Everyone is still trying to get a handle on the condition of the current real estate market. We are seeing mixed messages throughout Santa Clara, Santa Cruz and San Benito Counties as well as throughout the bay area.
Santa Clara County inventory is not climbing rapidly and buyers are being more selective about existing inventory. We currently have approximately 2550 properties on the market in Santa Clara County. Although this is nearly twice as much as we had on the market during the same time period in 2005 (approx. 1385), it is historically, very low.
In 2005, the buyers were buying up and competing for almost every property on the market. This year, we see buyers competing mostly for homes that are very well priced, in good condition and/or in a great location.
Basically, January started off relatively slow but picked up in the last week or two of the month. February started out strong for the first week or two and has since been slower. We are expecting another push as we enter into March but it seems as though the 2006 market has not yet found it's rhythm.
One of the biggest differences so far this year is the number of sales (total units) changing hands versus 2005. We are seeing a decline of anywhere between 10 to 25% fewer properties being sold so far this year versus 2005 (depending on the market area). The average sale price seems to be holding fairly steady and we are certainly seeing a variety of multiple offer situations but it is somewhat mixed and not across the board. Buyers are certainly out there and many open houses have been filled with 100 or more visitors over the course of one weekend.
Reports from around the region suggest the same. Inventory is increasing ever so slightly and buyers are going after well priced homes. One office had multiple offers on 50% of their sales during the week of Feb. 5th-11th and on all their sales during the week of Feb. 12th-18th.
Other offices experienced a large percentage of multiple offers over the past few weeks on properties listed between $620k and $1.6 million during the week of Feb. 12th-18th. One office saw 12 offers on a property listed over $1 million in Sunnyvale and a property listed in Los Altos at $1,499,000 received 12 offers and went well over list price.
Again, in most situations, properties seem to be sitting a bit longer and if/when they do receive multiple offers it's usually around 2 or 3.
Having said all that, this is still a good market and perhaps much more balanced than we've experienced over the past year or two. Most economists have predicted a more "normal" market and a "soft landing" for the real estate in 2006.
Expect more inventory and somewhat increasing buyer demand as we move into March.
Tuesday, February 28, 2006
Tuesday, February 21, 2006
Here Are 4 Ways You Can Use 'Common Senses' To Help Sell Your Home!
Sense of Smell: Nothing says " home" like the PLEASANT SMELL of baking. No one is suggesting you bake a cake every time your house is being shown. However, you'd be surprised how wonderfully a few pieces of bread (sprinkled with cinnamon) can smell, when placed in the oven on a low temperature for a few minutes! Here's a word of caution: sense of smell can also work against you. Strong cooking odors that linger, such as those emitted from garlic, onions, and curry may be unpleasantly remembered by buyers long after they've forgotten the color of the dining room walls.
Sense of Sight: Small VISUAL TOUCHES can make or break a room. Colorful pillows, vases with flowers, plants, and attractive afghans all give the feeling of a bright and cheerful home. Here's another word of caution: while tasteful personal touches definitely add to a room, do not overdo the effect. Too many decorating touches give a feeling of clutter, and anything truly unusual tends to distract the buyer. You want the prospective purchaser to remember your home as the one that felt warm and comfortable, not as the house with the tropical forest inside.
Sense of Hearing: If you have the ability to provide background music during a showing, (with an intercom system, or a stereo), then do it. Again, the operative word here is "background". Choose something nondescript, and soothing. Something that sounds like 'elevator music'! And, by all means, keep the volume very low!
Sense of Touch: Think about all the surfaces that buyers may come into contact with or, perhaps even absent-mindedly, run their hands over. Kitchen counters, bathroom vanities, and door knobs all have the potential to leave a negative impression if they buyers end up sticking to them.
Sense of Sight: Small VISUAL TOUCHES can make or break a room. Colorful pillows, vases with flowers, plants, and attractive afghans all give the feeling of a bright and cheerful home. Here's another word of caution: while tasteful personal touches definitely add to a room, do not overdo the effect. Too many decorating touches give a feeling of clutter, and anything truly unusual tends to distract the buyer. You want the prospective purchaser to remember your home as the one that felt warm and comfortable, not as the house with the tropical forest inside.
Sense of Hearing: If you have the ability to provide background music during a showing, (with an intercom system, or a stereo), then do it. Again, the operative word here is "background". Choose something nondescript, and soothing. Something that sounds like 'elevator music'! And, by all means, keep the volume very low!
Sense of Touch: Think about all the surfaces that buyers may come into contact with or, perhaps even absent-mindedly, run their hands over. Kitchen counters, bathroom vanities, and door knobs all have the potential to leave a negative impression if they buyers end up sticking to them.
10 Things This Real Estate Consumer Wants
- E-mails and phone calls returned the same day or at least within 24 hours.
- Agents who ask qualifying questions in the first telephone call that indicate they are interested in learning more about her needs.
- Agents who check the MLS for new listings daily.
- A complete packet of information about properties under consideration, such as the listing sheet, tax record, applicable zoning designations, existence of easements or covenants and known property conditions - all presented early in the transaction, not at contract signing.
- Agents who follow up, who don't give up after one phone call, who keep track of you and what you need, even when your needs change.
- Agents who are skilled at countering objections, who can point clients in the right direction, who freely share the benefits of their experiences. It's part of helping clients decide.
- Agents and brokers who participate in their industry, continually increasing their knowledge and skills.
- Two phone calls a year and three postcards.
- Surprise me - in a good way - by exceeding my expectations.
- Agents and managers who remember every day, in every transaction: When representing a buyer, seller, landlord, tenant, or other client as an agent, Realtors pledge themselves to protect and promote the interests of their client - The first sentence of the NAR Code of Ethics.
Sunday, February 19, 2006
What Sellers Should NEVER Say to Buyers
The door bell rings, you grasp the knob, and throw one last glance around. As your daughter quickly puts the vacuum cleaner away, you open the door with a big smile. There stands an agent and prospective buyers.
" Hi! ... How are you?... Come In." You say.
Those are probably the last three unsolicited comments that should pass your lips for the remainder of the visit. The real estate field is littered with stories of potential sales that were killed by sellers who inadvertently uttered the wrong thing.
