Student-Loan Debt Keeps Buyers Out of the Market

Student-Loan Debt Keeps Buyers Out of the Market
 As we hear that Congress struggles with the "student loans" question, it is good to put it in perspective with a few facts. I thought the article below was kind of important to keep in mind.

 

The impact of student-loan debt on the nation's housing market has real estate analysts worried due to the importance of first-time buyers to the health of the market. Questions linger about whether the housing recovery will be limited as deeply indebted college graduates struggle to stabilize their finances, which means young, first-time purchasers are not entering into homeownership at traditional rates.

• According to the NATIONAL ASSOCIATION OF REALTORS®, first-time buyers comprised just 28 percent of purchases in the resale market during May. For comparison, typically these buyers make up 40 percent of purchases. The lower rate is not surprising when one considers the statistic that college graduates on average carry $21,402 in student loan debt, and troublingly, only 39 percent are in a capacity to repay. Clearly, many college graduates have no choice but to postpone the purchase of a home due to heavy debts from student loans.
• The homeownership rate for those individuals who are still paying off student loans is 36 percent lower than among their peers who have no student debt, according to research from the One Wisconsin Institute.
• Student-loan debt will remain a long-term issue because the average payoff time is 21 years, ranging from 17 years for those who attended college but did not get a degree to 23 years for those with graduate degrees.
  
• The country’s total outstanding student debt has surpassed $1.1 trillion. For recent graduates, the debt load averages just under $27,000, but an estimated 13 percent of outstanding balances range from $54,000 to $100,000.

Read the full story on the Los Angeles Times article from Kenneth R. Harney, 6/28/13.
Do you have any thoughts on the subject? Feel free to chime in!

Francis

Silicon Valley real estate
Local market: Smart graphs
Current mortgage rates

Is this a safe neighborhood?

“Is this a safe neighborhood”?  ... is a question that we as Realtors® often hear from clients. (side note: a Realtor® is a real estate agent who is a member of the National Association of Realtors®, who adheres de facto to a very strict code of ethics - not all agents are Realtors®).
What people typically do not know is that as Realtors®, we are not allowed to answer such a question: it could be construed as discrimination.  Also, the opinion about how safe an area is can be so personal and relative!

I find that the best way to answer such a concern is to advise my clients to come back at different times of the day and walk around in the neighborhood, and talk with the neighbors as much as possible.  I would add that I believe it is always a good idea to do so, no matter how pretty or ugly an area may look.  You can learn a lot about a street, a block or a group of blocks by talking with the people living directly in the area.

Finally one has to remember that conditions change all the time: I live in an area that is fairly uneventful when it comes to crime, except that in the past few weeks there have been a well publicized increase in break-ins and thefts in that general part of Mountain View.  So the best way to answer such a question is to check for yourself with the police department and get a crime report, to talk to the neighbors (who will often tell you a lot about what happens nearby - and sometimes more than you want…), and also look at some internet resources on the subject.  Here are, below, some of the sites that I have come across in the past; but I recommend to check carefully how they collect their information, and what exactly they cover and do not cover.

https://www.crimereports.com 

http://www.spotcrime.com

http://www.mylocalcrime.com 

 

There is a specific web site for sex offenders:  http://www.meganslaw.ca.gov/

 

Some good information may also be found in the local newspaper.  For instance in the Mountain View Voice under "Crime Brief" or "Police Log",  and for Palo Alto "the Pulse" (PA Weekly).  Each local paper has a similar section.  One may need to check the evolution over a period of time to better judge a neighborhood.

 

Thanks for reading, as always!,

Francis

 

Silicon Valley real estate

Local market trends
Current Mortgage rates  ... Higher!!

Price increase in the Silicon Valley

To piggy up on my last blog (is the market slowing down?) here is the evolution of sales prices of houses and CID's (common interest development = condos and townhouses).

These graphs that I just pulled show the amount of increase in average prices in a year and a half, and illustrate how indeed this is a factor in a possible slow-down of the activity.

They also show something that is unusual: prices did not really go down a lot at the end of 2012.  On previous studies I showed how prices really adjusted towards the end of the year, in 2011 and 2010.  But the market stayed strong at the end of 2012.

Finally these graphs show that indeed prices are (somewhat) flattening at this point, at least in the case of the County of Santa Clara.

