Michael Roberts’ Blog - Buying Real Estate Foreclosures- Selling Homes in Santa Clara County

Following  very active home sales for nearly 60 days creates a problem for everyone!   What is a market price now?   Is it a Seller’s market or a Buyer’s market.    Well,  it sure is a market of change in all areas of Santa Clara County according to market statistics. Consider these 10 facts…

1. A spike in local sales activity. A spike refers to a significant rise in the number of home sales (or values) in a local market area, which generally is measured month to month. A spike does not necessarily mean continued growth, i.e. it could be a one month phenomenon.

2. Higher asking and selling prices vs. appraisal value opinions for residential properties. Appraisers study the markets; they do not make the markets. When the data shows higher sale prices in comparable properties market value opinions will increase proportionally. Appraisers seek evidence of value but do not create the value. In time periods with low activity, evidence of any kind is difficult to find.

3. More activity at open houses. Open houses with five to eight attendees is considered average,  so a dozen or more people attending, like we are seeing in Los Gatos and Cupertino,  open houses means buyer interest is picking up. Also, the mood of the attendees is important. Are they optimist and upbeat? Buyers interest alone does not always translate to effective purchasing power. If the number of buyers in the market increases but they do not have requisite down payments, the sales may still not occur.

4. Shorter marketing times. In some markets like  Downtown San Jose, houses have been up for sale for more than a year. In most balanced residential markets, properties that are priced competitively will typically sell in less than six months. If the Days On Market (DOM) is shortening, many practitioners will read an improvement in the market.

5. Reduced number of foreclosures and short sales. A reduction in these transactions commonly signals a more balanced market. This has become very evident in the  Cambrian area.  If lenders are reluctant to foreclose because of an oversupply of inventory, they may choose to wait to repossess the properties, which could allow a spike in the number of foreclosures later despite a better market condition.

6. Stabilized employment. Stable or increasing employment rates provide the necessary confidence for potential buyers to invest in a home. Since most buyers rely on borrowed funds to make real estate purchases and borrowing money usually requires a source of repayment and that usually means jobs, an increase in this basic need, will enable more real estate sales.

7. Fewer buyer incentives and seller concessions. Seller-paid incentives or concessions are a sign of seller motivation. If there are fewer builders offering “free” upgrades and fewer sellers sweetening the deal with big screen TVs, it may be a sign of lessening supply and therefore a better market.  The First Time Buyer Tax Credit is helping here a bunch!

8. New construction starts. Most builders are quite attune to their markets and will not build new homes without a corresponding contract for sale or a perceived increase in demand. An increase in the number of building permits usually indicates higher demand and higher prices. If residential properties are selling for 25% less than they cost to build, only a few new homes will be built. It would be prudent to buy an existing home rather than build a new one for a much higher price.

9. “Move-up” buyers entering the market. More buyers willing to move to a larger or superior quality home indicates a healthy market. The lack of buyers at the lower end of the price range will have a chain reaction throughout the market. If a buyer for a high priced home has a lower priced home to sell first, the sale of the higher priced home may have to occur before the higher priced one can sell.

10. Apartments advertising renter specials - fewer renters in the market may indicate more people are moving into owner occupied homes or it could indicate a reduction in population. Lower population will cause an oversupply of housing which will oftentimes permeate throughout several markets.

TAKE THE MYSTERY OUT OF BUYING AND FINANCING A HOME IN TODAY’S WILD MARKET!

                                     FREE! First Time Home Buyer Seminar!

WHEN: Tuesday, June 30
7:00 pm - 8:30 pm
WHERE: Sonoma Chicken Coop
90 Skyport Drive
(Near SJ Airport)
San Jose, CA 95110

You will learn…

• What Document You Should Never Sign
• How and Where To Find The Best Bargains
• What Realtors Don’t Want You to Know
• What is a  Short Sales and How to Get One

You’ll also find out more about…

• Qualifying for a Loan
• Closing Cost and Down Payment
• The Benefits of Buying vs. Renting

FREE Seminar!