Before continuing, you should understand that the types of 'better left unsaid' things discussed here have nothing to do with the Seller's Disclosure Addendum, or hiding anything from a potential buyer. To the contrary, all of the suggested "DON'T SAY IT!" topics presented here are based on personal preferences. Being human, sellers often find it difficult, if not impossible, to keep from offering opinions or information that they think makes them appear credible to the buyer. Without knowing the life's experiences and propensities of each buyer you see, how can you keep from opening your mouth and inserting your foot?
Please don't talk about:
" Hi! ... How are you?... Come In." You say.
Those are probably the last three unsolicited comments that should pass your lips for the remainder of the visit. The real estate field is littered with stories of potential sales that were killed by sellers who inadvertently uttered the wrong thing.
Before continuing, you should understand that the types of 'better left unsaid' things discussed here have nothing to do with the Seller's Disclosure Addendum, or hiding anything from a potential buyer. To the contrary, all of the suggested "DON'T SAY IT!" topics presented here are based on personal preferences. Being human, sellers often find it difficult, if not impossible, to keep from offering opinions or information that they think makes them appear credible to the buyer. Without knowing the life's experiences and propensities of each buyer you see, how can you keep from opening your mouth and inserting your foot?
Please don't talk about:
- How many kids are or are not in the area. Even if the buyer has children, you have no way of knowing whether or not they want gangs of them banging down their door on Halloween.
- The huge stone birdbath in the backyard that is visited by HUNDREDS of birds each year. How could you know the wife is deathly afraid of birds?
- How great your church is. They might be of different faith.
- How quiet the neighborhood is. They may want a more social atmosphere, and look forward to making new friends.
- The 'newness' of items in the home. New is most definitely a relative term! What you consider 'new' , may be old to others. For example, an item that is two years-old may be 'new' to someone who has lived in the house for 15 years, but may be old to a buyer who thinks of new as anything in place for less than less 6 months.
- Information on existing warranties. They may expire before the new owners close on the house, or they may not be non- transferable.
- How many 'showings' you've had. Buyers could interpret this as "No one else wanted the home, why do I ?" or "I wonder what's wrong with this house?"
Please don't OFFER the following statements as the reason you are selling:
- How you've outgrown the house. If buyers has the same number in their family, they may have second thoughts about their need for such a large home.
- How the home is too small for you. The buyer might feel that your home is 'plenty big', until you tell them how small it is for you. Your comment may give them the push to look for more expensive (bigger) homes.
- Your recent divorce. Potential buyers may be having marital problems. This could easily turn them off .
- That you bought another home. If a buyer knows there is urgency, this can be used against you in negotiating.
If you get the distinct impression that everything you say to a potential buyer could get you into trouble down the road then you have correctly interpreted this article. If you are under contract with a real estate agency to sell your home, the best course is to make yourself scarce after the greeting. In fact, a good course of action might be to say: "Please take your time viewing my home. And if I do not see you before you leave, thank you for coming. You'll have to excuse me, but : important phone call, helping kids with project, deadline at work, etc."
This extricates you from a potential "foot-in-mouth" encounter later, and does not make you appear to be avoiding the buyers questions.
Friday, February 17, 2006
10 Ways To Get Your Price
When buyers gain more leverage in a housing market, sellers must think out of the box to entice buyers to their homes, then to lock in their asking price. Below are 10 ways to get your home sold and, if not at your price, at least a little closer than what you might have gotten otherwise.
Finished rec room.
This gives the buyer a lot more than just money in his pocket. You may be able to finish an unfinished space for less than what the buyer wants to lower the price. When you're talking monthly payments, $50,000 in the mortgage amount would be $299.78 per month. By negotiating $50,000 in remodeling costs, the buyer could come up with a third more living space for less than the cost of a car payment.
Decorating allowance.
Is your décor tired looking and left over from the 80's or 90's? Then offer cash for upgrades, new carpet and a paint job. With good bidding on the job, you may be able to keep your price, give the buyer what s/he wants and make some money on the backside as well by not dropping your price. Many buyers would love $20,000 to spend the way they want on decorating.
Mortgage payments for 3 to 6 months.
How would you like to move into a house and make no payments for 3 to 6 months? On a $300,000 mortgage at 6 percent interest, the principal and interest payment is $1,798.65 per month -- over three months, the buyer would save $5,395.95; 6 months, more than $10,791.90.
Buy-down points to lower the interest rate.
For some buyers, it's all about the monthly payment. Try coaxing them into your price with an offer to buy-down their interest rates with points paid by the seller. If they can get the interest rate low enough, they will be able to carry a higher mortgage for a lower monthly payment because of your point money left at the table. This is a technique of "selling the deal" more than selling the house.
Vacations.
Buy a house, get a Caribbean Cruise. Take some tips from new home builders -- they're professionals at this incentive thing. Sometimes, a buyer might get cash back at the settlement table, but wouldn't dare spend it in a luxurious way. Offer a cruise, an expensive spa weekend, airline tickets to Asia -- or some other out of the ordinary travel package to entice them. When you consider the inventory has more than doubled in some markets, the only thing different from one house to another may be the cruise line.
Free Media room.
Did you know that movie ticket sales are down for the third year in a row? One of the reasons is the advent of the at-home, non-sticky, low-ticket price media room. During the recent Christmas holidays, some media room packages, complete with big screen monitor and surround systems were selling for under $5,000. This one investment alone could be the sweetener your buyer needs to sign the bottom line.
Year-long HOA Fees.
Looking for a more practical buyer benefit? How about relieving them of those expensive home owner association dues. Depending on the community, these fees could top out to more than $500 per month -- that's $6,000 for the first year. Offering this bennie could definitely help the cash-poor buyer get into his first condo.
Offer seller financing.
This option is overlooked by a lot of sellers because they or their Realtor just don't think about it. Seller financing can be in several forms -- as a first trust, second trust or even 100 percent financing for the whole house. For the seller who can swing a 1st trust mortgage, this can actually become quite the cash cow. For instance, a $100,000 mortgage offered at 7 percent over 5 years with interest-only payments followed by a balloon payment of $100,000 -- would actually result in the seller netting $135,000 over the life of the loan -- not a bad return.