 

 

If you have any area of interest, very local or at the City level, let me know and I will publish it for you.

 

Thanks for reading, as always!,

Francis

 

Silicon Valley real estate

Local market trends
Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

Is the market slowing down?

Is the market slowing down right now?

Ask an agent who is full-time involved in the market, on the buy and on the sell side, and you will probably hear that it looks that way.   

About a year and a half ago, in the middle of January 2012, suddenly in just a matter of a week or two you could tell if you were actively involved in sales that something was changing:  properties were not available any longer to place an offer on, or offers were just going to be heard that evening with 2 or 3 offers expected, or it was too late by a day etc... So we would go to the next best one, and it was gone too, with multiple offers.

In a similar way today little signs appear here and there: a property comes back on the market a few days after being in contract, or we see "offer dates" pass with no offers brought in.  Also the inventory (finally!) increases a bit so that there is actually some choice for potential buyers.  I also hear sometimes that after a few days on the market very few people have actually looked at the disclosures online.  A month ago you would already have had by the start of the week-end most interested buyers checking out the disclosures.

So yes, it seems to me that the market is slowing down.  Sales figures in a month or two will tell us if this is correct.  I would attribute this slight slow-down to factors like:

• Buyers are jaded by so many unsuccessful bids they may have placed,
• Prices have gone up significantly for the same type of house, certainly so in the eyes of buyers, and if the asking price is too close to the last comparable sale, another 10 or 15% jump from that high becomes too intimidating,
• With higher values have also come on the market properties which may not be the same high quality as those who just commended such high prices,
• A sense, at least for some would-be buyers, that they just do not know where prices should be any longer, after the many extreme bids that all can see in the MLS (hence the need for a good Realtor...),
• .. And last but not least, the rise in mortgage interest rates that have shot up in the past 2 weeks, effectively pricing out those buyers who were at the top of their borrowing power.

 

Let’s qualify those remarks though: in the areas with good schools, for properties priced lower than the last sales, there are still multiple offers, no doubt. For areas with very little inventory, the demand which has gone unsatisfied for so long is still there, and even only one offer will often bring a much higher price than the asking price.  The market is still very much a sellers’ market.  But in areas where inventory is larger, the new prices coupled with more choices will give a break to buyers who can still qualify. 

The future will depend a lot on:

-       The inventory (going up, going down again??)

-       The interest rates

-       Seasonality to a certain degree.  There are fewer people around during summer.

If I had a guess I would say that in general, going forward, we should expect prices to reach somewhat of a plateau, a market of muted price increase.  .. well, so there is my crystal ball. Do you want to try yours out in a comment?

Thank you for reading,
Francis

Local real estate
updated loan rates   Rates are up mostly, except for the 1-yr adjustable

Not enough money for your downpayment?

Not enough money for a downpayment?

Let’s imagine that you really, really want to purchase a home, you have the income to do it, and you’re ready, willing and able (all 3 conditions that as Realtors we always check for).  But there is a little problem: you do not have enough money for the downpayment.

The typical options are: - to get some gift money (it’s got to be from a relative to be acceptable by the bank making the big loan), - or get a second, in the form of an equity line of credit (just making their come back now), - or win at the lotto...

There is however an other option, that I have personally never seen used, but that I just read about and is worth mentioning:

REX HomeBuyer, a form of shared appreciation (or depreciation).

The principle of this option is that a group of investors get together, and loan you money to help with the downpayment on our purchase.

If the property has appreciated when you sell it, they share in the profit.

If the property has depreciated when you sell it, they share in the loss.

This is a good option for people who need some help with a downpayment, and feel shy going it alone on their purchase; it is reassuring in a way to have someone else share in the risks of the market variations.  And all the while you own the house the advantage is that you have used the downpayment money to actually buy a home and live in it, - and for a lot cheaper than if you had to borrow the whole amount.  (remember that when you borrow a 90% amount on a house, you have to pay PMI –Private Mortgage insurance – and this is not cheap: about 1 to 1.5% of the amount you pay, every time you pay anything it seems).

In that option, you do not pay interest on the money that made the rest of the downpayment.  It is like having a friend co-buy with you but without the hassle to draw a complicated “separation agreement” for when you want to be on your own later. Here it is done from the start, in a clear way.