Refreshments will be served!

Please RSVP to:
Michael Casey (408) 937-1057
mcasey@milestonemtg.com
Michael Roberts (408) 505-5614
mroberts@rwnetwork.com

Bringing the Dream of Homeownership Within Reach

I have waited to post this info since, the last time the program was announced it was removed and now, finally, we can rely on it’s use.   I have added a link below, from the housing dept., to clarify the details for you and everyone in our Santa Clara County community of interested buyers and investors.

Congress has passed the legislation that grants a tax credit of up to $8,000 to first-time home buyers.

Here is more information about how the 2009 First-Time Home Buyer Tax Credit can help prospective home buyers become part of the American dream.

Who Qualifies?

First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?

The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Will the Credit Be?

The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:

The price of the home-the credit is equal to 10% of the purchase price of the home, up to $8,000.    In our San Jose market this is a no brainer…the whole $8000 credit can be used if you meet the income restrictions.

The buyer’s income-single buyers with incomes up to $75,000 and married couples with incomes up to $150,000-may receive the maximum tax credit.

How to use the credit

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income-over $95,000 for singles and over $170,000 for couples are not eligible for the credit.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.

RealtyTrac®, one of the leading online marketplaces for foreclosure properties, released its May 2009 U.S. Foreclosure Market Report^TM, which shows foreclosure filings-default notices, scheduled auctions and bank repossessions-were reported on 321,480 U.S. properties during the month, a decrease of 6% from the previous month but an increase of nearly 18% from April 2008. The report also shows that one in every 398 U.S. housing units received a foreclosure filing in May.

“May foreclosure activity was the third highest month on record, and marked the third straight month where the total number of properties with foreclosure filings exceeded 300,000 - a first in the history of our report,” said James J. Saccacio, chief executive officer of RealtyTrac. “While defaults and scheduled foreclosure auctions were both down from the previous month, bank repossessions, or REOs, were up 2% thanks largely to substantial increases in several states, including Michigan, Arizona, Washington, Nevada, Oregon and New York. We expect REO activity to spike in the coming months as foreclosure delays and moratoria implemented by various state laws come to an end.”

Nevada, California, Florida post top state foreclosure rates

Nevada continued to document the nation’s highest foreclosure rate, with one in every 64 housing units receiving a foreclosure filing during the month - more than six times the national average.

With one in every 144 housing units receiving a foreclosure filing during the month, California posted the nation’s second highest state foreclosure rate despite a 4% decrease in foreclosure activity from the previous month.

Florida posted the third highest state foreclosure rate in May, with one in every 148 housing units receiving a foreclosure filing during the month

Arizona posted the fourth highest state foreclosure rate in May, with one in every 158 housing units receiving a foreclosure filing, and Utah posted the fifth highest state foreclosure rate, with one in every 316 housing units receiving a foreclosure filing.

Other states with foreclosure rates ranking among the nation’s 10 highest were Michigan, Georgia, Colorado, Idaho and Ohio.

Top 10 states account for nearly 77% of total U.S. foreclosure activity.

California reported 92,249 properties with foreclosure filings in May, the highest total of any state and up nearly 23% from May 2008. Bank repossessions in California were down 1% from the previous month and defaults were down 18%, but scheduled auctions were up 18%.

Default notices, scheduled auctions and bank repossessions in Florida were all down from the previous month, but the state still posted the nation’s second highest number of properties with foreclosure filings: 58,931, up 50% from May 2008.

Nevada documented 17,157 properties with foreclosure filings in May, the third highest total of any state and up nearly 83% from May 2008. A 23% increase in bank repossessions helped push Nevada foreclosure activity up 5% from the previous month.

Other states with totals among the 10 highest in the country were Arizona (16,865), Michigan (13,891), Ohio (11,360), Illinois (10,942), Georgia (10,516), Texas (9,813) and Virginia (5,385). The top 10 states accounted for nearly 77% of total properties with foreclosure filings nationwide.

