Talk to CJ

The most common question I receive is, “Do you think the housing market has hit bottom yet?”. While I am pausing to pull together my answer the person will normally add, “I am thinking about buying a house but if it is going to come down more I want to wait.”

Historically, the recognition of a peak or bottom happens about 9 months after the fact. So the first and immediate challenge will be to define the moment the bottom of the market will occur. The next challenge is much like turning the roulette wheel. While the wheel is spinning and the buyer is waiting for the deal, Mr. Bernanke and team are hard at work adjusting interest rates in order to contain inflation while gas prices are climbing and jobs are being lost. Remember, for every 1/2 point increase in mortgage interest rate the buyer can reduce their purchasing power by $25,000 by changing debt-to-income ratios or simply the difference in interest over a 30-year mortgage.

I understand why buyers are hesitant to buy a home just in time to see the value drop before the boxes are unpacked. With the average home buyer staying in the home an average of 7 years before moving again, the real bet is whether or not the next cycle of appreciation will happen while the buyer occupies the home. When I am working with a buyer, I show them the historical trends for the neighborhood they are interested in. For example, looking at Mountain View and comparing average sales price from June 2005 to June 2008 there has actually been about a 3% appreciation in average sales price. This is not the market you can come in with a 10% below market offer and expect to get the home. Mountain View did not have a high percentage of sub prime loans made in the area and therefore has not seen the slide down on prices. Mountain View also has good schools and a good commute to the tech world.

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I bought a home several years back and called the locksmith to change all the locks. The neighbor seeing the locksmith’s van parked in front of my home comes over, introduces himself and then extends a hand with a couple of keys. “I guess, these won’t be any good now. Joe (the previous owner) had given us a copy one weekend he went out of town and wanted the cats fed.” I had not even met this neighbor until this moment. [Read more →]

San Jose itself is the 10th largest city in the United States. San Jose is also surrounded by over 10 other cities. Each neighborhood is fairly unique and it can be quite overwhelming for those who have been raised in the area, much less for those of us who have relocated. Unless you recently lived in Manhatten, the first shock to overcome is the cost of buying a home. Once you make it over that hurdle, how do you decide what is the best neighborhood for you?

First, check out local maps to simply identify different neighborhoods. Use a simple map like Yahoo Maps or Google Maps that label the areas. While you are looking at this map pay attention to where the highways are, where the parks are, and where the train tracks are located. This will be important information when you start looking at zip codes and listings. It will help you identify the pockets that will most likely fit your basic lifestyle. [Read more →]

As you probably have already heard, the government is helping out the housing industry by raising the jumbo loan limit here in Santa Clara County from the previous $417,000 to $729,750. Woohoo! But as my friend Gabe Bodner at Lawson Associates points out on his blog, this may not be as helpful as we think.

According to Gabe, “…interest rates on conforming loans (and Jumbo loans) have risen anywhere from 0.5-1.0% in the last week (depending on the loan program). Therefore, conforming interest rates are close to what Jumbo rates were about 2 weeks ago which has negated much of the value in this whole loan limit increase package anyway.”

So, how will it help? The idea was that having Freddie Mac and Fannie Mae in the picture to secure bigger loans would give the lenders the confidence to lend more money. That is, assuming the loans would be bought by the government agencies. Not having these loan options in the past is what many believe created the exotic loan products that led to the sub prime fall out. In my opinion, the jumbo loan increase was long over due for California.

There are some restrictions related to these new loan options and we probably won’t see them in action until late summer. You can read more at Fannie Mae’s site. Like most, I will jump on this good news and hope that it allows more buyers to enter the market. With over 11 months of inventory in the Greater San Jose area, I will take a “maybe” over a “forget-about-it” any day.

Not every market in the U.S. is heading down. Interesting that in spite of sub-prime woes and lenders tightening their grip on monies there are still markets that will appreciate during this crazy real estate market. A great web site, Housing Predictor released their Top 25 Market Predictions for 2008. Hawaii ranked up there with 3 islands on the Top 25. It is my opinion that this is a result of the 1031 exchange process. Those folks who had rental properties in the continental U.S. trade them up for second homes on the islands. Not a bad plan. Rent them out for most of the year and save a bit of time for you and your family.

When you look over the list, Housing Predictor states the trend is to move out to smaller, more rural areas. I believe these small town appreciations like Kellogg, Idaho are the result of investors getting ready for the next boom. Also, take note that during the time of major military job growth, many of these cities are near military bases. Who knows what will happen after the election. You could see continued appreciation in these areas or major depreciation. But politics are even more difficult to predict than the real estate market so I will stick to keeping my ear to the locks on the doors and finding great deals for my clients.

