Palo Alto Real Estate

Dowtown Development plan: Transparency and mystery: resistances to change

noreply@blogger.com (Todd Beardsley) — Thu, 15 Oct 2009 06:57:00 +0000

Following the third phase of the presentation of the development for El Camino Real, the Menlo Park’s city council has approved an office development plan to be situated in an area formerly housing the Cadillac dealership. It is a “110,000-square-foot, 40-foot-high retail and office development on 3.5 acres” at El Camino, according to Almanac news.

The catch is, the council did not approve the inclusion of housing units. However, they “left the door open” for the eventual inclusion of housing units in the revised plan for which is expected to be released soon.

Apparently, reactions have been building up since the downtown planning process commenced. This was recently expressed through websites and during the workshops, but now we have an intriguing challenge at hand – a letter from a group called “Concerned Citizens of Menlo Park” which found its way to the City Hall, as if on cue, before the council meeting started.

The letter detailed concerns such as “ozone damage, greenhouse emissions, traffic concerns, and land use issues,” according to reports. The good thing is that citizens are continuously expressing their take on the matter, but the way this particular attempt at expression was done poses questions and creates an awkward situation. While the community workshops are ongoing, one may ask why a group of people would opt to send an essentially anonymous letter (hundreds of pages long) to air their concerns. This casts a shadow on the workshops which rely on open communication. If face to face communication cannot be successfully carried out through such venues, we could only wonder what this group’s next attempt at communication might be, and through what medium might it be delivered.

The city council is now facing pressure both from the citizens and the developer, who some think will not modify the plan to include housing. An area which could have been dedicated for multi-family housing is now going to be utilized for commercial purposes. Perhaps the council envisions a more vigorous economy pad where the housing project would be launched, but as of now, City Manager Glen Rojas has stated there are no current requirements for housing included in the project.

With any process of change, especially in cases such as these which involves massive transformations, there will always be resistance. The challenge now is maintaining transparency and fostering trust among the participants of change so that all parties may move in one direction. Through transparency, good communication is facilitated which tends to prevent the most recent attempt by a group to communicate via mystery or sensationalism.

The focus now should be only El Camino Real and the development plan being proposed, not special interest groups claiming issues with ozone depletion and greenhouse gasses. We can’t let groups like this steal the spotlight from the project and cloud the issues. Community-based workshops should continue maintaining a healthy exchange of opinion and insights and continue to serve their roll as data gathering venues. There may be lots of doubts and accusations right now about the recent developments, but the benefits of having a good housing project plan underway should be not be forgotten or compromised.

Downtown Menlo vs. Big City

noreply@blogger.com (Todd Beardsley) — Thu, 15 Oct 2009 06:56:00 +0000

The recent meetings involving stakeholders of the El Camino Real/Downtown Specific Plan drew mixed reactions and many challenges from residents. In this planning and consultation stage both sides are struggling for balance and credibility. It’s a good thing these intensive consultative meetings are community-based – it serves as a rich source of inputs and factors to consider. These results can help build the foundation of a flourishing plan for the downtown Menlo area. If done correctly, no one will complain of being left out since everyone was involved from the very beginning.

However, we cannot expect universal acceptance of the plan. Take for example the doubts and fears of residents expressed in preserveMPdowntown.org. They are looking at the consequences of high-density development, zeroing in on factors such as the loss of open space parking by the installation of multi-storied parking garages, congestion, and “over-development.” These factors, they say, will replace the “character of the downtown” with a big city feel, not to mention potentially slow down local businesses.

Perhaps this is an assumption, as development does not necessarily mean dampening the ambience or economy of a town. Enhancing the town’s potentials and highlighting its best features may be the best way to preserve its atmosphere while upgrading its facilities. Having community workshops at the heart of planning helps in shaping a customized plan which can accommodate various concerns of those involved. Instead of a careless, profit-centered development plan, El Camino Real and Menlo Park will enjoy a kind of development that would invite profit for the town and ultimately benefit its residents.

The emerging plan also stands up to the community’s worries. Congestion woes may be answered by the expanded public spaces and even wider sidewalks envisioned for the area. The loss of open space may not necessarily be a result of elevated parking lots; this may even facilitate the preservation of open spaces which may now be utilized for other functions instead of mere parking. The concept of “over-development” is hardest to qualify. In a span of 30 years, a town will surely move towards development. Planning for the town’s future development right now actually prevents unwanted or unexpected changes which the community may someday resent.

While fears of aggressive big businesses defeating small town enterprises have surfaced, we should also consider the fact that more business attracts investments, which would in turn stir the economy. This would create a draft carrying small and medium businesses into a more visible arena. If anything, this may result in a complementary boosting of small and large, local and non-local, and old and new enterprises.

Now that the third community workshop is finished, we must wait for the refining of the plan. It is an exciting thing to wait for its unfolding, and along with it, the future of Menlo Park and El Camino Real. Development goes hand in hand with envisioning the future, and at this stage there is certainly no need for worries as the workshops continue to accept comments and seek alternatives. After all, the challenge is creating a point of agreement between the community and the stakeholders.

noreply@blogger.com (Todd Beardsley) — Thu, 27 Aug 2009 09:56:00 +0000

Menlo-Atherton’s new theater opens in October

Mark your calendars! Menlo-Atherton High School’s performing arts center is making its debut this October.

Performing arts enthusiasts and residents of Menlo-Atherton community now have something new to be proud of and look forward to as Menlo-Atherton High School’s performing arts center is a few short months away from its debut.

Standing proudly at the corner of Ravenswood Avenue & Middlefield Road, the 490-seater theater is slated for opening in the second week of October. Landscaping has begun and furniture will be fitted inside soon after. The Center already has three events lined up to celebrate the theater’s debut, including a public concert by the local chamber music ensemble Music@Menlo on October 11.

Not only is the school excited for the opening of the $32 million-theater. The Menlo-Atherton community is enthusiastic it as well! Finally, local artists and performers will have a home to turn to. With the opening of the new arts center, we are expecting an outpour of artistic outputs that will hopefully place Menlo-Atherton in the art map.

What makes the unveiling even more exciting is the theater’s top-of-the-line acoustics, whose mastermind is the top acoustical design professional Paul Scarbrough, head designer of Cleveland Orchestra’s Severance Hall, Kennedy Center’s Concert Hall and Broadway’s New Amsterdam and New Victory theatres among many others.

Aside from 490-seater space, the new performing arts center has a multi-purpose hall that can sit up to 250 persons, rehearsal rooms and storage area for musical instruments.

Experts say that cultural development serves as a catalyst in community development, and Menlo-Atherton is no exception. Equipped with advanced lighting and audio equipment, the new performing arts center can now host the community’s and possibly the state’s biggest events — may it be drama, music and dance performances, meetings, conventions or social affairs — which will later help boost economy in Menlo-Atherton. It won’t be far until Menlo-Atherton experiences a surge in the arts and business as more people pour in to participate in conventions and attend performance, thus making Menlo-Atherton an even more ideal community to live in.

So mark your calendars, because this October, Menlo-Atherton High School’s new performing arts center will open and don’t you miss it.