More on this interesting idea on this Los Angeles times article by Lew Sichelman.
As always with financial arrangements, run this by an advisor or an attorney if you are considering trying it...

Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A noteworthy local non-profit:  Our Brothers' Home

Tax break disappears as housing values rise

As property values have been going up sharply in the Silicon Valley, so are the assessors' values of our houses, throughout the area. We can expect therefore to pay more in property taxes, come November and December of 2013.

During the past 4 years I have prepared updated market analysis for several of my clients, in order to justify a lower value to be sent to the tax assessor's office. The goal of course was to pay a lot less in property tax, and I am glad to have been incidental to huge tax reductions in several instances. It is very unlikely that this is going to be possible going forward, as for most of the local area values have gone back to the highs of 2007, and sometimes higher yet. There are some small pockets in the County which would still be lower but there are fewer and fewer of them.

Nonetheless, if you feel that you are being assessed too much, do not hesitate to call on me to double check on it!

An article on the subject was recently published in the Mercury News, stating that "tens of thousands of homeowners will see their property taxes go up significantly this year as rising home values

restore some or all of their homes’ lost equity".

Do you feel you are being assessed unfairly this year? Let me know.

Thanks for reading,
Francis

Local real estate
updated loan rates   Rates are up mostly, except for the 1-yr adjustable
Week ending 6/6/2013 (Source: Freddie Mac)
30-yr. fixed: 3.91% fees/points: 0.7%
15-yr. fixed: 3.03% fees/points: 0.7%
1-yr. adjustable: 2.58% Fees/points: 0.4%

Where the mortgage deduction really pays

Where the mortgage deduction really pays...  an interesting article.
Source: CNN Money

The mortgage interest deduction is one of the most-expensive tax breaks on the books, but its benefits are distributed unevenly across the country, according to a new, comprehensive report by the Pew Charitable Trusts.

In 2010, the year that Pew analyzed, the mortgage deduction resulted in $80 billion of forgone revenue to the federal government. Over five years, the tax break is expected to reduce revenue by about $380 billion.
This article by Jeanne Sahadi @CNNMoney shows however who really benefits from the tax break (and who benefits from other tax breaks),  while these report and maps look at the geographical distribution of the mortgage interest deduction.

Make sure to look at the interactive maps, from the Fiscal Federalism Initiative, showing how widely mortgage interest claim rates and average deductions vary, both across and within states.  They show in particular some key findings like:
- Average deduction per filer, by state,
- the Claim rate, by zip code,
- the average deduction per filer by zip code.

Local info:
Look at the average deduction per household in your local area.

Simply fascinating!...

Thanks for reading,
Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
 

Bay Area real estate values...

As seen on Thursday's front page of the San Jose Mercury News (and also in the SF Chronicle of today Friday), property values in the Bay Area as a whole are definitely picking up.  Typically when it gets in the paper, it is already a few months old, but the information is organized in a way that shows updates in some communities that are not obviously visible to us here in the Silicon Valley.

Some of the East Bay Cities are doing fantastic, showing some real improvement in 1st quarter 2013 over the first quarter of last year.  For instance:
Oakley is 16% higher in median values than in the first quarter of 2012,
Antioch is 28% higher,
Union City is 34 % higher,
Pittsburg is 9 % higher.

The article is also interesting because it touches on a subject I touched on earlier in this blog: why are there so few homes on the market?   They are showing that there are still a lot of houses either underwater, or with not enough equity for people to move:
according to Zillow there are still about 25% of homeowners who are in that situation in the Counties of Santa Clara and San Mateo, and a whopping 46% in the Contra Costa County.

That would include:
- people who bought when prices were higher,
- people who borrowed too much on their home equity over the years,
- prices that are slightly higher than when property was purchased, but would not break even with the costs of the sale.

Francis Rolland

Silicon Valley real estate

Trends: Local prices and graphs.

Own vs Rent ...

Despite US population growth of roughly 1 percent per year, the number of owner households has held steady, in the range of 75 million since 2007, while the number of renter households has increased from 35 million in 2007 to nearly 40 million today. 
This means that the historic proportion of 1/3 - 2/3 tenants - owners in the US is loosing ground.

Some of the reasons are:
- loss of home because of the crisis,
- difficulty to refinance,
- Some renters who would like to take advantage of today's favorable prices and interest rates are finding credit standards too tight to obtain financing.

