• 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.
Wednesday, July 29, 2009
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
February 12, 2009
• The news of the week is a big surprise in US pending homes sales, +6.3% and existing home sales +6.5%!
• Bond market winter thaw is on as Cisco seizes the opening in the credit markets to raise $4 Billion, GE raises $10 Billion, ConocoPhillips raised $5.95 Billion, AT&T $4.48 Billion, Verizon $4.23 Billion, Altria $4.22 Billion, GE Capital $3.94 Billion, Caterpillar $3 Billion, Proctor Gamble $1.99 Billion and Amgen $1.99 Billion
• Junk Bond Funds begin buying the best of the worst to drive yields down from near 18% to slightly above 12%.
• Per the Wall Street Journal Inventory of Homes For Sale in the US drop in January in 18 of the 29 areas down an average 2.5% nation-wide; which includes the Bay Area.
• Tax Credit for new home buyers going soon to the President’s desk for signature as a part of the new rescue package
• Gold continues to rise as investors seek a safe-haven ending near $950 an oz. ending at the highest level in 7 months.
• Pending sales in the past 7 days are: Palo Alto 24, Redwood City 58, Menlo Park 32, La Honda and surrounding area 1, Portola Valley 5 and Woodside 3.
• Mortgage rates per CNN 30 year fixed at 5.27%, 15 year fixed at 4.96%, 5/1 ARM at 5.61% (see me for detail rates for your situation and home search)
Comments: The Credit markets are thawing and faith has returned back to the credit markets. Investors are moving out of US Treasuries into corporate debt. Home buying has picked up both on a local level and national level. The fact that credit worthy companies are raising record amounts of capital through debt sales tells me that they believe rates are too low and will go higher. Cisco has a cash horde of $29.5 billion; of which, only $3-4 billion is in the US (more on this in “Where is the Growth Coming From, see below) From a safety of capital basis and store of value gold continues to rise in value as I believe the demand for real estate will continue to rise. The increase in junk bond purchases from High Yield Funds tells me investors now feel comfortable with the high yields to commit funds. This is shown in the rise in yields on 30 year US Trsy Bonds to a near term high of 3.75% in the past 5 days. Watch for this to continue with securitization of mortgage resuming soon.
WHERE IS THE GROWTH COMING FROM?
Going back 40 years or so to the last big recession gives a method of looking back and looking forward and the same time, one becomes the mythical God Janus.
Since 1974 the growth in the market and the economy has been spectacular. But, along with the growth comes “bubbles”. We went through a number of them recently, but let me take you back to the one that most particularly hurt our area, the DOT COM BUST. From the DOT COM BUST we had an excellent look at our area and area companies’ strength and growth potential. The Key word here is “Platform Company”. 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, that investment accounted for 10% of total non-financial corporate assets and generate some $4.7 trillion in sales per year and $700 billion in earnings. Allen Sinai in his Decision Economics concluded that if the US lowered tax rates it could lead to the repatriating of US$545 billion.
The precedent and the growth in California real estate from that action can be seen in 2004 when $360 billion came home as a result of a 5% temporary tax rate contained in the American Jobs Creation Act.
The result can be seen in the chart below, complement of the California Association of Realtors and Eric Trailer at Absolute Mortgage.
The dramatic rise in 2004 to date is my belief that our Bay Area Platform Companies brought home the Bacon in more ways than one.
Gary McKae
• Bond market winter thaw is on as Cisco seizes the opening in the credit markets to raise $4 Billion, GE raises $10 Billion, ConocoPhillips raised $5.95 Billion, AT&T $4.48 Billion, Verizon $4.23 Billion, Altria $4.22 Billion, GE Capital $3.94 Billion, Caterpillar $3 Billion, Proctor Gamble $1.99 Billion and Amgen $1.99 Billion
• Junk Bond Funds begin buying the best of the worst to drive yields down from near 18% to slightly above 12%.
• Per the Wall Street Journal Inventory of Homes For Sale in the US drop in January in 18 of the 29 areas down an average 2.5% nation-wide; which includes the Bay Area.