Here are some pre-construction renderings as well as an up to date photo of the actually construction status.

noreply@blogger.com (Todd Beardsley) — Thu, 27 Aug 2009 09:55:00 +0000

Councilman Cohen solo on no vote for Menlo Park’s new gym
While the rest of the city council is eager to see Menlo Park’s new gymnasium erected, Councilman Andy Cohen stands firm that the council’s decision overlooked key concerns and chose the gym over library users.

In Menlo Park, the only person that stands between the new Burgess Park Gymnasium and the residents’ better well-being is Councilman Andy Cohen.

During a July 21 meeting, Mr. Cohen abstained to vote for the construction of the 50-foot-tall, 25,700-square-foot new gym. But instead of explaining his stand, he chose to give a closing statement, turned off his microphone and kept mum during the rest of the meeting.

The $18-million new gym will have two basketball and volleyball courts, five office areas, a meeting room, lockers and a storage area. Planning and approval of the project alone has taken two years, beginning in March 2007, based on a council report. In April 2009, billionaire John Arrillaga volunteered to shoulder the rest of the gym’s construction costs beyond the city’s $6 million contribution .And recently, the city council has voted for the project’s approval amidst concerns about the resulting traffic and congestion problems. The gym is proposed to stand on the library’s parking area along Alma Street.

Critics also question the gym’s two basketball court-design, when the extra space can be used for parking by library users. Based on the plan six parking lots will be available for gym and library users once the gym opens. The city reports exploring the use of SRI International Inc.’s parking lot to accommodate parking overflow during nights and weekends.

Beyond the use of space debate, the new gym must push through because the community has been waiting for years for a decent and well-equipped facility, and there shouldn’t be another reason to make us wait any longer. To see a councilman who cannot overlook traffic problems for the various benefits a new gym offers is disappointing. More so is his lack of ability to rationalize his position.

Mr. Cohen’s courage to stand by his belief despite an overwhelming opposition deserves to be applauded, but choosing to keep silent takes away what leaves to be admired in his action. Wouldn’t those whom he represents opted to let their reasons be heard rather than sulk during the meeting? He wasted the opportunity to enlighten the council of his position.

But he did try to make up for the lost opportunity by explaining to the media in an interview that though he was grateful for Arrillaga’s donation, he felt the council overlooked the people’s welfare after being “blinded” by the million-dollar donation, thereby ignoring the project’s resulting problems. Mr. Cohen also believed that the council’s stand on the proposed gym chooses athletes over library users, a view that echoes the outcry of library patrons.

However, Mr. Cohen also fails to see the multitude of benefits that comes with a new and topnotch gym. Residents will have better facilities and better options to stay fit and healthy. More kids can engage in sports. Overall, a new gym gives Menlo Park residents a chance to improve their wellbeing, while an open parking space gives us just that — open space for vehicles — when there are other nearby available parking space.

Despite Mr. Cohen’s hyped solo opposition, at the end of the day the council approved the proposal to build the new gym. What a relief this is because Menlo Park residents deserve a well-equipped gymnasium and no one man should stand in the way destiny.

Menlo-Atherton’s new theater opens in October

noreply@blogger.com (Todd Beardsley) — Mon, 24 Aug 2009 12:44:00 +0000

Teaser: Mark your calendars! Menlo-Atherton High School’s performing arts center is making its debut this October.

Performing arts enthusiasts and residents of Menlo-Atherton community now have something new to be proud of and look forward to as Menlo-Atherton High School’s performing arts center is a few short months away from its debut.

Standing proudly at the corner of Ravenswood Avenue & Middlefield Road, the 490-seater theater is slated for opening in the second week of October. Landscaping has begun and furniture will be fitted inside soon after. The Center already has three events lined up to celebrate the theater’s debut, including a public concert by the local chamber music ensemble Music@Menlo on October 11.

Not only is the school excited for the opening of the $32 million-theater. The Menlo-Atherton community is enthusiastic it as well! Finally, local artists and performers will have a home to turn to. With the opening of the new arts center, we are expecting an outpour of artistic outputs that will hopefully place Menlo-Atherton in the art map.

What makes the unveiling even more exciting is the theater’s top-of-the-line acoustics, whose mastermind is the top acoustical design professional Paul Scarbrough, head designer of Cleveland Orchestra’s Severance Hall, Kennedy Center’s Concert Hall and Broadway’s New Amsterdam and New Victory theatres among many others.

Aside from 490-seater space, the new performing arts center has a multi-purpose hall that can sit up to 250 persons, rehearsal rooms and storage area for musical instruments.

Experts say that cultural development serves as a catalyst in community development, and Menlo-Atherton is no exception. Equipped with advanced lighting and audio equipment, the new performing arts center can now host the community’s and possibly the state’s biggest events — may it be drama, music and dance performances, meetings, conventions or social affairs — which will later help boost economy in Menlo-Atherton. It won’t be far until Menlo-Atherton experiences a surge in the arts and business as more people pour in to participate in conventions and attend performance, thus making Menlo-Atherton an even more ideal community to live in.

So mark your calendars, because this October, Menlo-Atherton High School’s new performing arts center will open and don’t you miss it.

Here are some pre-construction renderings as well as an up to date photo of the actually construction status.

Palo Altans? Sanitation Woes

noreply@blogger.com (Todd Beardsley) — Tue, 28 Jul 2009 02:48:00 +0000

The Palo Alto Sanitation Company has issued a notice that: “Beginning July 1, 2009, standard garbage collection service will be curbside. Back/side yard garbage collection service will be available for an additional monthly subscription fee.”

Many Palo Altans are irked about the situation, since it would mean either additional expenses for what used to be a complimentary service or curbsides strewn with garbage every morning.

On top of the garbage collection service, Palo Altans have one more thing to worry about. The Palo Alto City government has come up with a proposal to turn over the ownership of some of the city’s sewer pipes to its residents.

The main objective of handing over the responsibility to residents is so the city can save up on claims and lawsuits that are related to sewer spills and backups. According to the Palo Alto Daily News, the city has spent a total of $11,688 in 2008 to settle 7 out of 21 sewage-related lawsuits. Passing the buck to its residents seems to be the most sensible option for this city with a $10M deficit.

So aside from paying extra for garbage collection, residents would possibly also need to worry about settling sewage-related lawsuits. Indeed, Palo Altans are starting to feel the nasty effects of the economic crisis not just in the real estate market, but in sanitation as well.

Coming Soon in Menlo Park: A Supermarket or a County Jail?

noreply@blogger.com (Todd Beardsley) — Tue, 28 Jul 2009 02:47:00 +0000

Sticking out like a sore thumb in the posh residential area, the long stretch of vacant lot in El Camino, Menlo Park has been a problem for nearby residents ever since it had been abandoned by a Cadillac dealer.

Recently, there have been a few proposals for the vacant commercial space that the residents, and even the Menlo Park Planning Commission, may not be too happy to know about.

One developer had submitted four proposals -- none of them including residential projects. Sand Hill Property is considering either a supermarket, office space, or a commercial complex with a mix of restaurants, retail establishments, and a fitness center.

