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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.

Fair Oaks Community Park

The Fair Oaks neighborhood in Menlo Park is well known for its traffic-slowing British-style “roundabouts”, specifically designed to slow down those impatient folks trying to skirt around the busy traffic on Middlefield and Marsh. What these busy folks tragically miss when they speed through the neighborhood is the wonderful community-owned and cared-for park.

Located on Fair Oaks Avenue, just before it curves and then dead-ends into Edison, this park was started and funded by local residents. It’s a small park, not very ambitious, but very comfortable and homely, with a small basketball court, a number of swings, a sandbox, a jungle gym, and a few other distractions for the kids.

On any given day you’ll see an assortment of local moms, dads, and nannies, all carefully shepherding their little charges as they bustle about on the important business of childhood. This is a park where the neighbors meet, where friendships are struck, where adults get to laugh at the kids’ amusement. It is, in every sense of the word, a community park.

Halloween “Trick Or Treat” Report: Crescent Park Sucks, Fair Oaks Rocks!

Having neither children nor a sweet tooth, Trick or Treating has never been much of a tradition for me.  This year, however, the dear wife and I borrowed some kids and accompanied them on an a quest for as much teeth-rotting debauchery as possible.

To fit in, we of course needed costumes.  I did a pretty bad rendition of a 70’s disco dude, while my wife took on the disguise of a Freudian slip.  She’s the far better looking one in our marriage, but, alas, she’s also much more private than I, so you’ll have to content yourselves with this picture.

 

With drooling thoughts of a bigger haul, we headed across the San Francisquito Creek — and the city and county line — to Palo Alto’s ritzy Crescent Park neighborhood.  Much to our disappointment, the pickings were slim — and not because the neighborhood had already been picked clean.  At most 10% of the homes had any form of inviting Halloween decorations, and the homes that were offering treats were fairly skimpy with their offerings.

We soon headed back to our home turf in Menlo Park’s Fair Oaks neighborhood.  Much, much better.  At least 50% of the homes were taking part, and a good portion of those had gone all out with their decorations.  Everybody was generous, and the trickle of treats from Crescent Park soon became a torrent.

The same two or three homes stood out.  One in particular has become a neighborhood staple of over-the-top Halloween spirit, starting with a witch that seems to always run into the same telephone pole (though from different directions each year!), to a scary graveyard, to a haunted entrance…everything you could wish for!

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New Construction in Menlo Park Fair Oaks Neighborhood (Part II)

Continuing yesterday’s description of new construction in Fair Oaks, we move east of San Benito to 15th Avenue, aka Palmer Lane, an interesting street in its own right: it starts its life at Marsh Avenue in the humble Fair Oaks neighborhood, executes a sharp southward turn, crosses Fair Oaks, shortly thereafter boldly changes its name to Palmer Lane, crosses Middlefield Road, immediately takes on the moniker of Fair Oaks Lane, continues its leisurely meander past the weekend-only Atherton train station, crosses El Camino Real, and then becomes the picturesque Atherton Avenue, which remains its name for another one and a half southwesterly miles, and shortly thereafter becomes Ridgeview Drive, dead-ending just north of Bear Gulch reservoir. Five name changes and spanning at least three biomes — quite an accomplishment.

But back to the new construction: in its incarnations as 15th Avenue and Palmer Lane, there are no less than 6 — six!! — pending, new, or recently completed homes.

Starting from the south and moving northwards, we have 515 Palmer Lane, a grand old home sitting majestically on an ample 20,000 square foot lot. The home itself is over 3300 square feet and has 5 bedrooms and 3.5 bathrooms, plus a quaint old cottage in the back. When it was on the market from mid-2005 to mid-2006, it exuded charm from every pore, but it also begged for renovation: the floors were uneven and squeeky, the kitchen had certainly seen better days, and the wallpaper was practically screaming, “Get me outta here!” Sold for a tidy $1.8M, there has been a steady stream of work going on there, and no doubt the interior of the home has been largely restored to its original grandeur.

Right next door is 519 Palmer Lane, another home that started life as a grand old place on a 20,000 square foot lot. The home, alas, is no longer there, having been razed to the ground. The buyer split the property into two and is now building two large-ish homes on it. The listing agent — Sam Anagnastou Anagnostou — has a sign up already, though the homes are a good few months from being ready. (Note: My tradition is to link to the web site of any broker I mention, but I was not able to find Sam’s.)

Further up we have 659 Palmer Lane (I believe that’s its address), with a similar — though less ambitious — pedigree as 519. It’s done a neat little transformation from an 8000 sq ft lot with a teeny 1200 sq ft home to two larger homes, each on teeny lots.

Further up, at 770 15th Avenue, is a long, narrow, rectangular lot, whose highest and best use, given its shape, may be a bowling alley. Shelly Roberson — friend, top agent, and spouse of 3 Oceans contributor David Roberson — recently purchased the lot and has plans to put two “darling homes” on the site. It won’t be easy, but having seen some of Shelly’s other projects, I have no doubt she’ll succeed.