California, Florida, Nevada dominate top 10 metro foreclosure rates
Foreclosure filings were reported on 14,681 Las Vegas properties in May, one in every 54 housing units - more than seven times the national average and the highest foreclosure rate among metro areas with a population of at least 200,000. The city’s foreclosure activity increased 4% from the previous month and 78% from May 2008.

California and Florida accounted for the remainder of top 10 metro foreclosure rates.

California cities accounted for six of the top 10 spots: Stockton at No. 2 (one in 68 housing units), Modesto at No. 3 (one in 71), Riverside-San Bernardino at No. 4 (one in 75), Merced at No. 5 (one in 78), Bakersfield at No. 7 (one in 94), and Vallejo-Fairfield at No. 9 (one in 101).

Florida cities accounted for three of the top 10 spots: Cape Coral-Fort Myers at No. 6 (one in 82 housing units), Orlando-Kissimmee at No. 8 (one in 101), and Miami-Fort Lauderdale-Pompano Beach at No. 10 (one in 105).

Interesting statistics  published through RISMEDIA, May 25, 2009

I may be tapped into our local market here in Los Gatos and San Jose… it looks like more and more people across the country are feeling the same way as we do here in Santa Clara County.

Fewer homeowners may be starting complete kitchen remodels, but they’re still replacing countertops and re-facing cabinets. They’re also investing in improvements to make their homes more energy-efficient, according to a recent home remodeling and repair report by ServiceMagic.com. Others are splurging on hot tubs and home theaters after realizing that they may be in their homes for some years to come-and want to make them as comfortable as possible.

“People are not going bigger and better, but improving what they have more cost effectively,” said Craig Smith, CEO of ServiceMagic, a website that connects homeowners to prescreened contractors. For instance, instead of buying new furniture, they’re repairing what they have. Or they’re deep cleaning the carpet in lieu of replacing it.

All for good reason: Money is tight, lending standards strict and in a sluggish housing market you might not recoup as much of your remodeling investment at resale.

Home improvement spending is expected to decline 12% in 2009, according to Harvard University’s Joint Center for Housing Studies. Lower financing costs may be starting to stabilize the downturn in existing home sales, but “they have not been enough to offset rising unemployment and falling consumer confidence and encourage homeowners to undertake major home improvement projects,” said Kermit Baker, director of the Remodeling Futures Program at the Joint Center.

It’s much different than the days when home-equity lending was plentiful. Before doing anything, homeowners are carefully considering how they should spend their money.  If you consult with your favorite Real Estate pro before you start your project there is a better chance it will be a recoverable investment.   Besides,  you get to enjoy what you improve!

What would you estimate new Granite countertops (cost about $4000) will give you in return in say 3 years if you were to sell?

“I want to remodel now however, the market is so soft will I waste my money?”   That depends on the property value and what your LTV (loan to value) actually is.    I have been seeing lots of remodel projects lately around Los Gatos and Cambrian especially.

Consider this news from NAHB.  The residential remodeling market declined further during the final quarter of 2008, according to the latest National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI). The current market conditions indicator slid to 27.7, from 33.5 in the previous quarter. Future expectations of remodeling work plummeted to 19.6, from 27.7 in the third quarter. Both these indices descended to historic lows since the start of the RMI in 2001.

Wow!  If you have a low LTV and plan to be in your home for a few more years maybe a small re-do would be of value now.  I bet some San Jose contractors are ready to take just about any job to keep that cash flow coming in .

The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view market conditions as improving. The RMI has been running below 50 since the final quarter of 2005, following decreasing remodeling expenditures since that time.

“During the last quarter many remodelers were asking if their phones were still working because they received virtually no calls for work,” said NAHB Remodelers Chairman Greg Miedema, CGR, CGB, CAPS, a remodeler from Tucson, Ariz. “The jobs we are getting are for smaller projects and necessary home maintenance.”

