the low interest rates after the DOT.COM bust fueled the real estate industry further.
TAX CREDITS & INCENTIVES GALLORE!
• $8000 Federal Income Tax Credit for first-time home buyers with $10,000 State of California tax credit for buying a new home.
• FHA loans in the 4% range for up to $729,750
• Purchase price mortgages up 7.1% in February
• Energy efficiency upgrades for windows, insulation are eligible for a tax credit of 30% of qualifying costs
• Renewable Energy Systems as solar, wind, and geothermal may qualify for 30% tax credit
• Heating stoves that use renewable biomass fuel: such as, wood pellets, plants, now qualify for a tax credit.
HOME & DESIGN
Deciding on listing your home? Here are some budget ideas that can help you on the CHEAP!
Expand the Closet: One of the most overlooked areas of staging is the closet. Declutter stops at “out of sight out of mind”. It should take into effect the closet. If it looks stuffed, remove it. The ideal closet should have two hanger spaces between the next hanger.
B.Y.O.B. (BRING YOUR OWN BED) I love this one; arrange some moving boxes into the shape of a bed. Dress it up with some nice bedding and pillows. It takes about a half hour, great idea right?
PUT A LID ON IT: The best thing you can do to eliminate odors and bugs is to close all your drains, sinks and tubs; close all the lids on toilets close all the closet doors. Now, let all the sun in! You will get immediate results for zero dollars
GO GREEN: If your home has green features like EnergyStar Appliances, generator, double paned windows, bamboo flooring, make certain you list them in your MLS listing and advertising. Continue the theme with strategically placed soy candles, homemade guest soaps, and green cleaning products under the sink. Believe me this will put your home up a notch to current day buyers.
CREATE A FOCAL POINT: Pick out a visible corner and put in a large plant, live or silk will do just fine. Set up a spot light behind so it lights up the leaves and throws a shadow on the wall. It is a space perception, especially for a large room without too much natural lighting.
SET UP A CHAT ROOM: Whether it is a living room, family room, breakfast nook or den; set up an area that furniture does not have to be moved around so a conversation can proceed. Place fresh flowers and bring in a sense of caring and pride of ownership.
ADD BATHROOM ELEGANCE: Get some decorative hand towels, tie a sheer ribbon around them, and place them on towel racks in all the bathrooms. Use dried flowers and candles to complement colors and add a little SPITZ!
NIX THE PERSONAL PHOTOS
BRIGHTEN IT UP: Get the energy efficient light bulbs in with higher watts. Keep those drapes and shades open and up!
FRAME A LOCAL SCENE: Take those family pictures out and replace the family photo with local photos. Use some you have or from local calendars. The web is great for giving you great pictures of the bay and the ocean and the area around us.
REDO THE PET AREA: My wife has a trick of using a bowl or container of coffee beans to take away the odor of the pet area. She also uses them in closets. New food bowls are a must clean litter boxes and beds and put them in an area such as the laundry room or utility room.
ENTICE THEM AT THE ENTRANCE: Tighten the loose doors and cabinets, re-stain and paint or varnish the doors. Paint the trim on the floors and the ceilings. Paint outside trim, nicks on the house especially where the buyer comes in the house.
More next week on staging on the cheap, 6 Landscaping Tricks that WOW Buyers!
• Interest rates decline from FED action
• Mortgage rates at 4% level
• Housing Starts Surge 22%
• Multi-Billion Dollar Mergers a way to get money home
• Tax Credits for home purchase and home construction
• Home & Design: Staging on a Budget
FED ANNOUNCESNEW POLICY:
It is called Quantitative Easing, for the record and for those in finance and economic theory. The pro’s and those in the know thought it would not happen, but Professor Bernanke surprised them all. From all I have read Bernanke had studied this strategy long before anyone had any clue it would ever be used.
Before I explain the process and how it could benefit us all, let me start with a lesser known fact. The FED, Federal Reserve System, is the ONLY department of the U. S. Government that positively contributes to the income of the United States. It should it is a legal insider trading department. Just think it over, the FED creates which way interest rates will go, they can buy or sell in the market bonds, inject cash buy gold and virtually anything the FED deems necessary to manage our economy. If they bought bonds before the announcement the FED already has a profit as those bonds are worth more because interest rates declined!
The bond buying binge will put $300 billion in a purchase program of long-term treasury bonds. The FED will also buy mortgage backed securities. All told the FED will buy $1.15 Trillion into the economy in the next 6 months to jump start the HOUSING INDUSTRY and REAL ESTATE.
When I started my career as a floor trader I was told one CARDINAL RULE: DO NOT FIGHT THE FED! If there is any sign you will see our real estate market pick up this is it!
HOUSING STARTS SURGE
Boosted by an 82% increase in construction of apartment buildings housing starts in the U.S. surged 22%.
MORTGAGE RATE BELOW 5%!
(COMPLIMENTS OF MIKE COLYER OF COUNTRYWIDE)
High Conforming Loan Limit at 80%
REFINANCE - 30 year fxd = 4.625 with 1 point
PURHCASE - 30 year fxd = 4.375 with 1 point
417K and under
REFINANCE/PURCHASE - 30 year fxd = 4.375 with 1 point
JUMBO TO 1.5MM to 80%!!!! 3MM to 70%
REFINANCE/PURHCASE - 30 year fxd = 5.75 with 1 point
REFINANCE/PURHCASE - 5fxd Int Only = 5.25 with 1 point
Mike Colyer
Sales Manager
Countrywide Bank, FSB
650-257-7777 Office
650-288-8170 Cell
866-511-9024 Fax 40 Hawthorne Ave
Mail Stop: BR 737
Los Altos, CA 94022
http://www.TheBayAreaLender.com
Mike_Colyer@countrywide.com
ARE PLATFORM COMPANIES BRINGING THEIR OFFSHORE CASH HORDE HOME?
