Well with the typical holiday slowdown and lack of inventory, there has just not been much to report to you all.  With 2009 now behind, we all look hopefully to a better 2010!

So where are we at so far this year?  Inventory is at a 4 year low, 1548 active single family homes on the market. This level has not been seen since January of 2006!! Still characteristic of the market is high pending sales numbers, 2546 to be exact as of January 4, 2010.

Just one year ago we were at 3931 active homes and 1598 pending sales.  The market has done a complete 180 degree flip-flop!

Looking forward to the New Year, what is expected to happen?

1. There will be more inventory coming to market.  Read my last post “Where is this inventory starved market heading?“

2. Rates will be low for a couple months and then are likely to go up.  Why?  The Treasury has already given indication that it will stop buying mortgage-backed securities soon, which will then push the bank rates up and then our interest rates up.

3.  Short Sales are going to be more commonplace.  Banks are realizing that it costs less to work with the seller and short sale the home than to foreclose on it.  Also the HAFA program and other loan modifications are truly helping a very small percentage of people, so those distressed homes will end up as short sales.

Any other thoughts on what might happen in real estate for the new year?

Yes, inventory has continued to drop week by week since March 2009!  Today inventory is at a mere 2050 Single Family Homes with over 2800 consistently pending.  Higher pendings than actives you ask?  Yes, verifying that homes come on and fly right off the market is one week or less.  And not only is the speed much faster than normal, but we have only 58% of the inventory of the same time last year (2008) AND we have a 62% increase in sales compared to last year.  A huge swing of the pendulum.

I’m sure you’ve heard talk of banks holding back REOs…I’ve talked about it in many past posts even.  So the grand question is:

“Where is this market going?”

Let me explain 3 headwinds we are facing in Santa Clara county and throughout much of the country.

1. Option ARM resets peak early 2010

In 2007, subprime loans reset, causing the increase in supply of low-end homes (Under $500k in SCC).  This affect the 2008 market taking it to a stand still and then prices dropped enough that demand increased and the low-end of the market is again on fire and selling quickly.

Well coming spring 2010 and stretching several months, Option ARM loans (the ones where you can pay a minimum payment of 1%, but of course that means you are adding principal to your loan every month!) will hit a peak of resets.  Since values are significantly down, PLUS many of these borrowers have added to their principal, there WILL be an increase in foreclosures from this.

2.  Notice of Defaults and Notice of Trustee Sales are UP!

This means the pipeline of foreclosures is worse than ever!  Yes worse than what we are experiencing as a results of the Subprime peak in 2007.  This is a combination of subprime foreclosures continuing to increase as well as now Prime (“Good”) loans have many huge increases, such that they are surpassing subprime numbers!

These properties soon have to come out to the market, so there will be a wave of inventory, sometime…

3.  Unemployment UP!

We all know this statistic and are feeling it too.  Worse yet, we are probably about 6 months from the peak,  so there will be more people who just can not afford their homes anymore, which will add to point #2 even more!

So with all these factors coming together at once, the immediate future of real estate is definitely NOT price appreciation.  The flip side is buyers can count on more inventory coming sometime soon!

The Santa Clara county market has not had much to report on since it is the same and really worse than a month ago when I talked about low inventory and its effects.

County wide there are 2232 Single Family Homes on the market and 2975 pending since many homes come on the market and are sold in less than one week with multiple offers.  So yes, there are more homes pending then for sale!!  What that means is there is much more demand than supply.

With my first-time homebuyers it feels like we are desperately running to find almost any house that will take our bid.   Here’s why…

Under $500,000 there are 497 options for buyers in the entire county (90 are REO, 275 Short sale!).  Those 497 are only 22% of the options on the market, though I’d say the majority of the buyers are first-timers, most of whom can only afford around $500,000, just like I did when I was a first-time buyer too.  So with say 75% of the buying power going after only 22% of the inventory, no wonder it is crazy!  Plus put the time pressure on that of the first-time homebuyer credit expiring here soon and you’ve got many very eager first-time buyers!