Yep, it is time to make the call and inquire about an estimate so, you can figure out if this is a good time to finance improvements.

Nationally, market conditions for major additions and alterations shrank to 20.2 (from 29.4 in the third quarter), while minor additions and alterations conditions slowed to 33.5 (from 38.51). Maintenance and repair dropped to 27.6 from 30.9 in the previous quarter. Overall, major additions and other large remodeling jobs have experienced a greater decline than smaller remodels and maintenance.

“Remodelers suggest that the huge decline in consumer confidence, volatility of the stock market, and uncertainty about the future of the economy have made homeowners delay remodeling decisions,” said NAHB Chief Economist David Crowe. “These anxieties are causing consumers to wait and see if conditions improve before they are willing to commit to home improvement spending.”

All measures for future expectations in the remodeling market (calls for bids, amount of work committed for next three months, backlog of remodeling jobs, and appointments for proposals) dropped. Current market expectations slipped in all regions during the fourth quarter, with the Northeast declining to 24.9 (from 32.9 in the third quarter), the South 30.7 (from 31.5), the Midwest to 28.0 (from 36.2), and the West to 25.0 (from 36.1).

Ok!  So, If you bought a REO (foreclosure) you know you bought at a super price probably very near the bottom, and you can see yourself living in your home for a few years, then it is definitely time to take advantage of the soft remodel market and get your bids.  Good Luck! ….and remember I am always willing to provide good referrals for experienced and qualified service providers.

Are you a homeowner planning on moving up to a bigger or more expensive home? Here’s a guide for planning the transition in today’s foreclosure heavy market.

Figure out how much your current home is likely to sell for.
Have your real estate professional conduct a comparative market analysis. “Be realistic about pricing the home so it moves quickly,” adds Sandy Guralnik, a broker with Coldwell Banker United in Charlotte, N.C. This will help you avoid a long gap between when you buy your new home and sell your old one.

Consider the market.
If you have only been in the home two or three years and made little or no down payment, you probably do not have have enough equity to sell at a profit in today’s soft market. You might even owe more on the mortgage than the home is worth.  This is far to common in the current foreclosure heavy market.  On the other hand, if your home has appreciated well, it might be easier to move up to a bigger and better home than ever before!  Especially in Cambrian Park, Los Gatos, and Saratoga.  Cupertino has consistantly bucked the market recently.

Consider your finances.
Your overall debt picture is important if you plan to move into a larger, more expensive home. In addition to a higher mortgage, you’ll likely have higher utility, insurance and property taxes as well. If you owe money on a home equity loan, you’ll have to pay that back when you sell the home, which will eat into your profit.

Get preapproved by a reputable lender.
The lender will tell you how much money they’re willing to lend you, which will tell you how much house you can afford. Then, figure out how much you’re comfortable spending. The two numbers are not necessarily the same.  Your comfort zone should be your guide here.

Determine your long-term housing needs.
Will you be starting or expanding your family in a few years? Will the larger home be as teen-friendly as it is toddler-friendly? Is there a place for a home office if one of you eventually works from home?  With the many economy issues this should play a large part in your decision process.   Not to speak of the inventory that is available today.

Be realistic.
Most people will not be able to move up from a starter home into their dream home. It’s a long-term process that occurs over several moves, says Debbie Wong, a certified residential specialist with Prudential California Realty in San Mateo, Calif. Plus, it’s harder to qualify for a loan if the jump in monthly payments is too big, she says. Not to speak of all the hoops many lenders are expecting you to jump through now.

Preview properties in your target price range and location.
Most importantly does that “Super Foreclosure Deal” really translate into a home. Look to see whether the homes match your trade-up goals.

