Some perspective on the Silicon Valley market....

Some recent headlines turned heads and generated a lot of questions among my clients recently, headlines such as: “Case-Schiller Down 5.1%; What Will Stop It?” and “The Depressing State of Housing”.

What is really going on in the Valley? I find that chosen graphs speak much better than headlines. Comparison of the first 5 months of last year, with the same months this year, for the Counties of Santa Clara and San Mateo:

This graph shows roughly the same movement as last year. If anything, it shows a better situation, since we do not have in 2011 the government incentives for 1st time homebuyers that we had in 2010 (Calif. 1st time homebuyers credits, and federal incentives). These created last year a rush to buy before June, which does not exist in 2011.

Comparison charts for Sunnyvale and Mountain View:

Comparison charts for Los Altos and Palo Alto:

Average prices can vary  a lot from month to month.  These charts just show that overall the market is fairly the same as last year, at the very least.
Thanks for reading!
Francis

Mortgage rates: Week ending 6/23/2011:  - 30-yr. fixed: 4.50 fees/points: 0.8%   - 15-yr. fixed: 3.69 fees/points: 0.7%    -  1-yr. adjustable: 2.99% Fees/points: 0.5%  (Source: Freddie Mac)

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Monoxide detectors: don't forget: it's the law...

If you have a rental property, and if you receive my monthly e-newsletter, you have probably already received about 6 months ago a note about this new law that has passed: you need a monoxide detector in the house as of the 1st of July.

Whereas in your own house, there is little chance to have an inspector come and check you out, you must remember if you rent a property out that it is mandatory.
Typically you would put a CO detector on each level of your house, near appliances that emit carbon monoxide (furnace, wall heater, stoves, etc... although other sources of carbon monoxide include cars - in a garage for instance, and fireplaces).  Where exactly should it go? it is advised to "follow the manufacturer's instructions".

Also, it is good to check with your City: some Cities have special requirements.  Here is the link to the City of Palo Alto smoke and Co detector requirements.

Carbon monoxide is particularly dangerous: it has no color and no odor. 
If you have an old furnace in your home, or a wall heater, you have a risk of having a source of CO leakage.
Detectors seemed to cost at least $45 or $50 about 6 months ago, but it is possible nowadays to find the units below $30.

Do you find this note useful? Forward it to someone you know who might need to read it.
- or "like" it on FB

Thank you, have a great week-end!
Francis

Silicon Valley Real Estate
local resources (schools, Cities, etc...)

In the Valley: sell or become a landlord?

Sell or become a landlord?  That is the question.  A study by Zillow recently showed that more than 1/4 of homeowners considering a move in the next 3 years were considering renting out their home.

This question is being asked more often right now as people either are moving away from the Valley, or want to move up or down to change something to their present lifestyle. 
It is asked more often now that values have gone down from, may be, a high purchase price 3 or 4 years ago.
It is asked more often now that banks do not grant "bridge loans" like they used to, and now that rental prices go up (Nationwide, but also locally), and that it seems like just a matter of time until prices go up from where they stand now (even if it is not doing so like it was in the past 15 years).

To keep a property for ever makes a lot of sense to diversify one's portfolio.  It can and should be, long-term, a part of a retirement account if you already have a lot of money in the banking system.  Down the line, in 20 years, it will seem like impossible to afford to rent the house that today seems so high in price.

Today, as many people loose their property to short sale or foreclosure, they need to find a place to live, and this explains in part why there is pressure on rental prices.

If you are faced with this dilemna, consider the following factors:
- your confidence in the future of home values in the Valley,
- the tax implications, which could be positive or neutral for you depending on your tax situation and income, and the way the property would be managed,
- how comfortable you are with 2 mortgages,
- appeal of that kind of diversification of your retirement assets,
- who will manage the property?
- are you cut out to be a landlord?

Note: if you are moving up or down in lifestyle, the money that you may "lose" in the sale of your real estate asset might be quite equivalent to what you will gain by buying a cheaper replacement property.  So then it is a question of strategizing such a move.  If you are in this situation, contact me and we will review all the options together.

Thanks for reading,
Francis

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Smart Market Trends

Time to appeal that tax bill?

Is it time to appeal your tax bill?

It is that time of the year again when the Tax Assessor's Office of the County of Santa Clara sends to all homeowners a notice of the assessed value of their property.

If you think it is too high for your home (it always seems too high doesn't it, since you pay a yearly percentage of the assessed value) you have between July 2 and September 15 to file a review, or an appeal - depending on when you want to contest it.  The specific rules, and the specific dates to check for are on this page of the Santa Clara County official web site.

Where I can help is by providing you with MLS sales data that happened around the turn of the year of assessment.  This is information that you can send to the County in support of your request, along with any other data you may have (that would not be in the Realtors' MLS for instance).

