(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:

1. 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 Kevin Costner but guess what? Kevin Costner is OLD news now. That phrase was coined 20 years ago, so is that attitude. It’s freaking 20 years old. Shouldn’t we move on with the times?

A savvy marketer knows that today’s consumers are so de-sensitized by advertisements that they need more interactive and user-friendly contents [Note: "content," NOT "ads."] to make an educated decision before buying. You can see that through the fast rising numbers of business blogs and web 2.0 services. People want interaction, not sales agenda ramming down their throats.

Also, today’s agents no longer holds monopoly to MLS information. Internet has made today’s buyers more savvy, shrewed, efficient and much more likely to start their buying process without agents. Additionally, if the consumers cannot be satisfied by you, it’s very easy for them to go elsewhere. To be able to work in a competitive market, as a listing agent or FSBO (For Sale By Owners), you will need to get on with the time to provide a comprehensive and user-friendly marketing package.

To do so, here are a few tips as pointed out by Danika, our lovely buyer:

*Online presence is KEY. Staging the property will instantly make the home show-ready online. Once you have staged, having big & high quality photos is a must.

*Don’t just do 1 photo, if you are allowed to post 10, why not do 10?

*Place ONLY good quality photos that will entice buyers’ appetite. Photos like featuring the local eateries or parking lots are not really adding anything to your listing.

*Be creative, not boring and cookie cutter in your listing descriptions. “2Br for sale” is kind of a duh since anyone can read it from the sheet. Why not say something more descriptive that showcase the unique selling points of your listing?

*MOST IMPORTANT: Provide reasonable expectations for buyers. If your listing sounds like the “IT” property to buy and buyers walked into an ill-maintained home, they will turn around and leave immediately because you have wasted their time. If the house is staged, keep it staged while you sell. If you property was already on market then staged, showcase the staged photos online and on flyers and take out the old unstaged photos.

Happy selling!

Cheers,

Cindy

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If you’re Eliot Spitzer, probably three feelings come to mind: panic, disorientation and regret.  But if you’re a potential home buyer in the Peninsula region of California, you have good reason to feel excited, encouraged and confident!  Why?  If you read my last post last month, you know that the conforming loan limits for many California Counties are going up and that means cheaper mortgage rates on loan amounts between $417,001 and $729,750.  Now that HUD has made it official that ALL bay Area counties qualify for the revised maximum conforming loan limit, that means potentially big savings on mortgages for qualified applicants looking to purchase single-unit properties up to $810,000 with as little as 10% down!

We’ve all heard the cliche, “the devil’s in the details”, so what are the latest requirements to obtain a conforming loans between $417,001 and $729, 750?  Since I’ll provide you with a link to Fannie Mae website and announcement , I’ll provide you with some highlights that I think are most relevant and let you read further at your leisure:

1. Single-unit properties only

2. Purchase and “limited cash out” transactions only (i.e. no greater than $2,000 going into your pocket upon settlement)

3. If primary residence purchase, up to 90% loan-to-value (”LTV”) allowed if fixed-rate program is selected–700 minimum FICO(R) required; 80% LTV if an adjustable-rate loan is selected–660 minimum FICO(R) required; if refinance

4. If second home or investment property purchase, maximum 60% LTV allowed with minimum 660 FICO(R) regardless of eligible loan program selected

5. If refinance, regardless of type of eligible mortgage program, up to 75% LTV allowed, plus subordinate financing allowed in addition up to 20% LTV–660 minimum FICO(R) required

     a. SPECIAL NOTE, consolidating existing first mortgage and subordinate mortgage into one loan NOT eligible AND six  months of “seasoning” (six payments made on existing mortgage) required to refinance!

6. Loans are eligible for origination NOW 

7. Eligible programs include 30-year fixed, 15-year fixed, LIBOR-based 5/1 ARM (amortized and interest-only payments allowed for this program)– more programs may become available

8. Sufficient employment, income and assets must be verified and each file will require manual underwriting– automated underwriting engines not allowed at this time

Again, I do encourage you to read the Fannie Mae announcement from the 6th of March for all the details, but the above are the top highlights.

So what will pricing look like on these “new” conforming mortgages?  Well, pricing has just recently been released by only a few institutions, but it looks like the 30-year fixed is running at about 6.375% and the 15-year fixed is running at about 6.25%.  The 5/1 ARM pricing is expected to be released next month.  What I do think is that pricing may actually get a little better in the short term as more institutions post pricing and auctions are successful with Fannie Mae and Freddie Mac. 

What’s right for you as a would be home buyer on the Peninsula?  That depends of course on your specific situation, and I do encourage you to consult with your trusted mortgage and financial consultant before placing an offer on a home or refinancing your mortgage.  What I can say is that the majority of our clients who are buying or refinancing today are selecting a jumbo 5-year ARM in the mid-5% range due to its balance of savings, security and flexibility.

