Living in one of the best, most stable communities helped us maintain high home prices which appreciated immensely during the last 30 years. We did have some dips during that time but generally our homes appreciated about 5 times over, (milk, bread, fruit and vegetables hardly doubled in price). Very few homes get sold here. People prefer to stay put.
The easy access to shops, I-280 and I-85, the proximity to Cupertino, Los Altos or Palo Alto schools makes it ideal neighborhoods to live in. South Sunnyvale, Cupertino, Los Altos, Palo Alto and the good parts of Mountain View maintained high prices. A 3-bedroom ranch-style house in the South Sunnyvale, priced at $950K was reduced in price after a week to $908K and attracted 4 offers to raise the price to above $910k. Generally, in these desired areas the prices are about 20% lower than the peak time on March 2008. Back then, a 3 bedroom ranch style home was priced at $975K and after reviewing 11 offers sold for $1.109M. Invested funds lost many times more than 20%.
The banks’ new guidelines are very strict - they demand higher down payments and better credit. The new limit for Conforming loan starting January 2009 is $625,500. Buyers will have to pay a higher down payment or get a second loan. The underwriters who decide if you can get a loan and on what terms, expect a fully documented file. Stated income (in which you would state that you earn a certain amount without proving it) is gone. Many foreign families from overseas go back home to their native land. Most of them lived in rental homes so it didn’t affect the prices much. The banks are getting more organized and more in control of the situation but a new wave of layoffs is arriving and we all hope that the employment market stabilizes.

QUICK UPDATE:

The units sold in October 2008 v. October 2007 were up 57%. Most of that activity happened in homes under $500k, short sales and REO (Real Estate Owned by the bank after foreclosure or how you would want to call it “Real estate Opportunity”) In addition, the 1 million plus range seems to be moving better than the deep-freeze we were in from October 10 to the end of October. During the last 5 weeks buyers are buying 1 million dollar plus homes at a faster rate than in September - October. It’s a great opportunity to upgrade from smaller homes which lost relatively less to larger, more expensive home.

WHAT IT TAKES TO SELL IN THIS MARKET:

Price and condition of the home become even more critical than in the past. Homes that are still selling are either priced more aggressively or upgraded and in good Condition. The homes that are priced well and remodeled are attracting the most attention and getting sold faster.

Of course location is of utmost importance. Being in a good school area improves the saleability of the house immensely.

WHO IS BUYING TODAY?

Relocation Folks; First Time Homebuyers; Investors in anticipation for appreciation for under 400K market; Move-up Buyers making a lateral move; Folks that have been sitting on the sidelines for a few years; Folks at all price points that have been pushed out of the market by multiple offers over the last 4-5 years

Investors:

If you are planning to buy a short sale, check with your real estate lawyer. There are too many law suits going around due to innocent mistakes or not knowing the laws and regulations.

QUICK RATE UPDATE: please note, the actual rate that you can get depends on your credit history and down payment amount.

30 Year Conventional 6.000% @ 0 pts up to $417,000

30 Yr Agency Jumbo 6.375% @ 0 pts up to $729,750

5/1 ARM Super Jumbo 6.125% @ 0 pts up to $4M

In California the Real Estate Broker is responsible for pre qualifying the buyers, finding a suitable house/property that will fit the needs and budget of the buyer, negotiate the best price and terms, write the contract which is the purchase agreement, coordinate with the lender to get the best loan, inspect and check the property with professional inspectors, follow up and make sure all needed work be completed as per the contract, pay attention to every detail and educate the buyers through the process, walk through the check the property before releasing the down payment funds, check the closing statement and follow up with the home warranty and advice for many years to come. For Sellers, the Broker has to help decide on a marketable price, help prepare the house like a bride for her wedding day, do all property inspections, help the seller fill up all the disclosures, market the house and advertise in all possible ways, hold open house every weekend until the house sells, show it whenever needed, help maintain the house clean and tidy, choose the best suitable buyer, negotiate the best price and terms, check the lender and follow-up with every step of the sale process, and the contract and help deliver the house clean and ready to the next owners.

