In his article, “Fed bets $800 billion on consumers“ on CNNMoney today, writer Chris Isidore shares Uncle Henry’s latest plans:

“The Federal Reserve and Treasury Department on Tuesday unveiled a plan to pump $800 billion into the struggling U.S. economy in an attempt to jumpstart lending by banks to consumers and small businesses.

The government hopes that these initiatives will enable more money to flow to consumers in the form of loans than has occurred so far in previous bailout plans.

One program will make $200 billion available from the Federal Reserve Bank of New York to holders of securities backed by consumer debt, such as credit cards, car loans and student loans.

The Treasury Department will allocate $20 billion to back that lending in order to cover any losses that the New York Fed might suffer.

In addition, the Federal Reserve, announced it will purchase up to $500 billion in mortgage backed securities that have been backed by Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and Ginnie Mae, the three government-sponsored mortgage finance firms set up to promote home ownership. It will also buy another $100 billion in direct debt issued by those firms.”

Hmmm, buying mortgage backed securities . . . wasn’t that how TARP was sold to Congress in the first place? The idea of the US Government buying up toxic mortgage assets in an attempt to get the three remaining solvent banks to start underwriting mortgages is enough to get any red-blooded Realtor’s blood pumping again. If this restarts the housing market, let’s all be sure to thank the lobbyists working for NAR, and remember them on our Christmas lists.

The Fed goes the original plan one better by setting aside $200 Billion to buy securities backed by auto loan and credit card debt. Hmmm, let me see if I get this straight . . .

The idea behind mortgage backed securities was that they were safe because they were backed by the houses those mortgages were written against, and the logic was that those were APPRECIATING assets. This worked great until housing prices started falling, and the underlying assets were worth LESS than the loans on them.

A car drops 20% in value the minute you drive it off the lot, so you are already upside down on the loan if you put down less than 20%. The car ads are all touting $0 down, so let’s assume that most buyers today are putting down less than 20%. So . . . is this Groundhog Day?

Don’t get me started on buying credit card debt . . .

This is another reason I don’t work in the Treasury Department. That, and that pesky question about blog articles that would embarrass the President.

You can read the full text of the article HERE.

Thanks for reading . . .

When Treasury Secretary, Henry Paulson asked Congress for $750 Billion (yes, that’s with a B) financial bailout package, the justification was to buy up distressed mortgage assets so that banks would start lending again, and hopefully the epidemic of foreclosures sweeping the nation would be stalled.

The new plan doesn’t include that, of course, which has led to everyone asking, now what?

Lately, I have been holding open houses in Palo Alto pretty regularly, and almost everyone coming in asks me the same question: How is the Market? We discuss the market trends of homes taking longer to sell, increasing numbers of price reductions, the importance of pricing and preparation, etc.

The big shift we are seeing now is the effect of the stock market crash last month. Much of the wealth in Silicon Valley is tied to the stock market (options, grants, etc.). It’s how we pay our executives and employees, reward performance (bonuses), and fuel the venture capital engine. When the market drops over 30%, suddenly, potential home buyers are faced with the prospect of selling stock that is devalued by 30% to pull together the down payment on a home that is priced 5 - 10% off its high (typical Palo Alto home, your results may vary). That is pretty tough to justify, and in many cases potential buyers don’t have enough in their portfolios any more to cover the 20 - 30% down needed for that typical Palo Alto home.

So, we are seeing a bunch of Buyers exiting the market, while the inventory of homes for sale in Palo Alto is about double what it was at this time last year. The result is a Buyer’s Market. Good news if you are a Buyer, bad news if you are a Seller.

Many people in Palo Alto don’t NEED to sell their homes. They may be retired and wanting to move to a smaller home or relocate, or they may be a growing family needing more space. With the exceptions of people relocating out of the area, moving into retirement homes, or those who are selling for financial reasons, many sellers can afford to wait for the market to turn in their favor.

In the short-term, I predict that we will see the inventory of homes for sale drop, even more than the usual seasonality, as potential sellers wait out the market. The big threat to sales and prices is interest rates rising. Remember, that if the rate on a loan goes from 6% to 7%, the payment goes up about 15%. That is a big hit when you are talking about $1M loans, and a economy falling into recession.

For the longer term outlook, I’ll defer to this article that was recently in Money magazine that discusses how the credit crisis nationally is affecting ALL real estate, even here in Palo Alto. We Realtors love to say “All Real Estate is Local”, which is great unless the money to buy that local real estate is affected but national events. This time around, the events are international.