On February 12, 2009 I wrote you about Platform Companies. To review the company definition, A Platform Company has a fractionalized production process, keeping knowledge intensive activities like design and distribution in-house, while outsourcing low-value added physical production. They develop new product, new markets, and new products for new markets. They aggressively invest in foreign countries, they are growth companies like our Silicon Valley Companies, and they are Drug Companies. The amount of potential repatriated $US is estimated at $545 Billion.
1. Roche is buy Genentech for $6 Billion
2. Merck is paying $41.1 Billion for Schering-Plough
3. Pfizer purchase of Wyeth of $68 Billion.
Why is that important? Tax write offs of R&D and Goodwill and merger expenses will allow the potential re-patriot of billions of $US held over seas without a tax potential. Billion of $US here mean more for the U.S. Economy.
Economic growth comes from money. If any of you are history buffs, like me, you will know the Dark Ages did not disappear until Gold was taken from the Aztecs, Incas of the newly discovered America’s and used by the King of Spain and the Pirates of England to jump start the stagnant European Economy. Locally 2001 DOT.COM fueled our real estate and economy just as the low interest rates after the DOT.COM bust fueled the real estate industry further.
TAX CREDITS & INCENTIVES GALLORE!
• $8000 Federal Income Tax Credit for first-time home buyers with $10,000 State of California tax credit for buying a new home.
• FHA loans in the 4% range for up to $729,750
• Purchase price mortgages up 7.1% in February
• Energy efficiency upgrades for windows, insulation are eligible for a tax credit of 30% of qualifying costs
• Renewable Energy Systems as solar, wind, and geothermal may qualify for 30% tax credit
• Heating stoves that use renewable biomass fuel: such as, wood pellets, plants, now qualify for a tax credit.
HOME & DESIGN
Deciding on listing your home? Here are some budget ideas that can help you on the CHEAP!
Expand the Closet: One of the most overlooked areas of staging is the closet. Declutter stops at “out of sight out of mind”. It should take into effect the closet. If it looks stuffed, remove it. The ideal closet should have two hanger spaces between the next hanger.
B.Y.O.B. (BRING YOUR OWN BED) I love this one; arrange some moving boxes into the shape of a bed. Dress it up with some nice bedding and pillows. It takes about a half hour, great idea right?
PUT A LID ON IT: The best thing you can do to eliminate odors and bugs is to close all your drains, sinks and tubs; close all the lids on toilets close all the closet doors. Now, let all the sun in! You will get immediate results for zero dollars
GO GREEN: If your home has green features like EnergyStar Appliances, generator, double paned windows, bamboo flooring, make certain you list them in your MLS listing and advertising. Continue the theme with strategically placed soy candles, homemade guest soaps, and green cleaning products under the sink. Believe me this will put your home up a notch to current day buyers.
CREATE A FOCAL POINT: Pick out a visible corner and put in a large plant, live or silk will do just fine. Set up a spot light behind so it lights up the leaves and throws a shadow on the wall. It is a space perception, especially for a large room without too much natural lighting.
SET UP A CHAT ROOM: Whether it is a living room, family room, breakfast nook or den; set up an area that furniture does not have to be moved around so a conversation can proceed. Place fresh flowers and bring in a sense of caring and pride of ownership.
ADD BATHROOM ELEGANCE: Get some decorative hand towels, tie a sheer ribbon around them, and place them on towel racks in all the bathrooms. Use dried flowers and candles to complement colors and add a little SPITZ!
NIX THE PERSONAL PHOTOS
BRIGHTEN IT UP: Get the energy efficient light bulbs in with higher watts. Keep those drapes and shades open and up!
FRAME A LOCAL SCENE: Take those family pictures out and replace the family photo with local photos. Use some you have or from local calendars. The web is great for giving you great pictures of the bay and the ocean and the area around us.
REDO THE PET AREA: My wife has a trick of using a bowl or container of coffee beans to take away the odor of the pet area. She also uses them in closets. New food bowls are a must clean litter boxes and beds and put them in an area such as the laundry room or utility room.
ENTICE THEM AT THE ENTRANCE: Tighten the loose doors and cabinets, re-stain and paint or varnish the doors. Paint the trim on the floors and the ceilings. Paint outside trim, nicks on the house especially where the buyer comes in the house.
More next week on staging on the cheap, 6 Landscaping Tricks that WOW Buyers!
March 16, 2009: Happy St. Patty’s Day
Did you know there were never any snakes in Ireland? Apparently, snakes came from our prehistoric past and Ireland has always been locked by water, ergo, no snakes. The same holds true for New Zealand another island without snakes. I am like Indiana Jones, I HATE SNAKES!
• Good-bye McMansions
• Looking for a Mortgage says the New York Times, Check out FHA rules
• Stock Market Bottom, New York Times says even for veterans this is unchartered waters.
• New York Times says Housing Market’s Upside: AFORDABILITY
• Upside Down on Stocks, check out rules for tax loss selling
• Private Equity, Apollo Management raises stakes on Realogy in attempt to keep it afloat.
• Mortgage Applications Raise
• Mortgage Bankers seasonally adjusted index for Re-financing surges 13.3%
Mortgage Rates: CNBC.com
• 15 year fixed 4.54% down from 4.73%
• One year adjustable rate mortgages increased to 6.21% from 6.13%
Mortgage Rates: Mike Colyer Countrywide Bank
• $625,000 30 year 4.875%
• $800,000 30 year 5.875%
Housing Inventory & Statistics
Palo Alto Active Pending Sold
129 * 25 0
* $4,098,000
La Honda Active Pending Sold
11 * 2 0
* $625,000
Portola Valley Active Pending Sold
20 * 4 0
* $2,898,000
Woodside Active Pending Sold
44 * 6 0
Atherton Active Pending Sold
41 *2 0
* $1,399,000
Menlo Park Active Pending Sold
120 * 23 0
* $2,195,000
Rwd City Active Pending Sold
161 * 64 0
* $2,499,000
I made some changes to the lnventory statistics for the week and I have added the highest sales to the “Pending” list. When sales occur I will add the highest to that list. A present the gap between pending and sales is attributed to the delay in financing approval. What use to be done in 30 days or less is now in the 45 days or more category. I also added all of Menlo Park and all of Redwood City. There are areas in each city where the districts are lower income areas that are hard hit with REO’s and Foreclosures and Short Sales.