• Tax Credit for new home buyers going soon to the President’s desk for signature as a part of the new rescue package
• Gold continues to rise as investors seek a safe-haven ending near $950 an oz. ending at the highest level in 7 months.
• Pending sales in the past 7 days are: Palo Alto 24, Redwood City 58, Menlo Park 32, La Honda and surrounding area 1, Portola Valley 5 and Woodside 3.
• Mortgage rates per CNN 30 year fixed at 5.27%, 15 year fixed at 4.96%, 5/1 ARM at 5.61% (see me for detail rates for your situation and home search)
Comments: The Credit markets are thawing and faith has returned back to the credit markets. Investors are moving out of US Treasuries into corporate debt. Home buying has picked up both on a local level and national level. The fact that credit worthy companies are raising record amounts of capital through debt sales tells me that they believe rates are too low and will go higher. Cisco has a cash horde of $29.5 billion; of which, only $3-4 billion is in the US (more on this in “Where is the Growth Coming From, see below) From a safety of capital basis and store of value gold continues to rise in value as I believe the demand for real estate will continue to rise. The increase in junk bond purchases from High Yield Funds tells me investors now feel comfortable with the high yields to commit funds. This is shown in the rise in yields on 30 year US Trsy Bonds to a near term high of 3.75% in the past 5 days. Watch for this to continue with securitization of mortgage resuming soon.
WHERE IS THE GROWTH COMING FROM?
Going back 40 years or so to the last big recession gives a method of looking back and looking forward and the same time, one becomes the mythical God Janus.
Since 1974 the growth in the market and the economy has been spectacular. But, along with the growth comes “bubbles”. We went through a number of them recently, but let me take you back to the one that most particularly hurt our area, the DOT COM BUST. From the DOT COM BUST we had an excellent look at our area and area companies’ strength and growth potential. The Key word here is “Platform Company”. 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, that investment accounted for 10% of total non-financial corporate assets and generate some $4.7 trillion in sales per year and $700 billion in earnings. Allen Sinai in his Decision Economics concluded that if the US lowered tax rates it could lead to the repatriating of US$545 billion.
The precedent and the growth in California real estate from that action can be seen in 2004 when $360 billion came home as a result of a 5% temporary tax rate contained in the American Jobs Creation Act.
The result can be seen in the chart below, complement of the California Association of Realtors and Eric Trailer at Absolute Mortgage.
The dramatic rise in 2004 to date is my belief that our Bay Area Platform Companies brought home the Bacon in more ways than one.
Gary McKae
February 6, 2009
30 year Treasury Bonds are now at 3.68% and on my last letter to you they were at 3.06%. Mortgage rates were at 4.5% for conforming loans and now they are at 5.56%. This month the Government will raise approximately $36 billion of maturing debt and raise $30 billion of new debt. Gold has rallied from a low in December 2008 of $707.32 to $914 today.
A recent article in the Wall Street Journal, January 30, 2009, quotes George Sorros stating that if the Euro may not survive as a common currency unless the European Union presses for an international agreement on dealing with soured assets. Milton Friedman famously predicted that the euro would not last past their first economic crisis.
What does that mean for us who are looking to purchase or sell real estate? I suggest you look back in time to 1973-74 the last great recession we had. Like today there was world chaos, a recession, unemployment of over 8%, Presidents under pressure and gold as a source of store of value.
In 1977 Real estate values jumped over 40%. In many growth areas values were stronger. European and Asian buyers were considered "flight to safety" buyers as they purchase U. S. Real Estate. Banks were over loaded with REO's found ready buyers with "fright" money.
So is it today. Rates will increase as the U. S. Government raises Trillions of Dollars to stage our economic recovery. There is no chance that the mistakes of Japan in the past will be created today. With the increase in rates you will witness a strong demand as the dollar strengthens and the Euro weakens. Asian investors; as well as, Middle Eastern investors will look to stabilize their portfolios with U.S. $ denominated assets. Will they buy stocks, bonds, or hard assets?
I think the price of Gold will tell where they will go, hard assets. Gold will be the first choice and then hard assets which provide income, real estate.