Be sure to follow the links above to see the latest market data for Palo Alto and the surrounding communities, but you may want to fix a drink first. Or, you can register to receive updates on the market in local communities delivered to your email weekly at: www.REMarketReports.com

Thanks for reading . . .

Alerted by several folks, including those at NAR Wisdom, about NAR’s new “Social Media Manager” position, I find myself puzzled.  NAR and its state and local brethren are, at heart, finely tuned political action machines — that’s what they’re built for, it’s what they do best, and it’s what you would expect from a trade union.  I remember a year or so ago a small local town — Atherton, I believe — thought a good new revenue source would be to tax Realtor (r) commissions at the point of sale.  Dozens and dozens of Realtors showed up for the town hall meeting — practically more Realtors than the town had citizens!  These Realtors came from far and wide, and very few of them had anything to do with Atherton.  They came to show their extreme displeasure at this move, afraid that if it passed, the idea would spread like a cancer to neighboring towns.  Needless to say, the measure got voted down.

NAR is also great at getting out its message — very consistently — that it’s a great time to buy to sell to buy and sell to buy, sell, skip, and jump!

What exactly would a social media manager do at NAR?  Send out Twitters about NAR’s latest rosy forecast?  Alert everybody that Lawrence Yun is about to send another update?  There is simply too much of a disconnect between NAR’s stifling corporate culture and the social media world.  I imagine all blog posts would need to be cleared by a hundred-person NAR subcommittee.

I know they’re well-intentioned, and I give them credit for trying, but give it a rest, guys!

If somebody does get this job, I’ve got $50 that says they don’t last any longer than Mr. Luther did at move.com  Any takers?

Joanne Fraser, who sells real estate in Los Altos CA, informs me that a local police department (Mountain View) is now on Twitter.  (See here.)  They don’t have a lot of followers or updates yet, but kudos to them for embracing social media as a way of staying better connected to the community.

Turns out the Scottsdale police department is also in on this.

Neither Scottsdale nor Mountain View, however, are still quite “there.”  They’re using Twitter right now only as a way of disseminating information:

14 year old takes seizure medication. It is unknown when she took it last. She has long brown hair and is wearing green shirt, blue jeans.

SPD in area of 28000 N. 59th Place in reference to a missing juvenile female. It is beleived she is on foot in the desert area to the east.

Here’s where they’re missing out:  they could also be using Twitter to receive information from the public about law enforcement issues.  The Scottsdale PD is only following some 18 Tweeters (mostly local news stations), and Mountain View isn’t following anybody.  Think of the increased power of the medium if they both followed all Tweeters in their area!

Twitter could become a supplemental 911 system:

Help!  My house at 123 Main is being broken into!

I’m in the parking lot on Main & 1st.  Lights are out.  Suspicious looking guys are walking around, flashing lights into the cars.

Twitter could also act as a neighborhood “early warning system”:

What’s with all the boarded-up houses over on the West side?

Traffic is backed up on Marsh all the way to 101!  Accident?

Of course, if a local police department were to follow 500 local residents, it’d be difficult for them to keep on top of all that content, especially with looming cutbacks in government services.  Solution?  Create searches in search.twitter.com for key words like:  Help … Accident … Break-in … Robbery … Broken window …

Twitter is rapidly growing up.  It’s no longer just an interesting way to spend time:  it’s now becoming a credible and powerful way for organizations to disseminate and receive valuable information.

During one of the questions about the economy and the financial crisis, McCain dropped a bombshell!

When Tom Brokaw asked about what needs to be done to help the housing market, McCain suggested that Government should buy back all these defaulted loans and then give these people new loans at the current market value of the home. Hmmmm. Will this work? I think not. Why?

Well, let’s see how this would work…

1. Joe Homeowner has a house that he bought for $500,000 with a loan from Fly-By-Night Subprime Lending, Inc.
2. The house is now worth $400,000
3. Joe, like everyone else, has lost a lot of equity in his home
4. Unlike other Americans who are responsible and ARE paying their mortgage, Joe qualifies for the Government to buy back his subprime mortgage, because he’s NOT paying his mortgage.
5. The Feds buy his mortgage for $500,000 and immediately give him a new mortgage at $400,000, which he may or may not be able to afford
6. So now Joe is happy, but only until he can’t make his payments again…
7. Good ole’ taxpayers absorb a $100,000 loss
8. Multiply by millions of upside-down loans.