Good-bye McMansions was an interesting article in the latest issue of California Real Estate an issue sent to all realtors who are members of the California Association of Realtors. You can learn a great deal of housing history from the homes. Cookie-Cutter rows of small tract homes indicate the lack of building materials. Grand Victorians are time pieces form the early 20th Century. McMansions and their energy inefficient cathedral ceilings will remind us of the excesses of the Dot.com era and the sub prime melt down, says the CAR article. Evidence is trends are pointing to smaller homes, possibly with attached units, sound proofing and closer to other homes, energy efficiency and solar panels are noted demands for new buyers.
The National Association of Home Builders reports that 89% of its members planned homes of 2438 square feet down from 2629 square feet.
Look at the FHA rules says the New York Times. As I noted in a previous letter FHA is an area home buyers should look when getting competitive pricing for mortgages. FHA loans were once an area for low income borrowers the FHA has become a new area for all borrowers. The reason for this is the fees that lenders are tacking onto all mortgages. At present the FHA loans can be obtained for as little as 3.5% down and has become the least expensive when it comes to fees. Loan limits do apply and at present for our area the maximum loan is $729,750. FHA never marked the exotics of sub prime, 30 year and 15 year and adjustable rate mortgages are in the FHA offerings. Contact me or see the Department of Housing website for approved lenders. In many cases you will have to work with mortgage brokers.
Even for Stock Market Veterans it unchartered territory say the New York Times. During the last commentary I noted that all charts indicated the stock market had hit the downside targets technicians forecasted, but today we have the veterans unsure where we are going. Bryon Wein of Pequot Capital says he is an optimist. Barton Biggs, forever a bear o, of Traxix Partners places himself in the optimist’s camp. Peter Lynch, forever a bull, declares himself “bullish as ever”. That being said, I still believe it will take many years, maybe 10, for the new bull market to take over. There has been too much technical damage done. The trust has been destroyed and it must be earned back. Large investors both domestically and internationally are looking at the base strength of the United States, Real Estate, as the first to come back. As one of my clients has sate, “Dirt will always be worth something”
With that last comment in mind it makes much sense to consider A rising dollar lifts the U.S. but adds to the Crisis Abroad. Last week a colleague held a bus tour of visiting Chinese investors looking for high end and luxury homes in the East Bay. Two weeks ago I had the same tour in the Skyline area. The world is seized with anxiety. The safest place in the world for store of value (savings) and political and personal safety is the United States. American investors are ditching foreign ventures and bringing their dollars home. The raise in the dollar is adding to the inability of Third World nations balance their budgets or to finance their internal programs. The cost of the dollar makes Chinese goods more expensive at a time China must use their reserves to support their economy. This is common to all the Tigers, India, Pakistan and the rest of the Third World nations who prospered on the dollar’s weakness and the consumer spending of the United States. This tilt is also forcing locals within those nations to look at the safety of their accumulated wealth and personal safety as the authoritarian governments look to ways to fiancé their short falls and blame to their woes. Add to that the OPEC countries’ inability to finance their budgets due to the falling price of oil.
Before ending the Stock Market commentary, Upside Down on Stocks, selling stocks for tax losses? While the end of the year is the best time, around October and before November is the best time to install tax strategies, many investors panic at tax time to think about selling now and take the tax loss. Before doing so, talk to your tax professional or seek the help of one before dumping wholesale out of panic. There are many strategies from doubling down to 31 day buy and sell or sell and buy strategies.
The Wall Street Journal says Apollo Management raises stake on its Realogy stake. The price tag keeps growing for Apollo Management and its investment in Realogy. Realogy is the largest residential real estate brokerage business as parent to Coldwell Banker, Century 21, and Sotheby’s International, Better Homes and Garden and other major brands. Apollo pledged $150 million to keep Realogy afloat for 2009. Realogy continues to cut costs and is trying to increase market share by launching Better Homes and Gardens Real Estate brand.
U.S. Mortgage applications rise for the first time in three weeks. The jump came after the strongest government action recently taken to aid homeowners.
The Mortgage Bankers Association said the seasonally adjusted index of mortgage applications surged 13.3% for refinances to 3470.7, up 41.8% from one year ago.
• Good-bye McMansions
• Looking for a Mortgage says the New York Times, Check out FHA rules
• Stock Market Bottom, New York Times says even for veterans this is unchartered waters.
• New York Times says Housing Market’s Upside: AFORDABILITY
• Upside Down on Stocks, check out rules for tax loss selling
• Private Equity, Apollo Management raises stakes on Realogy in attempt to keep it afloat.
• Mortgage Applications Raise
• Mortgage Bankers seasonally adjusted index for Re-financing surges 13.3%
Mortgage Rates: CNBC.com
• 15 year fixed 4.54% down from 4.73%
• One year adjustable rate mortgages increased to 6.21% from 6.13%
Mortgage Rates: Mike Colyer Countrywide Bank
• $625,000 30 year 4.875%
• $800,000 30 year 5.875%
Housing Inventory & Statistics
Palo Alto Active Pending Sold
129 * 25 0
* $4,098,000
La Honda Active Pending Sold
11 * 2 0
* $625,000
Portola Valley Active Pending Sold
20 * 4 0
* $2,898,000
Woodside Active Pending Sold
44 * 6 0
Atherton Active Pending Sold
41 *2 0
* $1,399,000
Menlo Park Active Pending Sold
120 * 23 0
* $2,195,000
Rwd City Active Pending Sold
161 * 64 0
* $2,499,000
I made some changes to the lnventory statistics for the week and I have added the highest sales to the “Pending” list. When sales occur I will add the highest to that list. A present the gap between pending and sales is attributed to the delay in financing approval. What use to be done in 30 days or less is now in the 45 days or more category. I also added all of Menlo Park and all of Redwood City. There are areas in each city where the districts are lower income areas that are hard hit with REO’s and Foreclosures and Short Sales.
