• The Wall Street Journal’s third-quarter survey of housing-market conditions in 28 of the nation’s largest metropolitan areas found that home values declined in all but five markets compared with the second quarter, according to data from Zillow Inc.
• Meanwhile, rent levels have risen briskly across the country and mortgage rates, hovering around 4 percent, are the lowest in six decades.  As a result, monthly mortgage payments on the median priced home – including taxes and insurance – are lower than the average rent levels in 12 metro areas, according to data compiled by Marcus & Millichap.
• Homeownership also is looking more affordable because after several years of declines, apartment rents will rise approximately 4 percent this year, and rents are poised to pick up even more momentum across the country next year, according to Marcus & Millichap.
• Affordability could continue to improve as prices slide even lower in coming months. Price declines are likely because the share of “distressed” sales, including bank-owned foreclosures, tend to rise in the winter, when traditional sales activity cools.

HIGHLIGHTS:

For the general housing market of Silicon Valley and Central Coast:

The median price of existing single-family homes decreased to $510,000 down -1.0% vs Sep-11.
Existing single-family home sales decreased -13.9% from Sep-11 for a Oct-11 total of 1,722 sold units.
Condos decreased in price to $310,000 down -2.5% vs Sep-11.
Existing condo sales decreased -8.6% in Oct-11 over Sep-11 for a total of 489 sold units.

When you look at San Jose specifically:

San Jose Median Price = $485,000 which is up 2% when comparing October ’11 to Sept ’11
but down 2% when you compare October 2011 to October 2010.
Total volume of sales up 4% for October when compared to Oct 2010.

But San Jose Neighborhoods are the real deal:

Here is a pie graph showing neighborhoods by Sales Volume.  Fairly proportion to neighborhood size except Willow Glen.  Evergreen sales are up mainly due to Silver Creek average price. Total Dollar in Sales since July 2011:

Another graph -  More desired the neighborhood, the higher price and the lower the avg days on market (since July 2011):
Guess where the deals might be?

Finally- in preparation for holiday shopping – increasing inventory.  But remember, this time 2008, we had nearly 4700 home for sale.  (nearly 2x what we have now.)
Amazing how consistent total closed sales run.

I hope these numbers give you a quick glance of our market place.  If you have questions about specific neighborhoods, email CJ@TalkToCJ.com

You have probably heard the saying, “all real estate is local”.  Believe it or not, this is not simply a National Association of REALTOR® tag line.  I know, you don’t believe me.  But really, real estate is so very local you must understand the market neighborhood by neighborhood and more importantly, street by street.  Neighborhood boundaries don’t exactly follow zip code lines.  School boundaries do not follow neighborhood lines. All of those don’t follow generic San Jose reports.  To understand current conditions and/or even attempt to predict where a particular group of housing prices will go in the future, is extremely hyper local and can not be wrapped up into averages.  Speaking of averages, medians, and the like, the one statistical component that the real estate market predictions rarely include is standard deviation.  In my very humble opinion, this is where the rubber hits the road in regards to how a true real estate professional can help buyers and sellers understand the local market.  You need someone seeing homes come and go, understanding how many are distressed, how many are not, how many are positively effected by optimal commutes, high API school scores, pride of ownership, and local amenities to have a chance at predicting stabilization or appreciation of any home’s value.  A real local full-time professional can help you define the standard deviation related to any home’s value.

So with shadow inventory, I argue the information you are hearing and reading does not take into play neighborhood dynamics or more importantly the standard deviation related to the specific market of the home you might be looking to buy or sell.  Shadow inventory, simply defined, are the homes distressed not yet a part of the active real estate market.  They are the homes where the seller is not yet behind on their mortgage but soon will  be and they are the homes the lenders/investors are holding on to for various reasons and therefore have not become  a part of the active housing market.

How do we predict the impact of shadow inventory on a specific housing market? The ideal would be to identify all distressed homes and request the lenders to publish the homes within their portfolios with a projected release date to the open housing market.  Not easy to find this information.  Imagine the speculation that would come from such a report. However, we can get a general picture from looking at historical data from our very limited statistical resource tools offered by our very expensive local MLS board and see a pattern of predictions based on neighborhoods and zip codes with a sprinkling of lifestyle influences such as schools, jobs, and conveniences offered to predict the future housing depreciation or appreciation.  I am confident this idea will play out no matter what the result of the Greeks role in the European Union or who the president will be in 2013.