So let me ask one simple question - Does this make sense to you??  I suspect there will be a lot of responsible homeowners who are diligently paying their mortgage who will be awfully pissed off that they won’t be getting THEIR mortgage bought by Uncle Sam and reset to current market value.

Don’t get me wrong - I am not against McCain, and this isn’t about one presidential candidate or another.  I’m simply saying that this plan does not make sense.  However, I haven’t heard either candidate or anyone in congress or the treasury or the federal reserve or the private sector suggest something that might actually work to solve this mortgage mess.  Although today, Barack Obama rejected McCain’s plan, and his economic adviser said that McCain’s plan would cause the U.S. Government “to massively overpay for mortgages in a plan that would guarantee taxpayers lose money, and put them at risk of losing even more if home values don’t recover. The biggest beneficiaries of this plan will be the same financial institutions that got us into this mess, some of whom even committed fraud.”

Let’s hope that someone is smart enough to figure out how to use that $700,000,000,000 to get the housing market back on track.

In the meantime, I’m proceeding under the assumption that for the forseeable future, people will need to do a short sale and get their lender to take the loss.  So if you know of someone who is underwater and stuggling to keep up with their higher payments as their loan resets to a higher interest rate, tell them you know a foreclosure consultant who can help.  I’d be delighted to talk to them.

Don’t miss this opportunity to learn the latest advances in technology such as text messaging, picture messaging, camera phones, PDAs and many other technologies…

And in the next room, we’ll be talking about fax machines, rotary phones, and photocopiers!

The full promo:

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And that’s where my modest proposal comes in.

Fundamentally, this crisis is about housing values, or more specifically about uncertainty around housing values.  Behind most of the bankrupties, the bailouts, the CDO-thing-a-majiggies … lies a portfolio of mortgage loans whose value is … 3 cents on the dollar? A dime?  A quarter?  47 cents?  Nobody knows, and therein lies the problems.

Our fearless leaders have proposed spending the $700BN largely on buying these “non-performing assets.”  By some financial wizardry, the exact same folks who could not determine the value of these assets in the private market, are about to get hired by Uncle Sam to determine these assets’ values on the taxpayer’s dime.

So here’s what we do instead:  Let’s spend that $700BN buying not the mortgages, but the underlying homes themselves.  Let’s say homes in the US have an average value of $200K.  [Pause for my west and east coast readers to chuckle.]  $700BN divided by $200K is … 3,500,000 (three million five hundred thousand.)

That’s right.  With $700BN we could buy a couple of million homes.  We’d start by buying, say, 75% of the inventory on the market right now.  That should restore confidence in the market pretty quickly.

Presto!  Problem solved.

The New York Times reports that JP Morgan Chase has taken over troubled lender Wamu.

What next?

On the day that the Fannie and Freddie s$#@ hit the fan, Sherry Chris of Better Homes and Gardens Real Estate quoted Realogy CEO Alex Perriello, “I feel like I am in Imelda Marcos’ closet - the shoes just keep dropping.”  Indeed.

Fast forward a few days and we get the Bawld Guy, America’s foremost maxim-generating machine, reassures us that we ain’t all gonna die.  He’s seen this movie three times before, and the asteroid doesn’t hit earth.

Finally, Nikcolai Kolding, also of Better Homes and Gardens, brings out an interesting diagram explaining the phases of the real estate market:

["Sides", for the uninitiated, refers to each of the two "sides" of a transaction.]

The diagram suggests that transaction volume, not price, is the best leading indicator of a change in the market.  In a future article I’ll see how well our local data fit into this model.

I know this has nothing to do with staging But many of you who read my blogs know I am passionate about technology and its application to small businesses. My business certainly has benefited from technology tremendously and I would not have found the success that I have without using technology to streamline processes and lower my overheads.

With that said, I am one of the co-organizers for BizTechDay and I just found out we have booked Tim Ferriss of 4-hour Work Week for our keynote!

Here are the details:
BizTechDay – Technology Bootcamp for Entrepreneurs and Business Owners Saturday October 25 All Day Event
BiztechDay is the only conference that puts your business first before technology. Come meet Timothy Ferriss, best selling author of 4-Hour Work Week and George Wright (Marketing Genius behind the YouTube WillitBlend Campaign) and learn hands-on steps and ideas to take your business to the next level.