One thing to remember though, as they point out on the web site - and I quote: "IMPORTANT NOTE: It is very important to understand that filing an assessment appeal does not relieve an owner of the responsibility for paying any outstanding tax bill no matter how unfair the owner may feel a bill might be."
.. no surprise there I guess :-\

For the County of San Mateo, the dates when one can appeal the assessed home value are different.  Details can be found on this page: County of San Mateo Treasurer Tax Collector.

Let me know, as always, how I can help!
Francis

Silicon Valley Realtor
Local Real Estate resources

A link worthy of interest: http://www.ourbrothershome.org/

Real Estate Investors Compete Against First-Time Homebuyers.

With regards to this recent blog about investors competing against would-be homebuyers, it has definitely been my experience that this is taking place - in a large percentage of the offers I have seen recenty, especially in the low price ranges. One sure sign: in about 30 to 50% of the cases, the winning offer was all cash.

This is absolutely prevalent where a condominium is offered for sale, and more than 15% of the units in the complex are deficient in their dues payments to the association. In that case, I do not know of a bank that will lend money to buy the property. Only a cash buyer can puchase. Why buy in such a complex, with a fair risk that for lack of funds there will be deferred maintenance all around?  Because the rental income is worth it. And later on, when the real estate market improves, valuations will bring in more gains.  It is clear to me that many (real estate) investors have confidence in the Valley.

But I have also seen it in regular sales, where the dues problem does not exist. With prices very low now in the Valley, investors have been moving in; this has been taking place for at least a year in my experience, - and a little more for houses. Lowest prices were mid-2009.


Francis

Silicon Valley real estate

Sunnyvale prices, since 2006....

Following up on a few of my last blogs on the surrounding Cities, what happened in Sunnyvale in the past 3 or 4 years?

A picture is worth a thousand words. Here is the graph of average prices since 2006, both for houses, and for the group "townhouses and condominiums".

Click to see larger

In Sunnyvale it turns out that values as an average are still down about 11% from 2006 for houses, and about -15% for class 2 - condominiums.

These are averages, for the whole town of Sunnyvale, and a study of specific neighborhoods to see how they fared through the crisis is called for: not all areas went up or down in the same manner. I am thinking that the areas that have good schools probably did better, as is usual in other Cities.

As far as the price per square foot, here is the evolution, for houses:

and for class 2:

The trend is pretty consistent with the average prices of the first graph - though these graphs are only from 2008 on.

For specific areas let me know and I will try to find meaningful graphs and figures.

Thanks for reading!  --Francis

Silicon Valley real estate
Silicon Valley trends
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The real price of buying..

The real price of buying is the cost of buying.
Will prices continue to fall? Should I buy now?

While price is always one of the major concerns when buying a property, cost and affordability should be at the forefront of your considerations as a buyer.

That means you have to take into account what your monthly payment will be, considering not only the price of the home but also the interest rate of your mortgage. Waiting for prices to bottom out while rates are increasing can wind up costing a lot more.

So the price of the property is, in a way, not the thing to focus on: if interest rates are low enough, the home that will make you happy could be a lot lower in price than you'd think. - I know, I know, no one wants to over pay for a property; but this is an other matter - and so "relative".

We cannot control what the market will be doing, but we can control how we address our housing expenses. 

So I say, look at what is comfortable to own, without breaking the bank, and see if something fits the bill.

On the subject of interest rates:  all lending and financing institutions, like Fannie Mae (FNMA – the Federal National Mortgage Association), Freddie Mac (Federal Home Loan Mortgage Corporation), the National Assocation of Realtors, PMI (Private Mortgage Insurance) and the Mortgage Bankers Association are all projecting rising interest rates over the next several quarters.

Although I have to say, personally, that I did not expect rates to stay so low so long.  So who knows.  If you have an opinion, chime in!

Francis

Silicon Valley real estate
Silicon Valley Smart graphs

Market trend in Mountain View - price/sq.ft

Market trends -  Mountain View:
Following some of my last blogs on average prices in Mountain View and Los Altos, someone asked me to show the evolution of $ price per square foot.



 

So, how is “Google’s” City doing in that respect? 

  As always with figures and statistics one has to take the information with a grain of salt, or a good dose of caution. The figures can be deceiving.
The price per square foot is a good measure of the activity, as part of a combination of measures. It is shown below for the market of condominiums and townhouses, for the past 3 years; it is showing a lower value as we go into 2011:

…and for the house market, it shows a very healthy trend:

But this is one element of a big picture. In this case it is good to remember that as a property is larger, the price per square foot is lower. So the figures may also partly reflect a difference in average size of the properties sold.

Curious about another City? Do let me know at francis@frolland.com

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A link of interest: recycling event in Los Altos next week.