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The Silicon Valley Market Report for February 2010

So far 2010 is off to a roaring start, with multiple offers again becoming commonplace, and highly qualified buyers lining up in some cases to present strong offers for well-priced, desirable properties.

As a couple of data points, our listing for a three bedroom home at 842 Sycamore Drive in Palo Alto, an entry-level home priced at $949,000, received 14 offers and sold for over $1,100,000. A similar property nearby on Greer received 12 offers the same week and sold for just under $1,100,000 vs. a list price of $979,000.

This market imbalance of large demand chasing limited supply isn’t limited to the entry level, homes in Los Altos and Palo Alto listed between $1.5M and $2M are receiving multiple offers as well, and even our office listing at 75 Coronado in Los Altos priced at $3,995,000 has been getting more interest lately.

As we begin to see more homes coming on the market as we move through the spring, I expect to see the market cool as the supply of homes for sale catches up with demand, and buyers have more choices. In the meantime, the Sellers seem to have the advantage if they have homes that are attractive to mainstream buyers.

That $45,000,000 estate on Stonebrook Drive in Los Altos Hills is a great example, as it is now an $28,000,000 estate. Do I hear $15,000,000?

In summary our current market continues to be driven by the following conditions:

• Low inventory of desirable homes for sale that are well priced
• Buyers motivated & feeling like they will miss out with limited selection
• Fears of rising interest rates are driving motivation to buy now
• Realization by buyers that they can’t buy for 20% below list now. Most sales in $1M – $2M are 10% under to 10% over list.

Opportunities:

• Interest rates are currently at historic lows
• The government is buying down conforming rates under $729,750 through March 2010, which holds down jumbo rates as well
• Consumer confidence is picking up – I’m seeing new cars more often, and new car sales are an indicator of increasing consumer confidence which leads to a strengthening economy, as consumer spending is the largest component of our economy

Threats:

• Government buydowns of conforming loans are scheduled to end in March which will lead to rising interest rates on conforming and jumbo loans
• Forecasted loan resets on commercial property in 2011. You can’t refi empty office buildings and vacancies are up
• Lots of buyers rushed to purchase before the tax credit expired December 1,2009 – Will this leave a hole in demand in early 2010? Not so far . . .
• Unemployment is 10% locally, and there is limited job growth forecasted for the next year.

In the threat department, I’ll refer again to this report from Bloomberg last month, which is especially relevant in our area:

Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate. This brings the rate of default for these considerable loans up to a skyrocketing level of 12 percent as of September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages. This is quite a jump from the year prior where the rate for default on the $1 million dollar plus mortgages as only 4.7 percent.

In contrast to these ominous reports and Threats, we are seeing strong upwards trends across our area in our Market Action Index, that catch all indicator based on prices, inventory, and time on the market. We are even seeing the MAI climb toward parity in the lower price ranges in markets like Palo Alto and Mountain View.

On to the numbers:

Atherton:

The Average Price of a Single Family Home in Atherton is $6,124,821 with a range of $1,150,000 to $14,900,000. 25% (versus 33% last month) of the homes in Atherton have had price reductions, and the average number of Days on Market is 270 days versus 272 last month. It remains a Strong Buyer’s Market in Atherton, although the Market Action Index has been trending upward over the last quarter.

Los Altos:

Currently, the Average Price of a Single Family Home in Los Altos is $2,165,536, with a range of $995,000 to $4,995,000. 25% (down from 39% last month) of the homes in Los Altos have had price reductions, and the average number of Days on Market has fallen to 165 days versus 172 last month.

Los Altos Hills:

In Los Altos Hills, the Average Price of a Single Family Home is $4,983,866, with a range of $944,900 to $28,500,000. 30% (down from 33% last month) of the homes in Los Altos Hills have had price reductions, as Sellers are learning that the market has shifted, and the average number of Days on Market has declined to 247 days from 261 days last month.

Menlo Park:

This month, the Average Price of a Single Family Home in Menlo Park is $1,491,797 with a range of $190,000 to $6,495,000 (The $225,225 is in East Menlo Park, the bottom of the Menlo Park market is about $800,000). 27% (up from 24% last month) of the homes in Menlo Park have had price reductions, and the average number of Days on Market has risen to 163 days versus 150 last month.