When: Saturday, October 25th, all day event
Where: Hilton San Francisco
333 O’Farrell Street,
San Francisco, CA 94102

You can use this link to Sign up for BIZTECHDAY here. After 9/15 the price goes up $100. Use discount code BIZSCY148 ($129 instead of $149)

Who are Speaking?

* Timothy Ferriss - New York Time Best Seller and Author of Four Hour Work Week
* George Wright – VP of Marketing from Blendtec (WillitBlend – one of the most successful Business YouTube Campaigns – 700% increase in Revenue)
* Megan Casey - Editor in Chief from Squidoo.com (Top 500 websites in the World!)
* Yaniv Bensadon - CEO from Fixya.com (one of the most popular Tech Support website in the world)
* And many more!

Why Attend BiztechDay?

* Learn from business and technology who speak your language
* Get ideas and hands on steps so you can also put the internet to work for your business right away
* In-depth workshops and panel discussion to get you up to speed on essential tools you must have for your business
* Network and meet like-minded entrepreneurs and business owners (like you and me!)

What You Will Learn:

* How to Use Linkedin/Facebook/Yelp to Promote Your Business (+ 20 more websites)
* How to Collect Money Online Using Paypal, Google Checkout & Amazon Payment
* How to Develop Your Own YouTube Video & Podcast to Market Your Business
* How to Setup a High Traffic Business Website & Basics to Search Engine Optimization
* How to Setup a Successful Email Marketing Campaign
* How to Create Your Own Social Network and Build Your Customer Base
* How to Promote Your Event & Get Hundreds of People
* And many more!

Most of the topics are very applicable for real estate professionals. A lot of us have used social networks to promote our businesses. SEO certainly doesn’t hurt

TO YOUR SUCCESS!

Cheers,
Cindy

To reduce the tempatation of using the streets of Fair Oaks (in Menlo Park) as a convenient shortcut to avoid delays on Marsh Road and on Middlefield Road, the local neighborhood installed roundabouts traffic circles a while ago.  Most drivers slow down as they navigate around these obstacles, but some of the more aggressive drivers see them as a handy and challenging obstacle course, careening around them at full tilt, seemingly on two wheels.  Both the fast and the considerate drivers, however, still don’t seem to understand the most basic rule of traffic circles:  if you’re in the circle, you have the right of way.  If you’re not in the circle, you don’t have the right of way.

Simple, really — or it should be.  Alas, nearly every day brings about a near collision as a rule-following driver makes a left turn around a circle, while a non-rule-following driver comes merrily towards him, with no obvious intention of yielding.

People!  Slow down!  Yield the right of way to cars in the traffic circle.

‘Nuff said.

The GSEs hold or have securitized nearly half — roughly $5 trillion — of all mortgages in the U.S., and in the current environment with private lender constraints, they account for the vast majority of all new mortgages in California.

 This bailout (oops, did I say bailout?) removes much of the risk to lenders of writing mortgages for under $729,000 locally, decreasing to $649,000 next year, because they can resell these loans to the government backed and now managed GSE’s.

But what about loans over $729,000? Well, Wall Street and the secondary market will still be willing to buy those that are considered low risk (excellent credit score, low loan-to-value ratio, verifiable income), but they will demand a risk premium for those loans, meaning that rates are likely to go up, taking us back to the bifurcated market for rates that we have seen in previous years.

 On his way to the SILVAR Golf Tournament yesterday, co-contributor and local mortgage banking hotshot Eric Trailer of Absolute Mortgage Bank in Palo Alto gave this quick analysis of where he sees rates going (paraphrased here):

If you know you can sell off a loan to a government backed agency, you have very low risk, so you demand a low interest rate. However, as risk increases you will demand a greater “risk premium” to hedge against not being able to sell that loan, or the buyer defaulting on that loan. Right now we are seeing investors who are willing to lend the 20% to take a buyer from a 20% down, 80% loan to a 100% loan, but at 15% with 5 or 6 points. That’s expensive money, which is why it is dubbed “hard money”, but it offsets the risk to the lender.

 Eric thinks we could see Jumbo rates heading to the 8 - 9% region, which is still lower than in the 80’s, but the difference between a 6% loan and a 9% loan on $1,000,000 is $2500 a month just in interest.

 Let’s do some math. If you have an 80% mortgage on a median priced home in Palo Alto ($1,921,214, source Altos Research). That is a mortgage of $1,536,971, and payments increasing from $7685 @ 6% to $11,527 @ 9%. That’s a lot of $4.25 a gallon gas!