As commercial mortgages become delinquent, assets behind them will be sold and investors will pounce upon them as they have pounced upon foreclosure sales, REO sales and short sales. If there is any fear in your mind that real estate is shaky, look at the sales of foreclosures.
I suggest you buyers begin to look at what is available today AFTER you obtain a financing commitment. There is not one mortgage broker I have spoken to that does not believe that interest rates on mortgages will be higher one year from now. The math is simple. Take that one percent and multiply it against the 80% you will owe on your mortgage and that is what it will cost you for at least the next 15 years of a 30 year fully amortized loan. If you want to be exact take out the HP and work the numbers and see what 1% means. It will be a substantial sum over another 10% in real estate prices.
From my stand I have been over whelmed with new buyers. All have cash and all have great credit ratings.
To those of you, who are looking to list, wait a few more months. The inventory levels are high, a carry over from December. December is a normal month of historical high inventory. As we reach into March and April inventories are low and buyers who have waited for the decline in price and increase in inventory find themselves stuck into a larger crowd all trying to get through a increasingly smaller doorway.
A recent article in the Wall Street Journal, January 30, 2009, quotes George Sorros stating that if the Euro may not survive as a common currency unless the European Union presses for an international agreement on dealing with soured assets. Milton Friedman famously predicted that the euro would not last past their first economic crisis.
What does that mean for us who are looking to purchase or sell real estate? I suggest you look back in time to 1973-74 the last great recession we had. Like today there was world chaos, a recession, unemployment of over 8%, Presidents under pressure and gold as a source of store of value.
In 1977 Real estate values jumped over 40%. In many growth areas values were stronger. European and Asian buyers were considered "flight to safety" buyers as they purchase U. S. Real Estate. Banks were over loaded with REO's found ready buyers with "fright" money.
So is it today. Rates will increase as the U. S. Government raises Trillions of Dollars to stage our economic recovery. There is no chance that the mistakes of Japan in the past will be created today. With the increase in rates you will witness a strong demand as the dollar strengthens and the Euro weakens. Asian investors; as well as, Middle Eastern investors will look to stabilize their portfolios with U.S. $ denominated assets. Will they buy stocks, bonds, or hard assets?
I think the price of Gold will tell where they will go, hard assets. Gold will be the first choice and then hard assets which provide income, real estate.
As commercial mortgages become delinquent, assets behind them will be sold and investors will pounce upon them as they have pounced upon foreclosure sales, REO sales and short sales. If there is any fear in your mind that real estate is shaky, look at the sales of foreclosures.
I suggest you buyers begin to look at what is available today AFTER you obtain a financing commitment. There is not one mortgage broker I have spoken to that does not believe that interest rates on mortgages will be higher one year from now. The math is simple. Take that one percent and multiply it against the 80% you will owe on your mortgage and that is what it will cost you for at least the next 15 years of a 30 year fully amortized loan. If you want to be exact take out the HP and work the numbers and see what 1% means. It will be a substantial sum over another 10% in real estate prices.
From my stand I have been over whelmed with new buyers. All have cash and all have great credit ratings.
To those of you, who are looking to list, wait a few more months. The inventory levels are high, a carry over from December. December is a normal month of historical high inventory. As we reach into March and April inventories are low and buyers who have waited for the decline in price and increase in inventory find themselves stuck into a larger crowd all trying to get through a increasingly smaller doorway.
January 10, 2009
About a month ago I wrote you on the interest rate situation, TBills and TBonds, mortgage rates and other related items. Today we have seen much of what I stated begin to see fruit. Interest rates have risen on TBills and TBonds. On December 18, 2008 the 30 year TBonds hit a low yield of 2.546% return, on January 6, 2009 the yield rose to 3.06%. Mortgage rates declined and money became available for mortgages.
As to mortgage rates, money is available. An example is Countrywide, you remember them don't you? The rates on $1 million 5 year one year adjustable, interest only is 5.125% with no points and 4.75% with one point, full documents, owner occupied and 60% loan to value. That means 40% deposit. To those of you who are looking at first time purchases and below the $625,000 mark there are 85% loans out there.
I have two loan brokers who can get 5.25% rates on 75% LTV with seller take backs of 10% with buyer downs of 15%.