And finally, at the corner of 15th Ave & 18th Ave — you gotta love a neighborhood where 15th Ave and 18th Ave, as opposed to 15th Ave & 18th Street cross each other — is a new home that was finished some 18 months ago. County and MLS records for this property are sketchy, but it appears the current owner bought the home in the early 90’s, lived in it for a while, and then did an extensive remodel. It’s now a tasteful 2-story home whose view I enjoy seeing every time I negotiate the traffic circle (”roundabout” for my British readers) at 15th & 18th.

For a Google map overview of these properties, please head yonder.

New Construction in Menlo Park Fair Oaks Neighborhood (Part I)

As a denizen of Menlo Park’s quaint Fair Oaks neighborhood, I try to keep an eye on the goings-on in the neighborhood. Lately there’s been a rash of new construction. Armed with a camera, and a determination to give Google Maps a test run, I thought I’d give an update.

View Larger Map

This home, on the corner of 8th and Oak Drive, used to be, well, a dump — no other way of describing it. I remember touring it some 18 months back and it looked like a big red country barn that had escaped, perhaps from Modesto. An intrepid local builder named Homer — well known to folks in this neighborhood — bought the home, tore it down, and rebuilt it as a 3000-ish sq ft home, complete with all the trimmings. The home’s layout on the Oak Drive side had to be a bit creative, since Menlo Park is somewhat protective of its trees. Homer finished this project some 8 months ago.

Just down the road, at 535 8th Avenue, some new construction is in progress, and it looks suspiciously like a 2nd-story addition.

Four streets east, on San Benito Avenue, there is a forlorn-looking, but sizable, empty lot. Given the shortage of land on the Peninsula, it always surprises me to see such things.

Further down San Benito lies another forlorn property, this one with a rather disheveled home on it. Renovation has been on-and-off-going for a while now. This home undoubtedly had boatloads of charm, and will hopefully be restored to its rightful condition.

A Fair Oaks Castle

Fair Oaks is one of my favorite Menlo Park neighborhoods, partly because of the unpredictable mix of properties. There is a sprinkling — but only a sprinkling, mind you — of McMansions, but the rest are a melange of cottages, Victorians, Craftsmen, bungalows, and small Ranches.

Today’s tour offered a surprise in the form of 655 14th Ave, brought to the market by friend and colleague Shelly Roberson, wife of 3Oceans contributor David Roberson. I’ve driven by the home many times and found the exterior square-castle look intriguing, but the inside is even more so.

Though 1900 sq ft in size — larger that most Fair Oaks homes — the inside has a warm, cozy feel, brought about by the owners’ artistic flair and Shelly’s own staging handiwork. (She’s one of a handful of agents who stage their own properties. Trust me, you don’t want me doing that for you!)

My favorite touch was the Tintin poster on the wall in the upstair’s kid’s bedroom, which brought back nostalgic childhood memories — which I suppose was the intent! (If you did not grow up in the UK, France, or a former colony of either, you may not be familiar with the Tintin series. Do yourself a favor and buy a couple comic books. While you’re at it, get some from the Asterix series as well.)

This listing looked like a good excuse to try out the Popup Image Gallery Wordpress plugin from Yellow Swordfish (not to be confused with Redfin).

Fair Oaks, the Bastard Stepchild of Menlo Park? Not so Fast There!

On today’s broker tour list were a few properties in Fair Oaks, sometimes considered the bastard stepchild of Menlo Park.  Fair Oaks residents naturally bristle at the description, brought about by the harsh reality of being a) unincorporated and, more importantly b) in a poor school district.  Menlo Park-ians (and their southward Palo Alto-an neighbors) are nothing if not school-obsessed.  Throw in streets that might politely be called “rustic”, generally small lots, and starter homes, and the image is complete.

You generally know what to expect when you see a Fair Oaks home:  a small, but generally cute and nicely done up place.  Nothing exciting, but certainly nothing shabby either.

As a sign of the neighborhood’s attempt to catch up with the rest of the city, I present two properties that were on tour today.

First up was 657 10th Avenue, a Natalie Comartin (Coldwell Banker) listing.  Priced at just a whisker under $1.2M, the home looks respectable from the outside…but upon entering you have to stop and take a breath.  “Am I still in Fair Oaks?  Did I take a wrong turn and somehow end up in a small Atherton home?”  Its columned entrance leads in to an elegant tall ceiling, painted a bold but pleasing red, with shining-to-within-an-inch-of-its-life hardwood floors.  Even more striking is the high-ceilinged living room, with a fireplace and a skylight that gives the room a proper sun-drenching.  With 4 bedrooms, 3 bathrooms, 2320 sq ft, and a lot size just over 6700 sq ft, this same home in Menlo Park proper would set you back an extra $250K — at least — money that would buy years of private education.