 So, if you are planning on buying a new home and you need to borrow more than $729,000 you may want to get out there looking sooner rather than later.

 To learn more about the takeover of Fannie Mae and Freddie Mac and what it means to your home purchase, check out a new video featuring California Association of Realtors Executive Vice President Joel Singer at http://www.car.org/newsstand/video-js-gse. In “Fannie and Freddie: Why They Matter to You,” Joel explains the often confusing but critical role Fannie Mae and Freddie Mac play in the housing market in clear and concise terms.

Thanks for reading . . .

What The Government Seizure of Fannie Mae and Freddie Mac Means To You

Unless you have been hiding under a rock the past couple of days, you couldn’t miss the announcement that the U.S. Department of the Treasury has placed government backed mortgage companies Fannie Mae and Freddie Mac into a conservatorship. Under the terms of the deal, the federal government is authorized to take up to an 80 percent stake in the companies, and, as part of its duties under the conservatorship, will review both Fannie’s and Freddie’s financial condition quarterly, as well as inject money into the operations as needed. 
Tommy Fehrenbach of Stern Mortgage in Palo Alto had this to say about the Treasury Department’s move.

“To promote market stability, the companies will be allowed to buy more mortgages through the end of 2009. However, starting in 2010 the number of mortgages they own will gradually be reduced at a rate of 10% per year, eventually stabilizing at about $250 billion.”

 As part of this weekend’s action, both CEOs were relieved of their duties and Herbert Allison, former Merrill Lynch vice chairman, and David Moffett, former U.S. Bancorp CFO, were selected to lead Fannie Mae and Freddie Mac, respectively.

The markets cheered the move with the NYSE and NASDAQ rallying on the news, and mortgages rates for conforming loans (under $650,000 in 2009) fell almost half a point.

 All great news, mortgage rates fall, and the housing slump is averted, right? Not so fast there partner . . .

In a statement released today by the California Association of Realtors (C.A.R.), concern over the long-term impact of the move was expressed with the following cautionary forecast:

“Without an institutionalized mortgage-backed securities market, mortgage capital eventually will be less predictable and more expensive, and adjustable-rate mortgages could become the standard loan for home buyers, as could higher down payment requirements. The 30-year, fixed-rate mortgage as we know it will no longer be readily available for most home buyers and may effectively disappear. The result could be a dramatic decline in homeownership rates in California and across the nation.”

C.A.R. is concerned that the Treasury, and Fannie Mae’s and Freddie Mac’s new CEOs, will overreact and change the mission and role of the GSEs. Wall Street and investors are understandably reluctant to buy mortgage backed securities (MBS) that are not either originated from or guaranteed by Fannie or Freddie.”

I added the underlining for emphasis because what nobody is talking about is JUMBO loans. Those mortgages above $729,000 (over $650,000 in 2009) that are part and parcel of almost ALL sales of single family homes here in Silicon Valley (the median home price in Palo Alto this week is: $1,921,214, courtesy of Altos Research).

In summary, while this is a good move for conforming loans, and the majority of potential homebuyers across the country, high-cost areas like Silicon Valley may once again be left out in the cold.

Stay tuned for our next edition of Mortgage Mania - The Jumbo Strikes Back

Thanks for reading . . .

When I picked up the paper on Labor Day (Second Sunday?), the headline “Home Sales Raising Hopes” bravely attempted to be seen over the front and center HURRICANE HITS GOP main headline. What’s this I thought, positive news about the housing market from the Merc? Really?

I have grown weary and wary of the Merc and its drumbeat of foreclosure of the week, gloom and doom, and reinforcing that real estate is local, and my market in Palo Alto varies just a bit from south San Jose. If you don’t believe me, visit Altos Research and compare the chart for median home price over the last couple of years in these two cities. The results may surprise you . . .

The Merc got my hopes up with an intro and a couple of quotes from brokers saying they were expecting an upturn in sales in the Fall after activity was so low in the summer, and there is usually an upturn in the fall. There is some back and forth, and the article pretty much shot down the “fall uptick” conventional wisdom. Again, Altos to the rescue showing inventory and sales actually DO pick up in Palo Alto fairly consistently every fall before slowing down over the holidays.

To see the article on its entirety, click here to visit the Mercury online. For charts and stats galore, visit the Market Reports page on my website, now in Single Family and Condo!

Thanks for reading . . .