Pay off bills.
Some loan programs will allow sellers to pay off credit cards, auto loans, et. al., for the buyer. It could make the difference in qualifying for the mortgage and having to buy a smaller, less expensive house. Again, maintain your asking price and offer to pay off debt for the buyer.
Pay closing costs (up to mortgage program limit).
Here's the old standby. It's not as fancy as those above -- but it's very reliable and works very well.
Finished rec room.
This gives the buyer a lot more than just money in his pocket. You may be able to finish an unfinished space for less than what the buyer wants to lower the price. When you're talking monthly payments, $50,000 in the mortgage amount would be $299.78 per month. By negotiating $50,000 in remodeling costs, the buyer could come up with a third more living space for less than the cost of a car payment.
Decorating allowance.
Is your décor tired looking and left over from the 80's or 90's? Then offer cash for upgrades, new carpet and a paint job. With good bidding on the job, you may be able to keep your price, give the buyer what s/he wants and make some money on the backside as well by not dropping your price. Many buyers would love $20,000 to spend the way they want on decorating.
Mortgage payments for 3 to 6 months.
How would you like to move into a house and make no payments for 3 to 6 months? On a $300,000 mortgage at 6 percent interest, the principal and interest payment is $1,798.65 per month -- over three months, the buyer would save $5,395.95; 6 months, more than $10,791.90.
Buy-down points to lower the interest rate.
For some buyers, it's all about the monthly payment. Try coaxing them into your price with an offer to buy-down their interest rates with points paid by the seller. If they can get the interest rate low enough, they will be able to carry a higher mortgage for a lower monthly payment because of your point money left at the table. This is a technique of "selling the deal" more than selling the house.
Vacations.
Buy a house, get a Caribbean Cruise. Take some tips from new home builders -- they're professionals at this incentive thing. Sometimes, a buyer might get cash back at the settlement table, but wouldn't dare spend it in a luxurious way. Offer a cruise, an expensive spa weekend, airline tickets to Asia -- or some other out of the ordinary travel package to entice them. When you consider the inventory has more than doubled in some markets, the only thing different from one house to another may be the cruise line.
Free Media room.
Did you know that movie ticket sales are down for the third year in a row? One of the reasons is the advent of the at-home, non-sticky, low-ticket price media room. During the recent Christmas holidays, some media room packages, complete with big screen monitor and surround systems were selling for under $5,000. This one investment alone could be the sweetener your buyer needs to sign the bottom line.
Year-long HOA Fees.
Looking for a more practical buyer benefit? How about relieving them of those expensive home owner association dues. Depending on the community, these fees could top out to more than $500 per month -- that's $6,000 for the first year. Offering this bennie could definitely help the cash-poor buyer get into his first condo.
Offer seller financing.
This option is overlooked by a lot of sellers because they or their Realtor just don't think about it. Seller financing can be in several forms -- as a first trust, second trust or even 100 percent financing for the whole house. For the seller who can swing a 1st trust mortgage, this can actually become quite the cash cow. For instance, a $100,000 mortgage offered at 7 percent over 5 years with interest-only payments followed by a balloon payment of $100,000 -- would actually result in the seller netting $135,000 over the life of the loan -- not a bad return.
Pay off bills.
Some loan programs will allow sellers to pay off credit cards, auto loans, et. al., for the buyer. It could make the difference in qualifying for the mortgage and having to buy a smaller, less expensive house. Again, maintain your asking price and offer to pay off debt for the buyer.
Pay closing costs (up to mortgage program limit).
Here's the old standby. It's not as fancy as those above -- but it's very reliable and works very well.
Thursday, February 16, 2006
Santa Clara home sales decline; prices rise
Nearly 400 fewer new and existing homes and condos were sold in Santa Clara County last month than in January 2004, a La Jolla real estate information service reported on Thursday.
Still, the median price of a single-family unit in the county rose 14.7 percent to $648,000 in the 12-month period, according to DataQuick Information Systems.
The 20 percent drop in the county's sales pace to 1,486 units mirrored the results for the entire nine-county Bay Area as did the median price increase.
A total of 6,004 homes and condos were sold in the region last month compared with 7,509 in January 2005. But the median price for the region rose 13.7 percent to $607,000.
The region's January sales pace was the lowest for any month since January 2001, when 5,977 homes were sold, DataQuick said.
The median price of a Bay Area home fell 0.3 percent in January from the $609,000 level in December 2005.
Last month was also the tenth in a row to see a year-over-year decline in the pace of sales.
"We won't know for another couple of months if this is a lull in the market or part of longer-term downturn," said Marshall Prentice, DataQuick president, in a release. "It's always difficult to project from trends we see in January and February. The March numbers will tell us much more about what's going on."
The regional numbers mask substantial variations within each of the nine counties in the number of sales and median price changes.
Marin County, which has the highest median home price of all nine counties -- $741,000 last month, up slightly from a year ago -- saw a 32 percent decline in its sales pace.
Napa County saw its sales pace decline more than 37 percent to 103 units for the entire month. Its median price was up 10 percent year-over-year, however, to $596,000.
Closer to home, San Mateo County had an 18.2 percent drop in its unit sales count to 450. Its median rose 4.8 percent to $726,000 year over year.
In San Francisco, the sales pace dropped nearly 21 percent from January 2004 to last month. The median was up 5.6 percent to $722,000.
Still, the median price of a single-family unit in the county rose 14.7 percent to $648,000 in the 12-month period, according to DataQuick Information Systems.
The 20 percent drop in the county's sales pace to 1,486 units mirrored the results for the entire nine-county Bay Area as did the median price increase.
A total of 6,004 homes and condos were sold in the region last month compared with 7,509 in January 2005. But the median price for the region rose 13.7 percent to $607,000.
The region's January sales pace was the lowest for any month since January 2001, when 5,977 homes were sold, DataQuick said.
The median price of a Bay Area home fell 0.3 percent in January from the $609,000 level in December 2005.
Last month was also the tenth in a row to see a year-over-year decline in the pace of sales.