So NOW is the time if you are seller in the $500,000 ish price point to sell your home and make a move up to where the market is not as crazy!

Or if you are an investor, steer clear of the under $500,000 if you can!

Would you consider selling now to take advantage of the seller’s market?

by Rick Soukoulis, Chairman and CEO, Intero Mortgage

The Wave Theory

What does the surfers Wave Theory have to with the old jingle Happy Days Are Here again?

Surfers used to say that there would be three waves, each bigger than the previous one, and that it was always the 4^th wave that would be the perfect one to ride in on.

As hard as it might seem to fathom, the $700 billion Rescue Bill might just have been the 4th wave that signals the start of calm seas, that all the turbulence or the first three waves has been flushed out to sea.

Using that analogy, let’s look at the financial crisis in terms of waves.

• The First Wave was the sub-prime crisis, a term that almost seems quaint and irrelevant now.  Its victims were Indy Mac (back on July 11 of 08) and the quick and ferocious failure of mortgage companies across the country.  Shortly thereafter, Bear Stearns failed but was partially bailed out by governmental assistance.

• The Second Wave came later in the summer and early fall. We saw FNMA and Freddie Mac put into conservatorship by the government, Lehman Brothers failed, the BofA announce its intention to take-over Merrill Lynch, and AIG kept afloat with an $85 billion government loan.

• The Third Wave was at the end of the first quarter of 09 as, within days of each other, Washington Mutual failed and Wachovia sold itself to Citigroup in a desperate effort to avoid bankruptcy.  Wamu was the nation’s largest Savings & Loan and Wachovia was the fourth biggest bank in the country.  Combined, they had over a trillion dollars worth of assets!  That’s a helluva lot of banking assets to essentially fail in one week.

Although we all pretty much know who has been affected, the First Wave had the most immediate impact on the real estate industry.  It clobbered mortgage originators, Realtors, and anyone trying to sell a home or qualify for a mortgage.  This was Main Street getting taken down big-time, and it hurt.

The Second Wave impacted Wall Street more directly, but Middle Class America started getting nervous.  If these giants companies weren’t safe, who was?

By time the Third Wave hit, nervousness turned to fear, with banks failing across Europe and mainstream magazines like Time featuring covers asking if we were headed into another Great Depression.

With mortgages and other debt instruments being the root caused of the current crisis, we can see how the devastation has swept through different communities of interest.

1. First to be devastated were the people and companies that created and originated these mortgages.

1. Next to be hit were those who packaged it, securitized it, rated it, insured it and sold it.

1. Finally to feel the impact were those who held it.  These include giant banks and insurance companies, pension funds, and indeed, FNMA and Freddie Mac themselves.

It seems very clear to me that the boil has been lanced with the $700 billion Rescue Plan.  Everyone even remotely involved in the Crisis has felt the pain. The three huge waves described above have taken their toll, and the fever seems to be breaking.

There’s no guaranty that the Rescue Plan is working exactly as promised. But quite obviously a lot of bad things have been flushed out, and calmer seas are very near at hand.

I’m not ready to start singing Happy Days Are Here Again, but I can already hear it softly in the background.

Well, the anticipated September 15th date has passed and inventory is still dropping!?

As mentioned in past posts, the under $500,ooo market is frustrating for buyers and is only getting more and more that way.  Inventory this week is down to 2348 with 2973 homes pending.  As you can see home sales have slowed a tiny bit, but probably due to inventory decreasing as well.

So it appears banks will be holding back their inventory or just trickling it out just as Carole Rodoni anticipated.

See below for the trends from the last few months by week.

