July 28, 2009

• Long Island Tea Circuit
• Market Analysis& Statistics
• New Loan Requirements

One of the annual events of summer for the East Coast/NYC circuit are parties on Long Island. They are usually at a Beach Club or Country Club; and they all have one thing in common (What’s Hot in the Market). Of course the market on the Long Island Sound is Wall Street, Hedge Funds and the Hot Managers. This Saturday it was the annual Keller William Bar-B-Q. I was given the great complement from the newer agent to our group specializing in Commercial Investment Real Estate to be asked: “based upon your experience and training, what is your outlook on the economy, real estate and investments”? Boy what a big subject, my wife then said “are you sure you want to hear it?”

My Response: One of our greatest Generals was George Patten. General Patten believed he was the re-incarnation of military men going back to Sumeria, but could not determine if he was an officer then; but was certain for all the succeeding lives he was an officer. General Patten attributed his success with his tank corps in Europe to studying the battles of Caesar. Patten move so quickly through western Europe against the German’s he went beyond his supply line and was ready to cross the Rhine and take Berlin. Well what does that tell you? History is your greatest teacher. Lord Toynbee said “history repeats itself”.
The last “great recession” we had was the 1973-74 recession. The loss in value to the stock market was greater than the Great Depression as the Dow Jones Industrials declined some 55% from a hair over 1000 in 1971. What followed was a recession, unemployment of 10% and lay offs and slow down and cut backs. The exception was GM and Ford Cadillac and Lincoln Continental division ran 3 shifts. It took 10 years before we once again had steady growth and the Dow Jones went beyond its former high of 1000+.
It will take us over 10 years before the Dow and the various averages you follow to regain and exceed their former highs. The industries to follow and invest in will be “Green”, Biotech, and selective Technologies. Real Estate will stabilize in growth sectors of the US as the “rust belt” and industries de-stabilized from the reorganizations, but don’t expect a return to the growth and real estate market of the past. Value will be gotten from “estate sales”, “divorces” and “relocation”. The residential rental markets will see stable growth in rental income and amortization of principal of mortgages. The commercial area still looks foggy and needs a cleaning out. Expect regulation to return similar to the late 70’s and early 80’s, expect mergers and acquisitions to be the sole sector of growth in companies. To Big to Fail, will be the FTC battle cry as it dismantles Big Business, Banks, Financials, Insurance Companies and sues to stop mergers. Expect tax rates to increase; do not expect interest rates to escalate in the near future. The day of real estate for wealth growth will not be here for quite awhile.
Jeremy Siegel, of Wharton School of Business wrote a paper a number of years ago about the decline of growth and the future of the Western World as the “baby boom” generation mature. Baby Boomers will now be sellers of stocks, real estate and buyers of bonds as they look at retirement. The big homes for families will be sold and the available buyers will be limited. The take up in buyers will come from immigration. Immigration will come from the countries will large population increases such as the mid-east and Latin America. The “baby boomers” will live longer and probably work longer, they will have numerous careers. That means smaller homes, community life styles and inheritance will be further out for their children that it was from their parents, the frugal savers of the Depression Children. Days on the market will increase as it will take longer to sell the more expensive larger home to buy the empty nester smaller home. Don’t expect China to take over as their birth rate is below 2 and they will be importing or out sourcing labor duties to the nearer nations with higher birth rates.
My wife’s elbow in my ribs stopped me there!

This week’s statistics:
Menlo Park
Actives:90
Pending:10
Pending No Shows:13
Sold:58

Portola Valley
Actives:33
Pending:5
Pending No Show:1
Sold:6

Woodside
Actives:57
Pending:2
Pending No Show:5
Sold:3

Atherton
Actives:37
Pending:3
Pending No Show:10
Sold:7

Palo Alto
Actives:117
Pending:13
Pending No Show:25
Sold:27

All markets except Palo Alto had increases in homes sold. A home is sold when it closes escrow. A home remains pending until the contingencies are removed and then it becomes Pending Do Not Show. The active list is a new category for you to review. Every 14 days about 38 properties are either canceled or expire.

The Federal Reserve has put in more regulations for lenders to comply with in the Truth-in-lending area. Here are some items per US Trust Company Bank America.
• At application a “disclosure statement” is sent to applicant.
• If rates change 1/8% from the rate quoted in the disclosure, a new disclosure packet is sent and the applicant has 3 days to review.
• Loan Documents are drawn after 3 day waiting period and approval of loan.
• If applicant changes any of the terms and type of loan and if interest change by 1/8%, a new disclosure packet is sent and new documents written after 3 days and approval of loan.
• There is no 3 day right of recession with a new loan on a purchased property
• There is a 3 day right of recession on a refinance or Home Equity Loan.
• If you have great credit, balance sheet and income a loan could close in 15-20, increases in time line dependent on stable interest rates and no changes in the loan by the applicant.
• What should you look forward to in a loan closing? How about 45-60 days.