http://3oceansrealestate.com/blog Serving the real estate needs of the high-tech communities of Silicon Valley and the San Francisco Peninsula Tue, 16 Jun 2009 01:02:25 +0000 http://backend.userland.com/rss092 en I saw this on a blog on the Wall Street Journal, but a recently released paper by the Federal Reserve Bank of Atlanta looked at loan defaults on loans with a high mortgage payment to income ratio, and found that rising interest rates DID NOT significantly correlate to default rates. The two main indicators of a borrower's likelihood of defaulting were (drumroll please . . . ): Unemployment Declining future home prices Uh, oh, that sounds familiar here in Silicon Valley where unemplyment is 10.9%, and home prices in even the most resilient neighborhoods are off 10%. The article goes further to quote some numbers from the study: "The Fed paper estimates that a 1-percentage-point increase in the unemployment rate boosts the chance of a 90-day delinquency by 10%-20%, and a 10-percentage point fall in house prices raises the probability of a default by more than half. A 10-percentage-point jump in the debt-to-income ratio, meanwhile, increases the chance of a 90-day delinquency by 7%-11%." So, the 5% increase in unemployment over the last 18 months translates to a 50% increase in the likelihood of default. The 10-20% drop in local housing prices translates to a 14% - 22% increase in the likehood of default. Wow . . . Thursday's announcement that delinquencies and foreclosures have hit all time highs underscores the relevance of this study. The authors of the Fed paper recommend programs to assist borrowers who have lost their jobs get through their temporary economic challenge. The WSJ authors have an alternative solution; boosting short sales to get borrowers out of their homes. Which do I think will come to pass? Well, I have been getting training on short sales the last couple of months, and I have already seen two short sale listings in Los Altos this month. Read it at the source. Here is the WSJ blog article, ... http://3oceansrealestate.com/blog/why-borrowers-default-interesting-reading.html I send my clients a monthly market update and thought I'd share it with the blogosphere. If you agree and think that I'm a genius, please comment below. If you disagree and think I'm an idiot, keep your thougths to yourself. You can send me an email to subscribe to your city of  interest (Atherton, Los Altos, Los Altos Hills, Menlo Park, Mountain View, or Palo Alto), and I'll add you to my monthly update list. The commentary is as of June 1, 2009, that data is real-time.   May brought a ray of light into the local real estate market, as consumers, boosted by the rising stock market and low interest rates, began buying up homes on the market. Both Pending Sales and Pending Prices are up (see attached chart for a historical comparison), absorption numbers have outpaced new inventory both statewide and locally, and multiple offers on homes in Los Altos and Palo Alto have come back into play. At the low end, investors are superheating the Santa Clara and San Jose markets for single-family homes under $500,000, with many bank owned properties getting 20 – 30 mostly cash or all cash offers. In general, prices are at about 2004 levels, and interest rates continue to hover near historic lows, with conforming loans under 5% for 30 years, and Jumbo loans staying around 6%. The big question on everyone’s’ mind is, “How long will this last?” This past week we saw rates on the 10 year bond jump 0.5%, putting upward pressure on mortgage rates, which responded by rising for the different conforming loans. To get some additional input on whether this is short-term volatility or a longer term trend, I called my favorite mortgage bankers, who all had the same opinion, and all disagree ... http://3oceansrealestate.com/blog/the-market-report-june-2009.html Fellow contributor sent this to me, and I thought is was worth sharing. I'll have Administrator Kevin re-post this under his authorship when he has a minute.... We are finally seeing seeing a little sunlight through the economic gloom, both nationally and locally. Take a look at these new statistics, and some anecdotal data from here in Palo Alto. Pending Home Sales On a seasonally-adjusted basis, pending home sales in the US were up 3.2% last month (3.9% in the West) and 1.1% over last year (1.7% for the West) On a non-seasonally-adjusted basis, pendings were up 28.2% last month (23.9% in the West) and 3.2% over last year (4.3% in the West)-- wow What’s significant about this is not only the fact that we continue to see more homes selling, but the index itself is running at volumes similar to what we saw in 2001!  Further, this activity helps to stabilize the market, which leads to: more available lending, especially for the non-conforming (jumbo’s equity lines, construction financing) market helps the conforming market by enabling the MI companies to insure up to 95% again, as opposed to the 85% that they’re at now appraisal report concerns reduce reduces the emotional aspect of the sale that has created a tremendous amount of tension in the marketplace, as both buyer and seller feel more comfortable about moving forward A factor that could be contributing to this increased volume is REO’s since Fannie and Freddie had a moratorium on foreclosures from December through March.  As such, we may see a slight decrease in the median home price for the month of April.  That written, it’s been the first-time homebuyers who have been ... http://3oceansrealestate.com/blog/pendings-applications-and-multiple-offers-all-up.html If you were in the market to buy a $2,000,000 home home in the Bay Area, would it make a differnce to you if the monthly investment was less than $5,000 with a 30% down payment?   And I’m not just talking about the mortgage payment, I am talking about complete, tax adjusted cash flow including a 4.25% 30-year mortgage fixed for 10 years, property taxes and homeowners insurance.  Sound too good to be true?  It’s not.  And yes it beats market rental rates by thousands. Interest-rate buydowns are one of the most effective methods for both buyers and seller to obtain what they want, which of course is value.  For the sellers, buying down an interest rate can have up to 8X the power over a price reduction, depending on the cost to buy the rate down.  