Palo Alto:

In Palo Alto the Average Price of a Single Family Home is $2,270,343, with a range of $750,000 to $23,950,000. 20% (versus 34% last month) of the homes in Palo Alto have had price reductions, and the average number of Days on Market has fallen to 158 from 179 last month.

If you know of anyone who would appreciate having this market information delivered to them monthly, please forward this message to them, or CLICK HERE to send an email with your cities of interest. If you are a data junkie, you can receive these reports weekly, just register at: www.REMarketReports.com to select the markets and reports you would like to receive.

If I can answer any questions for you regarding the market, please contact me directly at: 650-450-0450.

Thanks for reading . . .

Tales From the Front 1/31/2010 – The Return of the Tulips

I have been patting myself on the back over the results of my contrarian marketing of 842 Sycamore Drive in Palo Alto.

It sold in a week with 14 offers, when the average Days on Market for a home in that area and price range is about 100.

Part of my contrarian marketing was to put it on the market during January, before the “traditional” beginning of the spring market, which is the week after SuperBowl Sunday. With the recent sales activity, I’m expecting a number of homes to come on the market starting in mid-February, as most agent “hold” listings until then. I have confirmed this with a number of my colleagues who are big “listing agents” meaning they hang signs in front of a lot of houses. (Most of my work is with Buyers).

Another house on Greer in the same neighborhood on and price range (listed at $979,000), received 12 offers and sold for very near what Sycamore did. Both homes had over 100 visitors to the open houses and the offers landed in the same ranges.

One question that came up immediately was “These are so similar, I wonder how many buyers are writing offers on both homes?” I haven’t been able to confirm anything, but I have a sneaking suspicion that the same 12 – 15 people were writing offers on both of these homes.

If this is the case, then the entry level market in Palo Alto is like a game of musical chairs. The same 12 – 15 people are going around writing offers on homes, and with every sale one drops out. After 12 rounds or so, they all have homes and the market stops.

So, when the conventional wisdom listings hit the market in February, there will be a flood of inventory, and choices, so the number of offers per home will likely drop off as buyers have more choices and less of a feeling of scarcity. In the case of the homes mentioned above, that would have resulted in a loss of thousands of dollars in proceeds to the sellers, but great news for the buyers of those homes.

This is all speculation now, but worth keeping an eye on over the coming months as we wait to see if the market is returning, or if we are seeing a short-term blip driven by a very limited supply in shortage to a relatively limited demand.

Thanks for reading . . .

Economic Forecast, Extending the Tax Credit and the Golden Window for Buyers

On October 12, I attended a SILVAR sponsored economic update and forecasting presentation by CAR EVP Joel Singer, and I thought you might find the following summary and comments beneficial:

• As we all know financing is the primary key to housing stability, and Singer is 100% confident that both tax credits and the $729,750 conforming limits will be extended into 2010—both of which are keys to continued recovery
  • 40% of first-time buyers for 2009 bought because of the tax credit
  • The Feds are on track to extend the credit, maybe even improve it, so let’s keep our fingers’ crossed
  • The CA State Senate already approved the extension of the state $10,000 tax credit, and it should pass Assembly this week—yeah!
  • Food for thought: before the competition increases due to formalizing the tax credits, first-timers should make their move sooner than later
• The move-up market here is the most impacted, but will improve as financing does; as such, he feels as though there will be some level of government involvement to stimulate the secondary market for non-conforming loans
  • Right now, inventory levels for $750k-$1mm are at 6.1 months, which is healthy; inventory levels for $1mm+ are at 12.8 months, which signals a clear buyers’ market
  • With government support, non-conforming lending will ease, but not necessarily cause rates to be lower—current margins are already at all-time highs primarily due to risk—by stabilizing the system and improving liquidity, risk is reduced, savings rates increase and rates remain about the same
• Futures point to a Fed funds rate rise of .500% to .750% and conforming 30-year fixed mortgages at 5.6% in Q2 2010
  • As such, this gives anyone needing a conforming loan about 5 months before both rates and prices are up significantly
  • And if you missed the headline on September 24th about the Fed easing their policy of keeping mortgage rates low, you’ll want to know that they are almost cutting in HALF the  the effort– $14B versus $25B
• The overall number of homes/units sold next year will be down, but that’s only because we had a record number of units sell already this year—foreclosures will be DOWN relatively significantly
  • Activity will still be high and it’s likely the $1mm+ segment that will provide buyers with the best value
  • The “second wave” of foreclosures due to rate adjustments is a farce—many people, like myself, are looking forward to loans adjusting at lower rates, which is precisely what the majority of those loans will do
• 2010 will be a growth year with GDP expected at about 1.9%
  • Great news for the economy, but growth causes higher prices and higher rates—
• The population of CA will grow another 1.1%, so that’s about $370,000
  • We’ve added about 600k people per year since 2000, and about 500k babies are born in CA each year, so I guess that means there will be more demand on housing, which is also good news
• Unemployment may be 12% in CA, but that number is tied mostly to construction-related industries. 
  • With High Tech, Finance, Exports and Travel all on the rise for the Bay Area, our property values and local economy should benefit significantly

