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Tax Credit Extended, Markets Further Stabilizing and Real Estate Ideal Hedge

Tax Credit and Conforming/FHA Loan Limit Extended

Made official on Friday, the tax credit for home purchases was extended through July 1, 2010 and the important details are exactly as they were in my post on Friday the 30th of October, which was summarized as follows:

· Effective on binding real estate contracts from December 1, 2009 through April 30, 2010, The tax credit would be $8,000 for first time home buyers and $6,500 for move-up buyers who have owned their current home for at least five years

· The tax credit expires on April 30, 2010; however, if a binding contract is reached by April 30, 2010, buyers have an additional 60 days to close the deal and still be eligible for the tax credit

· For purchases made in 2010, taxpayers would be able to claim the credit on their 2009 income tax return

· The income limits for both first time home buyers and move-up buyers would be $125,000 for single return and $225,000 joint return.

· Cost of the home may not exceed $800,000 to be eligible.

Remember that a tax credit has about THREE TIMES the impact of a tax deduction, which allows someone earning $125,000 per year to be taxed on about $102,000*. And since other items like interest and property taxes are also deductible*, that same individual may be looking at less than half of their earnings being fully taxable..!*

Add the above news to the fact HUD also extended the conforming loan limit of $729,750 in the Bay Area to December 31, 2010, and you have a “perfect storm” for every qualified first-time buyer in the Bay Area.

S&P Case-Shiller Confirming Further Improvement of Housing Prices

Released last week, the S&P Case-Shiller index confirms that housing prices continue to improve, especially in areas like San Francisco where the index moved another 2.8% in August to 132.47. This marks the seventh straight month of improvement.

Zillow also reported that their index reflected further stabilization for the third quarter, with over 26% of the metropolitan statistical areas showing signs of improvement.

Real Estate as an Ideal Hedge to Both the “W” Concern and Inflation

You may recall from my last post that we are seeing far more application activity for purchases in the $1mm+ range, especially the $1.5mm to $4mm range. These applications have been coming from our more financially-minded clients, as they not only see tremendous opportunity to obtain a more valuable home, but they are very concerned about a “W”-shaped economic recovery and subsequent inflation. As such, obtaining an upgraded home for less, cheap financing and hedging against inflation make buying a larger home an ideal move. All things being relative, the reality is that the S&P 500 currently has a rather high price-to-earnings ratio at about 19.52 versus the historical average of 15.7. As such, if we were in average economic circumstances, it’s arguable that the stock market is overvalued by about 25%. Given the fact that our current economy is FAR from being in average condition, it’s anyone’s guess just how overvalued the stock market is. All I know is that my savviest, financially-minded clients think that the stock market is due a correction and that real estate is a great asset to have as a hedge against both a market correction and inevitable inflation.

Fannie’s New Program: Deed for Lease

Announced on November 5, Fannie Mae is helping those qualified applicants to essentially sell and lease back their current home. This program is also applicable to investment-property owners who are facing foreclosure and wish to deed the property over to the lender and allow the renters to continue renting at market levels.

Rates and Activity

• Rates continue to run as low as 3.75%, depending on a number of different factors, with the conforming 30-year at just under 5% and the jumbo 30-year at about 4.75%
• 71% of our transactions last month were purchases, and the average loan was in the $500k range.
• As mentioned above, we’re seeing a heavy trend in purchase applications for the move-up market, but inventory is turning off a majority of those buyers
• We closed a deal in TWO weeks, but we still recommend a 30-day closing period
• If you or someone you know prefers to pay cash for a purchase, then finance that purchase within 90 days to protect valuable tax advantages, we can help, as we have programs that DO NOT require 6 months seasoning and pricing is based on purchase money, NOT a cash-out refinance

* Does not constitute tax advice.  Please seek any qualified tax professional for proper guidance.

Tales From the Front – The World of Palo Alto Area Real Estate 10/16/09

Today was re-tour day in Palo Alto. When the price of a home is reduced, or the listing agent is trying to generate some interest in a stale listing, they “re-tour” it, or have it on broker’s tour again. Today we visited three great properties that are looking for new owners and are on tour following price reductions.