Here is the evolution over time, nationwide:

In France, that proportion is about opposite: about 1/3 owners, and 2/3 renters.
If you are coming from another Country, let me know what is that proportion where you are coming from!
Thanks,
Francis

PS: in California, the homeownership rate has gone down regularly since 2008 and is now about 54%.

Local market trends

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

California: foreign-born population and homeownership.

California, the most popular State for immigrants...  When I came here first in 1970 the mentality was still very much like: "Go West, young man, go West" and a lot of people were arriving from the East to start anew.  There was a lot of space available, still, right outside your door.

 

What is the situation now?

 

 

Well, it is true that historically, California has been the popular destination for immigrants. Currently, about one quarter of the nation’s immigrants live in California. The top three countries of origin for the foreign born entering the U.S are Mexico, China and India.

However, California’s share of incoming immigrants has been declining since 1990 due to a rise in state bills related to immigration, and the settlements of new immigrant arrivals into different states with historically low concentrations of immigrants.

 

Length of stay and region of origin are significant factors in determining homeownership rate among international buyers. Those who have stayed longer, and have migrated from Europe and other parts of North America are more likely to own a home.

Homeownership rate among the foreign born population is 47.9 percent in California, much less than the rate among those born in the U.S (58.1 percent). When breaking down the foreign born population, naturalized citizens are twice as likely to own a home compare to those who are not (63 percent for naturalized citizens versus 28 percent who are not a U.S citizen).

 

One in five REALTORS® has worked with an international buyer in the past year.

The share of international buyers has slightly increased from 5.3 percent in 2010 to 5.8 percent in 2011.

In 2012, California accounted for 11 percent of home purchases by international clients, second behind Florida (26 percent).

The largest group of international clients in California is from Canada.

The median home price of foreign clients was $505,000, which is double the median price of single family homes in the state ($291,000)

 

The California Association of Realtors has published a new study on the subject.

Full study url:   http://www.car.org/3550/pdf/econpdfs/BusinessDataForInternationalRE_Final.pdf  

 

Thanks for reading,

 

Francis
Silicon Valley Real Estate

Smart stats

Reasons your neighbors hate you...

Well...  a little bit of humor mixed with some sound advice and remarks.. From Lucy O'Neill at the Improvement Center.

Francis
Silicon Valley real estate


9 reasons neighbors hate you
Courtesy of: ImprovementCenter.com

An unbalanced market...

As we advance deeper inside the year 2013, the sales figures start showing how much the market has been ... to put it mildly, unbalanced.
Here in this statistical recap coming from the CAR (California Assocation of Realtors) one can see how much the various Counties in the Bay Area have appreciated from March 2012 to March 2013.

Even though this is not exactly the 1-year appreciation, but only the jump from one month in 2012 to the same month in 2013, it certainly gives a good idea of the appreciation we are going to see at the end of the year, because in fact it is pretty much the same story month after month.

It sure is a steep rate of appreciation.  What do you think? Are we looking at a bubble, or does it reflect accurately the health of the local economy?

Thank you for reading,
Francis
Silicon Valley Real Estate

Smart stats

FTC - Tips on ID theft

Federal Trade Commission posts new video to help identity theft victims

The Federal Trade Commission has a new video designed to help facilitators who assist consumers in repairing their identity. Helping Victims of Identity Theft is the latest addition to the FTC’s library of resources that explain not only how to recognize identity theft, but also how to report it and repair the damage it can cause. The FTC gets more complaints about identity theft each year than any other consumer issue, and estimates that nine million consumers become identity theft victims each year.
The video promotes the Guide for Assisting Identity Theft Victims, a tool for advocates, social workers, attorneys, and others who work to help resolve the issues identity theft causes. The Guide is a complement to the do-it-yourself instructions in Taking Charge:  What To Do if Your Identity is Stolen.

When time comes to purchase a house or refinance, it is wise to double check one's credit reports to make sure no accounts have crept up without our knowledge.

Francis

Silicon Valley real estate
Local market: Smart graphs

The effect of interest rate change...

It is easier to visualize what happens to a mortgage payment when the interest rates go up or down.
The visual below is pretty good at showing it, I thought:

Looking for some good resources for lenders? Do not hesitate to call on me,

Thank you,

Francis
Silicon Valley real estate
Local market: Smart graphs

Note: our next free E-Waste collection and shredding event will be on: Sat. 4/6/13, at our Coldwell Banker office at 161 S. San Antonio Rd, Los Altos. Times: E-Waste 9am to 4 pm. Shredding: 10 am to 2 pm.