If given an option, the Menlo Park planning department would prefer housing projects on the vacant lot, which is a perfect spot for residents due to its proximity to the downtown area and CalTrain station.

The other proposal for the vacant El Camino lot is a rather more unusual and controversial one – a county jail.

San Mateo County has laid out plans for building a new county jail by 2011 and Menlo Park is one of the cities being considered to house this new project. Other sites under consideration are East Palo Alto, San Carlos, Burlingame, and Redwood City. These cities have been shortlisted out of 24 initial sites.

Menlo Park residents will most definitely not be happy about a county jail sitting smack in the middle of their executive neighborhoods since it would affect not just their image, but also the values and selling prices of their homes.

Menlo Park Purchase Assistance Loan Program

noreply@blogger.com (Todd Beardsley) — Wed, 22 Jul 2009 19:33:00 +0000

First-Time homebuyers in Menlo Park can avail of an affordable subordinate loan program that helps middle- income families purchase their own home in Menlo Park through the Purchase Assistance Loan Program (PAL).
To qualify, the homebuyer should have lived or worked in Menlo Park for at least one year. The benefits of PAL include:

1. Loans of up to 20% of a home’s selling price or $75,000, whichever amount is lower.

2. No maximum restriction on the selling price.

3. Maximum loan term of 35 years with 0% loan interest and no payments for the first 5 years and a fixed rate 5% annual interest after the first 5 years.

4. Loans are applicable for purchasing single-family homes, attached or detached units, condos, and town homes in Menlo Park.

5. PAL loans may be used in tandem with other loans from the FHA, CalHFA, and the County of San Mateo’s Mortgage Credit Certificate (MCC) Program.

The PAL is funded by the Menlo Park City government and is available to first-time homebuyers only.

THE SELL AND RENT BACK SCHEME

noreply@blogger.com (Todd Beardsley) — Fri, 10 Jul 2009 17:24:00 +0000

Most homeowners are not yet aware of the sell and rent back scheme where the homeowner sells the house and then becomes a tenant of the seller by paying a monthly rental fee. It works much like a pawnshop wherein you sell your property due to an immediate financial need, but you still have a chance to repossess it in the future.
Many homeowners choose to sell and rent back for a number of reasons. First is the convenience of not having to worry about where to stay after selling the home, which is the main problem of most home sellers.
Second, you could sell your home faster the sell and rent back scheme as opposed to selling your home through a real estate agent, which could take months or even a couple of years. And since you sell your home at least 25% lower than the market value, you can expect a quick turnaround time. In this time of recession, it is very difficult to sell a home and the lower value of the home makes it easier and faster to sell.
Third, if you already have a cash buyer interested in your home, then you save on real estate agent fees and legal fees.
Fourth, it is a good way to avoid repossession of your home. If you find yourself short on cash and could not afford the monthly mortgage, then you could sell your home and then rent it back for a lower rental fee than your monthly mortgage. This option is way better than having the home foreclosed and repossessed by the bank
Lastly, the sell and rent back scheme is perfect for the homeowners who are victims of the recession. For those who suddenly lost their jobs and find that they could not afford the monthly mortgage anymore, or those who simply need immediate cash, or for some it may be needed for a child going off to college, or to pay off a huge debt, whatever the reason, the sell and rent back scheme gives them the money they need right away without totally losing their home.
Homeowners could have peace of mind knowing they could still stay in the same place, their children don’t need to move to new schools, and they didn’t entirely lose their home. There is also an assurance that they could repossess the home after a minimum lease period of ten years or even longer if needed.

REO FACTS

noreply@blogger.com (Todd Beardsley) — Fri, 10 Jul 2009 17:23:00 +0000

REOs, or Real Estate Owned by banks, are either seen as a wise investment for most real estate investors or a risky investment for some. These buyers are aware that REOs are good investments since they are getting the lowest deals on foreclosed homes but they are too cautious to get involved with all the legal and financial aspects of these properties owned by banks.
Then there is the misconception that foreclosed properties end up to be more costly even if they have a lower selling price than other homes out in the market since they would have to be repaired, refurnished, repainted, etc. Just because it is an REO, it doesn’t necessarily follow that it is a neglected or badly damaged one. Most foreclosed properties are with the banks because the previous homeowner could not afford the mortgage anymore.
One good thing about REOs is they are sold at 20-30% below the average market value. This is because the aim of banks is to at least recover their money by disposing of these assets as quickly as they can, much like a department store clearance sale.
Just as you would in a typical Real Estate market, an investor should shop around and compare REO values of different banks prior to making a purchase. Include the cost of repairs in your comparisons to see if the property is indeed a bargain or more of an expense.
REOs can be good investments if one knows how to shop around and compare prices of either similar foreclosed homes or similar homes in the market. It is a good way to earn more profits as a real estate investor and many have become rich just selling REOs.

JUMBO LOAN RATES FALL

noreply@blogger.com (Todd Beardsley) — Fri, 10 Jul 2009 17:20:00 +0000

The government’s new tax credit program allows Fannie Mae and Freddie Mac to purchase jumbo loans mostly in high end markets such as Florida, California, and the Northeast. The provision states that both companies could start buying “super conforming” loans with a maximum limit of $729,750. The real estate market could already feel Freddie Mac and Fannie Mae’s entry into the high end housing markets, as Jumbo rates drop to approximately half of a percentage point. That means more borrowers can now obtain loans more easily and at lower, more affordable costs.

Palo Alto Real Estate

noreply@blogger.com (Todd Beardsley) — Sat, 13 Jun 2009 20:01:00 +0000

Voltaire said, “Madness is to think of too many things in succession too fast, or of one thing too exclusively.” Many people are focusing exclusively on one thing these days – mortgage rates. That doesn't mean these people are going mad, but more than a few are pushing themselves to distraction.
It's understandable, given the recent surge in mortgage rates, which in some ways feels like sand passing through the fingers. The national average on the benchmark 30-year fixed-rate mortgage was 5.95% last week, according to Bankrate's survey of large lenders, while the benchmark 15-year fixed-rate mortgage averaged 5.37%. Both rates are up 30 basis points in the past week alone.
As it now stands, the 30-year fixed-rate loan is at its highest rate since Thanksgiving 2008, when it averaged 5.97%, but it's worth noting that this same loan was averaging 6.52% this time last year. It's also worth noting – and we've noted this many times over the past month – rates still remain low from a historical perspective.
Admittedly, the higher rates have slowed down activity. Application activity fell 7.2% for the week ending June 5, according to the Mortgage Bankers Association. It was the third straight week that mortgage activity declined. Refinancing activity, in particular, has been hard hit, plunging 11.8%. But the good news is that applications for purchases actually moved up 1.1%, supporting our contention that housing remains in a recovery mode.
More good news could be taken from foreclosure filings. RealtyTrac counted 321,480 filings nationally last month, a 6% drop from April. Lenders have resumed cracking down on delinquent borrowers after foreclosures were temporarily halted earlier this year. Renewed interest in proceeding with foreclosures will help clear the market of inventory. What's more, the problem is relativity concentrated. Ten states, led by California, accounted for 77% of the foreclosures reported in May.
The Whole Picture
Yes, mortgages rates have risen substantially over the past three weeks, and we can't be sure when, or even if, they will come down. Mortgage rates are important, to be sure, but they are only part of the equation. Income and relative home prices matter too. On that front, average hourly wages continue to show incremental increases, while home prices continue to stabilize, and even rise, in many parts of the country.
Distinctions matter as well. Much has been made of the fact that lower interest rates mean more money in the pockets of borrowers. More money in the pockets of borrowers, in turn, means more money to spend to stimulate the economy. But let's not forget that it's a two-way street: The lender on the other end receives less income; thus, he has less income to spend. In other words, refinances with no equity extraction are really a wash in terms of aggregate demand for goods and services.
Mortgages used for purchases are another matter. If the house purchased already exists and the seller pays off a mortgage of the same or greater amount of the mortgage taken out by the purchaser, there is an increase in aggregate demand of brokerage and other fees collected in relation to the sale. If the house being purchased is a new one, then there is a net extension of credit and the value-added in the construction of the home is an addition to aggregate demand. In short, purchase mortgages have the greater ability to stimulate the economy, and the good news is that we continue to see an increase in purchase mortgages.