First up was a Crescent Park contemporary at 1012 Forest Avenue, listed by Alan Dunckel and Derk Brill of Alain Pinel Realtors in Palo Alto. Since there isn’t an actual Alain Pinel at that office, if you ask for him, you will be connected to Alan Dunckel, who is a nice guy and a good agent and his name is close enough. They have just reduced the price on this home from $2,395,000 to $2,195,000. Not bad for a 4 year old home in that neighborhood. It will have an open house on Saturday and Sunday from 1:30 to 4:30.

Next we moved a little South to 2145 Emerson Street in equally shi-shi Old Palo Alto. This newer traditional home is listed by Lisa Liu of Alain Pinel Realtors for $2,095,000, down from $2,295,000. At 2248sf on a 5000sf lot, it’s a cozy home, with great details, and great natural lighting. Open Sunday from 1:30 to 4:30.

Saving the best for last is my Intero colleague David Troyer’s listing at 75 Coronado Avenue in Los Altos. This new home is 6721 square feet on two levels on a 14233sf lot. Using modern Craftsman architecture and high ceilings, even the basement feels open and spacious, and it has great finishes and details throughout. Normally shown by appointment only, I’ll be there this Sunday from 1:30 to 4:30. Please stop by!

If you would like more information on any of these or other homes for sale in the area, send me an email, or call me at 650-450-0450.

Have a great weekend!

Tales From The Front – My world in real estate, October 9, 2009

I’m going back to some of our original content here on 3Oceans and providing some commentary on selected homes I saw today on Broker’s Tour that are worthy of mention to me. Thanks to JT for driving today, and Steve for navigational assistance.

I dragged my Los Altos compatriots to Palo Alto today to see a couple of fine homes from the 1930’s. Being an old house nut, 320 Kellogg Avenue, listed by Tim Trailer of Coldwell Banker in Palo Alto really captured my attention with its period details, classy kitchen remodel and the big soaking tub in the master suite. Set on nearly half an acre of Old Palo Alto, this fine property will only set you back $9,750,000.

Moving downmarket to 2050 Waverly Avenue, listed by Bonnie Bjorn of Coldwell Banker in Menlo Park is this beautifully restored Dutch Colonial, offered with the reduced price of $4,995,000. It’s less house and less land than Kellogg, but you don’t have the train noise, and I actually like the neighborhood better. Plus the almost $5million in change will get you a nice little place overlooking the fairway at Pebble Beach, or a small winery in Sonoma . . .

The highlight for me today was this newer Palo Alto Hills estate, listed by Grace Wu of Alain Pinel for $4,299,000. Almost two acres of land, sweeping views of the Hills, and a 3 car garage (must have!) make this a winner. No open houses, but I can set up a showing if you are interested.

Finally, a big shout out to David Chung of Alain Pinel for rocking his new Audi R8 on broker’s tour today! I think he is the new winner in the sexy Palo Alto Realtor Car competition. Eat your heart out Ken!

If you would like to see any of the homes I wrote about today, let me know.

Thanks for reading . . .

What Buyers Learn Before Escrow, They Forgive; What They Learn After Escrow, They Sue

I wonder if I may be making history here as the first person to ever be live-blogging a real estate legal update seminar.

Twice a year my broker, Alain Pinel Realtors, runs attendance-mandatory legal update seminars hosted by Bill Jansen of Broker Risk Management.  Most of us look at these events akin to a trip to the dentist:  painful, but necessary and perhaps even good for us.  Fortunately the company provides a breakfast to get us all there on time — a fairly reliable ruse in the case of Realtors.

Bill does his best to liven up his talks with anecdotes, pithy lines, and the occasional joke.  Some of his best lines today were on disclosure obligations:

1) Seller:  “Do I have to disclose–”

Agent (interrupting):  “Yes.”

The point?  If there’s any doubt about whether something should be disclosed, the answer is “yes”.  In legalese, everything material has to be disclosed, which is of course a subjective standard.  Since the likely plaintiff in any lawsuit is a buyer, their interpretation of material could come back to bite you.