Good-bye McMansions was an interesting article in the latest issue of California Real Estate an issue sent to all realtors who are members of the California Association of Realtors. You can learn a great deal of housing history from the homes. Cookie-Cutter rows of small tract homes indicate the lack of building materials. Grand Victorians are time pieces form the early 20th Century. McMansions and their energy inefficient cathedral ceilings will remind us of the excesses of the Dot.com era and the sub prime melt down, says the CAR article. Evidence is trends are pointing to smaller homes, possibly with attached units, sound proofing and closer to other homes, energy efficiency and solar panels are noted demands for new buyers.
The National Association of Home Builders reports that 89% of its members planned homes of 2438 square feet down from 2629 square feet.
Look at the FHA rules says the New York Times. As I noted in a previous letter FHA is an area home buyers should look when getting competitive pricing for mortgages. FHA loans were once an area for low income borrowers the FHA has become a new area for all borrowers. The reason for this is the fees that lenders are tacking onto all mortgages. At present the FHA loans can be obtained for as little as 3.5% down and has become the least expensive when it comes to fees. Loan limits do apply and at present for our area the maximum loan is $729,750. FHA never marked the exotics of sub prime, 30 year and 15 year and adjustable rate mortgages are in the FHA offerings. Contact me or see the Department of Housing website for approved lenders. In many cases you will have to work with mortgage brokers.
Even for Stock Market Veterans it unchartered territory say the New York Times. During the last commentary I noted that all charts indicated the stock market had hit the downside targets technicians forecasted, but today we have the veterans unsure where we are going. Bryon Wein of Pequot Capital says he is an optimist. Barton Biggs, forever a bear o, of Traxix Partners places himself in the optimist’s camp. Peter Lynch, forever a bull, declares himself “bullish as ever”. That being said, I still believe it will take many years, maybe 10, for the new bull market to take over. There has been too much technical damage done. The trust has been destroyed and it must be earned back. Large investors both domestically and internationally are looking at the base strength of the United States, Real Estate, as the first to come back. As one of my clients has sate, “Dirt will always be worth something”
With that last comment in mind it makes much sense to consider A rising dollar lifts the U.S. but adds to the Crisis Abroad. Last week a colleague held a bus tour of visiting Chinese investors looking for high end and luxury homes in the East Bay. Two weeks ago I had the same tour in the Skyline area. The world is seized with anxiety. The safest place in the world for store of value (savings) and political and personal safety is the United States. American investors are ditching foreign ventures and bringing their dollars home. The raise in the dollar is adding to the inability of Third World nations balance their budgets or to finance their internal programs. The cost of the dollar makes Chinese goods more expensive at a time China must use their reserves to support their economy. This is common to all the Tigers, India, Pakistan and the rest of the Third World nations who prospered on the dollar’s weakness and the consumer spending of the United States. This tilt is also forcing locals within those nations to look at the safety of their accumulated wealth and personal safety as the authoritarian governments look to ways to fiancé their short falls and blame to their woes. Add to that the OPEC countries’ inability to finance their budgets due to the falling price of oil.
Before ending the Stock Market commentary, Upside Down on Stocks, selling stocks for tax losses? While the end of the year is the best time, around October and before November is the best time to install tax strategies, many investors panic at tax time to think about selling now and take the tax loss. Before doing so, talk to your tax professional or seek the help of one before dumping wholesale out of panic. There are many strategies from doubling down to 31 day buy and sell or sell and buy strategies.
The Wall Street Journal says Apollo Management raises stake on its Realogy stake. The price tag keeps growing for Apollo Management and its investment in Realogy. Realogy is the largest residential real estate brokerage business as parent to Coldwell Banker, Century 21, and Sotheby’s International, Better Homes and Garden and other major brands. Apollo pledged $150 million to keep Realogy afloat for 2009. Realogy continues to cut costs and is trying to increase market share by launching Better Homes and Gardens Real Estate brand.
U.S. Mortgage applications rise for the first time in three weeks. The jump came after the strongest government action recently taken to aid homeowners.
The Mortgage Bankers Association said the seasonally adjusted index of mortgage applications surged 13.3% for refinances to 3470.7, up 41.8% from one year ago.
March 7, 2009
• Pending Homes Sales Index (PHSI) a new indicator of housing market activity.
• Mortgage Rates decline for the week
• Mortgage availability continues to expand
• Pending homes in our greater area continue to expand
• Unemployment in San Mateo County 7.4%, lowest in Greater Bay Area.
Pending Homes have become the new market indicator watched by home buyers trying to get an answer to,” Is this the bottom, should I buy now?” question. www.realtor.org/research will be able to help you here. The west has seen a 2.4% and a 13.5% increase from last month and last year in PHSI. Locally, in my covered area homes sales pending are:
• 0-$500,000 = 45
• $500,001 - $1,000,000 = 44
• $1,000,001 – 2,000,000 = 45
• $2,000,001 – 3,000,000 = 10
• $3,000,001 – 4,000,000 = 0
• +$4,000,000 = 3
After looking at these numbers I did something to check on my business career based upon past recessions. We hear and or read about the “worst recession in 26 years” and so on until we want to look for Looney Tunes on TV. Well forget about Buggs Bunny for now! In 1981 I took my wife on our first date, we were at the peak in unemployment nationally at +8%, my business was never greater. I had buyers coming out of the wood work. Prices were down and sellers were giving great offer. Interest rates were so high that sellers were taking back notes. When we married in 1984 unemployment was declining and we bought our first house in SF, a REO in Cow Hollow for $267,000. The recession was waning and employment numbers were getting better. Business was not as hot as it was in 1981. We did sell our home for $400,000 in October of 1984 13 months later and bought our first house in Woodside for $425,000, listed at $650,000. By 2000 we were in another recession and unemployment was +6%. We sold the Woodside house for $1.9 million and bought 5 acres in Woodside for $800,000. What that tells me is that Recessions and high unemployment numbers are “buying opportunities” If that is in your mind, do not hesitate. For the sellers, you have heard me tell you to wait. Refinance to end your monthly pains. I can help you with some great mortgage brokers.