To see current market data and price trends over the past year for local communities and confirm or refute Eric’s prognostications on the local market in Palo Alto and the surrounding communities,

CLICK HERE to see real-time market data, courtesy of our friends at Altos Research.

As you have likely been hearing, there continues to be more and more evidence that it will cost prospective home buyers more to purchase a home in select areas of the Bay Area as they allow time to go by.
Why? Let’s look at the basic reasons, then review an example:

1.        The median price across the board in Palo Alto and the surrounding communities has risen since the beginning of the year.

2.        On a national basis, the trough of the market was reached in April.

3.        The conforming loan limit will DECREASE over $100,000 in 2009 to $625,000.

4.        Rates have risen about .5% since the beginning of the year, despite the increase in the conforming loan limit to $729,750

5.        Loan qualifications are becoming more restrictive with each passing week.

6.        More restrictions on loans and a tighter supply of money forces rates to go up

7.        Because loans require more work to process them (requirements today are 4x what they were a year ago), rates will go up.

8.        Inflation is the number one concern of the Fed, and should be the number one concern for all of us.

Let’s say for a moment that you agree that rates are on the rise, but feel as though prices may come down on a $1mm property today; thus, you want to wait. Let’s further assume that you are right and the future price is $950,000, but rates have increased .5% at that future time. Using 20% down, waiting just cost you an ADDITIONAL $117 per month-over $1,400 per year.

But now let’s be more realistic given the appreciation rates of desirable areas of the Bay Area. If rates increase and the $1mm home appreciates to $1,050,000, you are looking at an ADDITIONAL $550 PER MONTH-OVER $6,000 PER YEAR!

What’s the take-away here?   Price matters much less than true cost… My motto has always been that it always pays off to buy sooner than later, provided your holding period is greater than four years. And to prove that I walk the walk, I am happy to share my personal situation written as an article titled, “How to Afford a Home in Palo Alto Without a Trust Fund.”

Kindest regards,

Eric

To call Eric on his walking the walk comment, and get a copy of his article, “How to Afford a Home in Palo Alto Without a Trust Fund.”, click on his pretty picture over there in the contributor column to send him an email.

Ms. Condoleezza Rice
Secretary of State

Kevin Boer, 3 Oceans Real Estate
Chris Iverson, Ventoux Real Estate

Dear Madam Secretary,

We understand based on recent news events (include Mr. Obama’s pre-emptive European victory lap), and on the harsh constitutional reality that your present employer will soon no longer be needing your services, that you may soon be looking for a new residence, perhaps near to your past employer Stanford University.

It seems, in fact, that Mr. Bush has already begun his own search, so there may be some urgency to this matter.

Allow us to suggest a residence suitable for a person of your experience and discerning taste: the Squire House at 900 University Ave in Palo Alto. This property is currently on the market, listed by the local Alain Pinel triumvirate Carol, Rosemary, and Nicole, for only $12.5M.

First of all, this home is a leisurely 20 minute walk down University Ave straight into the heart of the Stanford Campus:

Secondly, the facade of the home may well remind you of a similar grand mansion on the East Coast, one in which you have spent a considerable amount of time in the last 8 years:

(Image courtesy of 900UniversityAvenue.com)

Thirdly, the home is over 6000 square feet, and has a lot size of nearly one acre. This will provide ample room for all your entertainment, parking, and security needs.

Should you wish to view this property, have your people call our people, and we’ll make it happen.

Best regards,

Mssrs. Boer & Iverson

P.S. Some of your colleagues may be in a similar situation. We are happy to provide them with good references for real estate professionals in their home towns.

Mr. Paulson, for instance, may return to Manhattan to work for Goldman Sachs. May I recommend Mr. Noah Rosenblatt as the ideal discrete broker to assist him.

Should Mr. Gates return to his former employer, I recommend he contact Ms. Lani Anglin, who, though based in Austin, not College Station, would be a stellar pick.

If Mr. Gutierrez finds the siren song of Miami irresistible, I highly recommend Mr. Kevin Tomlinson.

Perhaps you could also relay to Senator McCain that, should he decide to retire, the right person to contact is Mr. James Wexler, one of the best real estate brokers in the Phoenix area. We understand this move might happen this year, or in 2012 or even 2016; Mr. Wexler is patient and will be awaiting his call.

Update:

Curtis Van Carter, who sells real estate in Napa Valley, claims he’s trying to nab another high-profile soon-to-be-unemployed individual, none other than “W” himself. Apparently, said individual, while in Napa Valley on a fund-raising expedition, took a little side trip to see a certain castle. Alas, it’s not even for sale, and spouse Laura found it cold and uninviting.