For buyers, a lower rate means higher qualification and bragging rights of having the lowest mortgage rate on the planet.  In the example above: If the buyer was qualified up to $1.8mm at 5.5%, they are now qualified at $2mm at 4.25% The seller only needs to invest four points or $56,000 to move the buyer $200,000; thus a $56,000 investment saves the seller about $144,000, which is therefore about FOUR TIMES more effective than reducing price I use the example above since I have been receiving a tremendous amount of inquiries about what’s happening at the higher end, which are those homes selling at $1.5mm+, and whether creative financing has been more common than not.  What we’re seeing is that creative financing, like interest rate buydowns and seller financing, are definitely more common at all price points.   But what’s been rather fascinating to watch is that many sellers are becoming less inclined to reduce price, despite the fact that prices are off by between 7% to 17%, depending on which city the ... http://3oceansrealestate.com/blog/buydowns-and-the-bottom.html January is a month typically filled with many things inspirational, and I must say that January 2009 appears exceptional.  In listening to Obama’s inaugural speech on Tuesday, my own interpretation was, “The power of change begins with me.  With you.  The sooner we all believe that we can change things for the better, the sooner we ACT to make things better.”  Would you like a tax credit of $7,500 for buying a home?  And I mean a REAL credit, not the 0.00% loan that the 2008 stimulus package was enactingfor firs time home buyers?  Well, that’s the latest possible modification going forward as part of the 2009 Stimulus Package, and it’s NOT limited to first time home buyers.  There’s discussion that ANYONE wanting to buy residential real estate will be entitled to this $7,500credit.   As you know, a tax credit directly offsets the amount of federal tax that you may owe the federal government—it’s not a reduction in taxable income—which makes this a very compelling reason for would be home seekers and investors to make a purchase this year.    Want another compelling reason why the smart, savvy buyers are acting sooner than later?  Because they know that average appreciation rates in California are 8.8% over the last 40 years (yes we all know that the Peninsula is much greater), and today provide an opportunity for both tremendous value and cheap financing.  Let’s think about real value for a moment.  The last year we had average appreciation in California, it was the year 2001 (8.7%).  If we strip out the overbuilt areas of California.., and concentrate specifically on areas where housing expansion is extremely limited, like the Peninsula, one can simply take the median price of comparable homes in 2001, add 8.8% appreciation per year, depreciate appropriate improvements to the property and a ... http://3oceansrealestate.com/blog/change-logic-and-money.html When I meet with homeowners who are struggling with their mortgage are maybe behind on payments and have no equity in their home, we always discuss their options when it comes to avoiding foreclosure. We usually get through my report and if it appears that their only option is to sell their house in a short sale, I always get this question - "Will a short sale hurt my credit score? And if so, by how much?" I have been doing a lot of research on this topic recently, and what I have found is there is a lot of mis-information out there. It's tough to find any definitive information about the impact of a short sale or foreclosure on one's credit report. I recently came across some great information provided by a mortgage broker and former underwriter in Southern California, Catherine Coy, on the www.BiggerPockets.com forums, where she explains that in terms of the Fair Issac scoring model, there is no difference between a foreclosure, a short sale, and a 120 day late (Notice of Default). Here is an excerpt from her post:  It's a total myth that somehow a short sale is less damaging to one's credit. Why? Because the following events are all the same; that is, the definition of a " foreclosure" by Fannie Mae and Freddie Mac is: Foreclosure None in past 5 years with minimum 3 active trade lines more than 24 months old, with no late payments or derogatory credit after the foreclosure.   Definition of Foreclosure: Any 120 day mortgage late within the last 24 months, any notice of default or settlement on a real estate secured trade line (short sale), any deed-in-lieu or forbearance agreements. The above is straight out of the Fannie Mae Selling Guide, so it's not speculation or conjecture. All underwriters know the facts: foreclosure/short sale = same/same. The hit to one's FICO score ... http://3oceansrealestate.com/blog/will-a-short-sale-hurt-my-credit-score.html You would have to be living under a rock to have missed this today, so here is a newsflash for all you subterranian dwellers. Henry Paulson's latest bailout plan now consists of borrowing $800 Billion from The Fed to buy up mortgage assets, consumer credit card debt and car loans. 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, ... http://3oceansrealestate.com/blog/mortgage-mania-26-and-henry-giveth-again.html Henry giveth, and Henry taketh away . . . 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 ... http://3oceansrealestate.com/blog/mortgage-mania-25-now-what.html I'd say it's a toss-up.  At least at the nudist colony there might be some, uh, ancillary job benefits, while the NAR position would require moving to Chicago.  And that's just a start. 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 ... http://3oceansrealestate.com/blog/which-job-would-be-more-frustrating-social-media-manager-at-nar-or-clothing-manager-at-a-nudist-colony.html Despite being a late adopter of technology generally, the real estate industry has embraced social media better than most industries have, and arguably behind only politics and technology.  Here's an interesting use of social media from a completely different industry:  law enforcement. 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!  ... http://3oceansrealestate.com/blog/the-tweet-cops-law-enforcements-use-of-social-media.html Did you see the debate last night? 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... Joe Homeowner has a house that he bought for $500,000 with a loan from Fly-By-Night Subprime Lending, Inc. The house is now worth $400,000 Joe, like everyone else, has lost a lot of equity in his home 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. 