As to Mortgage Brokers, below is something from Zack Hoffman of Pinnacle Bancorp:
Conforming
30 Year Fixed
4.750%, 1 Point Fee
15 Year Fixed
4.375%, 1 Point Fee
Conforming Plus
30 Year Fixed
5.375% 0.75 Point Fee
Jumbo to $5,000,000
7/1 ARM with Interest Only Payments
5.875% @ 0.50 Point Fee
10/1 ARM with Interest Only Payments
6.250% @ 0.50 Point Fee
Still available: 80% financing to $2,000,000 and 75% financing to $3,000,000 for qualified borrowers
This is not a commitment to lend nor should it be considered such. Rates quoted as best case scenarios on 3/6/09 and 30 day rate locks. Rates subject to change to due to market conditions. Please call for details on closing costs or qualifications. APRs in order of presentation: 4.88% and 4.60% based on $417,000 loan amount, 5.48% based on $650,000 loan amount, 4.62% and 5.15% on $5,000,000 loan amount
Zachary Hoffman
Pinnacle Bancorp
Mortgage Broker
Direct: 866 433 1719
Fax: 866 543 3050
Office Locations
11400 W Olympic Blvd, Suite 1700, Los Angeles CA, 90064
220 Montgomery Street, Suite 1950, San Francisco, CA 94104
136 Heber Avenue, Suite 208, Park City, UT, 84060
6400 S Eastern Avenue, Suite 15, Las Vegas, NV 89119
If you need another name use Eric Trailer, write or call me for more on Eric.
Eric notes in his letter to me that PSHI has historically peaked at +100 and this leads to strong demand and eventually constrains supply and pushes home prices higher. With no new homes being built, the inventory of available homes in your searched area will decline and prices will move up.
Eric recently is helping a client refinance their home in Menlo Park and saving them $2000 per month in payments.
The unemployment numbers continue to expand, but not as much as December and the outlook is for declining numbers as we see pick ups in Health Care, Government and Education. Manufacturing and auto have been in a bear market for years. The “rust belt” is just that and has been for over 20 years, so don’t focus on it! Focus on where we live. Focus on our businesses and on our industry. Why is Genetech sought after to a point billions more are added to the take out offer? Why would a company want to buy in a recession? The simple answer is it is cheaper to buy than to build. That goes for businesses and it goes for homes. Would you buy a home in Central Menlo Park for $2 million on a 10,000-12,000 square foot lot upgraded or a newly built home of the same square footage on a 6000 square foot lot in Menlo Park County area with the same interior square footage for over $2 million that was recently built? The answer is simple the county comes down and it sells. It is all about buying opportunities. The cost of carry for spec builders and contractors will sooner or later be dictated by their bankers and prices will cut and homes will sell! Just as the REO and Short Sales in Redwood City have created values and now inventories are down. President Obama will soon end all of that nonsense of below market sales that cost the Tax Payers money for the Banker’s stupid mistakes and yet maintain their high power bonuses!
So much for the week, for those who fret about your stock portfolios? We should see a meaningful rally soon as many of the point and figure charts have all hit their downside objectives. Do you sell, I can’t tell you that. Until next week, keep a positive attitude. I believe we are seeing the greatest opportunity of a life time.
• Mortgage Rates decline for the week
• Mortgage availability continues to expand
• Pending homes in our greater area continue to expand
• Unemployment in San Mateo County 7.4%, lowest in Greater Bay Area.
Pending Homes have become the new market indicator watched by home buyers trying to get an answer to,” Is this the bottom, should I buy now?” question. www.realtor.org/research will be able to help you here. The west has seen a 2.4% and a 13.5% increase from last month and last year in PHSI. Locally, in my covered area homes sales pending are:
• 0-$500,000 = 45
• $500,001 - $1,000,000 = 44
• $1,000,001 – 2,000,000 = 45
• $2,000,001 – 3,000,000 = 10
• $3,000,001 – 4,000,000 = 0
• +$4,000,000 = 3
After looking at these numbers I did something to check on my business career based upon past recessions. We hear and or read about the “worst recession in 26 years” and so on until we want to look for Looney Tunes on TV. Well forget about Buggs Bunny for now! In 1981 I took my wife on our first date, we were at the peak in unemployment nationally at +8%, my business was never greater. I had buyers coming out of the wood work. Prices were down and sellers were giving great offer. Interest rates were so high that sellers were taking back notes. When we married in 1984 unemployment was declining and we bought our first house in SF, a REO in Cow Hollow for $267,000. The recession was waning and employment numbers were getting better. Business was not as hot as it was in 1981. We did sell our home for $400,000 in October of 1984 13 months later and bought our first house in Woodside for $425,000, listed at $650,000. By 2000 we were in another recession and unemployment was +6%. We sold the Woodside house for $1.9 million and bought 5 acres in Woodside for $800,000. What that tells me is that Recessions and high unemployment numbers are “buying opportunities” If that is in your mind, do not hesitate. For the sellers, you have heard me tell you to wait. Refinance to end your monthly pains. I can help you with some great mortgage brokers.