Palo Alto Real Estate

noreply@blogger.com (Todd Beardsley) — Sat, 06 Jun 2009 23:38:00 +0000

After the previous week's spike in mortgage rates, we thought we'd see a pullback last week. Unfortunately, that wasn't the case; rates continued to push higher. Bankrate's national survey had the 30-year fixed-rate mortgage averaging 5.65%, while the 15-year fixed-rate mortgage averaged 5.06%. Basically, Bankrate was telling us what we already knew: These two benchmark rates are 50 basis points higher than they were two weeks ago.
So has the mortgage boat sailed too far from shore for those still wanting to jump aboard? Absolutely not. Let's keep in mind that a year ago Bankrate's national survey was showing the 30-year fixed-rate loan at 6.26%. The concern, though, is that potential borrowers are fixated on what they could have had a few weeks ago, so they've thrown in the towel in disgust. It's irrational to think that way, because there is nothing that can be done to change the situation. The logical way to approach it is to ask, where do I go from here?
Unfortunately, most people don't think that way, which could slow down the recovery in the housing market, as people delay buying or refinancing a home to wait for sub-five percent mortgage rates again, which we think is unlikely. There is no doubt that the housing market has been making progress. Indeed, the National Association of Realtors reported pending sales of existing homes rose 6.7% in April, posting the biggest monthly jump in eight years. The latest data are part of a flurry of other reports that suggest the housing market and the broader economy are stabilizing.
Factory orders are included in the data sets showing a stabilizing economy. Orders rebounded in April, rising 0.7% after declining 0.9% in March. It was only the second rise in factory orders in the past 10 months; however, the economic bulls will point to the fact that factory orders have risen in two of the past three months.

The employment situation could also be interpreted bullishly. The United States lost fewer jobs than forecast in May – 345,000, the least in the past eight months – reinforcing signs that the deepest recession in half a century is abating. Yes, the jobless rate increased to 9.4%, the highest since 1983, but it was due, in part, to more people joining the labor force to seek work.

The Power of Marginal Thinking
Here's a dilemma posed by economics professors: You bought two tickets to the NBA finals, which cost $300 a piece. You approach the arena entrance only to discover you've lost both tickets. Replacement tickets from the box office will cost you $400 a piece. What do you do?
Once the cursing has subsided, you have to consider what the game is worth. When considering the situation, most people mistakenly include the lost tickets in the equation, wondering if the game is worth more or less than $1,400. The correct way to approach the dilemma is to ignore the lost $600 – a sunk cost – and to only consider the $800. If the game is worth $800 or more, you buy the tickets. If not, you go home or to a local bar.
The point we are trying to make is that better decisions are made when people think on the margin, which means basing decisions on the reality of the situation from the current point forward. There is nothing we can do about last week's or the previous week's mortgage rates. We can only consider the rates from this point forward, which are still good, by the way. The same decision-making approach applies to home prices. Many people who want to sell are anchored to the price at which they bought, even if it has no basis in economic reality. And the reality is that home prices are darn low, which is why we think potential buyers shouldn't wait too long to pull the trigger, lest they suffer the same anguish that many procrastinating borrowers are.

Palo Alto Real Estate

noreply@blogger.com (Todd Beardsley) — Sat, 23 May 2009 18:17:00 +0000

As the economy sputters and putts along, many economists continue to look for signs the housing market is climbing out of the chasm dug by the subprime mortgage meltdown. Given the sentiment from homebuilders, some may say the housing market is finally making progress on scaling the chasm's often-slippery walls.
On that front, the National Association of Home Builders/Wells Fargo Housing Market Index rose by two points (to 16) in May, reflecting greater confidence in the newly built residential housing market. The fact that the May index continued to tick up from April’s five-point increase provides confirming evidence that the improved confidence level was no fluke.
Despite growing optimism in the new-home market, many economists remain less sanguine on the prospect of an overall housing-market recovery, given that the number of new housing starts declined 12.8% last month to a seasonally adjusted annual rate of 458,000 units, the lowest pace on records dating back 50 years. But it is worth noting that much of the decline was concentrated in apartment construction, which tumbled 46.1%. On a brighter note, single-family home construction actually climbed 2.8%.
Mortgage-market trends, on the other hand, offer a promising, tangible sign that a sustained recovery is possible. The Mortgage Bankers Association’s index of purchase applications, though falling slightly last week, continues along a higher long-term trend, thanks to investors and home buyers taking advantage of lower home prices and stable, historically low mortgage rates. On the latter, the 30-year fixed-rate mortgage remains near record lows reached at the end of March.
Not to repeat ourselves on one theme too often, but mortgage rates are unlikely to go significantly lower. Many of the government's recent economic stimulus initiatives have increased the odds of more inflation down the road. And that's not just us talking: Federal Reserve Bank of Philadelphia President Charles Plosser said prices may rise 2.5% in 2011, a rate well above central bankers’ preferred range, and cautioned against complacency on inflation – another reason we remain convinced that there is no time better than the present for getting a mortgage or for buying a home.

Bad News as Good News
There has been no shortage of media coverage on the foreclosure market over the past six months. In fact, the foreclosure market seems to be the only growth market left in the country, if you listen to some accounts. The bad news is that foreclosure activity is up 32% from last year, with one in every 374 US housing units receiving a foreclosure filing in April, the highest rate yet seen by RealtyTrac, which has tracked activity since January 2005.
The good news is that demand for these homes is growing. Indeed, Housingwire.com ran an article that basically stated foreclosed homes are becoming the “hot-ticket” item in real estate. In a survey by Trulia.com and RealtyTrac, 55% of survey participants indicate they are at least somewhat likely to consider purchasing a foreclosed home in the near future, compared to the 47% who said the same in November 2008.