Get your home on the market.
Moving up will go more smoothly if you are able to sell your home before trying to buy another. For one thing, many Sellers are leery of contracts in which the sale is contingent on the Buyer selling their current home. Foreclosures are held by Banks that are not willing to diminish there pool of potential buyers.  If they accept your offer they will be required to place the home on a pending status and other buyers will be considering it. Finances also are an issue.   Bridge loans to carry you from your current home to the next are almost impossible to get today.

Determine the best time for your move.
If you want to move in the summertime, start your other preparations early enough to meet that goal.

Wow,  it’s 98 degrees out!  The number of sales for the month of April for Santa Clara County are also hot and very encouraging.    It is obvious our market is stabilizing,  finally!  Or is it?  Could this just be a spike that will pop this little bubble?

If  I were a gambling man, I would bet that the heat today might keep (some) buyers away.  Nah!  Didn’t apply yesterday.

Yesterday,   Saturday,  there were so many agents and clients showing/viewing property that parking in front of many listings was hard to find.     Several new home listings, a few my clients found worth pursuing, were already looking at multiple offers.

The average days on market for the County was down by almost 30 days.     We were looking at 125+days and now we are seeing 108 days.   The average sales/listing price percentage is up to 96% and has held consistently here for a couple of months now.

I wonder if I should buy that 30,000sq ft home now.  It;s only $64mil.  Maybe after Ice Cream!

Update: June 11, 2009-First-time home buyers who would otherwise qualify for the $8,000 tax credit, but don’t have the money for a down payment or closing fees, may now be able to get a loan to help cover those upfront costs.

The U.S. Department of Housing and Urban Development (HUD) announced on May 29 that the Federal Housing Administration (FHA) will allow state housing finance agencies to provide second mortgages “monetizing” the tax credit so that borrowers can use the funds toward their down payments and closing costs for the purchase of homes with FHA-insured mortgage loans.  End Update

New measures for the $8K First Time Buyer Tax Credit have been announced and I am one who believes it may be something that first time buyers, here in high priced Santa Clara County, will find useful.

The measures announced by HUD would allow FHA-approved lenders; federal, state and local government agencies; and FHA-approved non-profit organizations to supply home buyers short-term or “bridge loans” up to the amount of the $8,000 first-time home buyer tax credit

I am not sure how lenders will implement repayment requirements though.   Stay tuned for that.

Previously, the home buyer would have been unable to access the tax credit until they filed their next annual tax return or an amended 2008 tax return and received the refund from the IRS.

“Secretary Donovan shares our view on the need for a housing and economic recovery,” said Robson(NHBA Chairman). “We appreciate his leadership in moving swiftly to help first-time home buyers to access the tax credit up-front at the time of closing. The timing could not have been better as we are in the midst of the crucial spring home buying season.”

To qualify for the tax credit, first-time home buyers must actually close on their home purchase by Dec. 1, 2009. Buyers can take the credit on their 2008 or 2009 income tax return.

In San Jose and surrounding cities like Cupertino, Los Gatos and Cambrian we have seen several creative financing programs serve buyers.   I hope this is one finance “tweek” that proves out to be successful.   The other programs were “funded” mortgage packages and the demand usually sucked the air out of them pretty quick.

Just learned the flood zone area boundaries will be changing May 18th.

The Federal Emergency Management Agency (FEMA) has issued revised Flood Insurance Rate Maps (FIRMs) for all of Santa Clara County that become effective on Monday, May 18, 2009

Prospective home buyers may wish to check with their insurance agent to see if the property’s flood zone, and insurance requirements, will be affected by the map changes. To comply with federal law and to obtain the lowest available rate, owners drawn into a higher-risk zone must purchase flood insurance before the new maps become effective on May 18, 2009.

Areas affected by the new maps…….

The revised FEMA maps will expand the 100-year flood zone and affect residential parcels in Palo Alto near Foothill Expressway, in Cupertino near Heney Creek Place, and in San Jose near Zanker Road and Component Drive, and Kingston Way and Manitoba Drive.

In some areas, the 100-year flood zone will be reduced in size and parcels will be removed.