As to Mortgage Brokers, below is something from Zack Hoffman of Pinnacle Bancorp:
Conforming
30 Year Fixed
4.750%, 1 Point Fee
15 Year Fixed
4.375%, 1 Point Fee
Conforming Plus
30 Year Fixed
5.375% 0.75 Point Fee
Jumbo to $5,000,000
7/1 ARM with Interest Only Payments
5.875% @ 0.50 Point Fee
10/1 ARM with Interest Only Payments
6.250% @ 0.50 Point Fee
Still available: 80% financing to $2,000,000 and 75% financing to $3,000,000 for qualified borrowers
This is not a commitment to lend nor should it be considered such. Rates quoted as best case scenarios on 3/6/09 and 30 day rate locks. Rates subject to change to due to market conditions. Please call for details on closing costs or qualifications. APRs in order of presentation: 4.88% and 4.60% based on $417,000 loan amount, 5.48% based on $650,000 loan amount, 4.62% and 5.15% on $5,000,000 loan amount
Zachary Hoffman
Pinnacle Bancorp
Mortgage Broker
Direct: 866 433 1719
Fax: 866 543 3050
Office Locations
11400 W Olympic Blvd, Suite 1700, Los Angeles CA, 90064
220 Montgomery Street, Suite 1950, San Francisco, CA 94104
136 Heber Avenue, Suite 208, Park City, UT, 84060
6400 S Eastern Avenue, Suite 15, Las Vegas, NV 89119
If you need another name use Eric Trailer, write or call me for more on Eric.
Eric notes in his letter to me that PSHI has historically peaked at +100 and this leads to strong demand and eventually constrains supply and pushes home prices higher. With no new homes being built, the inventory of available homes in your searched area will decline and prices will move up.
Eric recently is helping a client refinance their home in Menlo Park and saving them $2000 per month in payments.
The unemployment numbers continue to expand, but not as much as December and the outlook is for declining numbers as we see pick ups in Health Care, Government and Education. Manufacturing and auto have been in a bear market for years. The “rust belt” is just that and has been for over 20 years, so don’t focus on it! Focus on where we live. Focus on our businesses and on our industry. Why is Genetech sought after to a point billions more are added to the take out offer? Why would a company want to buy in a recession? The simple answer is it is cheaper to buy than to build. That goes for businesses and it goes for homes. Would you buy a home in Central Menlo Park for $2 million on a 10,000-12,000 square foot lot upgraded or a newly built home of the same square footage on a 6000 square foot lot in Menlo Park County area with the same interior square footage for over $2 million that was recently built? The answer is simple the county comes down and it sells. It is all about buying opportunities. The cost of carry for spec builders and contractors will sooner or later be dictated by their bankers and prices will cut and homes will sell! Just as the REO and Short Sales in Redwood City have created values and now inventories are down. President Obama will soon end all of that nonsense of below market sales that cost the Tax Payers money for the Banker’s stupid mistakes and yet maintain their high power bonuses!
So much for the week, for those who fret about your stock portfolios? We should see a meaningful rally soon as many of the point and figure charts have all hit their downside objectives. Do you sell, I can’t tell you that. Until next week, keep a positive attitude. I believe we are seeing the greatest opportunity of a life time.
March 2, 2009
• Gold reigns atop Great Divide
• Renters Lose Edge on Home Owners
• Raiding your 401K to Finance/Refinance
• 5%, 10% and 15% down, YES WE CAN!
Active Listings Number
Atherton 34
Menlo Park 102
Woodside 41
Portola Valley 20
Palo Alto 122
Los Altos 80
Los Altos Hills 44
Mountain View 83
Sunnyvale 144
Total 670
Pending Sales Number
Atherton 2
Menlo Park 29
Woodside 6
Portola Valley 5
Palo Alto 22
Los Altos 19
Los Altos Hills 2
Mountain View 16
Sunnyvale 59
Total 160
Sold Number
Atherton 0
Menlo Park 7
Woodside 0
Portola Valley 0
Palo Alto 4
Los Altos 3
Los Altos Hills 0
Mountain View 3
Sunnyvale 6
Total 23
The gold market continues to be the place for “fright money” to seek a haven of psychological security. Analysts are looking at $2000 as a target. With all the fright being generated many analysts are failing to point out that the offshore investor is now looking at the US as their Haven of Safety. The big news is that real estate is now becoming the investment of choice for investors both here and offshore. With the stock market hitting new lows, the place to put cash is limited.
The big news is that “renters” have lost the edge on “homeowners”. The relative cost of owning a home versus renting is now in the homeowners favor. Over the past 18 years, the after tax benefit of owning versus renting has favored renters. Now after 2 years of rapid home price depreciation the hoe owner is back on the plus side. What have also generated this favorable ration have been interest rates.
Raiding the 401 K plan has now been mentioned as a source of finance money, which I stated months ago. Check this out before you refinance. It can save you money and allow you to make money off your mortgage deductions.
FHA loans are available for 3.5% down. Buyers of homes up to $440,000 can buy with 5% down. Loans at $810,000 can be obtained with 10% down and at $2,350,000 15% down. Loans of up to $417,000 are priced aggressively at the high end of 4%. Loans from $417,000 to $625,500 are mid-priced in the low 5% range. Loans from $625,501 to $729,750 are TO BE PRICED HOPEFULLY SOON. Loans from $729,751 + range are priced from 5% to low 6’s% based upon terms. What it all means that there is money out there for home purchases.
• Renters Lose Edge on Home Owners
• Raiding your 401K to Finance/Refinance
• 5%, 10% and 15% down, YES WE CAN!
