DO AS I SAY... NOT AS I DO

DO AS I SAY... NOT AS I DO

There are many things about real estate that are great... one of which is that it never gets dull. With the boom everyone was a genius. With the bust everyone is pointing fingers at who's fault it was. Though banks had a big role in feeding the bubble it was Government policy or lack there of that created the ingredients for the bubble to form. Government policy encouraged home ownership to those who couldn't afford it and Wall Street in their creative capacity figured out how to create the financial products that would keep the supply of investment money coming in to fund the loans.

Government is now attempting to throw a lifeline to struggling homeowners and "rescue" them by creating programs and policies encouraging banks to offer loan modifications programs to struggling homeowners.... except for government held mortgages of course. An interesting read from the link to the article below.

http://money.cnn.com/2010/05/14/news/economy/fannie_freddie_principal_reduction/index.htm?section=money_realestate&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_realestate+%28Real+Estate%29

From the desk of Zach Trailer

A Bit of Perspective

This is an interesting article that brings a bit of gravity back to the encouraging housing sales statics that we have seen in 2010. The crux of this article touches on the fact that a high percentage of our national wealth is tied up in the housing market. Of course, over the last 10 years this wealth was leveraged to consume. The appreciating asset of our homes over the last 10 years created an "ATM" that people could then draw from for all sorts of purchases. Though this ATM has dried up for the average person the truth that this article points out is that this has other consequences that ripple through the economy affecting construction, small business, and government employment all which contribute to the jobs engine in the United States. This is a good read that helps bring to life the ripple effect that an overall reduction of value in the real estate market has.


http://finance.yahoo.com/real-estate/article/109507/real-estates-far-reach-to-continue-to-pinch

A Wild Ride on Wall Street

What a wild ride on Wall Street last week. All of 2010 gains were temporarily wiped out and after a roller coaster couple of days the Dow is gaining back what was lost. At one point a 30 year mortgage was in the neighborhood of 4.5% as money fleeing from EU risk came pouring into US Treasuries. An EU bailout has caused the dollar to fall again today 5/10 which is good for the stock market.

The Real Estate market continues to show strength. Below is a great link to see just how strongly the housing market has come back in silicon valley. http://www.burbed.com/2010/04/25/silicon-valley-median-home-price-rises-29-percent/ Median prices have risen by 29%. Likely there are a few contributing factors. The expiration of the first time home buyers tax credit brought a lot of buyers into the market. Historically low interests rates continue to be a big incentive to buyers. The truth of the matter is that compared with a year ago those who are still employed are far less afraid of losing their jobs than they were a year ago, especially in here in Silicon Valley. In Silicon Valley companies are financially healthy and making a lot of money. Many including Apple have announced fabulous earnings which gives confidence to those who are employed. In fact, tech is hiring again which will only continue to build strength in the market.

Have a great Monday!

From the desk of Zach Trailer.

Multiple Offers Abound

California is an amazing place: The weather, the diversity, the geography, the innovation... all of these factors make California like no other place on earth. Real Estate in California is no exception. Over the last seven years as a Realtor on the Peninsula in the Bay Area I have seen an historic ride up. What is more amazing is that as other markets have fallen spectacularly across the country, the mid-Peninsula has held-up spectacularly well. This just goes to show the resilience that Palo Alto, Menlo Park, Atherton, Woodside, Los Altos, Los Altos Hills, and Mountain View have. With Stanford and the heart of the of Silicon Valley a stones throw away these housing markets remain incredibly resilient. Multiple offers currently seem to be the norm in the heart of the Peninsula. Low interest rates, a rebound in the equities markets, and low inventories are feeding a sellers market. Weekend open homes inn the 1.3M-1.8M range have seen 50 plus groups of people through in a single day. The oldest words in real estate are location, location, location... this continues to ring true.

High Speed Rail

High Speed Rail remains an unknown in the Peninsula Real Estate market. It has the potential to impact homes and valuations along the rail corridor.

There is the possibility that property could be seized by eminent domain if the current corridor is widened. There is the possibility that the train could go underground throughout portions of the Peninsula leaving real estate generally unaffected. There is the possibility that the track will be elevated. There is the possibility that the project will be over budget and will not happen. The reality is that no one knows at this point what will happen though the public comment period may give a bit of insight into this. Regardless, this is an important issue to keep apprised of on behalf of all Peninsula real estate owners and especially those who have property abutting the current rail corridor. As more information comes to light I will continue to write on this subject.

Cash is King

In a booming market the highest bidder gets the home. In other markets it is often the cash buyer that has the advantage over all other interested parties. A buyer that is obtaining traditional financing may need 45-60 days and sometimes more in order to close escrow. From the sellers perspective during this time anything can happen with multiple contingencies available to the buyer. All of the documentation now associated with loans - appraisals, inspections, etc. provides safeguards to the buyer and lender... and these create transaction risk for the seller. The seller has to hope that nothing will derail the sale. Thus, when a buyer makes an all cash offer it is very attractive to the seller even though the offer may be less than other competing offers. In a truly free market the discount a seller is willing to accept from a cash buyer equals the risk the seller feels exists in the deal.

Long story short. Be a cash buyer if you can and still do your due diligence.

Mortgage Market off of Life Support

The Federal Government has officially stopped buying mortgage backed securities as of March 31st 2010. This government action is credited with keeping the broader housing market alive over the last year by keeping liquidity in the market and continuing to fund first time home-buyer mortgages. These purchases, stimulated by additional tax credits have accounted for up to 50% of purchases in many markets across the country and have provided key support to the broader housing market. Interest rates should be watched closely as the financial markets will determine demand for these securities and thus affect mortgage interest rates. The good news is that prices have not jumped nearly as much as people initially thought they might. Optimistically speaking... this will be a smooth transition.