"We won't know for another couple of months if this is a lull in the market or part of longer-term downturn," said Marshall Prentice, DataQuick president, in a release. "It's always difficult to project from trends we see in January and February. The March numbers will tell us much more about what's going on."
The regional numbers mask substantial variations within each of the nine counties in the number of sales and median price changes.
Marin County, which has the highest median home price of all nine counties -- $741,000 last month, up slightly from a year ago -- saw a 32 percent decline in its sales pace.
Napa County saw its sales pace decline more than 37 percent to 103 units for the entire month. Its median price was up 10 percent year-over-year, however, to $596,000.
Closer to home, San Mateo County had an 18.2 percent drop in its unit sales count to 450. Its median rose 4.8 percent to $726,000 year over year.
In San Francisco, the sales pace dropped nearly 21 percent from January 2004 to last month. The median was up 5.6 percent to $722,000.
Tuesday, February 14, 2006
Weekly Market Report for the Week of January 29th-February 4th, 2006:
Happy Valentine's Day Bloggers!
Santa Clara County inventory remained relatively stable this week at around 2433 total properties for sale. The increasing buyer demand and rate of sales is snapping up new inventory. The great weather is also heating up the bay area real estate market and it's a reminder of how blessed we are to live here.
We had a slow start in the beginning of January but we are moving into full swing. Many entry level markets in the valley with properties listed under $1 million are seeing a great deal of multiple offer situations. Our Santa Cruz market is just beginning to heat up as well. Coastal properties (beachfront) are moving well with cash buyers on the hunt for the right home. The entry level market in Santa Cruz is moving a bit slower but most likely trending activity in the valley. Expect a push in the next few weeks in the Santa Cruz, Capitola and Aptos markets in most price ranges.
Nearly every Silicon Valley office reported multiple offers this week and some, like Los Gatos, "in all price ranges." This included a few in the $2-3 million range. One of our Cupertino offices had two offers on a apartment building listed at over $10 million. Other offices reported multiple offers on 50% or more of their sales this week. Here are a few quotes from our managers over the past week, "the market is great," "Great sales, quiet listing week," "buyers are out looking for the best new listings-good properties get noticed," "Good activity, especially on open homes."
Expect slightly increasing inventory and continued buyer and sales activity throughout the balance of February.
Santa Clara County inventory remained relatively stable this week at around 2433 total properties for sale. The increasing buyer demand and rate of sales is snapping up new inventory. The great weather is also heating up the bay area real estate market and it's a reminder of how blessed we are to live here.
We had a slow start in the beginning of January but we are moving into full swing. Many entry level markets in the valley with properties listed under $1 million are seeing a great deal of multiple offer situations. Our Santa Cruz market is just beginning to heat up as well. Coastal properties (beachfront) are moving well with cash buyers on the hunt for the right home. The entry level market in Santa Cruz is moving a bit slower but most likely trending activity in the valley. Expect a push in the next few weeks in the Santa Cruz, Capitola and Aptos markets in most price ranges.
Nearly every Silicon Valley office reported multiple offers this week and some, like Los Gatos, "in all price ranges." This included a few in the $2-3 million range. One of our Cupertino offices had two offers on a apartment building listed at over $10 million. Other offices reported multiple offers on 50% or more of their sales this week. Here are a few quotes from our managers over the past week, "the market is great," "Great sales, quiet listing week," "buyers are out looking for the best new listings-good properties get noticed," "Good activity, especially on open homes."
Expect slightly increasing inventory and continued buyer and sales activity throughout the balance of February.
Saturday, February 11, 2006
Prices soaring for construction materials
Hurricane damage, oil prices leading to higher costs. Last year's hurricanes created a huge demand for wood products such as plywood and oriented strand board.
Expect prices for New Home Construction to climb contributing to increasingly higher housing prices in the Bay Area.
Expect prices for New Home Construction to climb contributing to increasingly higher housing prices in the Bay Area.
Government Auctions offer good deals?
The offerings change daily, the realty sales hype is refreshingly restrained and the caveats plentiful.
"Caveat emptor", Latin for "let the buyer beware"
HUD's real estate site
"Caveat emptor", Latin for "let the buyer beware"
HUD's real estate site
Pros and Cons of Tenant-In-Common (TIC) Investing
Tenancy-in-Common Investing is when income producing real estate is sold as securities - something like stocks and bonds. Investors own buildings directly rather than through a corporation or partnership. It's the age-old tenancy-in-common form of ownership, but with a twist. The investor turns his investment over to the investment management group, such as Triple Net Properties, LLC, and just collect the dividends.
PROS
Ease of Management:
Companies like Triple Net Properties of Santa Ana say they manage office and apartment buildings for investors who don't have to lift a finger.
Tax deferral:
According to a part of federal tax code known as 1031, investors who sell an apartment can defer capital gains taxes if they identify another similar rental property in 45 days and buy it within 180 days.
CONS
Less Liquidity:
These deals are for long-term investors. There is no secondary market for tenant-in-common securities, says the National Association of Securities Dealers. Also, unanimous consent of all investors in a property may be required to sell it.
Government Regulation:
So far government input has been helpful to investors. The Internal Revenue Service set down some rules for tenant-in-common investing in 2002, which helped fuel its expansion. But the NASD and the Securities and Exchange Commission are watching it closely. There is always a chance a government agency or Congress could change the rules.
PROS
Ease of Management:
Companies like Triple Net Properties of Santa Ana say they manage office and apartment buildings for investors who don't have to lift a finger.
Tax deferral:
According to a part of federal tax code known as 1031, investors who sell an apartment can defer capital gains taxes if they identify another similar rental property in 45 days and buy it within 180 days.
CONS
Less Liquidity:
These deals are for long-term investors. There is no secondary market for tenant-in-common securities, says the National Association of Securities Dealers. Also, unanimous consent of all investors in a property may be required to sell it.
Government Regulation:
So far government input has been helpful to investors. The Internal Revenue Service set down some rules for tenant-in-common investing in 2002, which helped fuel its expansion. But the NASD and the Securities and Exchange Commission are watching it closely. There is always a chance a government agency or Congress could change the rules.