Two neighborhoods:

Cambrian Park, known for its high API scoring schools within the Union School District, reasonable commute to the technology hub of Mountain View and Palo Alto, and nestled in between the very desirable communities of Los Gatos and Willow Glen.  Highly desirable, highly likeable, and highly competitive when it comes to home sales.  Here is a chart indicating the year-to-date active and sold listings and the amount of distressed homes in this market both short sales and REO (foreclosures).   On average, 20% short sales and about 5% bank owned properties are actively on the market.  No definitive increasing trends and this is true even when I went back to late 2008.   It appears that REOs move fast in the Cambrian market which keeps the overall active percentage low.

(Blue-Active Pending Short Sales as % of whole, Maroon Sold Short Sales % of whole, Yellow – Active/Pending REOs as a % of whole, and Green – Sold REOs as a % of whole)

Click on the image to enlarge.

Alum Rock, known as the “East Side” of San Jose, not very well performing schools, extremely limited in jobs as well as commute opportunities to the tech hub, inconsistent pride of ownership, and one of the last neighborhood markets to see an increase during the boom years.  Crime rates are higher and shopping, dining, and entertainment are more inconvenient.  This market provided the last opportunities for lower income families to buy a home and unfortunately, many bought with no money down, many with adjustable rates, or negative amortization loan products.  Of course, these home owners where the first home owners to face trouble when the housing values began to fall.   Consistently, 50% on average of distressed homes sales occur in this neighborhood.  The highest rolling average since the bust of foreclosures and short sales.  Longest days on market, lowest average sales price, and many reasons to believe there is more to come.  If you take the simple statistic that only 7 out of 10 short sales close, this large percentage of short sales are very likely to feed the foreclosure pipeline for many months to come.  As market values come down, home owners that did not participate in “exotic” loan products see their home values drop so much that it no longer makes sense to pay on a home worth 50% less than they owe.  The snowball continues.

Click on the image to enlarge.

There is a logical component in predicting how shadow inventory will impact housing prices.  But what percentage of a local San Jose neighborhood market is at risk to shadow inventory?  If you are looking to purchase a home in Cambrian Park, with less that 20% of the homes sales being distressed sales, you can understand why prices are at less risk to go down.  There is actually more opportunity for the average home price to go up because of supply and demand.  As the market prices stabilize or go up even a small percentage, the risk of new distressed homes goes down as well.

For Alum Rock, look for a triple if not quadruple dip between now and 2015.   So many of these home owners bought with riskier loans, are most impacted by job loss, neighborhood housing values will absolutely be further damaged when the banks release any inventory they are holding simply because the distressed market is already such a large percentage of the zip code sales.   However, banks selling bulk REOs to investor could potentially stabilize the neighborhood faster but as a rental neighborhood, may not have a positive effect on appreciation.  Herein lies the standard deviation of housing statistics not discussed on the evening news.  Herein lies the truth to the statement all real estate is local.

What do you think?  Do you think rising interest rates will tip the scales and make all neighborhoods equal?  Do you think expunging shadow inventory in the current weaker zip codes like 95127 will set them up for stronger appreciation later?  Do you think the bottom will never come?  I would love to hear your comments.  Understanding how buyers and sellers see the market helps me understand what tools are best to help them in the buying or selling of their homes.  Oh, and just for the record, I like Alum Rock and believe more local involvement by city government to reduce crime and stronger neighborhood initiatives by long time residents could help turn this area around.  We need to keep this neighborhood an affordable, safe option that provides the best education as any student can obtain in Santa Clara County.

So now, some data to back all these ideas up.

From the LA Times report, “home prices are projected to turn around in 2012 — jumping 11.5% to $321,138 next year, then rising 10% more in 2013 to $353,411. The recovery is expected to run through 2017.”  Here are graphs they showed on their post regarding California Home Price Recovery.

From the California Association of Realtors Economist Leslie Appleton Young’s prediction for 2012, “The California median home price will increase 1.7 percent in 2012 to $296,000 in 2012, according to the forecast.  Following a double-digit increase in the median price in 2010, the median home price will decrease a projected 4 percent in 2011 to $291,000.”

According to The Economist Magazine’s writer Kari Smith, “My concern is over Owner’s Equivalent Rent. The data suggest to me that there is a shortage of housing in the United States. We should expect rents to begin rising in the near term. This will push up Owner’s Equivalent Rent which accounts for somewhere around 35% of core CPI.”