Active Listings Number
Atherton 34
Menlo Park 102
Woodside 41
Portola Valley 20
Palo Alto 122
Los Altos 80
Los Altos Hills 44
Mountain View 83
Sunnyvale 144
Total 670
Pending Sales Number
Atherton 2
Menlo Park 29
Woodside 6
Portola Valley 5
Palo Alto 22
Los Altos 19
Los Altos Hills 2
Mountain View 16
Sunnyvale 59
Total 160
Sold Number
Atherton 0
Menlo Park 7
Woodside 0
Portola Valley 0
Palo Alto 4
Los Altos 3
Los Altos Hills 0
Mountain View 3
Sunnyvale 6
Total 23
The gold market continues to be the place for “fright money” to seek a haven of psychological security. Analysts are looking at $2000 as a target. With all the fright being generated many analysts are failing to point out that the offshore investor is now looking at the US as their Haven of Safety. The big news is that real estate is now becoming the investment of choice for investors both here and offshore. With the stock market hitting new lows, the place to put cash is limited.
The big news is that “renters” have lost the edge on “homeowners”. The relative cost of owning a home versus renting is now in the homeowners favor. Over the past 18 years, the after tax benefit of owning versus renting has favored renters. Now after 2 years of rapid home price depreciation the hoe owner is back on the plus side. What have also generated this favorable ration have been interest rates.
Raiding the 401 K plan has now been mentioned as a source of finance money, which I stated months ago. Check this out before you refinance. It can save you money and allow you to make money off your mortgage deductions.
FHA loans are available for 3.5% down. Buyers of homes up to $440,000 can buy with 5% down. Loans at $810,000 can be obtained with 10% down and at $2,350,000 15% down. Loans of up to $417,000 are priced aggressively at the high end of 4%. Loans from $417,000 to $625,500 are mid-priced in the low 5% range. Loans from $625,501 to $729,750 are TO BE PRICED HOPEFULLY SOON. Loans from $729,751 + range are priced from 5% to low 6’s% based upon terms. What it all means that there is money out there for home purchases.
February 22, 2009:
• Yields fluctuate within a narrow range with mortgage money available with FNMA, Freddie Mac and FHA.
• Traders take profits on short positions on Real Estate Investment Trusts
• Gold hits old high
• High Yield Bonds are popular
• Websites are becoming the place to go to find property and agents
• $8000 tax credit available to families making $200,000 per year.
• 30 year fixed conforming rates dropped within the past week to 5.26%, 15 year at 4.86%, 5/1 ARM at 5.53%; 30 year jumbo at 6.96%, and 5/1 jumbo ARM at 5.93% per www.bankrate.com.
The Wall Street Journal was full of conflicting articles over the trend of rates. My analysis is that investor funds are beginning to travel away from US Treasury Bonds and bills toward “risk”. Money Market Funds have hit a new high in size. Junk Bond Funds have continued to see more investor demand for them. Their yields have dropped and their prices have risen from a dismal 2008 when yields on the Merrill Lynch High Yield 100 Index was 17% to 11% recently. Since November 2008 investors have poured $4 billion into mutual funds that hold these bonds, according to fund researcher EPFR Global.
Gold hit a new high of roughly $1005 from the old high of $1003.20 since July of 2008. Declines in the stock market, concern over the fate of the Euro, Asian Banks and Eastern Europe all added to the move toward hard assets.
The move to hard assets can be seen in Trader’s decision to cover their shorts and their bearish bets on the Real Estate sector represented by Real Estate Investment Trusts after President Obama announced a multibillion dollar plan to stabilize the housing market. The “Options Report” of the Wall Street Journal indicated that traders were expecting rebound after a year long decline in REIT values.
Real Estate buyers continue to move to the Internet to find homes and realtors says the Wall Street Journal. I have seen that occurrence over the past 4 years, as I have dedicated more of my advertising and listing information to various sites. Some very interesting trends have shown up.
• Buyers are more sophisticated and internet savvy.
• Buyers are seeing value for long term commitments in real estate
• Buyers are looking for second homes near their primary residence and places of work
• Buyers have some to the misinformation of the press and media confused with the strength and stability of “Bay Area” communities and locations.
• Buyers are looking at the Santa Cruz Mountains for primary residences and second homes.
• Buyers are looking at real estate for investment value first and residences second.
• Motivated sellers are not from financial stress but marital dissolution and death, or a change in work location.
The tax credit for new home buyers of $8000 is available to buyers making $200,000, buying a $1.2 million home IF
1. Self Employed
2. Paying alimony
3. Paying tuition
4. Funding an IRA
(See your tax advisor for more details on this)
The impact of this tax credit is said to add 500,000 in additional real estate purchases, which is a decrease of 10% of the present inventory. For those who are waiting for a bottom, YOU ARE HERE! To add to that FNMA stated real estate investors may qualify to have up to 9 existing mortgages on their schedule of real estate holdings to still obtain conforming loans on their next real estate investment. FNMA also announced the postponement of foreclosures until March 6, 2009.
FEDERAL HOUSING AUTHORITY has been a new area for my buyers to seek mortgages. For years many buyers have been directed to FNMA, Freddie Mac and various other types of conforming loans. While I am not a mortgage expert; I too rely on Mortgage Bankers for advice, but common sense tells me that this is an area buyers must look for the mortgage money. The following is from Eric Trailer of Absolute Mortgage, www.absolutemortgage.com, 1-800-517-LOAN.
• 102.5% financing on $650,000 purchase. That means 96.5% financing or a 3.5% down payment with 6% in closing costs added to the loan principal.
• Rates below 6% on 30 year fixed programs
• Low PMI, principal mortgage insurance, at .55% or .5% of loan amount. This is half of the normal PMI rate from public lenders.
• Down payment and reserves can be a gift of funds from family.
• Fees for FHA are 1% loan fee and an advanced payment of PMI of 2% of loan value.
• Approval is required of both borrower and property. This helps buyers in the contingencies based upon condition of the property. Condo’s not already approved
• Closings from 30-45 days.
For more details on FHA loans, let me introduce you to Eric. He is a wealth of experience and knowledge. What else would you expect from a former Investment Banker!
Other sources of financing should include state and local agencies, community banks and credit unions.
• Many buyers fail to look at state and county agencies that have funds for borrowers who qualify due to income or geographical limitations. Teachers, state and county employees can benefit form their pension funds and local agencies as well.