As a result of the weekly letters to you I have had a number of inquiries on what to do with 401 K plans and can you use them for real estate purchases. The enormous hit that has occurred in 401K plans is leading many people to re-consider their asset allocation options. You can use the 401K to help finance your real estate purchases. Rather than taking a risk on a mutual fund or your company stock, try yourself! Lenders are willing to take on first position mortgages with your 401K plan as the second mortgage. The interest you pay yourself is tax deductible and the interest you earn is tax deferred. That is a pretty good deal! If you have any further questions, write or call me. Check with the administrator of your 401K plan for their terms. If there are rollovers IRA's in your name or spouse’s name the proper administrator will allow real estate to be purchased in the account. Again, talk to the plan administrator regarding the terms.
2009 and where do we go? The first thing to remember is that money in circulation is inflationary. Sooner or later the money from TARP and the Bailouts will be taken off the balance sheets in the form of TBills and TBonds and go into the economic system. When it does it will cause prices to rise. If you haven't notices, the price of gas is now up 10-15 cents a gallon and oil is up over $10 a barrel.
There have been 14 properties go pending with firms offers in hand in Palo Alto, one in Portola Valley ($3,980,000), two in Woodside, One in Atherton, and 5 in the Prime Areas of Menlo Park and three in the over $1.7 million to $2.2+ million range in the past 10 days. It is time to re-visit your home searches and get financing lined up.
Financing is the final comment. Where do I expect rates to be this year? I do not expect 4.5% mortgage rates to last long if ever available in the 80/20 full doc level for 30 year fully amortized loans. Why? The yield on 30 Year TBonds is 3.06% the FED has stated that they want the spread between mortgages and TBonds to be 1.5%. The spread is now at 2% points. I believe rates on TBonds will go up rather than mortgage rates going down. Why? The banks must sell Bonds to offer mortgages. When bonds are sold and the banks were the natural buyers, yields go up, if there are no willing buyers. If you look at the Treasury Inflation Protection Bonds the yield is 2.5% the CPI is 2% for an adjusted yield of 4.5%. That means the non-protect 30 year TBonds will go to at least 4.5% and mortgages could go back up to 6%. Lock in rates as fast as you can and get looking at property.
Inflation will mean home prices in the Location, Location, Location areas will firm up and possibly increase.
See you next week and keep you encouraging letters coming in!
As to mortgage rates, money is available. An example is Countrywide, you remember them don't you? The rates on $1 million 5 year one year adjustable, interest only is 5.125% with no points and 4.75% with one point, full documents, owner occupied and 60% loan to value. That means 40% deposit. To those of you who are looking at first time purchases and below the $625,000 mark there are 85% loans out there.
I have two loan brokers who can get 5.25% rates on 75% LTV with seller take backs of 10% with buyer downs of 15%.
As a result of the weekly letters to you I have had a number of inquiries on what to do with 401 K plans and can you use them for real estate purchases. The enormous hit that has occurred in 401K plans is leading many people to re-consider their asset allocation options. You can use the 401K to help finance your real estate purchases. Rather than taking a risk on a mutual fund or your company stock, try yourself! Lenders are willing to take on first position mortgages with your 401K plan as the second mortgage. The interest you pay yourself is tax deductible and the interest you earn is tax deferred. That is a pretty good deal! If you have any further questions, write or call me. Check with the administrator of your 401K plan for their terms. If there are rollovers IRA's in your name or spouse’s name the proper administrator will allow real estate to be purchased in the account. Again, talk to the plan administrator regarding the terms.
2009 and where do we go? The first thing to remember is that money in circulation is inflationary. Sooner or later the money from TARP and the Bailouts will be taken off the balance sheets in the form of TBills and TBonds and go into the economic system. When it does it will cause prices to rise. If you haven't notices, the price of gas is now up 10-15 cents a gallon and oil is up over $10 a barrel.
There have been 14 properties go pending with firms offers in hand in Palo Alto, one in Portola Valley ($3,980,000), two in Woodside, One in Atherton, and 5 in the Prime Areas of Menlo Park and three in the over $1.7 million to $2.2+ million range in the past 10 days. It is time to re-visit your home searches and get financing lined up.