Disclose, disclose, disclose.

2) “What buyers learn before escrow, they forgive.  What they learn after escrow, they sue.”  Buyers hate surprises, especially expensive ones.  Attorneys, on the other hand, simply luv ‘em!

——————–

Disclaimer:  I am not an attorney, so don’t make any decisions or take any actions based on what I’ve written above.  Consult your own attorney for advice related to your particular situation.

An NWMLS-Compliant Broker Tour Report

This post is in honor of the citizen journalists at Redfin, whose months of efforts at writing witty, insightful property reviews were brought down by an over-zealous MLS association bent on maintaining the rightful balance of power in the real estate business — ie, that the listing agent is at the top of the pyramid, the buyer’s representative is significantly lower, and the consumers…well, they’re not really that important, let’s face it.
I’m a good 800 miles out of the jurisdiction of the NWMLS, but I’m sure our local MLS’s are paying close attention.  So, here’s what my semi-regular property reviews would look like if they were to be NWMLS-compliant…

Ken DeLeon, Wilson Sonsini attorney turned Keller Williams mega-agent, has a new listing at 994 Loma Verde.  Like half of today’s tour, it’s priced just a whisker under $1.3M, but good common market sense would suggest it’ll go somewhat above that.  At ~1800 sq ft, it’s spacious and bright, and — as we would expect — it’s impeccably staged.  Another met expectation was Ken’s food line up — he always does a full-court press to bring in the agents, and we were there in force.  Ken’s open house schedule for this weekend is standard for him:  1pm to 5pm on both Saturday and Sunday.  That is, while other agents are still enjoying lunch, Ken is already out there at the property; while other agents have long gone home, Ken is still there, trying to get the best deal for his client.
(Full disclosure:  Just so there’s no mistake, I am not Ken DeLeon.  My name is Kevin Boer.  Ken is a friend, and, technically, a competitor.  I’m with Alain Pinel Realtors, not Keller Williams.  994 Loma Verde is not my listing.  I am not advertising the listing.  I am not pretending as if I am the listing agent in an effort to get people to call me about this property.  I am talking about the property because I saw it on tour today and it was pretty neat.)

Satisfied?

Why Can’t The Industry Response Effectively to Zillow? For the Same Reason Your Local PTA Ain’t Gonna Be Fielding a World-class Baseball Team Any Time Soon!

Michael Wurzer, the author of the well-written, provocative, up-and-coming FlexMLS blog, offers an MLS software provider's perspective on the recent Zillow developments, which from his point of view are yawn-inducing. Given that he first heard the news in the middle of the night after having been woken up by a puppy, he's probably grateful.

Michael raises the following challenge: Now is the time for brokers, agents, and MLS organizations to realize and increase the value of the MLS data repository.

I couldn't agree more. The unfortunate thing is…it simply ain't gonna happen. Why?  There are many reasons, not the least of which is organizational:  Realtor and MLS boards are designed with certain goals in mind, none of which have anything to do with technological innovation.

That's not necessarily a bad thing, mind you, since excelling in technological innovation is not a prerequisite for excelling in the real raison d’être for Realtor and MLS boards, namely fostering cooperation amongst otherwise fiercely competing brokerages and Realtors.  It really is coopetition in its purest form.

Think about it.  In our local market, the three biggest brokerages are Alain Pinel, Coldwell Banker, and Intero Real Estate.  The rivalry between these three companies, and between their respective agents, is fierce and unrelenting.  A new listing for Alain Pinel often takes place at the expense of the other two, since anybody interviewing multiple agents is likely to pick one from each company.  And yet, despite this intense competition, agents from any company — not just the big three — regularly and gladly show all the listings on the market, without regard to the listing broker.  Similarly, listing agents regularly and gladly listen to all the offers that other agents bring in, no matter which brokerage they come from.