At the other end of the spectrum, Los Altos Realtor Joanne Fraser suggests Condi may have to settle for a $1.6M Los Altos home because Stanford profs only make $175K per year. I completely disagree. First, she’d be the Provost, not a mere professor, which means her salary would easily be $250K. Secondly, I’ve heard she may be getting help for the down payment. Finally, there are rumors of a book deal in the works!

Here in Sillycon Valley, we are continuing to see variations on the Tale of Two Cities theme, with markets like Palo Alto and Menlo Park holding up strongly (click the links to see current market data), while prices in parts of Sunnyvale and San Jose have fallen off a cliff this year. We won’t mention Sacramento, because it’s not nice to kick ‘em when they’re down.

So, the key leading indicators for monitoring the health of your local housing market are:

1. Is the housing stock shrinking?
2. Are home prices falling at a slower pace?
3. Is it cheaper to rent than own?
4. Are houses becoming more affordable (relative to local incomes)?

Locally, we are still kind of bumping along. The current housing stock in Palo Alto is up slightly, but that isn’t unusually during the late Summer. If the trend continues through Fall, it may signal a trend.

Home prices have been stable here, so that is tough to measure, though the multiple-offer / overbid madness is definitely a rarity these days.

Depending on how you measure it, it’s still cheaper to rent than own, but tell that to my clients who were tossed into the housing market when the rental property was sold and they received a 60 day notice from the new owner.

Houses here are still unaffordable, but take a look at the chart at the bottom of the page and compare San Jose and San Francisco. It may be a good time to get into San Jose, especially if you understand foreclosures and short sales. If not, contact 3Oceans contributor Bart Marchioni, aka Mr. Short Sale.

Remember, real estate is local, and be careful what you read on the internet.

Thanks for reading . . .

For a long time, MLS searches have been available via email. Recently, some real estate search providers — like our friends at Trulia and at Diverse Solutions — have enabled MLS searches via RSS feeds. (That’s actually the technology I use on the sidebar to provide the link searches.)

As the latest new big online thing, Twitter has attracted a massive cult following, and as a permission-based communication tool, it’s ideal for sending out news snippets such as new listings.

Here’s how it works:

1. Sign up for an account at Twitter if you haven’t done so already.
2. Head thither and “follow” my Twitter “Menlo Park MLS” account. Other towns in the Bay Area will follow shortly.
3. Sit back and enjoy the “tweets” that will come your way by cell phone, email, Twhirl, online (depending on how you configure Twitter). These “tweets” will be little news snippets about new homes to hit the market. Want more details? Click on the link in the tweet and you’ll see pictures, details, and much much more.

If you’re more of a FriendFeed type, I have the same offering available in FriendFeed room format. Find your way yonder, select your favorite city, and click “Join This Room.” And, as our British cousins would say, “Bob’s your uncle!”

FriendFeed room example for Burlingame:

Twitter example for Menlo Park:

As video becomes more mainstream and more accessible via technologies like Qik, Mogolus, and ustream, this sort of event will probably become more common.

Pam Buda gets my vote for this year’s real estate Oscars!

In a former life, I was a middle school math teacher. In the Peace Corps. In Botswana. I distinctly remember spending a number of days teaching about the importance of place value in numbers — you know, the concept that decimal points and zeros aren’t just decorations. .32 and 3.2 and 32 and 320 are distinctly different.

As far as I know, none of my former students are Realtors in Palo Alto. Which might explain this juicy little chart from our friends at Altos Research:

Note the drop in per-sq-ft prices a few years ago, from $75,000 per sq ft down to perhaps only a thousand bucks a sq ft. Then, a massive run-up back to over $20,000. Then back down again. Kind of like a scary roller-coaster ride.

Even during the incredible run-up in real estate prices, trust me, we were never at $75,000 per sq ft! The explanation for that chart? Simple: Every now and then a listing makes it onto the MLS with a misplaced decimal or zero. A $2,000,000 home gets listed for $200,000 (these mistakes are typically corrected quite quickly when the listing agent gets 100 phone calls in the first hour from agents wanting to make offers.) Then a $700,000 home gets listed for $7,000,000. (These mistakes take longer to correct. The agent wonders why nobody comes for the open house, then figures it out.)