Financing is the final comment. Where do I expect rates to be this year? I do not expect 4.5% mortgage rates to last long if ever available in the 80/20 full doc level for 30 year fully amortized loans. Why? The yield on 30 Year TBonds is 3.06% the FED has stated that they want the spread between mortgages and TBonds to be 1.5%. The spread is now at 2% points. I believe rates on TBonds will go up rather than mortgage rates going down. Why? The banks must sell Bonds to offer mortgages. When bonds are sold and the banks were the natural buyers, yields go up, if there are no willing buyers. If you look at the Treasury Inflation Protection Bonds the yield is 2.5% the CPI is 2% for an adjusted yield of 4.5%. That means the non-protect 30 year TBonds will go to at least 4.5% and mortgages could go back up to 6%. Lock in rates as fast as you can and get looking at property.
Inflation will mean home prices in the Location, Location, Location areas will firm up and possibly increase.
See you next week and keep you encouraging letters coming in!
December 30, 2008
In my last email to you I detailed the interest scenario and banks holding the "bail out" money they received to bolster their balance sheets. Let me add here that the reason again is the year end accounting on December 31st. This is when the banks balance sheets are completed. Those balance sheets will be then presented to the rating agencies for the bank's credit ratings. If the banks can maintain or raise their credit ratings the cost of money in the open market place for their borrowings will be the same or lower. If their ratings drop the costs will be higher. Therefore, it is imperative that the money they have obtained from TARP will be in high grade securities, US GOVERNMENT BONDS. That is why we have 0% on TBIlls and less than 3% on 30 year TBonds.
Whereto from here? How do we get out of the basement? The answer is, ONE STEP AT A TIME!
Let me take that one step at a time, first inflation. We have no inflation at the moment and the BIG FEAR is deflation. Let's face it we want inflation, with inflation we have jobs, the economy booms and home prices increase; along with stock prices booming. Look at your retirement account, would it not be better to see you are up 5% than down 40%? What a foolish question, reality is the FED became so entranced on Inflation, it forgot that inflation benefits everyone. Deflation hurts everyone. As much as I like $1.69 for a gallon of gas, I would prefer to see home prices move up and the economy growing. Would you not feel the same?
Liquidity is the next step. We all know that the media says that mortgage are hard to come by and liquefy has compacted? That is where the 0% is very important. With 0% how can a bank earn money? The banks paying are interest in the form of interest to the US Treasury for the bail out funds, the interest they pay on passbooks, and certificate of deposits? That is why the FED wants bonds so low, the banks are forced to get competitive and use the bail out $$$. If not, investors go to CD's. Money market funds will not survive with 0% TBIlls. Who will invest in them? Where do they go? CD's, short term insured commercial paper. What happens with that money that goes into CD's? Will the banks buy more 0% TBIlls? Are you serious? Pay interest out and get nothing back. How long can you keep a business going that way? At some point mortgages become available for securitization. The banks cannot get greedy, because at the same time the FED is buying bonds in the market place driving interest rates down. The more money tat is in circulation we have inflation, another step out of the basement.
Great rates in mortgages are the next step. Do you remember ARM"S (adjustable rate mortgages) and the reset problem? It was not too long ago the Media spoke about the risk and how those ARMs were going to have double digit rates. Well, I have not heard one word from the media about the reset problem. Why? BECAUSE IT IS NOT A PROBLEM! Good News is not worth selling! It is sunny today and sunny tomorrow, why listen to the weather? Back to the ARM. A majority were 1 year LIBOR or 1 year Treasuries. 1 year Treasuries are .39%! 1 year LIBOR is 2.09%. ARMs with interest only tied to 1 month LIBOR are now at 1.75%! Is that a problem? HEY America wake up! Rates are down, mortgage payments are down and ARM's are adjusted to the new low rates. Doesn’t that sound like a great story for buying and investing?
