Renting vs buying... an age-old quandary.

In 75% of the US one gets ahead within 3 years by buying a home vs continuing to rent.

Typically, and historically, it was kind of understood that it takes about 3 years to see the advantages of owning instead of renting.  The first years, most often, it seems a lot more expensive, and you do not see yet the tax advantage, when there is one. Then you settle in and start feeling "at home" vs leasing you space in life, and that adds to the financial aspects of the question.

But now that prices have moved a lot and in different ways throughout the US, it is not so straightforward.  In short, where prices have fallen the most would be where it is most attractive to buy, vs to rent.

This study from Zillow gives more detailed information on the new quirks and wrinkles of this age-old quandary.

Francis

Silicon Valley Real Estate

Local market trends

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Current Mortgage rates

Property tax increase.

Property taxes, as levied by the Counties, cannot go up more than 2% per year, right?

Well, not really.  It is true that Proposition 13 capped the increase of property values at 2% per year, but there is another Proposition, - Proposition 8,  which passed the same year as Proposition 13, which allows the property value to go down if the market tanks.

When the market goes back up, though, that same Proposition allows then the reassessment of the properties by the County to go back up by more than 2%, until it reaches the value that it would have been if it had not gone down in the first place.

A little hard to follow?  Just imagine what would be the potential value of your property, after you bought it, if it had increased by 2% per year (assuming the market was going up).  This is the value that it could be reassessed by the County if the market does go back to that value...

The request for re-evaluation of an assessment by the County can be done electronically now through their revamped web site, which provides easier ways to search for comparables and maps.
Santa Clara County assessor's web site.
and: contesting your assessed value.

If you wish, I can also assist you by providing a study of the recent sales through the MLS - which has saved quite a bit of money to some of my clients in the past few years.

Francis

Silicon Valley Real Estate

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Local ratio: sales price / list price.

For the 3 Cities of Palo Alto, Los Altos and Mountain View combined, this is what the ratio of the sales price over listing price looks like, for all houses listed after the 1st of the year 2012.
This graph shows this interesting ratio sliced by list price range.

One of the interesting bars is the one for prices over $5 million:  -- the luxury market has definitely picked up from the past 3 years.

In the price range of $200k to $400k, this is for a (unique) house that, after a price reduction, was listed at $390,000 and finally sold at $335,199 in Mountain View, along 101.
Curious about your specific neighborhood? Let me know!

Thanks for reading!
Francis

Silicon Valley Real Estate

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Rates are super low right now! Mortgage rates

Californians on the move.

When Californians move, where do they go?

It turns out that when a Californian moves, he/she mostly stays in the same County (49%).

So most likely, when people move they just want to move up or move down.

4 years ago, a lot more people were going to an other state; possibly to deal more easily with the crisis, as the cost of living is so high here?  Once that wave happened, it seems that out-of-state moves settled around 20% of the movers.

Consistently, about 1% of the movers go outside of the US.  Funny to note that in 2009, at the worst time for real estate values, twice as many people left to go outside of the US.

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Thanks for reading,

Francis

Silicon Valley Real Estate

Local market trends

useful links

Current Mortgage rates

Rents increase, more than home prices.

Rent increases outpace modest home price rises (nationwide)...

Despite widespread national asking price rises, rent increases outpaced price increases in 22 of the 25 largest rental markets, according to the Trulia Rent Monitor. Nationally, rents were 5.4-percent higher in June than they were a year ago, and rents increased year-over-year in 24 of the 25 largest rental markets – all except Las Vegas. Furthermore, rent increases accelerated between March and June in most rental markets, with rents in San Francisco rising 14.7 percent year-over-year in June from 10.9 percent in March.

I was noting in one of my May's blogs that rents were up 9.4% in San Jose.

Home price rises are not so modest, by the way, locally (- but then, ditto for rent increases).

More info on this Trulia press release.

As always, thanks for reading,
Francis

Silicon Valley Real Estate

useful links

Current Mortgage rates

Fences and Neighbors...

A surprising number of homeowners are bucking the notion that good fences make good neighbors and taking down the fences in favor of bigger gardens and more space to entertain.

While some homeowners are turning previously neglected corners into shared garden and dining spaces, togetherness does have its down sides. Gardening expenses can be split evenly, but who pulls the weeds and who gets to pick the fruit? What happens when one neighbor wants to sell? Some people draw up legal contracts to help prevent acrimony and spell out how they will disband.

Additionally, yard-sharing is rare in new developments of single-family homes with privacy fences often required under community covenants and building codes.