Condos are "back" !... and other real estate surprises

Bay area condos’ tight supply has buyers scrambling.
And prices are going up a lot as a result.

Across the Bay Area, buyers are fighting for a limited supply of new and existing condos.

Several factors are combining to create this situation:

  -  investors have already snapped up many foreclosures and short sales and are renting them out.

  -  homeowners who might sell in a typical market are either still on the sidelines watching prices rise or are underwater and can’t afford to sell (much fewer now than yesterday!),

  -  those homeowners who do want to move up cannot do so, as they question rightfully their ability to purchase a "replacement property" in this one-sided market (the lack of bridge loans does not help),

  -  demand has been growing, because of the good job market in the bay area, and also - interesting trend - because many buyers who went through short sales or foreclosures are becoming homeowners again, thanks in part to loans from the Federal Housing Administration.

  -  finally, as housing starts have risen in the past year or so, home sales haven’t kept up. The gap suggests that builders are overwhelmingly building for renters, not buyers.  This trend is better studied in this article by Nin-Hai Tseng of CNN.

Investors as well as builders did not fail to notice the significant increase in rental prices that we witnessed in the past 2 years (locally certainly, but nationwide too).  In a way, we can see a small part of this phenomenon unravelling in my last blog about the San Antonio shopping center, where for the time being the only residential units being built there are for rent.

Need to know the value of your condo?  Do not hesitate to contact me,

Thanks for reading, as always!
Francis

Silicon Valley real estate

Trends: Local prices and graphs.

Coming soon: The Peninsula French Fair  - Art, food, and good company!!
Sat. March 23rd, all day.

California - a history of home prices...

California, a history of home prices...

 

Click to read better

What a trip! Difficult to imagine, if you purchased your home in the 70's, what it would be like today.

Did you buy your house in that decade?  what's your experience: how much is your home worth today?

Francis

Silicon Valley real estate

Trends: Local prices and graphs.

Coming soon: The Peninsula French Fair
Sat. March 23rd

Silicon Valley Luxury Home Sales - up 54% from year ago, Coldwell Banker residential brokerage reports

SiliconValley Luxury Home Sales Up 54% from Year Ago, Coldwell Banker ResidentialBrokerage Reports

by cbwesternregion

Luxury home sales in Silicon Valley surged 54 percent last month from the same period a year ago, according to a new report by Coldwell Banker Residential Brokerage, the Bay Area's leading provider of luxury real estate services.

The figures are based on Multiple Listing Service data of all homes sold for more than $1.5 million last month in Santa Clara County.

A total of 113 homes sold for more than $1.5 million in December, up from 73 in December 2011. The median sale price of a luxury home closing last month was down 7.8 percent from a year ago to stand at $2,019,500.

On a monthly basis, sales in December were down slightly from November's level of 121 transactions, but the median sale price was up 6.8 percent from November's median of $1.89 million.
Other key indicators for the luxury market improved last month from the same period a year ago. There were 58 sales over $2 million compared to 33 a year ago, and 20 sales over $3 million versus six a year ago. Homes also sold faster and sellers received a higher percentage of their asking price on average.

“The luxury market in Silicon Valley closed out 2012 the way it began, with healthy sales and strong buyer interest," said Rick Turley, president of Coldwell Banker Residential Brokerage in the Bay Area.
Turley noted that some of the increase in sales could be due to luxury homeowners deciding to sell before the expected increase in the capital gains tax rate took effect in January. Additionally, demand remained strong from employees of Silicon Valley technology companies with stock option money to invest.

Some key findings from this month’s Coldwell Banker Residential Brokerage luxury report:

• The most expensive sale in Silicon Valley last month was a three-bedroom, two-bath approximately 3,200-square-foot home in Palo Alto that sold for $6.75 million;
• Palo Alto boasted the most luxury sales with 33, followed by Los Altos with 31, Saratoga with 21, and Los Gatos with 14;
• Homes sold in an average of 58 days, down from 65 days a year ago but up from 50 days the previous month;
• Sellers received an average of 101 percent of their asking price, up from 97 percent a year ago and the same as the previous month.