Coming from an analytical background, I find myself digging through the local real estate statistics for San Jose and Santa Clara County into the wee hours of the morning more times than I should admit. I am always in search of a trend whether it is about one of the neighborhoods I work for or for an entire city like San Jose. Lately I have been digging through the short sale numbers in order to get a better handle on how these homes are affecting the average sales price, closed contracts, and days on market (DOM).

Now as most of us know, these short sale homes are not the easiest to close. I pulled one zip that I know is heavy with short sales and the average days in escrow was about 52 days. For the 4 troubled zip codes I researched, there was an average of 14% of the listings with the term short sale attached to the agent remarks.

The more interesting statistic I found was regarding the average price per square foot. I looked at sold and active listings over the last 6 months and I found that if there was a deal on a short sale it was only about $25/square foot compared to similar homes in the neighborhood that were not in a short sale situation. Of course, in California that $25/square foot is the difference between a $600,000 home and a $637,000 home. But what I was surprised to find was that in most cases the short sale homes were actually selling at a higher price per square foot then the non-short sale homes in the same neighborhood with comparable bedrooms and total square feet. I found on average the difference was anywhere from $10 more per square foot to $35 more per square foot. [Read more →]

There are a lot of reasons why I enjoy working with Karen Negrete at Transform Your Home. She is an amazing talent, an efficient professional, and most importantly she keeps me laughing while working in this sometimes challenging world called real estate. This week Karen has allowed me to post a recent article she wrote on how to, well, how to let go and get on with the selling of your home. Enjoy.

“I think I can stage.”

by Karen Negrete at Transform Your Home

Q: I watch a lot of HGTV and I think I can stage my own home. Do you have any tips?

A: HGTV is the best! I wish I owned stock in HGTV. But HGTV is, well…a TV show. The hosts get to have their hair and make-up done plus their clothes get picked out for them which is pretty cool if you ask me but most importantly (besides the hair and make-up and clothes ), they’re allowed “do-overs” in case if they make a mistake. As in “Oopies, I picked out a wall color that resembles clown barf now that it’s on the wall”. They make it look easy which isn’t to say staging is brain surgery but unless you’ve got a good eye for balance, visual weight, color palettes, etc. along with ice in your veins, you might want to leave it to someone else.

Why? Simply put, it’s difficult to be objective about one’s own house. Just because you love “it” doesn’t mean a potential buyer is also going to love “it”. Plus you’re going to have to get tough with yourself. Are you really going to be able to take down your children’s “artwork” that they did when they were in kindergarten……when Kennedy was in office? [Read more →]

I have now come across several articles and blog posts on the idea of declining markets and their impact on a buyer’s ability to follow through on a contract they have signed for purchasing a home or their simple ability to even shop for a home.

The same lenders that were willing to write loans at 125% to value are now deciding that certain areas are over-valued and will be losing money in the next time period. Therefore, to make sure they get their money and do not submit any more risk into the lending equation, they have labeled certain areas across the country as “declining markets”.

This is a map that shows the declining market areas.

Jim Duncan wrote an article about the declining markets and received this map from Countrywide as their list of counties indicated as declining markets. Jim goes into further detail then I will here about how this whole process borders on “red-lining”. It is worth reading.

What is most important to buyers to know is that this is a dynamic map and Countrywide (and other lenders) will be using it to ask you the buyer for more money down, or charge you a higher interest in order to mitigate the lender’s risk in these “declining markets”. I have already become acutely aware how days before close of escrow, the underwriter comes back and changes the loan requirements on the buyer. I have seen examples where lenders have asked for 5% more down before underwriting the loan because the property is located in a “declining market”.

If you are in the middle of the obtaining a loan or pre-approval, ask your lender about declining markets and find out if your potential purchase has been identified as an address within declining lines. It will help to save headaches and heartaches further down the road.

I always like passing on great web sites that provide real time help. Gary Dullect at The Home Inspectors is a local home inspector in San Jose and offers some great online help for home owners. With quick, get-it-done videos Gary goes through a variety of topics like fixing a faucet where the cold and hot water is reversed, to how to fix a door that is opening or closing by itself, and; What is a GFI anyway? Gary is a general contractor with over 15 years of experience. Check out his web site frequently as he is always adding videos on some type of repair.

The Neighborhood Housing Services of Silicon Valley is offering a series of classes for both first time buyers and home owners who are having trouble with their mortgage and want to avoid foreclosure.  This week they have a class on Tuesday, February 6th, 2008 on foreclosure prevention.  You can call to register at 408-279-2600 ext. 221.  The class will be at the Williams Community Center from 6:30Pm-8:00p.  If you can’t attend this class, go to their web site to see the schedule of classes between now and June of this year.  The NHSSV is a HUD approved mortgage counseling agency.