Palo Alto Real Estate

noreply@blogger.com (Todd Beardsley) — Sun, 17 May 2009 20:17:00 +0000

There was a lot of teeth-gnashing in the media last week when news hit that April foreclosures broached a new record, with 342,000 homes receiving notices of default, auction notices or bank repossessions. RealtyTrac, an online marketer of foreclosed properties, exacerbated matters by reporting that one in every 274 homes received a foreclosure filing during the month, the highest in the company's rather scant four-years of record keeping.
The media also pounced hard on the news that the national median home price fell to $169,000 in the first quarter of 2009, due to a market flooded with lower-priced foreclosures and short sales. The punditry then began to lament that the loss of home values puts more mortgage borrowers underwater, which, in turn, could increase foreclosure rates in two ways: Underwater borrowers have no home equity to draw on should they need to pay for unexpected expenses, which makes them more likely to miss mortgage payments; and when home values fall far below mortgage balances, homeowners sometimes walk away from their loans.
We feel it's our duty to provide a little perspective. Yes, a large unexpected bill can strain family finances and the ability to service mortgage debt. But the question that needs to be asked is, how large is the expense and how often do these large expenses occur? The answer is not as often as we are lead to believe. We also feel obligated to challenge the notion that underwater borrowers walk away from their loans. Some do, but most don't. If people are working and the monthly payment is manageable, they will keep paying, even if they are underwater. Walking away has its consequences, not the least of which is making it highly unlikely the defaulted borrower can get a refinance or purchase mortgage when the economy recovers. People realize that, so they are less cavalier about throwing away their future than we are lead to believe by the media.
It's also worth noting how concentrated the foreclosure “problem” is: Ten states accounted for 75% of all foreclosure activity, and they fell generally into two categories: one-time bubble markets and the rust belt. California , not surprisingly, outpaced the competition, but even California 's foreclosure boom was confined mostly to its northern regions. Other hard-hit former boom states included Florida , Nevada , and Arizona . The rust belts states with the most filings included Illinois , Ohio and Michigan . Georgia , Texas and Virginia rounded out the top 10. And let's remember, the pick-up in foreclosures is also due to more banks accelerating the process to clear the dead wood, and that's a good thing.
Another good thing is buyers will be allowed to use their first-time homeowner tax credits as down payments when they get FHA-insured loans. Depending on the buyer's tax-filing status and the price of the home, the tax credit can be as much as $8,000.

It's Getting Better All the Time
Federal Reserve Chairman Ben Bernanke has forecast an end to the US recession, which he believes will be kaput before 2010. Bernanke also told the Congressional Joint Economic Committee that the collapse in the housing market, which began three years ago, may have bottomed out, something we've been saying for the past month.
Forecasts, especially about the future, can easily go astray, so we don't want to put too much faith in the Fed chairman's prognostication. But many signs are appearing to suggest the recession won't go much deeper. The latest comes from Mr. Bernanke himself, who said last week that “early indications” show that investor demand for the central bank’s loans to buy asset-backed securities, including mortgage-backed securities, will rise next month from May’s total, suggesting confidence in so-called toxic mortgage securities is growing.
The banks are another sign all might be well. They have been loosening their purse strings of late. Mortgages are more readily available, and so is consumer credit. This tells us that the banks' balance sheets are improving, as has their outlook for the future. Our outlook, meanwhile, has already improved.

Palo Alto Real Estate

noreply@blogger.com (Todd Beardsley) — Fri, 15 May 2009 00:48:00 +0000

MARKET RECAP
Recoveries are often imperceptible in their earliest stages, which has us wondering about the status of the housing-market recovery. It seems to be one that's no longer imperceptible. In fact, the prices of residential properties listed for sale rose in 22 of 26 major markets during April, with prices in 18 markets posting three months of sequential listing price increases, according to a report published by Altos Research and Real IQ,
Meanwhile, pending home sales offer hope that the sales pace will continue to accelerate through the summer months. The National Association of Realtors’ pending home sales index, a forward-looking indicator based on contracts signed in March, increased 3.2% in March, posting its own three-month sequential increase.
The one notable piece of negative housing news is the number of borrowers who are underwater on their mortgages, which climbed to 20.4 million at the end of the first quarter of 2009, according to Zillow.com, an on-line real estate information company. Thomas Lawler, an independent housing economist, stated the obvious by noting that borrowers who owe 30% or more than their homes are worth are more likely to walk away than those who owe just 5% or 10% more. It's also worth noting that the borrowers who owe 30% or more are still a relatively small percent of mortgages outstanding, and most are concentrated in Las Vegas , sections of North California, sections of Florida, and Phoenix .
The employment situation could also be viewed as a potential negative. Payrolls fell by 539,000 in April, while the jobless rate jumped to 8.9 percent, the highest since September 1983. But the fact that employers cut fewer jobs in April compared to March is viewed as a sign that the worst of the recession has passed. Granted, many economists still expect the unemployment rate to rise to 9.5% by year's end, but that suggests the rate of increase is abating
Speaking of rate of increase, mortgage rates – relatively stable for the past month – are creeping higher, which should be expected given that yields on Treasury securities have been rising at an increasing rate over the past two weeks. In fact, the 10-year Treasury note – a benchmark for the 30-year fixed-rate mortgage – jumped over half a percentage point last week, posting one of its biggest increases in months. We've been beating the drum over the past month to lock in mortgage rates ASAP. Now we are beating that drum even harder.
Stressed, But Still A Success
It's official: Our financial system isn't going to collapse after all. I think we all knew that, but the Federal Reserve went out of its way to prove everything was okay by “stress testing” the banks. The Fed's test measured bank reserves based on what's known as common equity, the value of a company's common stock and profits. The test revealed that some of the banks have sufficient reserves by traditional measures, which include other credit-related assets, but fall short by this narrower standard. The bottom line is the nation's biggest banks are regaining their health, which should translate into a greater willingness to lend.
The stress test was a part of the Obama administration's plan to fortify the financial system. As home prices fell and foreclosures increased, banks took huge hits on mortgages and mortgage-related securities they were holding. The stress test has been criticized as a confidence-building exercise whose rosy outcome was inevitable. But the information, which leaked out all week, was enough to provide a much-needed dose of market confidence.
The stress test result is yet another sign that we are well on our way to an economic recovery. We begin this year saying we expect January 2010 to look a lot better than January 2009. Our prognostication appears to be headed in the right direction. It's also worth remembering that recoveries mean markets start tilting more toward the seller’s side, so this unprecedented buyers market in housing we've witnessed over the past 18 months is less likely to last much longer.