A shared yard also could dampen an individual home’s value and prolong the time spent on the market, as potential buyers likely will want to put up a fence instantly, adding costs to the home.

Because of these issues, some real estate agents are advising that neighbors restore fencing when either home is offered for sale. It is best to install the fence before the listing the home, as some buyers will not want to be the bad new neighbor who required a fence.

It is my experience that fences provide ample material for problems during a transaction: over the years, the fence may have been replaced, not necessarily by both neighbors, and it may not always be at the right place. Only a surveyor will help you in that case, to determine exactly where the property line is.  Sometimes, a part of the fence has been moved to accomodate a tree, or a structure.  This brings the need to draft an agreement to recognize that and memorialize it, possibly.  An attorney is best to do that.
Obviously the matter is more present in the Hills, where lots are larger.

More often than not, it is in the front part of the properties that you would find fences that are omitted, and there one might see a "shared" front yard.  Still in that case, I believe that it is good to keep a line on the ground, or another mark of sort, to delineate the separate lots. 
Finally, I would note here to keep in mind that typically, when rebuilding a fence, you need a permit.  The City is the best source of info for this.  This is an advice to both buyers, and sellers.

Do you have an experience, good or bad on the matter?  I'd love to hear it!
Thanks for reading,
Francis

Silicon Valley Real Estate

useful links

Current Mortgage rates 

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Buyers: the advantages of preapproval...

The advantages of preapproval.

The housing market is warming up in many areas, with multiple offers becoming more commonplace. Buyers who want an advantage in the bidding process will need more than a mortgage prequalification – they will need a preapproval.

The differences between mortgage prequalification and preapproval are significant. Prequalifying for a mortgage is based solely on what a borrower discloses to the loan officer or broker about his/her earnings, credit score, and total assets, including what is available for a down payment. By contrast, a preapproval requires a borrower to provide documentation of his/her income and assets and everything else.

The lender typically pulls the borrower’s credit report and score, while the borrower gathers together almost everything else needed for the actual mortgage underwriting: W-2 wage statements; 1099s; recent pay stubs; bank statements; and statements from Individual Retirement Accounts and 401(k)s; and other assets that could show the borrower has the resources to buy and maintain a home. 
-- An important note here: depending on your qualification, the loan will have a different cost !  Shopping for a loan is therefore often elusive: one would have to apply to different lenders to truly know to compare their rates, at the same given time (rates change several times a day, within the same organization).

A preapproval means that the file has gone through the underwriter of the bank/lender.  If approved, it is nearly certain that the loan will be granted to the buyer, subject to the specificities of the property itself, and a few other standard necessary conditions (like proof of insurance, and such...).

With so many homes receiving multiple offers, a preapproval is essential in today’s marketplace.

The preapproval letter should include the amount a borrower is qualified to borrow, as well as the loan officer’s contact information, and mention that the downpayment has been verified.

I personally advise buyers to obtain a preapproval letter for the maximum amount allowed, under the reasoning that the more qualified you are, the better you can negotiate.  If you borrow a lot less than you can, you advertise that there won't be any problem with you getting a loan.  Case in point: a cash offer is going to be always more attractive for the seller, right off the bat: there won't be any problem with obtaining financing....  What the seller wishes is the best assurance that the buyer he/she chooses is going to close the transaction.  Otherwise, the penalty is: wasting precious marketing time, at the beginning of the marketing period, which is the most important period in the property's listing cycle. 

You can see all the details in this article of the New York Times.

Thank you for reading, and if you have any particular experience in this domain, good or bad, I'd love to hear it ;-)

Francis

Silicon Valley Real Estate

useful links

Current Mortgage rates 


A noteworthy cause:  Habitat for Humanity

Santa Clara Cty Property Assessment up 3.25%...

I don't know if you have experienced the same thing, but my property value went up according to the County assessor's office - the notice of my property's assessed value that I just received in the mail.  This is not a surprise as we have experienced so many multiple offers since the end of last year, but sometimes reality is not completely reflected in the County's figures, and when the market goes down, one feels the need to fight what seems to be an assessed value that is too high.

In the past few years, I have helped several clients prove to the County assessor's office that their value was overinflated, by providing "comparables" from the MLS data, for similar properties sold that year.

However, when the market goes up, it is a lot more difficult to go about this procedure.

As evidenced by this June 2012 article of the Business Journal , the County is richer now, and things are looking up, at least for the County's coffers ...
My evaluation has gone up by about 2%.  How much did yours go up?

Francis

Silicon Valley Real Estate

Local market trends

useful links

A noteworthy web site: junk mail reducer: Catalog Choice