The Silicon Valley Luxury Housing Market Report is a monthly report by Coldwell Banker Residential Brokerage, a specialist in high-end real estate sales. Through its internationally renowned Coldwell Banker Previews® program, Coldwell Banker is recognized around the world for its expertise in the luxury housing market.

Coldwell Banker Residential Brokerage serves Santa ClaraCounty with 21 offices from Palo to Hollister.

Thanks for reading!
Francis

Silicon Valley real estate
Local market: Smart graphs

PS: coming soon: The French Fair, in Palo Alto.  March 23rd, 2013

The San Antonio shopping center

What is going on at the San Antonio shopping center?

Several clients have asked me about the new shopping center being built at the crossroads of Palo Alto, Los Altos and Mountain View.  The "Village" has its own web site where one can see the following information in more details (see below). But in a nutshell, there will be:
- a brand new, huge Safeway,
- a luxury appartment complex of 330 units, (not cheap as some people told me),
- and a new building with retail, office and restaurants.

A smaller building at the corner of San Antonio and El Camino will house retail stores.
 

Click to see larger Pix

larger pix

 

 

 More details and opinions can be found on this Town Crier article.  Indeed everyone has an opinion on the impact on 1/ the development of downtown Los Altos, as it tries to attract its own set of customers, and 2/ the Los Altos schools, as this development is part of the Los Altos elementary school district. Others worry about an already dense traffic situation in that part of town and I recall that the connections with existing biking paths were also part of the negociations during the approval process of the complex.

 

Some links of interest:

Local schools and Los Altos schoold district and school boundaries,

bike routes.

 

Thanks for reading!

Francis

 

Silicon Valley real estate
Local market: Smart graphs

Note: our next free E-Waste collection and shredding event will be on: Sat. 4/6/13, at our Coldwell Banker office at 161 S. San Antonio Rd, Los Altos. Times: E-Waste 9am to 4 pm. Shredding: 10 am to 2 pm.

2013 Cost vs Value Report

When you are thinking about selling your house, one of the first questions that will come to mind is: "what should I do to increase the value of my home?", which quickly becomes: "if I remodel, how much will I recoup"??

The Cost vs Value report is published every year and a lot of good information can be accessed from this article by Sal Alfano of the Remodeling Magazine of Jan. 2013.

Typically the data is sorted by project (kitchen remodeling, bathroom, etc..) and by region within the US.  (there are 4 regions).  Overall, the first thing that jumps out in the most recent report is that the ratio that one recoups has gone up, because of the recovery of the real estate market.

Results of the report are also summarized on NAR’s consumer website HouseLogic.com, which provides information on dozens of remodeling projects, from kitchens and baths to siding replacements, including the recouped value of the project based on a national average.

In my experience however, the return of a lot of these remodeling projects is much higher in our area, the Silicon Valley, than one can read in the Cost vs Value report.  I cannot put  an exact value on it of course, since each property is going to be different, but it is my experience that most buyers in the Bay Area are willing to pay a major premium for a property that has been remodeled and is ready to move in. 
Imagine a property worth $600k, that is in need of a new bathroom.  If you'd spend around $10k to remodel a bathroom (hypothetically), that would buy you a fairly nice remodeled bathroom.  The sales price is most probably going to be more than $610k in that example.

I believe that in this area, the Silicon Valley, if you know a contractor that will do a good job, for a reasonable price, and you have the time to stay involved in the project to monitor it, you would be better off with the remodel.  I also believe this is why there are so many purchases here which are investor-driven, and why there are so many multiple offers on "fixer-uppers".

Do you have any experience on this matter?  Let me know!

As always, thanks for reading!,
Francis Rolland

Silicon Valley real estate
Local market: Smart graphs

Note:  our next free E-Waste collection and shredding event will be on:
Sat. 4/6/13, at our Coldwell Banker office at 161 S. San Antonio Rd, Los Altos.
Times:  E-Waste  9am to 4 pm.  Shredding:  10 am to 2 pm.

Gifts for downpayment...

Notice to givers of down payments...  please read on:

Home buyers trying to scrape together enough money to cover the typical 20 percent down payment frequently look to relatives for help. About 1/4 of first-time home buyers were looking for some help from the family for their downpayment (typically 20% of the purchase price). But mortgage lenders closely scrutinize cash gifts, and the check may not count toward a home purchase if the borrower can’t thoroughly document its source and intention.