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All hail our legislative and executive branches for passing into law the latest shot of adrenaline to our economy: the 2008 stimulus package. And it looks like a record was set with how fast the bill became law– wow, pretty impressive… Efforts like providing consumers with tax refund checks and businesses with additional write-offs should certainly inject the economy with billions of dollars, but many have asked me how raising the conforming loan limit, especially in CA, will truly stimulate the economy. Further, many of those have asked me whether it’s really the right thing to do.

Let’s start with whether it’s the right thing to do. Probably one of the better arguments against raising the conforming loan limit is the fact that doing so seems to reward those institutions and individuals that/who put us into this mess. If estimates by the National Association of Realtors is correct, 500,000 refinance transactions will be generated, 300,000 additional homes will be purchased and 210,000 foreclosures will be avoided. So if we conservatively estimate the revenue generated and the losses avoided using industry standards, the total is over 40 billion dollars! $40 billion certainly helps answer the question of how such an effort helps the economy; but again, why help those who caused billions of dollars of losses and a turned the market upside down? Shouldn’t we be punishing those bad, bad people and institutions? Well, the truth is that many of those institutions and individuals have gone away or moved on. So let’s take a moment to see what’s being created here.

Raising the conforming loan limit has the following benefits:

1. It does in fact greatly stimulate the economy
2. Many consumers who got in over their head will now be able to afford their mortgage
3. Greater affordability for housing is created
4. It will influence a portion of the jumbo market that has been lost and create some investor confidence, and finally
5. California has been long overdue to have a raise to the conforming limit given that over 50% of the nation’s jumbo mortgages were originated in California.

Okay, let’s say that raising the conforming loan limit is good for a moment. What’s next and what are the details? There’s still some speculation, but here goes:

1. The conforming loan amount will be determined based on 125% of the median price of a given county…
2. This allowance will NOT go into effect for purchase or refinance transactions until July 1, 2008 (that’s the earliest date that the loan application may be signed) since the market needs from now to June 30, 2008 to liquidate current qualifying mortgages available for sale from institutions
3. The types of programs allowed will be fixed-rate programs on a full-doc basis, which means that the hybrid, interest-only programs using “stated” income will not be allowed
4. The property must be single-family and owner occupied, which means that 2nd homes, investment properties and multi-unit properties are ineligible
5. Credit scores must be “reasonable” with a combined loan-to-value not to exceed 90%
6. No cash-out, which means that a refinance may not allow the borrower to receive any greater than $2,000 at closing
7. Loans must be funded and closed prior to December 31, 2008

The last question really has to do with what pricing of conforming loans will look like come July 1, 2008. My prediction is that, all things being equal today, that conforming loan rates will increase and that jumbo loan rates will decrease, leaving a much smaller margin between conforming and jumbo loans in the future. Since all things won’t be equal due to decreased short-term rates by the Fed and the overall stimulus package helping the economy, conforming loan rates will increase greater than jumbo loan rates will decrease. So, if you’re buying closer to the conforming level today, you’re better off getting a mortgage for the long term; if you’re at the jumbo level today, you’re likely better off going more for a short-term solution. Of course always consult closely with your mortgage, tax and legal professional for the best advice as it relates to your individual situation.

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You heard it here first! A few weeks ago I posited that the Palo Alto market would soon see the standard Spring inventory bounce…before Spring itself.

And sho’ ’nuff…I see nary a leaf on a tree outside my window, but statistical and anecdotal signs of market activity picking up are legion.

Statistical evidence:

Charts from our friends the statistical geniuses at Altos research show the traditional early year inventory bounce happening in Palo Alto — Swiss-clock-like in regularity:

Anecdotal evidence:

• An escrow rep friend of mine says her order book is fuller than it’s been in six months.
• The manager of a mid-size local brokerage says his agents have been going on listing appointments, getting new listings, and writing offers at a much faster clip than in the last few months.
• At least one transaction in Palo Alto last week sold with multiple offers and sold for a substantial amount more than the list price.

Quotes:

Friend, fellow 3 oceans contributor, and Realtor Chris Iverson of The Ventoux Group says:

Listings are starting to increase, but slowly in Palo Alto. Mountain View and Los Altos seem to be off to a slower start this year than last as well.

I am seeing more activity from Buyer prospects since the beginning of the year, but a lot of them have gone back to a “wait and see” attitude following news of the potential increase in the conforming loan limit. That will have a significant effect for first-time buyers in areas like Mountain View and Sunnyvale, where $729,000 gets you a decent townhouse, or a house in Sunnyvale.

Jeff Klein at Absolute thinks it will take about 6 months from the conforming limit change for the resulting loans to be available to buyers, and for the impact on the market to be felt.