Last week the emails I received from lenders and mortgage brokers all spoke of "We have money for Mortgages. Countywide has money, Wells has money, and Bank America has money. There is money for Jumbo loans up to $10 million!!!Countrywide on December 20, 2008
Jumbo's 1.5MM - 2.5MM 5.875 No points
Jumbo's 1.01MM - 1.5MM 5.625 No Points
Jumbo's 625k - 999K 5.875 No Points
Conf loans up to 60k - 417k 4.875 with no points
Conf loans up to 417k-625k 5% With no points
Time to get your buying hat on!
I hope you enjoy my comments. I think it is something I bring to my clients with my experience, knowledge and Wharton Certification that most other Realtors cannot bring. You referrals are always welcomed and appreciated; as well as, your comments.
Whereto from here? How do we get out of the basement? The answer is, ONE STEP AT A TIME!
Let me take that one step at a time, first inflation. We have no inflation at the moment and the BIG FEAR is deflation. Let's face it we want inflation, with inflation we have jobs, the economy booms and home prices increase; along with stock prices booming. Look at your retirement account, would it not be better to see you are up 5% than down 40%? What a foolish question, reality is the FED became so entranced on Inflation, it forgot that inflation benefits everyone. Deflation hurts everyone. As much as I like $1.69 for a gallon of gas, I would prefer to see home prices move up and the economy growing. Would you not feel the same?
Liquidity is the next step. We all know that the media says that mortgage are hard to come by and liquefy has compacted? That is where the 0% is very important. With 0% how can a bank earn money? The banks paying are interest in the form of interest to the US Treasury for the bail out funds, the interest they pay on passbooks, and certificate of deposits? That is why the FED wants bonds so low, the banks are forced to get competitive and use the bail out $$$. If not, investors go to CD's. Money market funds will not survive with 0% TBIlls. Who will invest in them? Where do they go? CD's, short term insured commercial paper. What happens with that money that goes into CD's? Will the banks buy more 0% TBIlls? Are you serious? Pay interest out and get nothing back. How long can you keep a business going that way? At some point mortgages become available for securitization. The banks cannot get greedy, because at the same time the FED is buying bonds in the market place driving interest rates down. The more money tat is in circulation we have inflation, another step out of the basement.
Great rates in mortgages are the next step. Do you remember ARM"S (adjustable rate mortgages) and the reset problem? It was not too long ago the Media spoke about the risk and how those ARMs were going to have double digit rates. Well, I have not heard one word from the media about the reset problem. Why? BECAUSE IT IS NOT A PROBLEM! Good News is not worth selling! It is sunny today and sunny tomorrow, why listen to the weather? Back to the ARM. A majority were 1 year LIBOR or 1 year Treasuries. 1 year Treasuries are .39%! 1 year LIBOR is 2.09%. ARMs with interest only tied to 1 month LIBOR are now at 1.75%! Is that a problem? HEY America wake up! Rates are down, mortgage payments are down and ARM's are adjusted to the new low rates. Doesn’t that sound like a great story for buying and investing?
Last week the emails I received from lenders and mortgage brokers all spoke of "We have money for Mortgages. Countywide has money, Wells has money, and Bank America has money. There is money for Jumbo loans up to $10 million!!!Countrywide on December 20, 2008
Jumbo's 1.5MM - 2.5MM 5.875 No points
Jumbo's 1.01MM - 1.5MM 5.625 No Points
Jumbo's 625k - 999K 5.875 No Points
Conf loans up to 60k - 417k 4.875 with no points
Conf loans up to 417k-625k 5% With no points
Time to get your buying hat on!
I hope you enjoy my comments. I think it is something I bring to my clients with my experience, knowledge and Wharton Certification that most other Realtors cannot bring. You referrals are always welcomed and appreciated; as well as, your comments.
December 8, 2008
I have a degree from Wharton in a field call Investment Management Analysis. It is a bit like statistics and probability, but the important part of it is knowing and understanding cycles.