There are some rules to know and to follow, and it is easy to understand once you think as a bank: if one takes too much of a loan, the risk of not being able to pay it back increases.  So the help with the downpayment cannot be another loan, in one form or another.

This article from the New York Times (by Lisa Prevost, published: December 27, 2012) is most interesting and also gives some pointers as to some of the tax implications.

As always, I advise my clients to talk to the specialist: the lender, and to do so ahead of time because it may take time to structure the transaction properly.  The first stop in buying a property is really and truly the lender, in my opinion.

Thanks for reading,

Francis Rolland

Silicon Valley Real Estate

Smart stats

But, where did the old bridge loans go??

I am surprised that no one talks about it, but:  where did all the bridge loans go?

It used to be that when you wanted to move up, or move down, you could buy a property first, and then sell your current home.  You insured in the process that you would not be out of a place to live and you would only move once.

To achieve that, you would get a bridge loan. 

Banks used to lend you money, based on your qualifications of course, but also based on the fact that the old house would be sold immediately.  They required to see that the house was listed with a Realtor, and if the market was not awful, it made a lot of sense: the house would eventually sell, and the old loan would be paid back.  The banks did not take any risk doing so (the profile of customers doing this is not particularly risky when you think about it).

The fact that the market went seriously South is certainly a good enough reason to stop doing bridge loans.  But, haven't the banks heard yet that in the certain areas, it is a strong sellers' market?  You would think that they would have acknowledged that by now, in particular in the Bay Area.  And the Bay Area is by no means the only area with a sellers' market.

Among the many factors that would help the recovery of the real estate market nationwide, and the economy as a whole, this is a major one.  My experience is that a good 10 to 20% additional properties would be on the market if banks made bridge loans. Right now the way things are goes like this: sellers have to sell their house first, then buy the replacement home with the proceeds of the sale.  But since they are not sure at all that they will be able to buy because of the excessively competitive environment, they do not risk the move.

A bridge loan is the solution.  By freeing a lot of housing inventory, it would enable more people to buy homes (one just has to look at open houses in the Bay Area since the beginning of 2012 to see the demand), more loans would be made, and the market would go up - in a more orderly fashion than now.  The banks would certainly win: they are in the business of making loans, good loans.  And in these situations, there are two loans to be made, instead of just one.

So, what are they waiting for? 
Does your personal experience fit in this scenario? Let me know...

Thanks for reading,

Francis

Silicon Valley real estate
Local market: Smart graphs

Nearly 21 million U.S. homeowners are mortgage free

With all of the problems associated with real estate, and for new homebuyers the difficulty of getting a loan, one wonders: how difficult is it to own a place in the US.  Well, taking a step back, and seeing the big picture is always a bit surprising and informative, as evidenced by the article below.

Almost 21 million Americans, or 29.3 percent of homeowners, own their homes outright, unencumbered by a mortgage, according to a recent Zillow analysis of mortgage data.

Analyzing data through the third quarter of 2012, Zillow found that 20.6 million homeowners nationwide own their homes free and clear of mortgage debt.

Among the nation's 30 largest metro areas included in the study, Pittsburgh, Tampa, Fla.; New York, Cleveland, and Miami had the highest percentage of free-and-clear homeowners. Washington, D.C., Atlanta, Las Vegas, Nev.; Denver, and Charlotte, N.C. had the lowest percentage.

It is good to keep things in perspective.

Thanks for reading!

Francis

Silicon Valley real estate

Stats, smart graphs etc...

Current Mortgage rates

New laws (as in: fiscal cliff) & real estate...

President Obama signed the American Taxpayers Relief Act into law last Wednesday (1/9/13).

Here are some housing-related provisions included in the federal law:

- The restoration of a tax deduction for mortgage-insurance premiums, including premiums paid to the Federal Housing Administration and private mortgage insurers. This provision expired at the end of 2011 but has now been retroactively extended for all of 2012 as well as 2013.

- 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

- Capital gains rates will remain at 15 percent for those earning less than $400,000 (individual) and $450,000 (joint). Gains above those income levels will be taxed at 20 percent. Gains on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 taxpayers filing jointly.