Transfer your current property tax base to a new home
You may be able to transfer your current property tax base to a new home. When home prices rise, so do property taxes for homebuyers. You may have considered changing your residence and been concerned about an increase in property taxes.
If you are over 55 years old and meet certain requirements, Propositions 60 and 90 may be the opportunity for you. These propositions allow you to transfer your current property tax base to a home of equal or lesser value. Proposition 60 allow you to transfer to a home within the same county.
Proposition 90 allows you to transfer to a home in any county of California that has passed ordinances enabling Proposition 90. These propositions my be the opportunity for you to make your move and save money. Ther may be an opportunity to transfer your current property tax base, resulting in substantial tax savings.
If you are over 55 years old and meet certain requirements, Propositions 60 and 90 may be the opportunity for you. These propositions allow you to transfer your current property tax base to a home of equal or lesser value. Proposition 60 allow you to transfer to a home within the same county.
Proposition 90 allows you to transfer to a home in any county of California that has passed ordinances enabling Proposition 90. These propositions my be the opportunity for you to make your move and save money. Ther may be an opportunity to transfer your current property tax base, resulting in substantial tax savings.
No time limit on ownership for 1031 exchange
There is no minimum period of ownership required for 1031 exchange properties. A 1031 tax-deferred exhange allows owners of land, investment and business real property to sell at a profit and acquire more valuable real property without being taxed on their gain.
For example, investment land may be sold and a more valuable property - like an apartment building or a percentage ownership in an office building - may be acquired without tax liability. A 1031 tax-deferred exchange is similar to an IRA or a 401(k) retirement plan that is not subject to taxation until the investor begins to cash out of the retirement plan.
IRS rules require that real estate investors or business owners engaged in 1031 exchanges use a qualified intermediary. Many firms provide this service. IRS rules require that the real property must be held for business or investment purposes.
For example, investment land may be sold and a more valuable property - like an apartment building or a percentage ownership in an office building - may be acquired without tax liability. A 1031 tax-deferred exchange is similar to an IRA or a 401(k) retirement plan that is not subject to taxation until the investor begins to cash out of the retirement plan.
IRS rules require that real estate investors or business owners engaged in 1031 exchanges use a qualified intermediary. Many firms provide this service. IRS rules require that the real property must be held for business or investment purposes.
What is Title Insurance
Title insurance is a policy that is usually issued by a title company to protect the lender against somethingvthat might have happened in the past, rather than something that might occur in the future. In essence, an extensive search of public records is conducted by the title company to validate who has held title to the property in the past. The lender wants to know if there are any liens, judgments or easements on the property that they should be aware of.
But title insurance also guards against hidden risks or unknown factors that might cause an encumbrance at some point in the future, such as unknown heirs, forged deeds or wills, misinterpreted wills, false impersonation of the true owner of the property, deeds signed over by persons of unsound mind, or defects in the recording of past titles. Title insurance covers the cost of the title search, and any legal fees that may result from any dispute over past property ownership. It is required by the lender and paid for by the buyer.
The smart home buyer will also purchase title insurance to protect their own interests. This is a one-time premium that protects the buyer or their heirs, as long as they retain an interest in the property.
But title insurance also guards against hidden risks or unknown factors that might cause an encumbrance at some point in the future, such as unknown heirs, forged deeds or wills, misinterpreted wills, false impersonation of the true owner of the property, deeds signed over by persons of unsound mind, or defects in the recording of past titles. Title insurance covers the cost of the title search, and any legal fees that may result from any dispute over past property ownership. It is required by the lender and paid for by the buyer.
The smart home buyer will also purchase title insurance to protect their own interests. This is a one-time premium that protects the buyer or their heirs, as long as they retain an interest in the property.
Thursday, February 09, 2006
Housing affordability stabilizes at low rate
Housing affordability in California stabilized at a very low rate at the end of 2005, the California Association of Realtors said on Thursday.
The percentage of households that could afford a median-priced home in the state was unchanged from November's 14 percent, which is 5 percentage points lower than the rate at the end of 2004.
Nationwide, about half of all households can afford to buy a median-priced home.
The minimum household income needed to purchase a median-priced home at $548,430 in California in December was $134,200, based on an average effective mortgage interest rate of 6.33 percent and assuming a 20 percent downpayment.
In CAR's Santa Clara region, the affordability rate was 18 percent, down from 21 percent the year before. The median price in the region of $734,950 was down 1.3 percent from November, but up more than 11 percent from the end of 2004.
In the Monterey region, where the median price was $712,500, the affordability rate was 9 percent, down from 11 percent in 2004.
Affordability increased slightly in Santa Cruz county, at 11 percent in December 2005 versus 10 percent in November. It was down from December 2004, though, when the rate was 14 percent. The median price there was $742,000, down from $789,500 in November.
The percentage of households that could afford a median-priced home in the state was unchanged from November's 14 percent, which is 5 percentage points lower than the rate at the end of 2004.
Nationwide, about half of all households can afford to buy a median-priced home.
The minimum household income needed to purchase a median-priced home at $548,430 in California in December was $134,200, based on an average effective mortgage interest rate of 6.33 percent and assuming a 20 percent downpayment.
In CAR's Santa Clara region, the affordability rate was 18 percent, down from 21 percent the year before. The median price in the region of $734,950 was down 1.3 percent from November, but up more than 11 percent from the end of 2004.
In the Monterey region, where the median price was $712,500, the affordability rate was 9 percent, down from 11 percent in 2004.
Affordability increased slightly in Santa Cruz county, at 11 percent in December 2005 versus 10 percent in November. It was down from December 2004, though, when the rate was 14 percent. The median price there was $742,000, down from $789,500 in November.
Santa Clara County Inventory Trend
As of February 7, 2006, the inventory in Santa Clara County for single family homes is up to 1,919 and condo/townhomes is up to 661 units. This is up 250 homes and 70 condo/townhomes from January 3rd.
Our inventory levels are now just under 2-times the amount of inventory this time last year. Our current level of inventory is similar to the amount of homes and condo/townhomes that were for sale in the summer of 2005.