Colleen Foraker, of Alain Pinel Realtors in Palo Alto, says:

“We in the industry need to do a better job of educating sellers that this is actually a great time to sell.  Inventory is at a 10-year low, and we’d love more listings.  Problem is, sellers are reading the media, hearing that the market is up to no good, and deciding to wait it out.”

Steve TenBroeck, also of Alain Pinel, notes on his blog:

This past week was brutal!   Last Saturday & Sunday we had the most traffic ever to come through our open houses.  However, on Monday (MLK Day) foreign stock markets crashed.  On Tuesday the Fed dropped the Prime Rate by ¾ of a point.  And by Wednesday, according to several agents, local buyers were retracting their offers to purchase homes.  Then, at the end of the week, Congress came up with a plan to restore confidence and stability in the market.

…

We continue to get calls from prospective home buyers who believe that it has become a “buyer’s market” in our area … The bottom line: demand for homes exceeds supply in this market place.  It was reported this week in the SF Chronicle that in 2007 the Bay Area added 54, 000 jobs.  It’s expected, they said, that at least 15,000 jobs will be added in 2008.  While the housing market nationally and in the wider region of the Bay Area may be the slowest since the Great Depression, the housing market from Menlo Park through Los Altos is very strong; homes sell quickly, often with multiple offers.

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Fellow 3 Oceans contributor and South Bay Keller Williams Realtor Bart Marchioni forwarded me a rather entertaining newsletter from National Building Inspectors. “Entertaining” and “Building Inspectors” aren’t normally found together…but — perhaps due to my macabre sense of humor — I couldn’t help laughing at this imagery…

Imagine a colony of termites infesting your home . Now imagine pouring orange juice on them. . Termites start drinking . Termites start dying.

Here’s what it might look like:

Ok, actually, the orange substance isn’t orange juice, but rather orange oil, or Limolene, a “terpene hydrocarbon colorless liquid with an extremely strong smell of oranges.”

And NBI is a reputable firm, so no, they wouldn’t recommend dousing your home with OJ in hopes of killing your termite housemates.

According to the NBI newsletter, they’ve been asked by many people about whether orange oil is effective at killing termites. A summary of their opinion:

• Yes, termites will be killed on contact by orange oil. (Of course, they would also be killed on contact with my foot!) Getting termites to come in contact with said orange oil, however, would be nigh impossible in the hidden wooden structures of the home — ie. in the vast majority of where you would find termites. A handy little diagram from NBI:
• Yes, orange oil will “defy gravity” — ie soak in all directions, including upwards — but, for that matter, so does water. The key problem is that orange oil apparently biodegrades after only 4 days.

The personal opinion of the newsletter’s author is that NBI “would never certify a home as being ‘free and clear’ of a drywood infestation that was treated with orange oil.”

Disclaimer: I am not a termite inspector. More importantly, I am not your termite inspector. If you have termite issues, or questions about termites, please ask your friendly professional termite inspector. Above all, do not pour orange juice over your home in an attempt to kill your termite housemates. ‘Nuff said.

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Recent sightings of Vendus Encourigitis — a local Palo Alto insect that emits pheromones that make sellers drop everything they’re doing and get their home on the market immediately — indicate that 2008 may turn out to be a similar year to several of its predecessors.

Here’s how this insect affects the local inventory cycle…

Buyers, sellers, and real estate agents go into Trypophan-induced hibernation around Thanksgiving, and tend not to wake up till early January. Not many new homes come on the market during that time, and not many buyers are out looking for them. This tends to be a time of uncertainty in the market: sellers are not confident about putting their homes on the market because, well, other sellers aren’t putting their homes on the market; similarly, many buyers are spooked out of the market because they aren’t seeing crowds of competition at open houses — ergo, this must not be a good time to buy.

Putting aside all questions of whether such assumptions and actions are rational or not, come January, swarms of Vendus Encourigitis descend on the city and — kablooei!!! — before you know it, the market gets unstuck, sellers finally put the for-sale sign up, and inventory starts its predictable upward march. Shortly thereafter, a related insect — Achetus Encourigitis — begins its work on the buyers, and sure enough, they descend en masse on open houses and begin buying.

Data provided by our friends at Altos Research shows us the pattern for the last couple of years: inventory is at a low at the end of the year, and begins to increase as soon as January rolls around:

A number of nearby towns exhibit similar patterns…

Saratoga:

Los Gatos:

What’s interesting about Los Gatos is that its beginning of the year inventory is somewhat higher than it normally is. Arn Cenedella* of Coldwell Banker notes a similar pattern in Menlo Park real estate, while Dave Blockhus*, also of Coldwell Banker, notes that Los Altos’ real estate inventory pattern is more similar to Palo Alto’s.

Further up the Peninsula, Burlingame has a similar pattern:

Roughly the same trend happens in many of the marquee towns up and down the Peninsula, while in the less tony towns a completely different picture is emerging — more on that in a later post.

* Dave and Arn are both clients of 3 Oceans’ sister company Domus Consulting.

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