Next up was Vincent Armando’s listing 433 8th Ave, a 3/2 with 1770 sq ft and a 5300 sq ft lot — standard in Fair Oaks.  The home was on the market last year during the doldrums and didn’t sell; the owner should have better luck this time.  Though quite modest from the outside, the inside was again a different story, with hardwood floors that may well have been done by the same craftsman as 657 10th.  Most surprising was the small pool in the back yard — a rarity in Fair Oaks — which unfortunately left not much of a back yard.

Menlo Park: Laid back suburban living

Lying across the San Francisquito Creek and just to the north and west of its bigger, brasher neighbor Palo Alto, Menlo Park is the epitome of upscale suburban Silicon Valley living. Bounded roughly by Highways 101 and 280 and the cities of Palo Alto, Atherton, and Redwood City, Menlo Park is as well-manicured as it is wooded.

Apart from its natural beauty, Menlo Park’s denizens are proud, and rightly so, of its school system, which include the eponymous Menlo Park Elementary School District and the Las Lomitas School District (both of which it generously shares with Atherton) and the Sequoia Union High School District for the older students.

The shopping district centers around Santa Cruz Ave from El Camino Real to University Drive and boasts furniture stores, upscale salons, a toy store, numerous high-end restaurants (including The Left Bank), a wonderful 70’s vintage breakfast hangout named Anne’s Coffee shop (where one devotee has taken the time to upload a Youtube video), and Drager’s, which performs the amazing feat of making Whole Foods look like an inexpensive Safeway clone. Santa Cruz Ave is pretty quiet after 8:00pm, a sure sign that Stanford students prefer the glitz and glamor of Palo Alto’s University Ave.

While Palo Alto boasts the world-class university Stanford, Menlo Park’s contribution to Silicon Valley’s unique entrepreneur-laden business ecosystem is the venture capitalist heaven Sand Hill Road, an otherwise nondescript stretch of road running from El Camino Real to Highway 280.

The neighborhoods to the north and west of Menlo Park — Fair Oaks, Flood Park, and the Willows — are where you’ll find the city’s starter homes adjacent to Highway 101, with prices for a 1400 sq ft, 3 bedroom, 2 bathroom home starting in the mid-$700,000’s. Prices rise rapidly each block south and east of the highway, with the nicer and larger homes deep in the Willows running a tidy $1.6 million.

The Menlo Oaks neighborhood, bounded roughly by Bay, Willow, Middlefield, and Ringwood, boasts some of the largest homes and lots in this area of meandering streets and wonderfully old and large Oak trees. Crossing Middlefield, you come to the Allied Arts/Downtown neighborhood which includes the Allied Arts Guild. Further west brings you to the West Menlo and Alameda neighborhoods.

Menlo Park’s Fair Oaks neighborhood: A touch of the rustic in the middle of suburbia

One of the hidden treasures of Menlo Park is the Fair Oaks neighborhood, nestled between Middlefield Rd, Marsh Rd, and a seldom-used industrial rail track. Squashed between the three neighboring towns of Atherton, Menlo Park, and Redwood City, it nonetheless manages to have a character all its own.

A stranger walking the streets of Fair Oaks wouldn’t help but notice a lack of sidewalks and proper drainage, and an abundance of little British-style roundabouts. Both help create the unique sense of neighborhood for which Fair Oaks residents are justly proud — a uniqueness that comes from a peculiar combination of benign neglect (as part of unincorporated San Mateo County instead of Menlo Park proper) and a strong neighborhood association (which installed the roundabouts to slow down commuters who use the neighborhood as a way to avoid the traffic on Marsh and Middlefield).

The neighborhood association also oversees Fair Oaks Park, a little gem maintained without a cent of public money and situated on a Hetch Hetchy right of way; residents keep their fingers crossed that the massive water system’s pipes will never need to be dug up.

Being part of unincorporated San Mateo County — “Menlo Park” in this neighborhood being technically only a mailing address — is a mixed blessing. On the one hand, Fair Oaks residents don’t have the luxury of access to Menlo Park’s phenomenal elementary school system; on the other hand, property values are a good 20% to 30% lower than nearby Menlo Park proper, most of the difference being accounted for by…the poorer schools. What you would pay just under a million dollars for in nearby Flood Park would set you back a mere $800,000 or so in Fair Oaks.

Many of the homes are small — 1200 sq ft or less — and sit on small lots of 4500 sq ft or less, a testament to Fair Oak’s origins as weekend country homes for rich San Franciscans and San Jose-ans in the 1920’s. There are a smattering of larger lots left, mostly a relic of spillover estates from nearby Atherton, which technically the southeast corner of Fair Oaks is still part of.

Conveniently located only minutes from the bustling downtown of Palo Alto, as well as Menlo Park’s more bucolic downtown, Fair Oaks is also only a vigorous stone’s throw from highway 101, making it a convenient location for commuting to many of Silicon Valley’s top high-tech employers.

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