It really is quite impressive, and the structures behind this are the much-maligned Realtor and MLS boards.  They create and enforce rules that enhance cooperation amongst competitors.  They have arbitration committees for settling disputes.  They have codes of conduct that prohibit poaching another Realtor's clients.  They require all members to upload new listings within 48 hours.

The big price they pay for enabling this coopetition, however, is that these boards tend to be consensus-driven (or nearly so), slow-moving, plodding, and methodical.  While this is the only way to get sworn business enemies to agree on anything, it's a terrible way of fostering  innovation.

Want to put sold listings up on the MLS?  Hell, no!  If one key player puts his foot down, perhaps threatening to remove his listings from the MLS, then that ain't gonna happen.

Let's talk about uploading the listings to Trulia, Google, or Zillow?  Absolutely not!  (Unless you're the Houston MLS.)  All it takes is one big broker to feel threatened by this move and it simply won't happen until there's absolutely no choice.

Ok, then, let's discuss creating a snazzy state-wide MLS to compete with these interlopers!  Sure, we'll discuss it, but what we really mean is "let's set up a feasibility steering committee to investigate this and report back to the board in the Spring of 2009."

Zillow and the other 2.0 players have no such restrictions.  Quite the opposite:  they're designed to turn on a dime, to be responsive to competitive pressures, to be creative, to be laser-beam focussed on consumers.  That's why they're so good at constantly turning out great products:  they're designed from the ground up to do precisely that.

Think of the Realtor and MLS boards as being akin to your local PTA.  The PTA is set up to do  extremely well at certain things:  raising money for a school, getting parents to volunteer in the classrooms, fostering interaction between parents and teachers.

But would you choose a PTA-type organizational structure to field a team of world-class baseball players?  No way!  To do that, you'd need to be much more business-oriented.  You'd have to be willing to take chances, to fire players that weren't doing well, and to be a hard-nosed negotiator.  That's now how PTA's are set up.

The next time you get frustrated at our industry's seeming inability to respond to these competitive threats, remember that that's simply the price we pay for having an organizational structure that otherwise suits our needs quite well.  Your local Realtor or MLS board ain't gonna be beating Zillow or Trulia at the technology game any time soon.

Today’s Menlo Park Real Estate Tour: The Travails of a Gluten-Intolerant Realtor

Alas, the Americans with Disabilities Act does not consider gluten-intolerance a protected condition, and thus I went hungry during today’s Menlo Park real estate tour, in which many homes offered tempting delicacies to lure us in.
Though the dearth of housing inventory remains an issue (see the 90-day rolling average chart to the left), the numbers have been increasing lately (per the 7-day rolling average chart on the right), and this was reflected in today’s tour which featured a surprising number of properties in the Willows.

But before stopping by the Willows I went to the Flood Park neighborhood sandwiched between Bay Rd and Highway 101 to see Corey Sijbrant’s listing at 1033 Ringwood, Menlo Park. Weighing in at $1,049,000, with 3 bedrooms, 2 bathrooms, and 1600 square feet, it’s been nicely done up and the master bedroom boasts a loft area, a touch I’ve always liked.

Moving on to the Willows, I started at 927 Arnold, a Tasha Standridge (Keller Williams) listing. This home is a classic “Timing is everything story.” On the market during last year’s doldrums, it just didn’t sell. Tasha wisely took it off the market, made some improvements, and now it shows even better than before and will doubtless sell within the week. With two stories, 4 bedrooms, 2 bathrooms, and about 1750 sq ft, this home is listed for only $990,000. A home that large in the Willows for under a million dollars? What gives? Simple — it’s unfortunately only a stone’s throw from Willow Rd and from highway 101. The sound barrier wall deflects a lot of the noise, but there’s still enough noise to make the property’s yard a poor choice for a yoga meditation session. Check it out this weekend during the Saturday and Sunday open house.
Next was this week’s winner of the “great spread” award: 212 Chester St from mother-and-daughter team Gloria and Caitlin Darke (Alain Pinel). I had to content myself with the healthy stuff there — celery sticks and carrots — and pass on the undoubtedly delicious, but tragically gluten-ridden, breaded chicken. Oh yes, the home itself…Priced at a whisker under $1.3M, the home has been significantly redone, boasts a large lot over 7300 sq ft, and has nearly 2000 sq ft of living space. See it for yourself during this weekend’s open house on both Saturday and Sunday.

