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

Silicon Valley real estate news
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
Selected schools page

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

Silicon Valley real estate
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A link of interest: recycling event in Los Altos next week.

Los Altos prices: condos vs houses.

In the category: condominiums vs houses, I was curious to see how Los Altos fared, in plain simple terms.


Does it vary a lot from one City to another?  Not much: it turns out that it is fairly similar between Los Altos and Mountain View.
The following graph shows how condominiums and houses evolved in the past 5 years:

In Los Altos the condominium market started to be soft earlier than houses, and is a little slower to recover; - but overall is doing very well.




Los Altos townhall

  From the average price in 2006 to the average price in 2010, condominiums lost 4.3% in value, while houses lost 5.3% .  This is about the same as what the market did in Mountain View.

I think what is important to note is the general direction these figures point to, and the general idea that the peak was in 2007 - 2008, and the low 2009.

Again, it mirrors fairly closely what the County of Santa Clara experienced.      --Are you curious about your area? Let me know I am curious too.  I'll run the figures for you.
Francis
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Silicon Valley real estate

Silicon Valley and FHA loans..

Home prices are pretty high in the Silicon Valley.  Here, where sometimes wages are comfortable and disposable income or savings pretty low, it is good to remember that it is still possible to purchase a home with as little as 3.5% downpayment. 

How is it possible? with an FHA loan, which is an (almost) normal loan, guaranteed by the Federal Housing Administration.

How does it work? Well it is fairly easy in fact - there are few limitations: the buyer does not have to be a first-time home buyer, there is no limitation of income for the buyer, and the property purchased can be pretty much any price.  The loan amount is limited to about $730,000.

So I like to remind my clients of this option if they have little savings or family help for the downpayment, or if their salary is modest: they can still think in terms of homeownership while prices and interest rates are low.  It is quite a good loan, with an attractive interest rate (at or slightly lower rate than a normal conventional loan).  It is a little more expensive to get: there is a 1% upfront fee for the mortgage insurance and a fee of about 1% every year on the amount of the loan.  Note: If it is used to purchase a condominium, the complex has to be FHA approved.

If you know someone who wants to take advantage of such a loan program let me know: I will share names of lenders who know FHA loans well.  Time is also important: the loan limit will go down on October 1st to $625,500. 

Thanks for reading, and sharing!
Francis Rolland
- Since 1985

Silicon Valley real estate
Search for homes in Los Altos

A link of interest:  American Legion Santa Clara Post 419