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 So now Joe is happy, but only until he can't make his payments again... Good ole' taxpayers absorb a $100,000 loss 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 ... http://3oceansrealestate.com/blog/mccains-debate-night-bombshell.html From the "What decade are we in?" department, comes this choice gem of a promotional email from our good friends at the California Association of Realtors.  They're running an Expo next week, and a promotional email just arrived in my inbox, from which I quote: 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: Take home MAX'S TOP TIPS A Technology Survival Guide for PDA-Smartphones and Digital Cameras Technology is evolving, and it is affecting our lives and our profession. 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 that agents are using to maximize their marketing and communication. Sign up to attend the REALTOR.com® Workshop October 15 You must register separately to attend the C.A.R. REALTOR® EXPO Oct. 14-16, 2008 http://3oceansrealestate.com/blog/are-digital-cameras-and-pdas-really-the-latest-in-advanced-technology-thats-what-car-thinks.html Even us "glass half-full" types have to admit the news these days is bad.  Any day Congress passes a $700BN and has to tag on only another couple billion or so of Christmas ornaments to get it passed, well, on that day, you know things were urgent, and they had to act fast.  Wooden arrow manufacturers, Caribbean distillers, and certain other recipients of congressional largesse pork may be quite happy now, but hopefully the remaining $700BN will be spend actually trying to solve the problem. 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 $700BN we could buy a couple of million homes.  We'd start by buying, say, 75% of the inventory on the market right now.  That should restore confidence in the market pretty quickly. Presto!  Problem solved. http://3oceansrealestate.com/blog/lets-end-the-housing-crisis-here-and-now-a-modest-proposal-for-how-to-spend-the-700bn.html Apparently at least a handful of government financial regulatory employees were doing something today other than figuring out how much money Wall Street needs to keep from further imploding... The New York Times reports that JP Morgan Chase has taken over troubled lender Wamu. What next? http://3oceansrealestate.com/blog/jp-morgan-chase-takes-over-washington-mutual.html Movies.  Shoes.  Phases.  What do they have in common?  All have been recently used as metaphors describing the economy or predictions of where the economy is going. On the day that the Fannie and Freddie s$#@ 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. http://3oceansrealestate.com/blog/whats-happening-in-this-market-a-liberal-dose-of-mixed-metaphors-to-help-us-understand-it.html Hello ladies & gents 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 ... http://3oceansrealestate.com/blog/see-tim-ferriss-speak-in-san-francisco-discount-code-bizscy148.html Having spent much of my life in former British colonies, I am well versed in various British-isms:  marmite (yuck), lifts (not elevators), sprinkling my words with extraneous u's ... and the correct use of roundabouts -- or "traffic circles" as they're commonly known on this side of the Atlantic.  Sadly, many of the folks here in Silicon Valley seem to have missed that part of driver's ed. 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. http://3oceansrealestate.com/blog/attention-all-you-crazy-drivers-in-the-fair-oaks-neighborhood-those-traffic-circles-are-there-to-slow-you-down.html Amid all the celebration and hullabaloo associated with the recent drop in conforming interest rates as a result of the Treasury Department taking over management of GSE's Fannie May and Freddie Mac, there has been scant analysis of the elephant in the room, namely Jumbo (aka non-conforming) loans that are part and parcel of home purchasing here in Silicon Valley. 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 ... http://3oceansrealestate.com/blog/mortgage-mania-19-the-jumbo-strikes-back.html 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 ... http://3oceansrealestate.com/blog/mortgage-mania-18-can-you-say-taxpayer-bailout.html Long-time readers know that I do my newspaper reading online via the New York Times. In a throwback to a quieter time, I do subscribe to the San Jose Mercury News on Sundays as we like to peruse the articles and share witty banter about the headlines over morning coffee. In an interesting twist, I also receive the paper on other random days of the week . . . but I digress. 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 ... http://3oceansrealestate.com/blog/good-news-about-real-estate-in-the-mercury-well-sort-of.html Credit for this post really goes to 3 Oceans contributor Eric Trailer who sent me this content in a letter this week. My clients got it last week, and the blogoshpere can now benefit. We can assume that Eric has better things to do on Labor Day than blog. I'm guessing something involving his lovely wife and son . . . 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 ... http://3oceansrealestate.com/blog/timing-the-market-a-bankers-viewpoint.html Image via Wikipedia 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 ... http://3oceansrealestate.com/blog/900-university-avenue-palo-alto-ca.html Having a little too much post-Inman fun and excitement... http://3oceansrealestate.com/blog/hate-speling-misstakes-and-bad-pictures-in-the-mls-support-my-campaign-for-nar-president-and-put-an-end-to-this-nonsense-once-and-for-all.html CNN Money is a favorite consumer source for news and sensationalism about issues affecting us financially. A friend uses it as his homepage, and sent me this article on indications that the housing market is pulling out of its downward spiral. Judging by the commentary on the Yahoo news service that picked it up, most people think it is another self-serving article written by real estate agents who want to further dupe consumers into buying homes and further leveraging them selves with unnecessary debt. There, I said it, so you can save your comments. 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: Is the housing stock shrinking? Are home prices falling at a slower pace? Is it cheaper to rent than own? 