- The “Pease Limitations” that reduced the value of itemized deductions, including the mortgage interest deduction, are permanently repealed for most taxpayers but will be reinstituted for high income filers. This provision reduces a taxpayer's itemized deductions by 3 percent of the amount of his or her adjusted gross income (AGI) that exceeds the threshold amount. Under the new law, the Pease thresholds are $300,000 for married taxpayers filing jointly and $250,000 for single taxpayers (i.e., a married couple with an AGI of $400,000 would be $100,000 over the threshold; the couple’s deductions would be reduced by $3,000 which is 3% of $100,000). No matter how high a taxpayer's AGI, the Pease reduction cannot exceed 20 percent of the amount of itemized deductions otherwise allowable for the year.


The bill includes a provision to extend the Mortgage Forgiveness Debt Relief Act, which will for one more year exempt the taxation of mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale or loan modification (including any principal reduction). While debt relief has been extended at the federal level, the California exemption expired at the end of 2012, so forgiven mortgage debt is considered taxable state income for now.

This information is just in from our California Association of Realtors.  Of course, as always with tax questions, you are advised to check with your tax accountant how the new laws apply to you, and affect you in your particular situation.

Thanks for reading,
Francis

Silicon Valley real estate
Stats, smart graphs etc...

Current Mortgage rates

Fewer first-time homebuyers.

Is it a sign of the times?  Real estate fares much better today than last year, but a new trend emerges:
first-time buyers are fewer...

A survey by the NATIONAL ASSOCIATION OF REALTORS® found that only 31 percent of their sales were to first-time buyers. Normally, first-time buyers represent closer to 40 percent of the market.
More details about this (sad) trend on this article of the New York Times.

Thanks for reading!
Francis

Silicon Valley real estate
Smart graphs...

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

Home prices nationwide rise.

Home prices nationwide rise for eighth consecutive month.

CoreLogic’s October CoreLogic HPI report shows home prices nationwide, including distressed sales, increased on a year-over-year basis by 6.3 percent in October 2012 compared with October 2011, representing the biggest increase since June 2006 and the eighth consecutive increase in home prices nationally on a year-over-year basis.

Highlights as of October 2012:

• Including distressed sales, the five states with the highest home price appreciation were: Arizona, 21.3 percent; Hawaii, 13.2 percent; Idaho, 12.4 percent; Nevada, 12.4 percent; and North Dakota, 10.4 percent.
• Including distressed sales, the five states with the greatest home price depreciation were: Illinois, -2.7 percent; Delaware, -2.7 percent; Rhode Island, -0.6 percent; New Jersey, 0.6 percent; and Alabama, -0.3 percent.
• The five states with the largest peak-to-current declines, including distressed transactions, were Nevada, -53.5 percent; Florida, -44.5 percent; Arizona, -40.2 percent; California, -36.6 percent; and Michigan, -35.3 percent.

Corelogic Home price index.   (The CoreLogic HPI incorporates more than 30 years’ worth of repeat sales transactions, representing more than 65 million observations...)

Thank you for reading,

Francis

Silicon Valley real estate

Current Mortgage rates

Non-profit organization worth noting: Random acts of flowers.

Previews Luxury Market Report

The 2012 edition of the Previews Luxury Market report has been released! As 2012 comes to a close, Coldwell Banker Previews International® has taken a look back on the affluent marketplace for the December 2012 Luxury Market Report. Inside the report, you’ll find:

• Ultra-Affluent Market Survey. What motivates a buyer or seller at the very top of the market? We surveyed Previews® NRT agents who have either listed or sold a property priced at $10 million and above in the last three years to give you new insight into this rare consumer.

• Women of Affluence. Did you know that women control $20 trillion in consumer spending worldwide and women’s global incomes have been estimated to grow by $5 trillion in only a five-year span? Previews explores the reasons why affluent women have become one of the most influential groups in the luxury marketplace today, and how they’re rapidly changing the business of real estate.

• Top 10 U.S. ZIP Codes. This year, the ZIP code charts reveal a few new hotbeds for affluent buyers, such as Manhattan Beach, Calif. and Saratoga, Calif., in addition to the blue-chip luxury neighborhoods of Beverly Hills and Greenwich, Connecticut.

We hope this information will give you a more nuanced picture of the global luxury marketplace as we move into 2013. Click here to download the full report.

Thank you for reading,

Francis Rolland

Silicon Valley real estate

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.