Keeping you updated on the market! - Palo Alto Area Real Estate

noreply@blogger.com (Todd Beardsley) — Sat, 02 May 2009 16:49:00 +0000

For the week of May 4, 2009
________________________________________
MARKET RECAP
Sometimes bad news isn't as bad as it seems. For instance, gross domestic product dropped at a 6.1% annual pace in the first quarter of 2009, easily blowing past predictions for a 5% annualized drop. The decrease marked the weakest posting since 1958. Bad news, right?
Not so fast. It's tempting to cite the grim first-quarter GDP decline to squelch talk of any recovery in the U.S. economy, but the numbers actually contain flickers of hope. Nearly half of the GDP contraction was due to businesses slashing production in order to bring inventories in line with sales. The process, although perhaps incomplete, is well advanced, which means businesses may soon have production levels where they want them. That, in turn, could set the stage for increased business spending in the second half of the year as consumer demand increases.
In fact, consumer demand is already picking up. The monthly data on home, car, and retail sales confirm that consumption has broadly stabilized. Although home construction has tumbled, the worst is probably over: in any case, the sector is now so small that further declines mean little to overall output. The recent rise in stocks prices – arguably the most reliable economic indicator – and in consumer confidence also bodes well for businesses and consumers alike
More good news can be found in seemingly bad news on the housing front. Home prices continued to decline in 20 major U.S. cities in February, according to the S&P/Case-Shiller Home Price Index, but the rate of decrease slowed for the first time since 2007. Average prices are now down 30.7% from the housing market's mid-2006 peak. Phoenix has fallen the furthest, dropping 50.8% from its high, while Dallas has been one of the better performers, slipping a relatively modest 11.1% from its peak. Odds at this juncture favor long-term home-price appreciation over long-term depreciation.
Meanwhile, mortgage rates continue to hold steady, with 30-year fixed-rate mortgages still available in the 5% range. But again, we need to warn that rates could be approaching a low, if they haven't already reached one. Treasury yields are starting to rise, a sign of a strengthening economy and a sign that inflation could be lurking on the horizon. At this point, we think holding out for lower mortgage rates is becoming a riskier bet.

Confusing Averages
Averages are an intricate part of data aggregation and dissemination. We reference averages, such as national average mortgage rates or average existing new or existing home prices, in the newsletter. These averages are useful, because they project a large macroeconomic picture quickly.
But averages can also misinform. Picture a room with Bill Gates, Warren Buffett, and eight other people, each of whom earn $100,000 annually. If a statistician were to average the annual incomes of the 10 inhabitants, the average annual income would be several million dollars a year, even though eight of the 10 inhabitants make nowhere near that amount. It would be impossible to implement a successful sales strategy based on that average income. In other words, averages can be irrelevant.
Such is often the case with real estate. We noted that home prices in Phoenix tumbled an average of 51% from 2006 highs, while Dallas prices tumbled an average of 11%. Average these two numbers and you get an average decline of 31%, which makes the Phoenix market look more robust than it is and the Dallas market less robust. What's more, that average is even more misleading because it is based on an average of an average.
Point is, don't let national averages influence your opinion of the economy too much. Most business is local, and what's happening in one part of the country can be completely different from what is happening in another part of the country. What's happening in your part of the country is what's most relevant.

Keeping you updated on the market! - Palo Alto Area Real Estate

noreply@blogger.com (Todd Beardsley) — Sat, 25 Apr 2009 17:34:00 +0000

Keeping you updated on the market!
For the week of

April 27, 2009

Change is fickle: Sometimes it comes gradually, other times it comes instantaneously. One thing is for certain; change will come eventually because trends can’t last forever. With that prelude in mind, change is occurring in the housing market, and the good news is it’s the kind of change we can all believe in.
To wit: sales of existing homes stayed near a four-month average in March while prices rose from February’s levels, a sign the housing recession has at least abated if not improved. While recent numbers from the National Association of Realtors showed sales fell slightly more than forecast to an annual rate of 4.57 million, economists noted that the sales level is hovering near the level it reached in November. What’s more, prices for home resales posted their biggest monthly gains since June 2005, according to NAR economist Lawrence Yun.
Meanwhile, purchases of new homes were higher than expected in March, posting at an annual pace of 356,000, with inventories of unsold homes falling to a seven-year low. Federal Reserve efforts to bring mortgage rates down combined with tax credits for first-time buyers are expected to continue supporting new-home sales in coming months. Homebuilder confidence is another positive, having risen from a record low in January to a six-month high in April.
Low mortgage rates continue to aid recovery efforts, but for how long? Keep in mind, change will occur in this market as well. We’ve been saying for the past month that additional rate drops will be hard to come by, and that appears to be the case: Bankrate’s national survey has shown rates leveling, if not rising, in many markets. The Federal Reserve has exerted great effort to keep the benchmark 30-year fixed-rate mortgage under 5.5 percent. It can’t keep exerting great effort in perpetuity.

An Impending Seller's Market
The Wall Street Journal reported last week that falling home prices are starting to ignite bidding wars in some areas of the country, noting several real estate brokers who say multiple offers have become more common in parts of California, Arizona, Washington, D.C. and the Minneapolis-St. Paul metropolitan areas. The Journal even reports that some markets are running into shortages of moderately priced homes in middle-class neighborhoods.
A tighter housing market seems plausible, given that the Federal Housing Finance Agency reported that home prices nationwide rose a seasonally adjusted 0.7 percent in February from January. In short, all signs are signaling that the worst has ended and that a recovery is near, if it isn’t already occurring. Many housing economists remain cautious though, believing the market will gradually recover over the next year or two, with some parts of the country stabilizing before others.
But economists are often wrong. Recoveries, or deteriorations for that matter, almost never occur at the smooth, even pace economists predict. More often, recoveries move swiftly, and before you know it sellers are getting 10 percent more for their homes this month than the month before. It’s still a buyer’s market today, but today becomes yesterday a lot sooner than most people perceive. That’s something to consider for any buyers sitting on the fence.

Market Recap - Palo Alto Real Estate

noreply@blogger.com (Todd Beardsley) — Mon, 20 Apr 2009 15:06:00 +0000

The latest economic releases indicate the economy remains a mixed bag of nuts. Fortunately, the good stuff – the cashews, almonds, and hazelnuts – are accounting for more of the bag. For instance, banks continue to earn their way out of the mess they got themselves into in 2007 and 2008. JP Morgan Chase, Goldman Sachs and Citigroup all posted stout earnings last week, indicating that last year's financial crisis may turn out to be more of an inconvenience from this point forward as the banks continue to successfully clean house.
Cleaning house is an apropos term. Most of the major banks, along with Freddie Mac and Fannie Mae, say they have increased foreclosure activity in recent weeks, lifting internal moratoriums that temporarily halted the process. The recent change in attitude is one reason the number of foreclosures jumped 175,200 last month, according to Foreclosures.com.
The news on the foreclosure front isn't as dire as you might think. The foreclosure problem was always there. You could say that everyone had been whistling past the graveyard for the past few months. Now, it appears that banks have the confidence and financial wherewithal to address the issue head on. The good news is that the sooner the issue is addressed, the sooner it can be resolved.
Mortgage rates are still low, and fueling a bit of a refinance boom as such. Depending on FICO score, income, debt-to-equity ratio, and down payment, a 30-year fixed-rate mortgage can easily be had for under 5 percent – a bottom from a historical perspective. What's more, recent data on consumer prices suggest rates should remain low, at least for the near future, given that inflation is currently a non-factor. Keep in mind though, the Federal Reserve has been flooding the market with money over the past six months, which will eventually stimulate inflation, and therefore stimulate rate increases.