2009 Single Family Res.Date Active Pending

7/6/2009 2722 3054

7/13/2009 2834 2959

7/20/2009 2822 2939

7/27/2009 2795 2917

8/3/2009 2725 2884

8/10/2009 2690 2917

8/17/2009 2598 3007

8/24/2009 2543 3023

8/31/2009 2461 2995

9/7/2009 2351 3011

9/14/2009 2407 3020

9/21/2009 2390 2995

9/28/2009 2348 2973

]]> http://homeownerexperience.wordpress.com/2009/09/29/where-are-all-the-reos-and-other-inventory-in-silicon-valley/feed/ 0 Theresa Wellman http://homeownerexperience.wordpress.com/2009/09/23/prepare-your-home-for-winter/ http://homeownerexperience.wordpress.com/2009/09/23/prepare-your-home-for-winter/#comments Wed, 23 Sep 2009 17:48:49 +0000 Theresa Wellman http://homeownerexperience.wordpress.com/?p=367 ]]>

Fall maintenance is important because it helps make homes more energy efficient during the winter months, and will safeguard homes against potential seasonal ‘disasters’ such as leaking roofs or home fires caused by neglected chimneys.

Here are ten tips to a safer, warmer winter.

TIP #1 – Check the heating system. Check the filter, pilot light and burners in a system fueled by gas or oil. Fireplaces, boilers, water heaters, space heaters and wood burning stoves should also be serviced every year. Have the specialist inspecting your unit show you how to change the filter and then you should change it at least once every 2 months. Clean ducts in the heating system. Clean and vacuum dust from vents, baseboard heaters and cold air returns. Dust build-up in ducts is a major cause of indoor pollutants. Ducts should be professionally cleaned about every three years.

TIP #2 — Have the chimney inspected by a qualified chimney professional. Chimneys should be checked and cleaned, if necessary, on an annual basis.  If you have a chimney that will not be used, consider having it sealed shut.

TIP #3 — Test fire alarms, smoke detectors and carbon monoxide detectors, and vacuum out the dust. Batteries should be checked every six months to ensure that they’re working.

TIP #4 — Remove excess leaves and damaged branches from trees surrounding the house. Dead branches have the potential to break and fall, ruining roofs, decks, or vehicles and the possibly causing injuries to people.

TIP #5 — Maintain gutters. Remove all debris that can slow or impede the ability of water to drain effectively from the roof. Trapped water can be destructive not only to the gutters themselves but to the adjoining roof as well. Make sure gutter water drains away from your home.

TIP #6 — Inspect the roof. Look for damaged or loose shingles, gaps in the flashing at joints with siding, vents and flues, as well as damaged mortar around the chimney.

TIP #7 — Inspect exterior walls, doors and windows. Check walls and window sills for damage such as cracks, gaps, loose or crumbling mortar, along with splitting and decaying wood. Caulk exterior joints around windows and doors, which helps keep the home weather tight and lower heating bills. Check windows and doors to make sure locks work properly and that they are in good condition. Clean tracks and lubricate hinges. Repair or replace any cracked windows.  Add or replace if needed weatherstripping around your doors.

TIP #8 — Maintain steps and handrails. Repair broken steps and secure loose banisters and handrails. Broken steps can cause a dangerous fall. Similarly, a person slipping will grab a handrail for support.

TIP #9 — Inspect the attic and crawlspace. Insulate voids in the attic – the entire attic floor above a living space should be insulated with at least six inches of insulation, except around electrical fixtures such as recessed lights that aren’t rated for contact with insulation. Damp basements and crawl spaces can become mold and mildew problems. Watch for leaks from your water heater, plumbing system and seeping rain water from the roof. Locate and maintain a clear access to your main water shut off valve. If you have a sump pump, test, clean and lubricate it.

TIP #10 –Adjust sprinkler systems and outside faucets for the cooler weather and increase of rain soon to come.

Excerpted from http://rentonwa.gov/

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Well the season of art and wine festivals is upon us.  This weekend there are 2 large ones to enjoy!

