Archives for June 2011

Rejoice, landlords! Sorry, tenants

ForRentSignFor some time, there’s been reporting on the trend toward residential leasing as the housing sector continues limping along. Leasing is chic and the stigma around it is slowly fading. People that are fully capable of buying are sitting still or trying out new areas of town while others have no choice and are living in rentals due to foreclosure. Either way, “rent” is no longer a cuss word.

Rental rates have been going up considerably over the last year and it appears it is accelerating, rising at a rate beating most economists’ projections for 2011. A new report released by real estate search site reveals that residential rental listing prices have jumped 6.7% from June 2010 with the fringe listings of studio and five bedroom apartments escalating most rapidly. says that “this is a telling trend which may indicate a growing demand for rental housing among first time renters and larger families” but we see it more as a supply and demand issue in that studios and very large rental units are less common (low supply) and because rentals of all sizes are in high demand right now, it appears a premium is being set on studios and five bedroom units.

In most cases, the rapid rise in rent has occurred in 2010 rather than a slow increase over the past twelve months. We are seeing consumers flocking to their chosen social networks, flustered that their landlord is screwing them over and are being met with the harsh reality that it isn’t their landlord, it is the entire market. Times have been rough for landlords, is this the time to recoup the losses met since 2008? In some markets, rents have been held down but national trends are allowing an increase as perception of the market is softening.

Rental trends graphed:


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Using your credit card in foreign countries

Could credit cards go the way of the dodo? Many of the industrialized nations around the globe are moving away from traditional credit cards with magnetic strips in favor of embedded microprocessor chips, because they may cut down on fraud. The chip-and-PIN method is the newest smartcard technology, where a microchip is embedded in the credit or debit card. When the customer pays for goods, the card is placed into a “PIN pad” terminal or modified swipe-card reader, which reads and authenticates the chip. The customer then enters a 4-digit PIN that must match what is on the smartcard.

If you’ll be traveling abroad but do not own a smartcard, you may need to depend on ATM machines. Carrying extra credit cards and cash is also recommended. And if you want to use a chip-embedded debit card, you can obtain one for free, but exchange rates are not stellar. Last but not least, notify your bank about your travel plans as some credit companies will freeze your card for charges deemed suspicious or out of the norm.

The chip-and-PIN technology is becoming the standard in Asia, Latin America, and Canada. While the U.S. lags behind, some banks including Wells Fargo, JPMorgan Chase, and U.S. Bank are starting to offer the cards to their customers on small scales.

Silicon Valley housing market is heating up fast

Source: USA TODAY Publication date: June 24, 2011

By Dan Levy, Bloomberg News

Silicon_Valley_MapA surge in wealth from technology stock sales and initial public offerings is spilling into California’s Silicon Valley real estate market as newly rich workers bid up home values in suburban cities south of San Francisco.

The median price of single-family houses sold in Palo Alto, home of Facebook, rose 20% in May from a year earlier to $1.63 million, the biggest jump since 2008, according to preliminary figures from research company DataQuick. In Mountain View, the base of LinkedIn, prices rose 3.1% to $957,500, the ninth year-over-year gain in 12 months.

The advances are defying a U.S. housing slump that has sent national values to an eight-year low. Share sales such as the IPO of LinkedIn and an expected offering from Facebook will fuel a boom in some Silicon Valley cities into 2013, said Kenneth Rosen, an economist at the University of California-Berkeley.

“It’s just the beginning of the story, and I suspect we’ll see an explosion in the next couple years,” Rosen, chairman of the school’s Fisher Center for Real Estate and Urban Economics, said in a telephone interview. “You’ve got young people with real money, and it’s not surprising they want to have a house.”

Almost 300 companies have filed for IPOs in 2011, the most for any year during the same period since 2000, and more than 10% of those are in California, according to data compiled by Bloomberg. Silicon Valley is the U.S. hub for early-stage companies, receiving almost 40% of the $23.3 billion in venture-capital firm investments last year, estimates from the National Venture Capital Association show.