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 ... http://3oceansrealestate.com/blog/a-housing-rebound-looking-for-the-bounce.html I've been accused -- rightly, I might add -- of being a geek. I also happen to be in real estate. You put the two together, plus a keen interest in using new social media tools like Twitter, and what do you get? The Twitter-MLS! 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: Sign up for an account at Twitter if you haven't done so already. Head thither and "follow" my Twitter "Menlo Park MLS" account. Other towns in the Bay Area will follow shortly. 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: http://3oceansrealestate.com/blog/geeks-of-the-world-rejoice-behold-the-first-ever-twitter-mls.html Sorry I'm Twittering http://3oceansrealestate.com/blog/im-twittering.html About a year ago we did what may have been the world's first virtual open house.  Alas, we've been one-uped by Pam Buda, a Coldwell Banker agent in the wine country north of San Francisco.  In conjunction with Trulia, she's live-web-casting her open house in Healdsburg today. 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! http://3oceansrealestate.com/blog/wine-country-agent-one-ups-us.html <rant> 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, ... http://3oceansrealestate.com/blog/from-the-i-missed-that-class-where-we-talked-about-place-value-department-palo-alto-per-sq-ft-prices-drop-precipitously-down-from-75000.html 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 . . . http://3oceansrealestate.com/blog/mortgage-mania-17-foreclosures-inside-the-bubble.html Yes, for those of you gents who still may be holding on to the rather relaxed "grunge" look from the 1990's, I've got a newsflash for you: grunge, along with the current housing crisis, is over.   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. http://3oceansrealestate.com/blog/right-along-with-the-grunge-look-the-housing-crisis-is-over.html Memorial Day weekend -- expect little open house traffic, and not many open houses to check out. Most Realtors take a break this weekend. # Powered by Twitter Tools. http://3oceansrealestate.com/blog/todays-market-updates-via-twitter-3.html http://twitpic.com/1dat - Testing from email with attachment # 2 new Palo Alto listings in last 24 hours: 2916 Ramona ($2.5M; 5/3) from Lynn Chou; 890 N Cal. ($1.6M 5/2.5) from Tim McKeegan # Eye candy alert: 5070 Alpine Road, Portola Valley. Only $8.4M! 7800 sq ft home. Listing agent Pat Looney # Palo Alto median home price now just under $2M # http://twitpic.com/1e76 - Bummed I couldn't make broker tour today. Wanted to see 12335 Stonebrook in Los Altos Hills -- $45M mansion, l ... # Powered by Twitter Tools. http://3oceansrealestate.com/blog/todays-market-updates-via-twitter-2.html @PhoenixREGuy Give my regards to your whole crew! Wish I could have been there as well... # Testing from twittermail # Listings are random...case in point: About 8 listings on Palmer Lane/15th Ave in Fair Oaks in a 3 block area. # Plus, many of the current Fair Oaks listings are HUGE -- uncharacteristic of this neighborhood. 4 current or recent homes have been $1.5M+! # Sam Anagnostou's listing at 523 Palmer Lane (Menlo Park) has already sold. Amazing interior, very tasteful. # http://twitpic.com/188q Menlo Park days on market is back to ~20 -- right where we would expect it. # Powered by Twitter Tools. http://3oceansrealestate.com/blog/todays-market-updates-via-twitter.html After a writing hiatus, I'm back! It's been a crazy spring. As a Certified Foreclosure and Short Sale Specialist, I've been very busy consulting with homeowners and working with them to avoid foreclosure. Every day, I'm talking with people who are facing the prospect of losing their home. 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 ... http://3oceansrealestate.com/blog/how-to-avoid-foreclosure-part-2-of-3.html 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. http://3oceansrealestate.com/blog/public-service-announcement-nationwide-home-mortgage-loan-company-is-stealing-content.html (photo credit: mop squad) Kevin Costner was hot 20 years ago in Field of Dreams. So was that comment "If you build it, they will come." I received a fantastic comment from a home buyer today for my previous post How Listing Agents Unintentionally Sabotage Their Own Staged Listings: Danica Says: May 12th, 2008 at 10:51 am That is so true. As a potential buyer, I have been frustrated many times by Craigslist ads that have no picture. There are a ton of houses out there, and I’m trying to weed out the ones I don’t want to look at - it’s really impossible without a picture.I’ve seen so many places, staged or unstaged, that sounded great on paper and then turned out to be hideous-to-unlivable in person.More importantly, even though online listings at a place like Craigslist are free and offer almost unlimited space, a lot of sellers just put up one or two sentences and no pictures - and to me that says “I don’t have it together enough to actually market this house.” And my experience has been that often, that means they don’t know how to deal with the paperwork, or with my questions, or even with basic social skills.I guess in a way it’s helpful to see a boring, picture-less, one-line house ad - because it tells me I don’t want to deal with that seller. But it’s still hilariously frustrating to see an ad online that says something like, “2 BR 1.5 BA NICE!!! MUST SEE CALL JAMES SMITH REALTOR 555-1414!” This is a brilliant comment, it just goes to show that with that in this fast changing real estate market, our buyers' behaviors have changed. The old attitude of "If you list it, they will come" no longer works. That worked in the movie Field of Dreams for ... http://3oceansrealestate.com/blog/sorry-if-you-built-it-they-are-not-coming.html Symantec, the Internet security firm, today released what they described as a "code red" security patch for all real estate bloggers currently using the now-infamous "Google Juice Sucking" Trulia widget. Tipped off by an anonymous Active Rain'er who had come across this discussion thread, which in turn had been prompted by good investigative sniffing [sniff one, sniff two, sniff three] by the pack at Bloodhound, Symantec's elite Taskforce Realty Internet Permission Experts (TRIPE) worked through the night to come up with a patch. The head of TRIPE, Dr. Francois