The Latest on Rates and Activity

Even with the incredible rates that continue to drive the refinance market, over 50% of the transactions that we closed in September were purchase transactions.  Also of importance is the fact that of those purchase transactions, 35% were financed using “JUMBO” loans!   Jumbo 30-year fixed loans are running about 5.75% and that jumbo 5/1’s are around 4.50%.  And if you have a $417k conforming loan, 5/1’s are available at 3.75%!!

According to the MBAA, last week’s applications were down, but the four week moving average is up, along with interest rates (albeit slightly).  We’re seeing the opposite effect locally, but it’s likely due to the many move-up buyers looking to take advantage of the $1mm+ market through Winter.

Is it just me, or does it genuinely feel like the golden window of opportunity for buyers right now..?

A great success story for us lately included funding a loan for a borrower who had a 63% debt-to-income ratio.  We have also bridged three separate transactions that allowed buyers to move up without having to sell their current home first.  And finally, we improved a client’s credit score by 100 points and saved them over $8,000 by having an erroneous collection removed from their credit record.  So even with all the news headlining the challenges in the mortgage world, at least some great success stories continue to be made.

900 University Ave, Palo Alto: Attention, Madam Secretary Rice: We Have The Perfect Home For You After January 20, 2008

Ms. Condoleezza Rice
Secretary of State

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

Dear Madam Secretary,

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

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

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

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

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

(Image courtesy of 900UniversityAvenue.com)

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

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

Best regards,

Mssrs. Boer & Iverson

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

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

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

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

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

Update:

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

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

From The “I Missed That Class Where We Talked About ‘Place Value’” Department: Palo Alto Per-sq-ft Prices Drop Precipitously Down From $75,000

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

</rant>

Right Along With the Grunge Look, the Housing Crisis is Over

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.

Eliot Spitzer and Making Sense of the New Conforming Loan Limits

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.

Zillow Tells Tales Of Housing Woe … Meanwhile, Back At The Ranch, Multiple Offers Are Back In Vogue…An Object Lesson In “All Real Estate Is Local”

Embargoed for release until 9:00pm (hence the 9:01pm time stamp!) is the news that Zillow has just released their Q4 2007 analysis. It ain’t pretty.

Giant swathes of the country are bathed in the bright red color of price decreases and upside-down homeowners…here, for instance, is the national map of homes with negative equity. The bubblistas are gonna love this one!

Here’s how to interpret that map: 50% or more of the homes bought in 2007 in, say, Modesto are now worth less than what the owner still owes on the property. Sounds pretty grim, and it certainly is if you’re one of those homeowners…especially since we Californians have taken it as our God-given right to have property appreciate steadily year on year.

Here’s a map I’d like to see: the percent of homes bought in 2005, 2004, 2003…pretty much any year going back which are now “under water.” Instead of bloody red color so much loved by the bubblistas, we’d see a map bathed from sea to shining sea — including even the fabled fruited plains themselves — would be painted a joyful bright green, the color signifying “0% to 10%.” In fact, the map would have to be modified to show the precise number 0%.