There are many other roles a broker has that are not written, like staging, moving furniture around, decorate with fresh flower arrangements, and be a real friend.

With the new situation of the mortgage companies and banks that are going under, like Indibank this week and who knows who is next on the list, there is a feeling of uncertainty. Buyers are afraid to remove loan contingency because their lender might change terms at the last moment or even go under, leaving the buyers with no loan, risking their deposit check of 3% of the sale price, which is a considerable amount of money in our area. Until about 1985 the contract enabled the buyer to have loan contingency up to the final approval of the loan or the funding day. It is still the case in other states like Texas and Louisiana but not in the bay area. Here, the seller gets mad and asks the buyer what rights he has to expect the seller to hold his property off the market while he waits for his loan to get approved without jeopardizing his deposit check. Maybe it’s time to change this condition and give the anxious buyer some peace of mind.

The Real estate market is more balanced these days. There are more negotiations and less bidding wars. Some extraordinary homes still sell with multiple bids but most homes are being sold after a few weeks on the market and tight negotiations. Sellers still insist on their prices and buyers are more cautious. Many buyers wait to see what will happen with the banking industry, but others still buy homes especially in the preferred areas with the good schools.

We hear and read all these predictions and market analysis about the market in the Bay area and the U.S. Everyone claims to know what is going to happen and why.

Foreclosures and short sales are still here to stay for a while. There are still many homeowners who owe more money to a lender than the value of their home. Sometimes it is more than a $100,000 difference. Many home owners, in order to avoid an ugly stain on their credit history, try to sell their home in a “short sale”. They (or their agent) approach the lender who is willing to forgive some of their debt in order to cut his losses short. The lender might agree to get less money and avoid having to deal with foreclosure. There are many short sales everywhere. It’s a long, tedious process and if a buyer can cope with it he might get a house for a better price.

If you are looking for a house for your family in a good school area, namely Palo Alto, Los Altos, Cupertino, Saratoga and South Sunnyvale, you are in a totally different market. To my personal experience, all of the homes in the Cupertino school district that I submitted offers on or represented the seller within the last month had 4-7 offers and people offered up to 6% over asking price. Back in February – March of this year buyers offered 10-15% more than asking price to win a home. In Los Altos, a few days ago, a $2,395,000 house with 2294 S.f. was sold (all cash) for $50,000 over asking price. The asking prices remained the same. The difference is how much buyers are willing to pay over asking price. There are very few ’short sales’ in these areas because prices are holding strong.

There is a feeling in the air that the inflation is getting worse. Bernanke didn’t lower interest rates, and oil prices, food prices and everything else are getting more expensive. Mortgage interest rates are on the slow rise (1/2% last week and 1/8% yesterday and today it went down ¼%). You can expect either a rush to buy homes before interest rates rise even higher or buyers to be scared away because they cannot afford higher interest rates. It would be wise to watch the rates very carefully before locking the rates because they can change during the day.

The inventory keeps growing as well as the number of transactions. Many short sales, Foreclosures and REO (homes that were foreclosed, were not purchased by an auction on the Court house stairs and remained in the banks’ possession) are being sold, some of them with multiple offers. Even the foreclosures in Stockton are being sold out.

There are still many people who can afford to purchase homes. Los Altos and Mountain View and Sunnyvale are getting more balanced, with less multiple offers and more negotiations and concessions toward the buyers. Palo Alto, Cupertino and Saratoga are still holding tight. When I see a nicely remodeled house in a beautiful street and good schools I know it will attract many buyers and sell for more than asking price but the rest of the homes are being sold with negotiations, more contingency times and demands from buyers to fix things. This is the sign of a balance market where supply and demands are the main drivers. I did manage to get a “deal” for one of my clients in Mountain View. A similar house, in the same street, is priced for sale at $175,000 more. When you see a for sale sign standing for a long time it’s because the house is on a busy street or it was priced too high. Pricing right is very important especially in a down turn market. If you price it too high you end up chasing the market down by having to lower the price. The house becomes “stale” as we say in the real estate jargon. This is the time for bargain hunters.