Viande-Fichu, released the following press statement: With thanks to the ever-vigilant Active Rain-droppers for tipping us off, we were stunned to find some pretty damning evidence of foul play in Trulia's widget, which unsuspecting Realtors have been deploying on their web sites in droves. Trojan Horses are one thing, but what they've come up with is something far more nefarious: a Peloponnesian Unicorn. The Trulia widget does the following: Sucks out the hosting web site's Google Juice, especially the Raspberry flavor. Decreases the hosting web site's Google Page Rank to negative 5. Installs a little Trulia MarkerMan on the desktop whose eyes follow you around as you surf, and they roll sarcastically whenever you visit Zillow's site. Automatically and instantaneously rises Trulia to the top of the Google rankings for all searches related to the host site. Makes the web site owner/blogger start chanting Gregorian hymns in the original Latin. Refers all incoming traffic to the hosting site's owner's fiercest competitor, in exchange for a 25% referral fee. When challenged to provide evidence of the above, Dr. Viande-Fichu displayed the following code embedded into each Trulia Widget. <;?Php Embed Java Script<Trulia Evil Widget.class.nefarious>; While {5>1 DO: Trulia.PageRank = Site.PageRank*2 / Slurp.Giant.SuckingSound; Site.PageRank=-5; Install.Icon = http:/trulia.com/images/trulia_markermen_icon.gif; option bug eyes="true"; If Site.Visit="Zillow" Do {Icon.Roll.Eyes And Sigh.Loudly}; Google.LocalSearchRankings.Site.City = "Truliawful"; Trulia.LocalSearchRankings.Site.City = "TopOfFirstPage"; Launch Latin.hymns.InstanceGregorian; End Do} ?end Php> Agents who've installed ... http://3oceansrealestate.com/blog/symantec-issues-high-priority-security-patch-for-trulia-widgets-called-worst-peloponnesian-unicorn-ever.html Maybe it's the frustrated business school professor in me, or the memories of sitting in Professor Barry Nalebuff's classes during business school, but what has fascinated me the most about the ongoing debate about Trulia's no-follow outbound listings links (started here by Galen Ward, then continued here, here, here, and here) is not the arcana of the no-follow tag, not the dissection of SEO intricacies, and not really even the question of what is or is not appropriate to do with listings online. No, what really fascinates me about this debate is how it accentuates co-opetition in the real estate industry.  Co-opetition is simply the notion that companies compete and co-operate simultaneously.  Arch-rivals Northrup Grumman and Boeing go mano-a-mano to get a lucrative government contract ... and the winner often subcontracts part of the project to its rival.  Microsoft and Oracle have competing database platforms but often sell eachother's products. In our industry, co-opetition reaches nearly incestuous levels.  For instance: Brokers John and Betty compete for the listing at 123 Main Street.  Betty wins and puts the property on the MLS.  The very next week John brings potential buyer clients to the property.  Sure, he would rather have won the listing, but that's in the past.  Now he's working with Betty to consummate the transaction.  No hard feelings. Realtor Bob hangs his license with ABC Realty.  He puts an ABC Realty sign on the front lawn of all his listings, and the ABC Realty logo is prominent in all his media ads.  He's co-operating with his real estate brokerage to promote their brand, and he in turn benefits from that brand awareness.  Co-operation.  A phone call from a prospective buyer of one of Bob's listings, however, may well go through to the agent on "floor duty."  That agent turns this phone call into a ... http://3oceansrealestate.com/blog/a-perfect-example-of-co-opetition-the-real-estate-industry-barry-nalebuff-would-be-proud.html Continuing my earlier rant about how real estate statistics don't always tell an accurate story, let's look at what Menlo Park's numbers seem to indicate for our ongoing robust spring market. First, a recap:  courtesy of our good friends the quant jocks over at Altos Research, we saw that the median price numbers for Menlo Park had dropped by some 30% -- from $1.25M to $850K -- over the 9 month period from April of 2007 to January 2008. That drop in median price, however, by no means reflected the reality on the ground in Menlo Park -- in other words, it is not true that a home in Menlo Park that was worth $1M in April 2007 was suddenly only worth $700K in January 2008.  The reason for that disconnect was simply the change in the mix of properties being offered:  in the last half of 2007, the inventory of lower priced homes east of 101 swelled, dramatically pulling down the overall median. As if to emphasize that disconnect, we see what appears to be a dramatic price recovery from January of 2008 to now in May of 2008; in fact, it looks like the market has regained all 30% of what it ostensibly lost late last year! Again, the reality on the ground is quite different; that is, a Menlo Park home that was worth $1M in January of 2008 is most emphatically not suddenly worth $1.3M today. Moral of the story?  Simple:  real estate statistics are good at telling some stories, but not very good at telling others.  In particular, the median often simply reflects the mix of properties currently on the market and not necessarily any underlying ups or downs in the market. http://3oceansrealestate.com/blog/lies-damn-lies-and-statistics-what-mark-twain-and-benjamin-disraeli-would-say-about-menlo-park%e2%80%99s-median-price-numbers-part-2.html As our resident expert, Kevin Boer noted in his April 1 posting, the housing market officially hit  bottom a couple of weeks ago. For those of you who  were  skeptical of his information given the  April 1 posting date, and Kevin's well known reputation for satire and irony, the California Association of Realtors published some new market data yesterday (April 24) showing how real estate really is local, and that the local real estate market in Silicon Valley is humming along nicely, thank you: In case you’ve been wondering why high-end real estate markets continue to perform relatively well:  One out of every 10,000 American families has an annual income greater than $10.7 million, according to two university professors who study the super-rich.  By their tally, there are some 15,000 Americans who fit into that category.  