The real estate gains in Silicon Valley, located primarily in the San Jose metropolitan area, are mostly occurring in towns where million-dollar values are already the norm. The median price in Cupertino gained 12% last month from May 2010 to $1.08 million, and values in Saratoga rose 4.7% to $1.62 million, according to San Diego-based DataQuick.

Housing in much of the rest of the nation is struggling as foreclosures and unemployment of more than 9% weigh on consumer sentiment. Home prices in 20 U.S. cities dropped 3.6% in March from a year earlier to the lowest since 2003, according to the S&P/Case-Shiller index of property values. The measure has declined 33% from its 2006 peak.

In Palo Alto, traffic at home showings has tripled in recent weeks, with the average age of potential buyers dropping from about 50 to the mid-30s, said Daniel Siciliano, an associate dean at Stanford Law School who attends the tours because he’s in the market for a bigger house.

“People at start-ups have a lot of pent-up demand and tend to spend a portion of their new liquidity pretty quickly,” Siciliano said of his newfound competition for residential real estate. “They want to manifest their wealth.”

Past Silicon Valley property booms started in Palo Alto, adjacent to the Stanford campus, and Cupertino, home of Apple, because of those institutional links and their coveted public schools, said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto. Buyers from China have also been drawn by education resources in prestige Valley locations, and pushed up demand.

“We’re a happening place because of the university, and a lot of the folks that have been buying are relatively young,” said Levy, who has viewed downtown condominiums selling for double what he paid in 2005.

Sean Scott, head of sales for Redwood City-based software firm Ingenuity Systems, looked at a four-bedroom, two-bath home in Palo Alto last month priced at $1.8 million. The house has “soaring ceilings and generous living spaces,” two patios and a “lush backyard garden,” according to a marketing flyer.

A sale is pending for more than 20% above the asking price, or at least $2.2 million, after five bids were received, said Denise Simons, the listing agent at Alain Pinel Realtors.

“The market seems to be returning to the crazy days, and the question is whether or not it is a false recovery or a sustained recovery,” Scott said in an e-mail after viewing two more homes at $1.25 million or more, and declining to make any offers. “I suspect that it is a sustained recovery, given the planned liquidity events with social-networking companies.”

Speculation that Facebook will go public in the next year is mounting even as the world’s largest social-media site remains silent about its plans.

Some investors have already cashed in equity in their companies through private share sales, boosting Silicon Valley housing demand and contributing to price gains, Rosen said. Stakes in closely held firms can be sold on secondary exchanges such as SharesPost, which connects buyers and sellers. The exchange values Facebook at almost $53 billion.

Shares granted to employees of public companies can’t be sold until 180 days after the IPO, under U.S. securities rules.

“You will probably see hundreds, if not thousands, of newly minted millionaires in the next two or three years,” said Steve Eskenazi, a tech investor in Hillsborough, north of Palo Alto, where the minimum lot size is a half acre. He sold his portion of an online advertising network to Sunnyvale, Calif.-based Yahoo in 2007.

“Most people in their 20s who find themselves millionaires feel it’s their inalienable right to buy real estate, and they’re typically not price sensitive,” Eskenazi said.

Facebook founder Mark Zuckerberg, 27, bought a house this year in Palo Alto, said Larry Yu, a company spokesman. He declined to disclose details. Zuckerberg paid $7 million for a 5,000-square-foot, seven-bedroom home in a “leafy and affluent” neighborhood, the San Jose Mercury News reported May 5, without saying where it got the information.

The purchase was made before Facebook’s scheduled move to Menlo Park, just north of Palo Alto.

As more firms go public and workers cash in shares, real estate within 15 miles of the office will climb, said Rosen, who gave a presentation at Google’s Mountain View headquarters before the company’s 2004 IPO to educate employees on housing.

In Cupertino, about 12 miles from Palo Alto, a three-bedroom home listed for $908,000 got more than a dozen offers and sold for $950,000 on June 8, said Albert Kao, an agent at Giant Realty in the city. The previous owner, who bought the property in 2002, decided to sell after her children graduated from the public schools. She made a $290,000 profit before commissions, Kao said.