Next up was Karen Izzo’s (Coldwell Banker) listing at 3 Cleland Place. Also open this Saturday and Sunday, this $1,200,000 “Charming Willows Bungalow” has a surprisingly large back yard — complete with a nostalgia-inducing tree swing — and 1410 square feet of living space, including 3 bedrooms and 1.5 bathrooms. Her Realtor treats included some much-needed coffee and some undoubtedly also delicious, but sadly be-glutenized muffins. I had to pass.

From there the next on my list was local Keller Williams superstar Miles McCormick’s listing at 336 Concord Drive. Miles was in the business and web-savvy early enough that he snagged the domain name “HomesOfThePeninsula.com”. At $786/sq ft, this 1520 square foot property will set you back just under $1.2M, and you’ll get not only a spectacular Willows location — with proximity to downtown Palo Alto — but also a very nicely done up 3 bedroom, 2 bath home. Again, delicious treats. Again, not for the gluten-intolerant Realtor. Oh yes, this home is also open on both Saturday and Sunday.

Trulia Gets More Listings and More Delightful

Hot on the heels of Trulia’s announcement that Keller Williams’ listings will soon be added to Trulia’s database, now the company can proudly boast that another giant — Realogy — is on board. Included in Realogy’s portfolio are the giants Century 21, Coldwell Banker, and ERA.

Trulia has been slowly building its relationships with brokerages around the country to get their listings on board, and has won the trust of the industry — naturally wary of online predators who take the listings, snazz them up, and then sell them back as leads — by faithfully directing traffic back to the brokerage’s sites and staying true to its promise of making money only through advertising.

Don’t know how I missed this promo when it launched on Youtube late last year, but here’s some slick advertising for the company, featuring, amongst others, Alain Pinel’s CEO Larry Knapp.

This is where things start to get interesting. While Trulia’s search experience has always been at least on par with the best real estate search engines out there, its relative dearth of inventory — compared to broker-run and MLS-run sites — has been its Achilles heel. Sure, it’s always been fun and cool to search on their site, but in the early days when their site had only 20% of the listings in an area, many would have sacrificed Trulia’s coolness for the completeness of less cool sites.When Trulia got up to 50%, the same could perhaps be said. With Keller Williams and the Realogy giants now on board — as well as the large local players, like Intero and Alain Pinel Realtors here in the Bay Area — they could well soon reach the tipping point of, say, 80%, after which the remaining stragglers will have no choice but to go on board as Trulia becomes a more popular search destination.

It’s unlikely Trulia would ever have 100% of the listings in any given area because of the “long tail” nature of listings. In our MLS catchment area, for instance, there are currently 4110 active listings, of which fully 536 are from brokerages that currently have only 1 listing. There’s simply no way Trulia can knock on the doors of all these brokerages to get those stragglers, so the company will have to rely on the “me-too” syndrome for them to join.

Today’s Palo Alto and Menlo Park Properties: A Guard Tower to Ward off Marauding Athertonians

What better way to spend a balmy, sunny, spring day than viewing the new crop of homes to hit the market in Palo Alto? Come along for the ride as we explore the inventory, which, per our friends at Altos Research, is still tight, but improving.

First up was a stray Menlo Park property — “stray” because Menlo Park properties are normally on broker tour on Tuesdays, not Fridays — namely, 1026 Menlo Oaks in the Menlo Oaks/Flood Park neighborhood of Menlo Park. A retired fireman’s residence, this classic old 3/2 home sits on a 9000 sq ft lot, a size more commonly found south of Bay Road than north of it. The listing agent, Jeanne Wangsness of Coldwell Banker, has it listed at $1,047,000, and in this market it’s anybody’s guess what the winning bid will be, despite how close it is to the charming sounds of highway 101. Look at it this way: you’re paying $100,000 for the home, another $2000 for the quaint (but gas-burning) stove, and $945000 for the land.