Focus on the Long-Term
When times are tough, the first course of action is to cut back spending on personal and business expenses. In short, we are reacting to a distinction between risk and uncertainty, first noted by economist Frank Knight. Risk, according to Knight, describes a situation where you have a sense of the range and likelihood of possible outcomes. Uncertainty, in contrast, describes a situation where it’s unclear what might happen, let alone how likely the possible outcomes are. Uncertainty is always a part of business, but in a recession it dominates everything else; no one’s sure how long the downturn will last or whether we’ll go back to the way things were.
Uncertainty overwhelms the economy with a sense of “short-termism.” We lose the ability to see the forest through the trees. Short-term considerations trump long-term potential, so we cut back on investment, advertising, and overall business activity. But there’s a trade-off for doing so: numerous studies have shown that businesspeople who keep spending and keep working to build their business do significantly better when the economy recovers than those who made deep cuts during the downturn.
Today, most people are far more worried about sinking the boat than about missing it, and that creates opportunities for those of us who are far more concerned about missing it.

Market Recap

noreply@blogger.com (Todd Beardsley) — Sat, 11 Apr 2009 16:32:00 +0000

“The reports of my death have been greatly exaggerated,” said Mark Twain upon hearing his obituary had been published in the New York Journal. Our beleaguered banking sector should be forgiven if it were to pinch Mr. Twain's famous quote, for Well Fargo reported that it expects first-quarter earnings of $3 billion. (Yes, that's billion with a “B”.) Banks are far from being dead.
Bank stocks have been sluggish for most of 2009, to be sure, following fretful forecasts from key analysts about the bad loans they carried on their balance sheets and other long-term woes. Today, investors believe the woes were overdone, which is why Wells Fargo barreled ahead nearly 32% this past Thursday, while taking many of its competitors along for the ride.
The fact that mortgage lending is pacing the banking recovery is encouraging. It demonstrates funds are readily available to a wide swath of the borrowing public. In addition, more funds should be available to an even wider swath of borrowers once President Obama's $275 billion plan to stabilize the housing market takes hold. One key component of the plan is to allow as many as five million homeowners to refinance their mortgages. The program is open to borrowers who are current on their payments, have loans owned or guaranteed by Fannie Mae or Freddie Mac, and owe between 80% and 105% of their home's current value.
The recent recovery in banks, along with the overall stock market, has economists rethinking this whole recession thing. Earlier in the year, many of the more vociferous opinion makers were saying the economy was unlikely to recover until well into 2010. Now, many economists presage a recovery as soon as September.
Mortgage rates, on the other hand, are one segment of the lending paradigm where a recovering could be ending. We've been warning for the past few weeks that additional rate drops are going to be difficult to come by. Indeed, rates actually reversed course and moved slightly higher across most durations and types last week. We're not so presumptuous as to assume rates can't go lower, but we wouldn't bet the house on it. That's something to consider for anyone shopping for a refinance or purchase loan.

Next Up, a Housing Recovery
Politicians of all stripes have lamented that the bursting of the housing bubble has been a national tragedy. But is it really that bad? According to George Mason law professor Todd Zywicki, the answer is “no.” In a recent Forbes article, Zywicki reasons that there are three types of housing markets, and only one of the three shows real signs of distress.
Zywicki states that the first type of market behaves the way markets are supposed to behave, with smooth adjustments between supply and demand. When prices rose, builders constructed new houses. When prices softened, builders stopped. Charlotte and Dallas represent such markets. The second type of market demonstrates a long history of price volatility, such in San Francisco and Seattle . Zywicki notes that people who live in these markets expect big price swings and adjust their behavior accordingly. These two markets, says Zywicki, are basically sound.
The third type of market displays both the ability to expand the supply of houses that characterizes the first type of market and the price swings that characterize the second type. This is the market where the real bubble developed, and not surprisingly, it is concentrated in the Sun Belt: namely, Las Vegas , Tampa , and Phoenix . Investors seem to have calculated that a lot of people would either retire or buy second homes in these places. And when prices went up, speculators moved in and a bubble formed.
Zywicki might be on to something: If you vet the news carefully enough, you'll find more stories highlighting rebounds in many of the type one and two housing markets. Yes, troubles in the Sun Belt remain frustratingly intractable, but given current mortgage rates and the plethora of buyers' incentives, we suspect that market will recover sooner than many pundits think.

Mortgage Market Update

noreply@blogger.com (Todd Beardsley) — Fri, 10 Apr 2009 17:26:00 +0000

On first blush, last week's economic news seemed dire. But what you should keep in mind is that economic statistics such as confidence numbers, home prices, and unemployment rates are lagging indicators. They tell us where we have been, not where we are going. The stock market, in contrast, is a leading indicator. People invest based on where they think the economy is going. The good news is, they think the economy is improving. The Dow Jones Industrial Average tacked on another 400 points last week, and is up 2,000 points in the past month alone. More encouraging, the dour employment numbers released on Friday barely caused a ripple among investors.
Many media types cited the change in accounting rules, which will allow banks to record certain securities (like lower-rated mortgage-backed securities) on their balance sheets at market value but not necessarily fire-sale value, for the most recent surge in stock prices. The new rule helps, to be sure, but it's really more cosmetic than economic, so it's unlikely to have been much of a catalyst. The real catalyst, the one under-reported in the press, is that more investors see an improving business, housing and lending environment.

Still a Buyer's Market....
The National Association of Realtors’ pending home sales index (PHSI) rose to 82.1, in February, beating consensus expectations for a 78.1 index reading. What's more, the PHSI's affordability index rose 0.9% to a new record high level of 173.5, which is 36.3% higher than it was a year ago.
Lower home prices obviously contributed to the record-high affordability index posting, and so did record-low mortgage rates, which are now regularly being quoted below 5% on the prime 30-year fixed-rate loan and near 4.5% on the prime 15-year fixed-rate loan. But good things don't last forever. We've been saying over the past few weeks that it's unlikely these rates will go much lower. Our opinion is supported by John Koskinen, interim CEO of Freddie Mac, who stated last week that home loan rates are near their bottom and that any further decreases will be small.
Some pundits have been speculating that deals are driving the housing market more than mortgage rates these days, and perhaps they are right. They also speculate that even better deals lie ahead because consumers are overly cautious. Buyers are certainly cautious, but they should probably be taking their cue from the stock market, which is hinting that the best deals might not be around much longer, instead of unreliable punditry.

This Feels Like a Market Bottom

noreply@blogger.com (Todd Beardsley) — Thu, 09 Apr 2009 01:52:00 +0000

This Feels Like a Market Bottom

I have been seeing a few signs lately which have me believing we have seen our market bottom for the Palo Alto area real estate market and it is here and now.

Buying Activity – the past couple of weeks we have seen a burst of buyer activity. At this point the evidence is primarily anecdotal – agents talking about a sharp increase in the number of phone calls, emails and property showings. These activities take time to show up in MLS statistics but you can be sure it is only a matter of time before we see this activity result in more closings.

Capitulation – Recently I have seen a few sales get done at prices much lower than the asking price. Typically, rather than allow a buyer to negotiate a price less than 90% of asking, sellers will drop the price by some smaller amount in the MLS and give the price reduction some time to bring in the next layer of buyers. Some of these recent sales lead me to feel that some sellers are throwing in the towel. It is at just this point, when fear is the greatest, that markets of all types are at their inflection point, a market bottom. Additionally, for the past two months, the key ratio of Pending Sales to Total Inventory has moved higher, with the cumulative effect showing the Real Estate market moving from a clear Buyers Market to a more neutral market.
In a couple of months we will be in what is traditionally considered to be our peak buying months in the Palo Alto area. I just don’t believe you will see sellers capitulating if they see the stock market strong with more and more homes going “pending”.