These individuals also are getting an increasing share of the economic bounty:  In 2006, the super-rich possessed 3.89 percent of total income, up from .87 percent in 1980 and the highest level since 1916. Strong employment and wage growth are two factors that have helped the San Francisco Bay Area stave off the kind of home sales and price declines experienced in the inland regions of California.  For example, Santa Clara County residents earn nearly double the nation’s average weekly wage and surpassed Manhattan as the county whose residents take home the largest paycheck, according to the U.S. Bureau of Labor Statistics.  Santa Clarans take home an average of $1,585 per week, slightly more than Manhattanites, who earn an average of $1,544 a week.  San Mateo County ranks fifth in the nation at $1,322, while San Francisco is eighth at $1,286.  Nationally, the average is $818.  San Francisco ranked tenth ... http://3oceansrealestate.com/blog/have-we-really-hit-bottom-market-statistics-vs-media-hype.html Some of you will remember my post on the lawsuit in Southern California where the buyers of a home were suing their agent because they felt they overpaid, and the agent had acted to hide that information from them (Refresher available here). This case had lawyers salivating, and brokers trembling, as it potentially could provide precedent and open the door to lawsuits by home buyers who purchased homes during the recent run-up in housing prices, and are now seeing their local markets stagnate or fall. According to the following article released by the California Association of Realtors, the jury on the case found in favor of the real estate agent. There was no mention of the issues that I flagged in my earlier post, namely that the agent didn't share the appraisal or list of comparable properties with the client, or that he encouraged them to get their home loan through him and use his appraiser. I'm sure that there are many real estate agents out there who also are great mortgage brokers. I'm not one of them. Frankly, I'm not smart enough to keep up with all the issues in real estate law and the local market, plus all the ongoing changes in the lending market. Thanks for reading . . . REALTOR® WINS HIGH PROFILE JURY TRIAL After only two hours of deliberation yesterday, the jury unanimously vindicated a buyer's agent accused by his clients of failing to disclose that two other homes in the neighborhood sold for less than what they paid. As a trial court case, this decision in Ummel v. Little is binding on the parties to the case, but has no binding authority for other cases. Moreover, the buyers may file an appeal. This case involved a couple who bought a home in a coastal ... http://3oceansrealestate.com/blog/as-the-market-slows-lawyers-are-salivating-part-2.html With surprisingly little fanfare, Redfin, that pesky little Seattle brokerage the real estate industry loves to hate, announced yesterday their "Redfin Select" program, which looks suspiciously more and more like ... a traditional brokerage offering. Redfin's initial business model, which made great sense in the VC's conference rooms, was to outsource a big chunk of the buying process to its clients in exchange for a big chunk of the buy-side commissions.  For better or for worse, however, that model has continued to run dab-smack into the middle of the reality of real estate:  the listing agent, though representing the seller, is not usually responsible for showing the property to every interested buyer.  That service is usually provided by the agent representing the buyer.  The problem?  In order to make offers on a property, Redfin's clients have to actually, well, see it.  If they don't manage to hustle there during an open house, then they're SOL -- unless a Realtor-magic-key-toting Redfin agent comes by to open it.  And just like that, poof! goes half the business model. Fast forward to today.  If you're a Redfin client and you want a regular set of property showings, just give up a portion of the commission that was coming due to you and have Redfin show you around, just like a traditional broker would do.  Instead of getting 66% of the commission back, you get 50% back. Possible explanations come from two different fronts: First is my "Innovator's Dilemma" proposition:   Redfin as a classic disruptive company, will first figure out how to be profitable serving the lower end of the market, the price-conscious clients that traditional brokers don't mind losing.  Then it will move upmarket, charge more, and offer more service -- ie. become more like a traditional brokerage, but with fatter margins. At first glance, Redfin's move ... http://3oceansrealestate.com/blog/redfin-select-school-marmish-innovators-dilemma-becoming-what-they-hate.html I have to honest. I have been reading Kevin's posts on social media and blogging, I am itching to write one on the topic myself since internet & blogging has done tremendous for my business. So here it is! (We will continue the regular programming on staging for next post ;) I promise.) I have been toying with Facebook a lot lately because I am intrigued of how this thing can work for my business (since I am spending a ridiculous amount of time on it) and how fun it actually can be even for work. Facebook has exploded on the business sphere lately largely because of its user-friendliness, much more professional look than myspace, and easy to network quickly with a string of people in a more relaxed atmosphere (they now even added a People You May Know section, which is frankly scary how they know I know these people). At first I only used Facebook for contacting old college classmates & long lost friends, secretly comparing looking where they are working now how much weight they had gained, but lately I am finding a lot more business applications being developed and used, as well as an increased number of contacts in both staging and realtor fields. (Finally, no more of those invites of "Are You a Vampire?" but "Have my online business card.") I also read Guy Kawasaki's 10 Things You Don't Know About Facebook: "the fastest growing demographic on Facebook is those ages twenty-five and older. [per Facebook's own stats] Facebook is quickly becoming not just place for friends to meet friends, but for business users, baby-boomers..." Which prompted me to establish a "store front" (in Facebook lingo: Page) for my staging business. I listed my mission statement, basic info, even added blog syndications and apps such as charity that ... http://3oceansrealestate.com/blog/how-to-use-facebook-to-brand-yourself-and-expand-your-business-network.html The gray lady herself comments today on the stress of blogging:  intense competition to be the first to break a story, the seemingly relentless need to be on top of all the news. There is a cost to this: Two weeks ago in North Lauderdale, Fla., funeral services were held for Russell Shaw, a prolific blogger on technology subjects who died at 60 of a heart attack. In December, another tech blogger, Marc Orchant, died at 50 of a massive coronary. A third, Om Malik, 41, survived a heart attack in December. The article admits, of course, that "the premature demise of two people obviously does not qualify as an epidemic." My thoughts?  