Moral of that story: I feel your pain, trust me. If you bought a home in 2007 in Modesto, and life circumstances force you to sell it in 2008…your life sucks. Absolutely. But what about those who can stick it out for 2, 3, perhaps 5 years that this market will remain sucky for much of the country? Life for them won’t suck. Absolutely.

Let’s examine San Mateo County. Zillow’s “Z-index” for the whole county shows a 5.5% drop — that’s right, a drop — quarter on quarter. Translation: If in 2007 Q3 you bought a hypothethical home that covered the entire county, that home’s value dropped by 5.5% by Q4 of 2007.

Sounds grim, right? Again, let’s look at the whole story…

Here’s a city-by-city heat map of price appreciation from Q4 2006 to Q4 2007 … and in this map, red is good (at least for homeowners; for perma-renters and bubblistas it gives heartburn.)

Interpretation:

Huge swathes of San Jose, the East Bay and further inland, plus some pockets of the Peninsula — like East Palo Alto and South San Francisco and Redwood City — are down, in some cases dramatically. Most of the Peninsula, however, saw price increases from 2006 to 2007; in particular, the marquee towns of Palo Alto, Menlo Park, Atherton, Cupertino, Los Gatos, and Saratoga saw prices go up 10% or more.

Folks, it’s a mixed message out there: a lot of the country is in pain. But just remember this, as always: Real estate is local, local, local. Just because prices in Vegas haven’t fallen doesn’t mean you should sell your particular home and live in a tent. You need to look at the price trends in your neighborhood.

Oh, and the “multiple offers” mentioned in the title? Here’s a small sampling of what the rumor mill says has happened in the last week…

• Saratoga — $1.8M – ish –> 15-20 offers (two incidents)
• San Carlos — $850K – ish –> Two properties sold with a combined 13 offers. (Hat tip to Arn Cenedella, a Menlo Park Realtor, for providing that particular juicy piece of gossip.)

The Trees May Not Yet Have Leaves, But Buyers And Sellers Seem To Be Waking Up!

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.

How NOT to Let Great Rates Hold Up Your Closing

I recently read a great post from Dan Green, a mortgage planner in Ohio, titled, “While Rates Are Low, Schedule Your Purchase Closing At Least 45 Days Out “, and I wanted to remind any potential home buyers searching within or around Palo Alto, CA that local sellers are still requiring a 30-day or less close. Thanks to our main man, Dr. Boer, for bringing this blog to my attention.

Dan does have some great points about turn times deteriorating, underwriters being more cautious and resources being slimmer. All of these concerns are valid and may press the close date on any transaction. Thus, it’s important to verify with whomever you select as your lender what the timetable looks like for your situation. As a general rule, purchase transactions are given higher priority than refinance transactions.

The reality is that we have worked on two transactions already this month where the close date was ten days or less from contract ratification. In fact, one call I received yesterday asked whether a month-end close would be possible for a client looking to buy a condo in Menlo Park. Yes, a one-week close is possible.

So how can you prepare, and whom can you trust to get your transaction done right and on time? I offer the following:

1. if you have a trusted mortgage lending source, double check to determine whether the institution makes direct lending decisions (usually a direct lender or a mortgage bank)

2. if your trusted source does not make direct decisions (usually a mortgage broker), request a realistic timetable to determine whether your loan will fund in the time required by the contract

3. ask your real estate professional for a referral to a lender that she or he trusts

No doubt, this is a fantastic time to be buying a home: there a some local values out there, rates are phenomenally low (have you seen that 5-year treasury lately, wow! And what a move by the Fed to lower another .75%..!) and our local economy is doing well (check out Iverson’s latest post for more on that subject). The flip side is that the inventory of available homes has not been very encouraging (only four new ones in Palo Alto on Friday– ouch).

My position has always been that you can’t go wrong with purchasing real estate in select areas of the peninsula, provided that your holding period is five years. And if you’re someone with a reliable real estate professional, a reliable lender, reasonable qualifications and a solid plan, you will likely see a nice bump to your net worth over the next five years by making a move sooner than later.

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