Stock Market Prognosticators – It seems many of the talking heads are jumping on the “stock market bottom” bandwagon. The greater Palo Alto area real estate market is more sensitive to the stock market than most of the country. Many buyers are in one way or another vested in the stock market. Finding the bottom for real estate on the peninsula requires some serious consideration of this point

Just as in stock market bounces, the Palo Alto are real estate market can turn on a dime because here it is all about state of mind. Buyers have the wherewithal to buy and the desire to buy, they just need the timing to be right. I am definitely seeing an increase in the number of buyers contacting me and telling me they think the timing is right. It may take a couple of months for the statistics to accurately reflect this change in sentiment. By then you are chasing the market back up. Since it is almost impossible to pick the bottom I would encourage buyers and sellers alike to put some serious consideration into the possibility that the Palo Alto real estate market is here and now.

Spring is in the air – Spring is typically when the Palo Alto area real estate market starts to get moving after the doldrums of winter. This past winter was particularly stark due to the financial crisis. We are now seeing a normal cyclical uptick in activity combined with an improved state of mind for buyers. This should lead to an uptick in prices as well. From here, this cyclical activity will lead us out of the market doldrums and carry us into next winter and by then the local economy as well as the Palo Alto area real estate market will be in better shape and prevent a return to the lows.

No one knows anything for sure but I feel some optimism out there and optimism is sufficient to cause sellers to hold their ground rather than throw in the towel.

Options for buying now and selling later

noreply@blogger.com (Todd Beardsley) — Thu, 11 Dec 2008 22:32:00 +0000

You don’t have to be made of money to own two homes for a short period of time. Ideally a buyer would be in a position to take advantage of this current market weakness by buying their new home without having to first sell their current home. There are a few reasons why this is beneficial. First, I believe we are somewhere close to a local real estate market bottom and by June of next year we should see things perk up. Why do I think this? Because I believe mortgage rates will come down and mortgage loans will be easier to obtain. For more of my thoughts on this subject see my blog post titled “Why I believe mortgage rates will fall during the coming year”. Below I have outlined one of many possible strategies for buying into the current weakness and selling into whatever strength we have after the first of the year or even the spring.
Buy now with a long escrow period and sell later this spring: Some sellers do not have to actually move, rather they need the money. In these instances, sellers will sometimes be willing to give you a multi-month escrow but will require that some of your down payment flow through escrow directly to the seller to help them with their immediate financial needs. These funds are non-refundable but do become part of the down payment. If for some reason you do not follow through with the transaction, you may be liable for actual damages to the seller in the event he ends up selling his home for less than he was going to sell it to you. This holds true for all real estate transactions but in normal transactions you have to work with the title company (not the seller) to get your money back. You need not fear, there are lots of protections built into this process. In the end, if you find a home you love and are 100% you want it, there is no risk to a long escrow with a premature release of funds to the seller. This long escrow period also gives you more time to prepare your current home for sale not to mention you avoid the unpleasantness of having to sell your home in this slow-moving market.

Find out more about Menlo Atherton Realty and our commission rebate program here.
Have any of you tried any of these tips? If so let me know how it worked out.

Why I believe mortgage rates will fall during the coming year

noreply@blogger.com (Todd Beardsley) — Thu, 11 Dec 2008 20:36:00 +0000

For one, the Fed Funds rate continues to decline and this is normally a precursor for a drop in the rates for treasury securities on which mortgage rates are loosely based. The spreads between the Fed Funds rate, treasury securities and mortgage rates typically fluctuate around their means but right now they are grossly out of sync with their statistical averages. In time, these spreads will narrow and move toward their means. What does this mean for home buyers? Well, the narrowing of these spreads can take shape in a variety of ways. All of which point to lower mortgage rates. There exists a phrase which is warmly embraced by Wall Street. It goes like this: “never bet against the Fed”. What they are saying is that it is unwise to invest in a direction contrary to what the Federal Reserve is trying to achieve. At this point in the cycle it is clear that the Fed is trying to bring down retail borrowing rates. They have mentioned the possibility of reducing the Fed Funds rate to zero and if that does not exert enough downward pressure on retail rates they have mentioned the possibility of buying up U.S. treasury securities. These government purchases would drive up the price of U.S. bonds which reduces the net interest rate the bonds are yielding. In time, reducing the yield of U.S. treasury securities will invariably enforce its gravitational downward pull on mortgage rates.
Secondly, the government is pumping hundreds of billions of dollars into the financial system. These actions make more money available to financial institutions to lend with. More importantly this flood of money helps ease the widespread fear which has caused large financial institutions to hoard their cash and refuse to lend it. As this fear ebbs, firms will begin to lend once again. As more firms feel comfortable lending their once precious cash we will see competition for customers drive rates down. I welcome any thoughts on this matter? How do you think the coming year will go?

Find out more about Menlo Atherton Realty and our commission rebate program here.

Why I believe right now is a great time to sell your home

noreply@blogger.com (Todd Beardsley) — Thu, 11 Dec 2008 20:31:00 +0000

Right now is a great time to sell your current home if you are also ready and willing to move up to that bigger and better home you have been wanting. The reason I say this is that the market is very slow right now and properties stay on the market longer and receive fewer offers. Surely you are asking yourself “How can this be good for me if I am selling my home?” Let me explain. Right now prices are flat or declining. This will surely result in a sales price much lower than you could have gotten a few months ago. It will also take much longer to sell your home. But on the other side of the transaction you will be buying your new home for a corresponding percentage less and perhaps more if you play your cards right. Assuming you will be buying a more expensive home, you will be saving more money on the buy side than you will be losing on the sell side. Let’s look at a possible scenario: your current home would have sold for $1.2 just a few months ago but today you might only be able to get $1.0. On paper it is quite clear you just lost $200,000. Let’s also assume you are planning to upgrade to a home in the $2.0m range. That same home would have sold for perhaps $2.4 just a few months ago so you are picking up $200k in net equity on the pair of transactions.

There are two more huge advantages to moving up in a down or sideways market. 1) The available inventory of homes is generally higher so you will have many more choices and perhaps find a bargain. The other biggie is the fact you will not get into a bidding war and emotionally pay too much for a home. In the end, the whole process will take longer than in a hot market but both transactions will be more orderly and well thought out. This is why I like this type of market best for moving up.

Strategies for moving up in today’s market.
Ideally you would be able to buy now and sell later. Right now we are at a market high as far as fear goes. You may see average prices move lower but your ability to pick up a great deal will not be any better than it is right now. With each passing day we distance ourselves mentally from the financial turmoil which has gripped the world. At some point buyers and sellers will resume their normal buying and selling patterns which completely preclude the possibility of picking up a smoking deal.

How many of you have recently sold your home? What are your thoughts on this?

Find out more about Menlo Atherton Realty and our commission rebate program here.