There's more than enough stress in my life already, thank you very much, so I try to make sure blogging doesn't add to this.  I've gone several weeks without posting when things just get too busy.  I find blogging in modest doses -- say, 30 minutes per day -- to be therapeutic.  I like writing, I like reading, I like the camaraderies and interaction. So here then is my modest blogger manifesto, part serious, part humorous.  Tell me what you think!  Any more we should add to the list? From Saturday at 6pm until Monday morning, no blogging.  [Present post excluded.]  There's really nothing so important that it can't wait till then.  [Again, excepting this article.] No vendor pre-briefs less than 48 hours before the news embargo lifts.  I need time to digest the information and come up with a cogent response. Once a month, I will prune my feed reader.  If I haven't read a blog in a month, off it goes. Many of us in real estate tend to be perfectionists, and our motto traditionally is, "Only perfect is good enough."  Let's turn that on its head and say:  "Good enough is perfect." If it's ... http://3oceansrealestate.com/blog/blogging-stressing-you-out-youre-not-alone-says-the-new-york-times-a-modest-blogger-manifesto.html Yes, the market is bad in many parts of the country -- even many parts of the Bay Area.  But real estate, as the adage goes, is local, local, local -- and in many of the good school district parts of the Bay, prices continue to go up and multiple offers are back in vogue.  Case in point -- in the last week, there were at least two properties that sold with multiple offers -- with "multiple" in this case meaning "more than 10." So, if you're a buyer competing with other buyers, what should you do?  Our advice:  Pull out all the stops.  Here are some time-tested suggestions*: Bring a large manila envelope stuffed with 100 dollar bills to the offer presentation.  Discreetly slip it to the listing agent. Rename your first born after the owner of the property.  Bring said child to offer presentation, clearly labeled "I named him/her after you!" Offer a 15-year free rent-back to the sellers. Bring along your dream therapist.  Have him/her describe your last session in which you clearly saw yourself buying, owning, and living in the home. Lobby congress to make it illegal to not accept your offer. Stalk the seller for a few days ahead of the offer presentation.  Hold up signs saying, "Sell me your home!  Please!" Add an extra zero to the price you're offering. Do a "presumptive close."  The day of the offer presentation, show up with moving trucks, decorators, painters, and other assorted workmen.  Tell the current home owners you're about to move in -- didn't they get the memo? Bring along your burly cousin to the offering.  Have him sit menacingly in the corner, swinging a baseball bat.  Make oblique comments about "keeping him happy" and "how disappointed he'll be if I don't win the house." Put up a sign outside the offer presentation office saying, "The ... http://3oceansrealestate.com/blog/what-bad-housing-market-what-we-need-are-tips-on-how-to-win-multiple-offer-situations.html Michael Parker of Blackwater Consulting Group, writing in the Texas Realtor Magazine, says "Yes": I respectfully call social networking and Web 2.0 great hype with great future promise. I just don’t think they help sell houses today in any proportion to the emphasis they are receiving. [Sidenote:  What's Michael doing writing an article about social media in a Realtor magazine?  Shouldn't he be protecting diplomats in Iraq?  Oh, wait a minute -- that's the other Blackwater.] Michael raises some very interesting points, definitely worth addressing in a future post. Sherry Chris, CEO of Better Homes and Gardens Real Estate*, however, begs to differ. Friend and business colleague Pat "Transparent Real Estate" Kitano and I had the privilege of meeting Sherry and Camilla -- BHG's new head of marketing -- over breakfast recently.  Sherry's team has the exciting task of building a brand new nationwide real estate franchise from scratch, but with the incredible advantage of using a name with incredible brand equity.  They're pulling out all the stops in their pre-launch efforts, including some very interesting online social media initiatives, with participation from the whole executive team. Taking a page from Rudy and Joe, Sherry always has a video camera with her, and she made the mistake of interviewing Pat and me.  Whether it was the content or the participants that caused this, I'm not sure -- but the hotel did give her grief about filming without permission. [youtube CaYw3yh6wZ4 Sherry Chris of Better Homes and Gardens Real Estate interviews Kevin Boer and Pat Kitano] * Better Homes and Gardens Real Estate is a client of Domus Consulting, a sister company of 3 Oceans Real Estate. http://3oceansrealestate.com/blog/is-social-media-a-waste-of-time-texas-realtor-magazine-yes-sherry-chris-better-homes-and-gardens-no.html Zillow, the perennial surprise-maker of online real estate, has just launched its long-anticipated foray into the mortgage world with a "Mortgage Marketplace."  The company's original online real estate product -- the controversial "Zestimate" -- is a computer algorithm estimating the value of homes.  The logical mechanism behind a "Mortgage Marketplace" would thus also be a computer algorithm -- say, a mortgage pricing engine that spits out rates from lenders based on the borrower's situation. In a delicious twist of irony, however, the mechanical Turk behind this new product is ... a person.  As in, homo sapien.  