Then there’s the square foot mistake, where a $1,600,000 home (price entered correctly) gets its floor space shrunk from 2000 sq ft (correct) to 2 sq ft (incorrect.) Voila! This home now costs $800,000 per sq ft! A few of these in the same week, and poof! Up goes that average!

Athol Kay has proved that, as a species, we Realtors aren’t that good at taking pictures. But for the love of God, people, can we please please please remember the importance of correctly-placed decimal points and zeros!

</rant>

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 . . .

Articles about the housing crisis ending have been few and buried in their respective periodical, my favorite of which was in TIME magazine back in February titled, “Ignore the Headlines“.  But now we have the Wall Street Journal. claiming that the trough was reached in April with an article from May 6, “The Housing Crisis is Over“.

I agreed with Peter Lynch back in February.., and it’s becoming more an more apparent that the longer prospective home-buyers sit on the fence, the more expensive that home purchase will become.  And this is not just because I believe that home prices will rise, it’s also because I believe that both long and short term interest rates will rise.  The 10-year Treasury Note, for example, is up over 1/2% since the middle of March, and the 10-year Treasury Note is a decent barometer to use when you want to know what the trend in long term mortgage rates have been.

That written, if you really want to continue with the grunge look, might I suggest saving it for your next camping trip?

As always, kindly consult with your trusted real estate, tax and mortgage professional before seriously considering any home purchase.

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In part 1 of this 3-part series, I talked about the options a homeowner has to keep their home. In this part, I’ll discuss the three options that allow them to get out of the house and out from underneath their loan.

The first option is a conventional sale. This obviously is only an option for homeowners who have equity in their homes. It’s not out of the question that someone may have an adjustable rate mortgage which is going to reset soon, or recently has, and is too much for them to afford. In this case, if the homeowner has enough equity to afford the costs of selling a home (which can commonly totals 7% of the sales price), including title insurance, escrow fees, brokerage commissions, county taxes, and other miscellaneous fees, then they can get out of the loan through a conventional sale.

The second option is a short sale.  If the homeowner is “underwater,” meaning that the total value of the loans against the property are more than the current market value, then they might be able to attempt a short sale. This involves putting the home up for sale at current market value, and getting the lender to take the loss on the difference. As I discussed in a previous post, “What is a Short Sale?“, this is accomplished by sending the lender a “Short Sale Package” which includes many documents supporting the fact that the borrower can no longer pay their mortgage and must sell the property at a loss to the lender, and the only other alternative is foreclosure. This whole process is best conducted by a Realtor who is experienced in short sales, because the process is long, tedious and complicated. Many agents, in a desperate attempt to get any business they can, are trying to do short sales and not getting very good results.

The third option for getting out from underneath the loan is to simply give the home back to the lender in what is known as a deed in lieu. When a lender foreclosing on a property agrees to allow you to deed the property back to the lender before the foreclosure is complete, it is called a “deed in lieu of foreclosure.” This can be advantageous to lenders because they get the property back sooner from cooperative homeowners which mitigates their losses. It can be advantageous for a homeowner because they may have less damage to their credit and they can move on with their lives without a stressful foreclosure hanging over your head. This option is usually not available if there is a 2nd mortgage on the property, because the 2nd mortgage would still be on the title after the deed-in-lieu-of-foreclosure is completed. The only way for the 1st mortgage holder to clear the 2nd mortgage from the title is to proceed with the foreclosure.

As you can see, the most viable option for homeowners tends to be a short sale. Since so many people bought homes over the past 5 years with either subprime loans or simply have adjustable rate mortgages which are resetting to a higher interest rate, it’s no wonder that fully 28% of the 8,592 homes for sale in Santa Clara County are short sales. But as I said, these are no easy feat. It takes an agent with patience, knowledge, skills and training to successfully negotiate a short sale with a homeowner’s lender. In the end, because most agents don’t have this training, a very small percentage of short sales actually close. If you are facing foreclosure, and would like to get out from underneath your loan, don’t let this happen to you - talk to an agent who has experience closing short sales. If you need a referral to someone in your area, let me know. If you live in Santa Clara County, and would like to discuss your situation, give me a shout - I’d be happy to help in any way I can.

Another despicable splogger is stealing content from various places on the Internet, including this blog.  Sadly, the side gives no contact information, so I’m not able to send my usual polite “cease and desist” notice.

Hopefully this post and picture — which will soon appear on the Nationwide Home Mortgage Loan Corporate blog — will embarrass the owners into stopping this nonsense.