From there it was on to Palo Alto and 2297 St. Francis, listed by local Coldwell Banker superstar Brendan Leary. Tragically close to highway 101 and Embarcadero — and priced accordingly at $925,000 — is a definite candidate for the cute award, with 2 bedrooms, 2 bathrooms and 1120 square feet. Detracting from its charm, however, is a somewhat unkempt back yard.

After popping by Intero Real Estate’s Lana Raltson’s listing at 290 Iris Way in Palo Alto, I mosied on over to see fellow Alain Pinel-er Arti Miglani’s listing at 3055 Stelling. Showing my softer side, I took time to coo over an adorable little 8-month baby whose mother was busy looking over the property. Listed at just under $1.2M, this 3/2 Eichler home has been well-looked after and nicely remodelled, maintaining some of the original charm. Typical of this style home, there is a partial wall separating the kitchen from the living area, but the kitchen has been redone with tasteful tiles, cabinetry, and appliances, and is well lit from both the large windows and door leading outside and the track lighting. Arti had thoughtfully provided a coffee cart service — a wonderful way to keep Realtors lingering longer at the property.

Then it was two quick stops at 3934 Nelson (Pat Miller, Alain Pinel) and 2590 Bryant (Tim Anderson, also Alain Pinel) — the latter a small home on a big yard, whose nearly-certain fate is to be torn down and built into a McMansion like the one currently being built 2 houses down.

Today’s pièce de résistance was definitely the last property I saw: 345 Lincoln Ave, a grand century-old Professorville home listed by the Carol/Rosemary/Nicole team (again — Alain Pinel!) For just under $5M, you get a 21000 sq ft lot (pretty rare in Palo Alto), an elegant 4000+ sq ft home, 6 (or more) bedrooms, two stories plus an attic — and thought I can’t speak for the listing agents, they would probably be happy to throw in a GPS so you can find your way around. The nicest touch of this property was undoubtedly the “guard tower” perched above the back of the house, extending up to a four-story house, surrounded by a wall of glass. A perfect place for a sundowner or a late afternoon nap, one imagines this tower would have been perfect for spying on those marauding Athertonians in the old days before peace broke out between the two neighboring towns.

Curious about the route I took? I didn’t think so…but here it is anyways.

Today’s Palo Alto Real Estate Gems

Undeterred by the light rain — and well-protected by bright yellow rain gear — I ventured out to sample a pick of today’s properties.
First up was a listing from the local real estate triumvirate of Carol, Rosemary, and Nicole of Alain Pinel at 1428 Hamilton Ave.  The home’s ranch-style exterior gives an undeserved first impression of blandness, an impression completely undone once you see the inside.  The living room, presumably an addition, uses skylights, light paint, recessed lighting, and the natural sunlight coming in from the French doors to give a large, warm, welcome feel.  A little office cottage in the back went unvisited, alas — I had left my shoes at the front door — but I did take the time to check out the basement, an unusual enough feature of Bay Area homes that they always warrant a visit.

Bob and Lori Ann Wolff of Coldwell Banker’s entree at 1295 Wilson, also in Palo Alto, is one of those classic “they just don’t build ‘em like that any more” Victorians with a 112-year old history.  The inside is as true to form as the outside, with wooden staircases, a charming attic, storage nooks, a jack-and-jill bathroom.  The original owner took a picture of the home in all its Palo Alto farmland glory which has remained with each subsequent owner, and will pass on to the next lucky owner as well.

After seeing a few other properties, my last one was a contemporary listing in downtown Palo Alto by Alan Dunckel (Alain Pinel Realtors).  Situated at 334 Hawthorne and designed by local architect David Solnick it is sleek and well-lit, with all the creature comforts of a contemporary:  recessed lighting, open plan granite-counter kitchen, and snazzy bathroom fixtures.  If you’d like a look, drop by this afternoon (Feb 9, 2007) from 5pm to 7pm for Alan’s cheese and wine soiree.

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