Specifically, a mortgage professional. In a pre-launch briefing with "What would David Gibbons do" David Gibbons, he described the all-too-typical grief that a potential borrower goes through with many lenders, whether online or offline:  bait-and-switch salesmanship, hidden fees, inflated rates, and perhaps most egregiously, a complete lack of anonymity. Zillow's solution?  Let consumers ask for mortgage quotes without revealing their name.  Let mortgage brokers respond to these requests.  Let consumers sift through the responses and choose the broker they want to work with; then and only then does the buyer have to reveal his or her name. What about the whole bait-and-switch thing?  Zillow deals with that in a very Web 2.0 way -- consumer reviews of mortgage broker performance.  Plus, the participating mortgage brokers are vetted -- at least minimally -- to confirm that they are, in fact, licensed mortgage brokers. And here's something sure to make at least some mortgage brokers sweat a bit:  the competing mortgage offers are visible not just to the consumer who requested them...but also to the other mortgage brokers who submitted offers! The cost to mortgage brokers?  Zero.  In David's words, Zillow remains committed to being an advertising platform.  The data they can now gather about consumers -- what their home is worth, ... http://3oceansrealestate.com/blog/irony-of-ironies-the-mechanical-turk-behind-the-zestimate-of-mortgages-turns-out-to-be-not-an-algorithm-but-a-real-live-mortgage-person.html The news that all fence-sitters have been waiting for finally happened: at 2:34pm this afternoon, the bottom of the real estate market was officially reached when 356 Avocado Lane in Stockton finally sold -- with multiple offers -- after 30 months on the market. Said listing agent Trevor Blackstone of Stockton Realty: "Phew! I'm glad that's over. I'm the fifth Realtor for these folks! They went on the market at $750,000 and after 25 price reductions they finally reduced it $275,000 and it sold! In fact, we got two offers, both just above the list price." CAR chief economist Leslie Appleton-Young broke out the champaign at CAR headquarters in Los Angeles. "We've been keeping our eyes on that property for a long time. We knew that when it sold, the housing recession would officially be over." Mike Simonsen over at Altos Research had this to say: "Our charts predicted this a few months ago already. The 7-day rolling average of the ratio of the median days on market for the upper quartile in the worst area of Stockton has been steadily moving upwards. That's the sign that's accurately predicted the bottom of every single market since 1900!" TJ Shanahan of Realty World in Sacramento was also not surprised. "Seven of my top 10 ways of predicting the market bottom came true literally in the last week!" Astoundingly, every single market bottom has also happened on April 1st, and at the exact same time. Here's the Altos Chart to prove it: Bubblistas are already salivating over the next real estate recession, scheduled to start in late 2024. The domains IToldYouSo.blog and WorstHousingRecessionEverWillStartIn2024.com have already been reserved. "In the meantime," said a prominent bubblista, "I'm gonna stay renting." http://3oceansrealestate.com/blog/market-bottom-officially-reached-at-234pm-this-afternoon-impasse-between-buyers-and-sellers-finally-resolved.html Just a few months after we got the shocking news that Odysseus was not invited to be the keynote speaker at either Inman's or NAR's convention, comes the doubly shocking news that our very own Teresa Boardman was not invited to be the keynote speaker at the Republican National Convention, to be held in Minneapolis/St. Paul in September. Reached for comment, Teresa said, "What am I, waxed fruit?" The string of poor corporate decision-making continues with other little-known recent non-invites from within the re.net world: Brian Brady, though often consulted by Uncle Ben, was not invited to speak at the Fed's recent "Bail Out Bear Stearns" party. Athol Kay, despite his photography prowess, was not invited to speak at this year's Kodak convention. Kris Berg was not invited to the annual "Scripps Ranch Market Is Tanking" convention put on by the bubblistas. http://3oceansrealestate.com/blog/teresa-boardman-not-selected-as-keynote-speaker-at-republican-national-convention.html Civilians and other normal people -- scat.  This post is only for hard core re.net geeks. This just in via the grapevine...despite an earlier, uh, tiff, Dustin Luther and Greg Swann, formerly best friends, most recently not so tight...have made up.  Dustin's highly acclaimed 4Realz seminar series and Greg Swann's Bloodhound Unchained conference will soon be merging. Surprising news for those of us inclined to follow such events.  Still, it makes good sense. In Dustin's words:  "You know what?  We're targeting the same group of clients.  We're both trying to help the real estate industry better understand how to use online and offline marketing effectively.  It just didn't make sense for us to stay separate." Greg Swann concurred (I think):  "Luceat lux vestra!  Luctor et emergo,  silentium est aureum.  sic semper tyrannis.  Quid pro quo -- quo vadis?  Ipsom lorem.  Sine quo non. In dentibus anticis frustrum magnum spiniciae habes!" A potential sticking point -- where to hold their joint conference -- was easily resolved with the help of a slide rule and Google maps.  Palm Springs, CA is more-or-less in between the two previous venues, so attendees of both upcoming conferences will be meeting in the middle. The truce was apparently brokered by none other than Joe Ferrara, broker, attorney, and blogger extraordinaire. Other surprising related revelations: The combined entity, to be known as "Bloodhound 4Realz Unchained," is engaging the dynamic duo at 1000 Watt Consulting to market the event.  At Greg Swann's insistence, all market collateral will be in Latin haiku.  Said Marc Davidson of 1000 Watt:  "The haiku bit is no problem.  My Latin's a little rusty.  But it should be no problem." The combined entity is said to be in talks with Inman.  Joel Burslem:  "People were getting sick of the whole San Francisco and New York thing and indicated a different venue would be ... http://3oceansrealestate.com/blog/breaking-news-4realz-and-bloodhound-unchained-to-mergefirst-joint-conference-to-be-held-on-neutral-ground-in-palm-springs.html