• Open accounts with community banks. They have been the bright spot in the banking crisis. Community banks, in general, did not have toxic assets and did not participate in the TARP program. Research this with local community bank before you open an account and apply for a mortgage. Again, generally, they do not use mortgage wholesalers for clients, but generate their portfolio of loans from depositors.
• Credit Unions are another source of mortgage loans. They too, in general, did not have toxic assets and did not participate in TARP. They hold their own loans and do not have “red tape” when dealing with loan staff.
Where to the direction of interest rates? Watch the auction next week of the massive US Treasury offering from the Stimulus Package. Germany, the strongest nation in the Euro, had difficulty raising money in their Euro Offering last week. So far, my discussions with Mortgage Bankers expect higher rates within a year.
Thank you for all your comments and continued encouragement, Gary
• Traders take profits on short positions on Real Estate Investment Trusts
• Gold hits old high
• High Yield Bonds are popular
• Websites are becoming the place to go to find property and agents
• $8000 tax credit available to families making $200,000 per year.
• 30 year fixed conforming rates dropped within the past week to 5.26%, 15 year at 4.86%, 5/1 ARM at 5.53%; 30 year jumbo at 6.96%, and 5/1 jumbo ARM at 5.93% per www.bankrate.com.
The Wall Street Journal was full of conflicting articles over the trend of rates. My analysis is that investor funds are beginning to travel away from US Treasury Bonds and bills toward “risk”. Money Market Funds have hit a new high in size. Junk Bond Funds have continued to see more investor demand for them. Their yields have dropped and their prices have risen from a dismal 2008 when yields on the Merrill Lynch High Yield 100 Index was 17% to 11% recently. Since November 2008 investors have poured $4 billion into mutual funds that hold these bonds, according to fund researcher EPFR Global.
Gold hit a new high of roughly $1005 from the old high of $1003.20 since July of 2008. Declines in the stock market, concern over the fate of the Euro, Asian Banks and Eastern Europe all added to the move toward hard assets.
The move to hard assets can be seen in Trader’s decision to cover their shorts and their bearish bets on the Real Estate sector represented by Real Estate Investment Trusts after President Obama announced a multibillion dollar plan to stabilize the housing market. The “Options Report” of the Wall Street Journal indicated that traders were expecting rebound after a year long decline in REIT values.
Real Estate buyers continue to move to the Internet to find homes and realtors says the Wall Street Journal. I have seen that occurrence over the past 4 years, as I have dedicated more of my advertising and listing information to various sites. Some very interesting trends have shown up.
• Buyers are more sophisticated and internet savvy.
• Buyers are seeing value for long term commitments in real estate
• Buyers are looking for second homes near their primary residence and places of work
• Buyers have some to the misinformation of the press and media confused with the strength and stability of “Bay Area” communities and locations.
• Buyers are looking at the Santa Cruz Mountains for primary residences and second homes.
• Buyers are looking at real estate for investment value first and residences second.
• Motivated sellers are not from financial stress but marital dissolution and death, or a change in work location.
The tax credit for new home buyers of $8000 is available to buyers making $200,000, buying a $1.2 million home IF
1. Self Employed
2. Paying alimony
3. Paying tuition
4. Funding an IRA
(See your tax advisor for more details on this)
The impact of this tax credit is said to add 500,000 in additional real estate purchases, which is a decrease of 10% of the present inventory. For those who are waiting for a bottom, YOU ARE HERE! To add to that FNMA stated real estate investors may qualify to have up to 9 existing mortgages on their schedule of real estate holdings to still obtain conforming loans on their next real estate investment. FNMA also announced the postponement of foreclosures until March 6, 2009.
FEDERAL HOUSING AUTHORITY has been a new area for my buyers to seek mortgages. For years many buyers have been directed to FNMA, Freddie Mac and various other types of conforming loans. While I am not a mortgage expert; I too rely on Mortgage Bankers for advice, but common sense tells me that this is an area buyers must look for the mortgage money. The following is from Eric Trailer of Absolute Mortgage, www.absolutemortgage.com, 1-800-517-LOAN.
• 102.5% financing on $650,000 purchase. That means 96.5% financing or a 3.5% down payment with 6% in closing costs added to the loan principal.
• Rates below 6% on 30 year fixed programs
• Low PMI, principal mortgage insurance, at .55% or .5% of loan amount. This is half of the normal PMI rate from public lenders.
• Down payment and reserves can be a gift of funds from family.
• Fees for FHA are 1% loan fee and an advanced payment of PMI of 2% of loan value.
• Approval is required of both borrower and property. This helps buyers in the contingencies based upon condition of the property. Condo’s not already approved
• Closings from 30-45 days.
For more details on FHA loans, let me introduce you to Eric. He is a wealth of experience and knowledge. What else would you expect from a former Investment Banker!
Other sources of financing should include state and local agencies, community banks and credit unions.
• Many buyers fail to look at state and county agencies that have funds for borrowers who qualify due to income or geographical limitations. Teachers, state and county employees can benefit form their pension funds and local agencies as well.
• Open accounts with community banks. They have been the bright spot in the banking crisis. Community banks, in general, did not have toxic assets and did not participate in the TARP program. Research this with local community bank before you open an account and apply for a mortgage. Again, generally, they do not use mortgage wholesalers for clients, but generate their portfolio of loans from depositors.
• Credit Unions are another source of mortgage loans. They too, in general, did not have toxic assets and did not participate in TARP. They hold their own loans and do not have “red tape” when dealing with loan staff.
Where to the direction of interest rates? Watch the auction next week of the massive US Treasury offering from the Stimulus Package. Germany, the strongest nation in the Euro, had difficulty raising money in their Euro Offering last week. So far, my discussions with Mortgage Bankers expect higher rates within a year.
Thank you for all your comments and continued encouragement, Gary
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