Lower-price areas are still struggling with weak demand. In all of Santa Clara County, which encompasses some Silicon Valley cities, prices fell 5.1% in May from a year earlier to $498,000, as distressed sales pulled values down in the broader market, DataQuick said in a report. The drop was smaller than in the rest of the San Francisco Bay Area, with the nine-county median in the region tumbling 9.3%.

(c) Copyright 2011 USA TODAY, a division of Gannett Co. Inc.

Only two thirds of America could get a home loan

Denied stampObtaining financing is frequently cited as one of the most difficult obstacles in the modern real estate transaction and the numbers now show that it is not a problem with perception, rather a reality. The WSJ analyzed the 10 largest mortgage originators’ data to reveal a national average of 27% of all mortgage applications in 2010 experiencing a denial. The denial rate is up nearly 15% in the last year alone and it is likely denials will increase in 2011.

We’ve spoken for years about the pendulum swinging away from the Barney Frank’s push for homeownership for all back in the day (that led to risky loans) to today’s reality of increasingly difficult lending for any and all applicants.

Only two in three Americans who applied for a mortgage last year were able to move forward, but the data does not make clear whether or not all of those actually made it to purchase without a last minute lending issue (another commonly cited obstacle in getting a deal done).

“Although lenders were expected to pull back from the freewheeling conditions that helped inflate the housing bubble, some economists argue they are now too conservative, and say that with the U.S. economy still wobbly, mortgages need to be easier to obtain for qualified borrowers, not harder,” the WSJ reports.

Mississippi, Vermont & Texas have denial rates over 35%

In order of lowest denial rates to highest:

  • 19.9%   Minnesota
  • 20.3%   Virginia
  • 21.0%   South Dakota
  • 21.0%   Kansas
  • 21.1%   North Dakota
  • 21.6%   Iowa
  • 21.8%   Nebraska
  • 22.4%   Maryland
  • 22.8%   Colorado
  • 22.8%   District of Columbia
  • 23.0%   Wisconsin
  • 23.1%   North Carolina
  • 23.3%   Washington
  • 23.6%   California
  • 23.7%   Massachusetts
  • 23.8%   Alaska
  • 24.4%   Delaware
  • 25.1%   Missouri
  • 25.1%   Pennsylvania
  • 25.2%   Montana
  • 25.5%   Illinois
  • 26.0%   Connecticut
  • 26.4%   New Hampshire
  • 26.5%   Oregon
  • 26.6%   New Jersey
  • 26.8%   Wyoming
  • 27.2%   South Carolina
  • 27.4%   Arizona
  • 27.5%   Hawaii
  • 28.2%   Indiana
  • 29.0%   Idaho
  • 29.1%   Rhode Island
  • 29.2%   Nevada
  • 29.5%   Georgia
  • 29.8%   Maine
  • 29.9%   Tennessee
  • 30.0%   West Virginia
  • 31.1%   Kentucky
  • 31.6%   Michigan
  • 32.2%   Florida
  • 32.8%   Oklahoma
  • 33.0%   Arkansas
  • 33.1%   Alabama
  • 33.5%   Ohio
  • 33.7%   New Mexico
  • 34.1%   Louisiana
  • 34.8%   New York
  • 35.1%   Texas
  • 36.6%   Vermont
  • 38.9%   Mississippi

All of this highlights the importance of working with a team. Everyone on our team, starting with our Mortgage Broker, work to make sure our clients are well taken care of.

The best and worst home renovations

If you’re planning on renovating your home, consider these best and worst projects based on the amount of money recouped in the event of a sale. According to Barbara Corcoran, real estate contributor on Today, the most worthwhile renovations provide the biggest bang for your buck.

  • A new front door is a wise investment. At an average price of $1100 – $1200, the homeowner will recoup about 102% of the dollars spent. Most important, the front door speaks volumes to prospective buyers that the inside is just as good as the first impression.
  • The garage door also plays a part in the overall first impression. At about $1299, you can recoup about 87% of that investment.
  • An outdoor deck, 10 feet by 30 feet, can cost about $10 K, but you’d make back about 70% of that in a sale. The deck is a visual extension of the house, and without it, something definitely seems amiss in the backyard.