We expect inventory to increase as we head into the summer and buying activity has picked up substantially from November of 2005.
Our inventory levels are now just under 2-times the amount of inventory this time last year. Our current level of inventory is similar to the amount of homes and condo/townhomes that were for sale in the summer of 2005.
We expect inventory to increase as we head into the summer and buying activity has picked up substantially from November of 2005.
Tuesday, February 07, 2006
What is your home worth?
All homes have a price, and sometimes more than one. There's the price owners would like to get, the value buyers would like to offer and a point of agreement which can result in a sale.
In considering home values, several factors are important:
In considering home values, several factors are important:
- The value of your home relates to local sale prices. The same home, located elsewhere, would likely have a different value.
- Sale prices are a product of supply and demand. If you live in a community with an expanding job base, a growing population and a limited housing supply, it's likely that prices will rise. Alternatively, it's important to be realistic. If the local community is losing jobs and people are moving out, then you'll likely have a buyer's market.
- Owner needs can impact sale values. If owner Smith "must" sell quickly, he will have less leverage in the marketplace. Buyers may think that Smith is willing to trade a quick closing for a lower price -- and they may be right. If Smith has no incentive to sell quickly, he may have more marketplace strength.
- Sale prices are not based on what owners "need." When an owner says, "I must sell for $300,000 because I need $100,000 in cash to buy my next home," buyers will quickly ask if $300,000 is a reasonable price for the property. If similar homes in the same community are selling for $250,000, the seller will not be successful.
- Sale prices are NOT the whole deal. Which would you rather have: A sale price of $200,000, or a sale price of $205,000 but where you agree to make a "seller contribution" of $5,000 to offset the buyer's closing costs, pay a $2,000 allowance for roof repairs, fund two mortgage points, re-paint the entire house and leave the washer and dryer?
How much is too much?
Because all transactions are unique there is flexibility in the marketplace. The amount of flexibility depends on local conditions.
For example, suppose you're selling a townhouse. Suppose also that there have been five recent sales of the model you own and that sale values have ranged between $200,000 and $210,000. You now have an idea of how your home might be priced. In a strong market perhaps you can ask for $210,000 or a little more. If the market has slowed, $210,000 may be a reasonable asking price, but perhaps more than the final sale price.
Here's another scenario. Imagine that you live in a community of Victorian-style homes, most of which were built in the 1920s. All the homes are different in terms of size, condition, modernization, style and features. In such a neighborhood, an average sale price is just a statistic without much practical meaning. On a single block one home may sell for $400,000 while another is priced at more than $1 million. The average price may be outrageously high for one home and staggeringly low for another.
Who can help?
Experienced REALTORS® are active in the local marketplace and can provide assistance with pricing, marketing, negotiation and closing.
Because experienced REALTORS® have handled many transactions, they're familiar with the terms and conditions that went into individual sales, not just published sale prices which may not reflect various premiums, discounts and adjustments.
Monday, February 06, 2006
Weekly Market Report for the Week of January 22nd-28th, 2006
Overall market activity has increased dramatically over the past 1-2 weeks. The rate and number of sales has increased substantially from the first half of January. Santa Clara County inventory remains quite low (around 2360) so it will be interesting to see if we experience a dramatic increase following the Super Bowl weekend. We are still running very close to 2004 inventory levels (around 2100+ during the same week in 04').
Nearly every office saw multiple offer activity this past week. The most active price range is the under $1.5 million mark, although several higher-end properties went under contract as well. We also had a number of properties in the $2 and $3+ million range go into escrow.
Overall, the number of Santa Clara County sales (units) was off somewhere between 10-20% for January 2006 vs. January 2005. At the same time, the January 2006 sales volume numbers were lower but more comparable to January 2005 figures (around 5-10% lower sales volume in 2006) due to stable sales prices and a number of high-end sales that went into escrow during the first month of 2006.
All in all, the market is definitely going into full swing. Several offices had multiple offers on over 50% of their office sales. One office received around 6-8 offers on properties listed under $1 million. Open Houses are very active with a large number of "real buyers" looking around on the weekends.
Expect increasing demand and activity as the inventory starts to make it's seasonal climb.
Nearly every office saw multiple offer activity this past week. The most active price range is the under $1.5 million mark, although several higher-end properties went under contract as well. We also had a number of properties in the $2 and $3+ million range go into escrow.
Overall, the number of Santa Clara County sales (units) was off somewhere between 10-20% for January 2006 vs. January 2005. At the same time, the January 2006 sales volume numbers were lower but more comparable to January 2005 figures (around 5-10% lower sales volume in 2006) due to stable sales prices and a number of high-end sales that went into escrow during the first month of 2006.
All in all, the market is definitely going into full swing. Several offices had multiple offers on over 50% of their office sales. One office received around 6-8 offers on properties listed under $1 million. Open Houses are very active with a large number of "real buyers" looking around on the weekends.
Expect increasing demand and activity as the inventory starts to make it's seasonal climb.
Sunday, February 05, 2006
When Buying, Don't Forget Your Pre-Approval Letter
Most home buyers know they should get a mortgage pre-approval letter from a lender before they begin seriously shopping for a home. But the reasons for this advice aren't always clear, and buyers sometimes are dismayed by the amount of paperwork involved. Here is some of the reasoning behind the advice:
1. A pre-approval letter is more reliable than a pre-qualification letter. Getting a pre-qualification letter is easy. You just call a mortgage broker or lender, provide some basic financial information, then wait a few minutes for the letter to come through your fax machine. Getting a "pre-qual" from a Web site is just as easy. Enter some information, click "submit" and voilà. A pre-approval letter, on the other hand, involves verification of the information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment and other aspects of your financial circumstances. Granted, a pre-approval is more time-consuming (and possibly more stressful) than a pre-qualification The additional due diligence is exactly why the pre-approval carries more weight.
2. You'll know how much money you can qualify to borrow. Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there's no quick-and-dirty way to translate that monthly payment into a specific maximum mortgage amount because other factors -- down payment percentage, mortgage insurance, property taxes, adjustable interest rates and so on -- are part of the calculation. And, you might not be qualified to borrow as much as you think you should be able to borrow, depending on your income, your debts and your credit history.