What we went through in October was a complete breakdown in trust. Fear and panic ruled the day and anything other than US government securities was RISKY!!! What occurred was that mortgage backed securities were sold along with all corporate debt and foreign debt. Foreign money sold all their debt and all piled in the US Treasury market. In one day in October the US Treasury issued some $40 Billion in Treasury Bills for 0%, that's right no return. People wanted no risk and would take 0% return for it. Once the T-Bill market went to almost 0, the rest of the Treasury market went the same way. Last week I think we hit the top in price and bottom in yields for Treasuries. The 10 year was at 2.5% and the 30 year at 3.1%. The inflation rate in October was 3.7%. That meant that a negative return was created for investors. Whereas, the Treasury Inflation protected bonds yield over 4%.
Real Estate is a function of money. The great move we had in real estate was from the securitization of mortgage debt. Pensions bought it, foundations bought it, foreign investors bought it and speculators leveraged it and created investment plays over the fractions of a percentage point moves called basis points. They fled the market and mortgages dried up. Only Portfolio Loans from Banks were available at their terms!
T-Bills are 90 day duration. In January the first wave of 0% bills mature. Where do they go? If you look at the corporate bond market you will see that there was a 5% rally in that market this month. As the fear and panic of risk subsides, mortgage backed securities will take hold. This is especially good for the market because the leaders in it were Freddie Mac and Fannie Mae, both now US Government entities. The bonds will be US guaranteed. The yields on those bonds were 7%. That will make the investor holding a 30 year to think, "Why do I want a 3% government bond when I can have a 7% bond. You don't need a masters from Wharton to figure that out. The way back to the credit markets will occur from January forward as the T-Bills mature and the bond yields of Treasuries will go back to an inflation plus relationship.
What does that mean for real estate in the Peninsula and the stronger markets are looking at? Sellers have taken their homes off the market. It is only the estate sales, divorces and fixer uppers that remain; as well as, a few spec builders who want to end their pain. I would look very carefully at what is out their now before the end of the year. If you don't mind paying up and having the comfort of knowing the economy is not going to zero that is your option, wait until next year. My goal is to keep you informed so you can make the wise and comfortable decision.
Happy Holidays,
What we went through in October was a complete breakdown in trust. Fear and panic ruled the day and anything other than US government securities was RISKY!!! What occurred was that mortgage backed securities were sold along with all corporate debt and foreign debt. Foreign money sold all their debt and all piled in the US Treasury market. In one day in October the US Treasury issued some $40 Billion in Treasury Bills for 0%, that's right no return. People wanted no risk and would take 0% return for it. Once the T-Bill market went to almost 0, the rest of the Treasury market went the same way. Last week I think we hit the top in price and bottom in yields for Treasuries. The 10 year was at 2.5% and the 30 year at 3.1%. The inflation rate in October was 3.7%. That meant that a negative return was created for investors. Whereas, the Treasury Inflation protected bonds yield over 4%.
Real Estate is a function of money. The great move we had in real estate was from the securitization of mortgage debt. Pensions bought it, foundations bought it, foreign investors bought it and speculators leveraged it and created investment plays over the fractions of a percentage point moves called basis points. They fled the market and mortgages dried up. Only Portfolio Loans from Banks were available at their terms!
T-Bills are 90 day duration. In January the first wave of 0% bills mature. Where do they go? If you look at the corporate bond market you will see that there was a 5% rally in that market this month. As the fear and panic of risk subsides, mortgage backed securities will take hold. This is especially good for the market because the leaders in it were Freddie Mac and Fannie Mae, both now US Government entities. The bonds will be US guaranteed. The yields on those bonds were 7%. That will make the investor holding a 30 year to think, "Why do I want a 3% government bond when I can have a 7% bond. You don't need a masters from Wharton to figure that out. The way back to the credit markets will occur from January forward as the T-Bills mature and the bond yields of Treasuries will go back to an inflation plus relationship.
What does that mean for real estate in the Peninsula and the stronger markets are looking at? Sellers have taken their homes off the market. It is only the estate sales, divorces and fixer uppers that remain; as well as, a few spec builders who want to end their pain. I would look very carefully at what is out their now before the end of the year. If you don't mind paying up and having the comfort of knowing the economy is not going to zero that is your option, wait until next year. My goal is to keep you informed so you can make the wise and comfortable decision.
Happy Holidays,
Subscribe to:
Posts (Atom)