The three worst renovations have to do with converting a bedroom into something else entirely or building an add-on.

  • The home office remodel is not recommended because it’s expensive to put in and equip. For a $28K investment, you might get $13K back, but you’ve also lost a bedroom, and homebuyers count the literal over the possible number of bedrooms available.
  • A sun room is hardly used and shows poorly. A typical sun room costs $75K to install, and that doesn’t include the extra heating and cooling expenses.
  • Adding a bathroom is costly (about $40K), and homebuyers simply aren’t willing to pay the premium for it. Corcoran suggests the “nip/tuck” method to spruce up current bathrooms.

Having said this, if you’ve planned on building that special sun room and love the house you’re in, feel free to customize. Just be aware that the actual cost for installing it or other unique features will not likely be made up in a future sale.

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How Long Is the Wait to Buy After Foreclosure?


MORTGAGE troubles won’t necessarily shut you out of the housing market forever.

As the economy and real estate market continue to struggle, millions of Americans have lost their homes through foreclosure, short sale (when a property is sold for less than is owed) or a deed in lieu of foreclosure (when the bank takes ownership without foreclosure).

Even if you think you never want to own a home again, clean credit is important. Bad credit can make it more expensive to rent. In some fields, especially financial services, it can make it difficult to find or keep a job.

How quickly your credit score improves depends in part on how the problem is reported, said Sarah Davies, a senior vice president of VantageScore in Stamford, Conn., a credit-scoring company that competes with FICO, the dominant scoring system.

In a short sale where the balance is forgiven and no deficiency is recorded in public records, recovery can be quick. “Simply paying all your debts on time could bring your score up to a reasonable range in nine months,” Ms. Davies said. “Reasonable” may not qualify you for a mortgage, but it will help in other situations.

A foreclosure or bankruptcy can weigh you down for years. FICO has found that it takes three years for a borrower to pull a score back up to a fair-to-middling 680 after a foreclosure, according to Joanne Gaskin, a company director. A borrower who started out with a near-perfect 780 score would take about seven years to climb all the way back.

But if someone has gone through foreclosure and still has a mountain of debt and not enough income, bankruptcy is worth considering, said Tracy Becker, the founder of North Shore Advisory, a credit-restoration company based in Tarrytown, N.Y. Sure, it will be another hard blow to your credit rating — but your credit most likely is already “wrecked,” at least for now, she said.

Bankruptcy can wipe out some debt. “The choices you make for the future about your financial options should be based on how bad your credit is,” Ms. Becker said. With one 30-day-late payment, for instance, “don’t assume your credit is ruined forever,” she said. It’s easier to recover from that than it would be to pull back from a string of late payments.

And what about a future mortgage? Fannie Mae, Freddie Mac and the Federal Housing Administration set guidelines for how long a borrower must wait after a “significant derogatory event.”

There are plenty of asterisks and conditions. But to generalize, the wait is longest after a foreclosure. Extenuating circumstances like a job loss, illness or divorce reduce the wait.

With such circumstances, Fannie and Freddie specify a two-year wait after a short sale, deed in lieu, or discharge or dismissal of bankruptcy, and three years after foreclosure. Without extenuating circumstances, waits can extend to four years after bankruptcy and seven years after foreclosure.

“The key is to avoid the foreclosure,” said Andrew Wilson, a spokesman for Fannie Mae. “That is what will help you be eligible for the shorter period.”

As for F.H.A.-insured loans, they are available three years after a foreclosure, assuming perfect credit afterward, and two years after a bankruptcy is discharged. After a short sale, there’s a three-year wait if the borrower is in default at the time of the sale and there are no extenuating circumstances. If the borrower was on time with all payments for 12 months before the sale, there is no wait specified, meaning that an F.H.A. loan might be available immediately. Among the conditions: A loan isn’t available if the short sale was to “take advantage of declining market conditions,” according to the F.H.A. Home Loan Handbook for lenders.

One caveat: All of this assumes you have income to pay off debts and stay afloat. It’s likely to be a long time before the mortgage market returns to an anyone-can-borrow-anything way of thinking.

resource: NY TIMES