3. You'll have more leverage in negotiations with the seller. Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction. A pre-approval letter is an especially favorable point in a close multiple offer situation. And, you might feel more confident about making an offer with a pre-approval letter in hand and the knowledge that you'll be able to obtain a mortgage.
4. Your real estate agent will work harder on your behalf. A pre-approval letter signals to your real estate agent that you're a well-qualified buyer who is serious about purchasing a home. The increased likelihood of a closed sale -- and a commission -- will naturally motivate your agent to devote more time and energy to you. In fact, some agents won't even show property to buyers who don't have a pre-approval letter.
5. A few caveats: Pre-approval letters aren't binding on the lender, are subject to an appraisal of the home you want to purchase and are time-sensitive. If your financial situation changes (e.g., you lose your job, lease a car or run up credit-card bills), interest rates rise or a specified expiration date passes, the lender will review your situation and recalculate your maximum mortgage amount accordingly.
1. A pre-approval letter is more reliable than a pre-qualification letter. Getting a pre-qualification letter is easy. You just call a mortgage broker or lender, provide some basic financial information, then wait a few minutes for the letter to come through your fax machine. Getting a "pre-qual" from a Web site is just as easy. Enter some information, click "submit" and voilà. A pre-approval letter, on the other hand, involves verification of the information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment and other aspects of your financial circumstances. Granted, a pre-approval is more time-consuming (and possibly more stressful) than a pre-qualification The additional due diligence is exactly why the pre-approval carries more weight.
2. You'll know how much money you can qualify to borrow. Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there's no quick-and-dirty way to translate that monthly payment into a specific maximum mortgage amount because other factors -- down payment percentage, mortgage insurance, property taxes, adjustable interest rates and so on -- are part of the calculation. And, you might not be qualified to borrow as much as you think you should be able to borrow, depending on your income, your debts and your credit history.
3. You'll have more leverage in negotiations with the seller. Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction. A pre-approval letter is an especially favorable point in a close multiple offer situation. And, you might feel more confident about making an offer with a pre-approval letter in hand and the knowledge that you'll be able to obtain a mortgage.
4. Your real estate agent will work harder on your behalf. A pre-approval letter signals to your real estate agent that you're a well-qualified buyer who is serious about purchasing a home. The increased likelihood of a closed sale -- and a commission -- will naturally motivate your agent to devote more time and energy to you. In fact, some agents won't even show property to buyers who don't have a pre-approval letter.
5. A few caveats: Pre-approval letters aren't binding on the lender, are subject to an appraisal of the home you want to purchase and are time-sensitive. If your financial situation changes (e.g., you lose your job, lease a car or run up credit-card bills), interest rates rise or a specified expiration date passes, the lender will review your situation and recalculate your maximum mortgage amount accordingly.
Inflation Jitters Push Up Mortgage Rates in Freddie Mac Weekly Survey
McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market SurveySM (PMMSSM) in which the 30-year fixed-rate mortgage (FRM) averaged 6.23 percent, with an average 0.5 point, for the week ending February 2, 2006, up from last week's average of 6.12 percent. Last year at this time, the 30-year FRM averaged 5.63 percent.
The average for the 15-year FRM this week is 5.81 percent, with an average 0.5 point, up from last week's average of 5.70 percent. A year ago, the 15-year FRM averaged 5.14 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.87 percent this week, with an average 0.5 point, unchanged from last week when it averaged 5.75 percent. A year ago, the five-year ARM averaged 5.00 percent.
One-year Treasury-indexed ARMs averaged 5.33 percent this week, with an average 0.7 point, up from last week when it averaged 5.20 percent. At this time last year, the one-year ARM averaged 4.23 percent.
"Declines in worker productivity coupled with accelerating labor costs increase the threat of inflation down the road. Inflationary pressure generated by these two factors pushes long-term mortgage rates upward, which is why we have seen rates rise these last two weeks," said Frank Nothaft, Freddie Mac vice president and chief economist. "Still, to keep things in perspective, mortgage rates are currently only about one-half a percentage point higher than they were at this time last year."
"Mortgage rates will surely fluctuate in the weeks and months ahead, but the trend now is for higher rates over the long run."
The average for the 15-year FRM this week is 5.81 percent, with an average 0.5 point, up from last week's average of 5.70 percent. A year ago, the 15-year FRM averaged 5.14 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.87 percent this week, with an average 0.5 point, unchanged from last week when it averaged 5.75 percent. A year ago, the five-year ARM averaged 5.00 percent.
One-year Treasury-indexed ARMs averaged 5.33 percent this week, with an average 0.7 point, up from last week when it averaged 5.20 percent. At this time last year, the one-year ARM averaged 4.23 percent.
"Declines in worker productivity coupled with accelerating labor costs increase the threat of inflation down the road. Inflationary pressure generated by these two factors pushes long-term mortgage rates upward, which is why we have seen rates rise these last two weeks," said Frank Nothaft, Freddie Mac vice president and chief economist. "Still, to keep things in perspective, mortgage rates are currently only about one-half a percentage point higher than they were at this time last year."
"Mortgage rates will surely fluctuate in the weeks and months ahead, but the trend now is for higher rates over the long run."
Friday, February 03, 2006
Foreclosure activity up 15.6% in California
Foreclosure activity in California was up 15.6 percent in the last three months of 2005, according to a report released on Thursday.
Lending institutions sent 14,999 default notices to California homeowners during the October-to-December period, according to Dataquick Information Systems.
That was up 19 percent from the third quarter, and up 15.6 percent from 2004's fourth quarter.
All regions of the state saw an increase in foreclosure activity, ranging from 10.5 percent in the Bay Area to 19.6 percent in Southern California.
Santa Clara county saw a 5.6 percent increase, while Santa Cruz saw a 14.8 percent increase and Monterey went up 25.3 percent.
Dataquick said foreclosure activity hit a low during the third quarter of 2004 when 12,145 default notices were recorded. Defaults peaked in 1996's first quarter at 59,897.
