SubscribeTax Credit Extended, Markets Further Stabilizing and Real Estate Ideal Hedge
November 11, 2009
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 – My world in real estate, October 9, 2009
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 . . .
Mortgage Mania 17 – Foreclosures Inside The Bubble
June 7, 2008
Long-time Mortgage Mania readers, (aka Mortgage Maniacs) know that I’m an avid reader of the New York Times, so it should come as no surprise that I would have some comments on this article in the Friday June 6 edition regarding the continuing foreclosure crisis affecting consumers across the country.
Authors Bajaj and Grynbaum review some recent statistics on foreclosures, and then go on to predict another wave of foreclosures as the economy continues to slow and more consumers fall victim to layoffs and job cuts.
It’s easy to ignore these rumblings here in wealthy Silicon Valley where the local economy is still vibrant, even with nearly $5 a gallon gas, as it is still a minor impact on a budget with a $5,000 a month mortgage. It’s easy for us living in The Bubble of Unstoppable Real Estate (which I define as: Palo Alto, Menlo Park, and Los Altos, your mileage may vary) to say “it can’t happen here”.
Not so fast there pardner. A Short Sale in Atherton you say? It’s almost enough to make you drop your Grey Poupon.
This little number at 199 Selby Lane in Atherton recently listed by Lanny Dannenberg of Keller Williams is a short sale at $1,795,000. It has been on the market with a couple of different brokers for over two years, starting at $2,495,000 in March of 2006.
The good news is that the local market continues to be pretty strong, especially at the upper levels, above $3 million. Don’t take my word for it, check out this market data for the latest facts and figures on Palo Alto and surrounding communities.
Thanks for reading . . .
How Come Redfin’s P&L Looks Distinctly Unlike That Of A Traditional Real Estate Brokerage? Because Redfin Is Actually A Brokerage, Not A Landlord!
October 1, 2007
Tipped off by another insightful Greg Swann piece (Greg — do you ever sleep?) I just read through Glenn Kelman’s fascinating soul-baring finances-revealing post over on Guy Kawasaki’s blog. As a serial entrepreneur — and quite a successful one at that — Glenn has certainly done more than his fair share of financial modeling, and his post is rich in advice for the prospective entrepreneur.
What is particularly fascinating is how Redfin’s financial modeling is thoroughly and utterly unlike that of a traditional broker. That makes sense, of course, since Redfin is, well, not a traditional broker. In particular, unlike traditional brokers, Redfin makes its money through the act of – wait for it — brokerage — that is, representing buyers and sellers of homes.
Traditional brokerages — Coldwell Banker, Prudential, ReMax, Keller Williams, Alain Pinel — on the other hand, most emphatically do not make money through brokerage activities — they leave that work to their agent work force, usually a collection of independent contractors. Traditional brokerages, you see, make their money through landlording.
They provide agents with office space, training, mentoring, branding, open house opportunities, telephone lines, etc. and then charge these agents twofold: first, a portion of their commissions (starting at 50% or more for new agents, going down to perhaps 5% or 10% for the top agents, averaging perhaps around 25%) and secondly, a rather long laundry list of fees, including tech fees, desk fees, legal fees, and a myriad of others.
Much of what remains in the agent’s pocket after the broker’s share is divvied up among countless vendors, including the local MLS, newspapers, cell phone carriers, web site vendors, and Lexus dealers.
Here’s a picture of the money trail:
…and here’s one of them new-fangled Sketchcasts…
Further commentary from others:
- Ardell summarizes her take on the article: Sounds like the practical people are the ones asking for money, and the impractical ones are the people giving the money.
- Joel wonders if the downturn in the market will do a Foxton’s to Redfin.
Trulia Turns Two Today
September 25, 2007
Trulia, the online listing site which aggregates data from brokers and agents around the country, just turned two today. In that short time, they’ve accomplished some fairly impressive feats:
- They built a home search site, getting listings Realtor-by-Realtor, broker-by-broker, without going through MLS’s.
- They formed partnerships with a number of leading regional and nation-wide brokerages, including Alain Pinel, Coldwell Banker, and Keller Williams.
- They layered on an impressive array of quantitative data on schools, neighborhoods, price trends, and so forth.
- They mixed in qualitative information with their Voices product, which has spawned quite an active consumer-agent forum.
- They became one of the leading sources of online traffic for many of their broker partners.
As founder Pete Flint notes in this blog post, they did all this without resorting to the all-too-common bait-’n-switch tactics in this industry.
An NWMLS-Compliant Broker Tour Report
May 18, 2007
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?
Today’s Menlo Park Real Estate Tour: The Travails of a Gluten-Intolerant Realtor
March 13, 2007
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.