The Almaden Art & Wine festival is always a big turnout and a great community event with local performers and a great kids area.  This year it is going to be held this Sunday, September 20. Read reviews on yelp and check out the details at http://www.almadenwine.com/.

The logo this year was designed by Jennifer Chen, a 17 year old Senior at Leland High, just one way this event shows it is truely a community event.

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The Santa Clara Art and Wine Festival is also happening this weekend, both Saturday and Sunday Sept 19&20. Read details athttp://www.santaclaraartandwinefestival.com/.

This weekend was another busy couple of work days for me.  I had several buyers out looking at homes and it is ever apparent that the market is very tight in inventory (on 9/13/09 in Santa Clara County there were 2407 active Single family homes and 3020 pending!).This demand and competition is especially noted in the first-time buyer arena, under $500,000 price point (499 Active Single family homes, 1798 pending!!!).

This weekend I experienced, cars parked for blocks, people lined up back to back walking through homes (literally in line through the home), AND you have to fill out a bidding sheet before you leave the home if you want a chance at making an offer!  (Funny enough I think the general public is catching on to this mass influx of people to for-sale home as there were garage sales on the same street at BOTH these busy open houses!)

Yep really, we were handed a bidding sheet and told you must fill this out BEFORE you leave the home for a chance to make an offer.  The papers are not to leave the property and are quickly stored in the gatekeeper’s manila envelope once filled out.

Sunday afternoon right after the open houses, bids are put in bidding order, with the top bid setting the bidding war floor.  Listing agents get on the phone and call all bids telling them “the top bid is …and we had …offers.  Are you out or do you want to up the offer?”

What a depressing call to make to my clients when I was told their initial bid was outbid by $150,000 (even though they bid $50,000 over list price) and even worse, there were 95 OFFERS!!!!  Wait, how many?

Again can I make a plea, Banks and homeowners (not in financial trouble), let your inventory go!

If you are needing to move and sell your home sometime soon, wouldn’t you want to benefit from all this demand in the market today??

Here it is, an REO home that is about typical. I have seen MUCH worse condition REOs than this and I personally bought one that was in MUCH better condition. But for those of you who have not seen what these look like, it is VERY different than a home being presented via traditional sale.

The good news is traditional sales look like diamonds versus today’s competition!

The market in the eyes of a first-time homebuyer can be described only as FRUSTRATING! With 2399 Single family homes on the market on 9/9/09 and 3021 pending, demand is obviously still high and inventory not big enough to satisfy the thirst for inexpensive Silicon Valley real estate!

So with the laws of supply and demand, multiple offers happen and first time buyers are pushed out of the game.  Under a $450,000 list price (most sales prices end up higher), there are only 381 homes active on the market in Santa Clara county (15.8% of the market).

Most first-time homebuyers are hoping for the $8000 tax credit that requires the property sale to be closed by Dec 1, so that means short sales are out of the question to get this credit.  Narrowing the market to just regular and bank-owned (REO) sales, there are now only 172 options for these $450k first-time buyers in the ENTIRE COUNTY.

In my experience, the most desirable areas for the $450k first-time home buyer are Blossom Valley, Santa Teresa and Cambrian, which leaves only 12 options!  I’ve mapped these to show you how scarce the selection is!   (Searching all of Silicon Valley SFR <$450k, REO only there are 64 homes available for sale!!)

Which areas are feeling the inventory crunch the most?  Here is data of ALL Single Family Homes by MLS area.  Most areas are less than 1 month inventory! These areas are Alum Rock, Berryessa, Blossom Valley, Cambrian, Central San Jose, Evergreen, Milpitas, Morgan Hill and Gilroy, Santa Clara, Santa Teresa, South San Jose and Sunnyvale.

First time homebuyers are supposed to be excited and the point of all these federal and state incentives is to get these buyers in to the market!!!

So Banks and homeowners (not in financial trouble), let your inventory go!

What is the point of all these government regulations on REOs, when this area needs inventory?