"There's always going to be a certain amount of financial distress. People lose their jobs, have medical emergencies, get divorced, pass away or make bad money decisions at a certain rate.
increasing amount of equity that people have had in their homes. That equity is now being created at a slower pace, and default activity is inevitably on the rise," said Marshall Prentice, DataQuick president.
The annual home appreciation rate in the state hit 22.8 percent during the second quarter of 2004. Since then it has come down and in fourth-quarter 2005 it was 14.5 percent. The appreciation rate is expected to fall below 10 percent sometime this summer.
The median amount owed when the default notice was recorded was $6,862 in fourth-quarter 2005, up from $6,130 for the same period a year ago.
Dataquick said that only about 5 percent of homeowners who find themselves in default actually lose their homes to foreclosure. Most are able to stop the foreclosure process by bringing their mortgage payments current, or by selling their home and paying the home loan off.
Lending institutions sent 14,999 default notices to California homeowners during the October-to-December period, according to Dataquick Information Systems.
That was up 19 percent from the third quarter, and up 15.6 percent from 2004's fourth quarter.
All regions of the state saw an increase in foreclosure activity, ranging from 10.5 percent in the Bay Area to 19.6 percent in Southern California.
Santa Clara county saw a 5.6 percent increase, while Santa Cruz saw a 14.8 percent increase and Monterey went up 25.3 percent.
Dataquick said foreclosure activity hit a low during the third quarter of 2004 when 12,145 default notices were recorded. Defaults peaked in 1996's first quarter at 59,897.
"There's always going to be a certain amount of financial distress. People lose their jobs, have medical emergencies, get divorced, pass away or make bad money decisions at a certain rate.
increasing amount of equity that people have had in their homes. That equity is now being created at a slower pace, and default activity is inevitably on the rise," said Marshall Prentice, DataQuick president.
The annual home appreciation rate in the state hit 22.8 percent during the second quarter of 2004. Since then it has come down and in fourth-quarter 2005 it was 14.5 percent. The appreciation rate is expected to fall below 10 percent sometime this summer.
The median amount owed when the default notice was recorded was $6,862 in fourth-quarter 2005, up from $6,130 for the same period a year ago.
Dataquick said that only about 5 percent of homeowners who find themselves in default actually lose their homes to foreclosure. Most are able to stop the foreclosure process by bringing their mortgage payments current, or by selling their home and paying the home loan off.
Thursday, February 02, 2006
Mortgage Rates Update
Rates have once again followed the slow rise that has become a familiar trend. As expected the Federal Reserve raised the Fed Funds Rate by 25 basis points to 4.5% when they met on Tuesday bringing the Prime Rate up to 7.5%. With the Fed Meeting behind us, we look towards the Labor Department's report scheduled for release tomorrow. This report is by far the most important of the week. The Labor Department will post January’s Employment data, giving us the U.S. unemployment rate and the number of jobs added or lost during the month among other related statistics. Analysts are expecting to see the unemployment rate remain at 4.9% and approximately 250,000 new jobs. An increase in unemployment and fewer new jobs than expected would be great news for the bond market. It would probably create a bond market rally, leading to lower mortgage rates tomorrow.
Wednesday, February 01, 2006
San Jose chooses Japantown developers
Sharon Simonson
The Olson Co. has beaten a partnership of two of the region's largest developers to enter exclusive negotiations with the city of San Jose to redevelop 7.7 acres in Japantown.
The approval, granted at the San Jose City Council meeting yesterday, gives the Brea, Calif., company approximately eight months to work with the San Jose Redevelopment Agency and the community to come up with a plan that will bring new housing, retail and public spaces, such as Japanese gardens, to three sites. All three parcels sit within roughly a half-mile of one another, generally along Japantown's central spine, Jackson Street.
The total investment in the project upon completion is expected to exceed $100 million.
The most important parcel, 5.8 acres now used by the city for vehicle maintenance and storage, is immediately north of Jackson between Sixth and Seventh streets.
The project has been sought by some in the community for as long as 25 years, Vice Mayor Cindy Chavez told her fellow council members in recommending The Olson Co. and a nonprofit partner, First Community Housing, be selected for the job.
To get the work, Olson and First Community defeated fellow finalists SummerHill Homes and KB Home. The city received nine proposals in total from a variety of interests for the job.
Councilman Chuck Reed sought assurances from the Olson Co. that it would be able to successful develop and tenant the proposed new shop space, saying the city has learned the hard way that it can build space intended for shops but that doesn't necessarily mean that it can find tenants that actually want it.
Olson's vice president for community development in Northern California, Mitch Solomon, said the company is working with a retail consultant with strong qualifications for just this kind of job.
"We have a high degree of confidence that the retail piece will turn out exceptionally well," he said.
The Olson Co. has beaten a partnership of two of the region's largest developers to enter exclusive negotiations with the city of San Jose to redevelop 7.7 acres in Japantown.
The approval, granted at the San Jose City Council meeting yesterday, gives the Brea, Calif., company approximately eight months to work with the San Jose Redevelopment Agency and the community to come up with a plan that will bring new housing, retail and public spaces, such as Japanese gardens, to three sites. All three parcels sit within roughly a half-mile of one another, generally along Japantown's central spine, Jackson Street.
The total investment in the project upon completion is expected to exceed $100 million.
The most important parcel, 5.8 acres now used by the city for vehicle maintenance and storage, is immediately north of Jackson between Sixth and Seventh streets.
The project has been sought by some in the community for as long as 25 years, Vice Mayor Cindy Chavez told her fellow council members in recommending The Olson Co. and a nonprofit partner, First Community Housing, be selected for the job.
To get the work, Olson and First Community defeated fellow finalists SummerHill Homes and KB Home. The city received nine proposals in total from a variety of interests for the job.
Councilman Chuck Reed sought assurances from the Olson Co. that it would be able to successful develop and tenant the proposed new shop space, saying the city has learned the hard way that it can build space intended for shops but that doesn't necessarily mean that it can find tenants that actually want it.
Olson's vice president for community development in Northern California, Mitch Solomon, said the company is working with a retail consultant with strong qualifications for just this kind of job.
"We have a high degree of confidence that the retail piece will turn out exceptionally well," he said.
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