Interest rates are expected to begin creeping up between 0-.25% per month in 2012 according to the the November 2011 Federal Reserve Update.  If you have questions about a specific housing market around San Jose, contact me. If you have questions about real estate, ask me now via my online chat link to the right of this post.

How much are Santa Clara County transfer fees? There are fees related to the transfer the property and in Santa Clara County these are paid by the seller.  However San Jose, Mountain View, and Palo Alto also have a city transfer tax and this is typically split 50/50 by buyer and seller.  Other counties such as Santa Cruz, Contra Costa and Napa do not have city transfer fees.  Normally the transfer tax is calculated by multiplying the rate by sales price per $1000.

An example of  Transfer Tax:

A home with a $500,000 sales price in San Jose would have the seller paying $1.10 per $1000 or $550 for the county transfer tax.

The city transfer tax for this example would be split 50/50 by the buyer and seller and would be at a rate of $3.30 per $1,000 which would equal $825 each.

There are also document recording fees, courier fees, electronic copy fees and miscellaneous fees such as notary and FedEx normally adding up to less than $500.

Lender fees include the cost of completing the loan and can include points, processing, and document prep fees.  Extra fees paid can also include appraisal(s), credit reports, and certifications.   A point charged is normally considered an origination fee and represents 1% of the loan amount.  Buyers can pay points to help lower their annual percentage rate (APR).  Each lender and each type of loan can vary in cost and it is best to shop fees for different lenders.  However, the percentage rate of a loan varies mostly by point of time related to the “lock” and not the lender.  Why?  There are major players in the lending industry that set percentage rates for borrowing money.  These rates dictated by a point in time and for the most part, if there is a loan product out there offering 4.0% interest rate on any given hour of the day, almost any loan officer can obtain it.  So when trying to shop your loan product, shop the fees around that loan rate and the lenders services.  Do you want to compare loan products and fees? Here is a downloadable PDF to help you compare side by side loan products and related fees.

What is Mortgage Insurance? This is an insurance policy purchased by the lender on behalf of the borrower to protect the lender against a borrowers default.  This insurance typically has an upfront fee (which can be financed into the loan) and a monthly fee (charged as a part of the monthly house payment).  Mortgage insurance is in play for any home where the borrower is placing less than 20% down or utilizing an FHA loan.  Lenders consider any borrower placing less than 20% down a risk for default in a dynamic free market and therefore insure against default.  There are some lenders who will loan at 10% without a monthly MI but they charge an upfront MI.  Having to carry  mortgage insurance  is a common criticism of FHA loans.  All FHA loans, irregardless of the amount financed will require mortgage insurance; either upfront or monthly.  However, it makes logical sense if a borrower is only able to place 3.5% down it may very well be the only way to buy a home.  If you want to find out more about mortgage insurance check out local mortgage professional, Shashank Shekhar, blog posts on MI FAQs and FHA mortgage insurance qualifications.

Escrow fees charged by a neutral 3rd party to manage the transfer of title and money involved within the transaction.  In Santa Clara County , the seller pays for escrow fees and therefore reserves the right to choose with escrow company is used.  In contrast, Alameda County the buyer chooses and pays for escrow fees.  Most of the companies are only dollars off of each other on what they charge for services but buyer or seller can shop around if they want.   Escrow fees in general range from $800 – $1500 dollars per transaction.  It can vary depending on the sales price and type of sale involved.

Title fees charged to the buyer and seller to secure the title is free and clear of liens and is transferred with no other claims to the property.  This is an insurance policy to protect the seller in the transfer of title from seller to buyer.  A second policy is purchased by the buyer for the lender (unless the deal is all cash) to protect the lender’s collateral; the property.  Title insurance for the seller is paid by the seller and title insurance for the buyer or buyer’s lender is paid for by the buyer.  Policies are priced based on sales amount and loan amount.

HOA Fees can be charged when buying a condo, town home, or PUD (Planned Urban Development) home.  The Home Owner Association can charge for transfer fees, document preparation fees, and certifications.  A recent bill signed by Governor Jerry Brown limited the amount Home Owner Associations and related 3rd party vendors can charge buyers and sellers during the transfer of ownership.

Additional fees can come in form of repairs or inspections billed to escrow.  Some companies who complete inspections are willing to bill to escrow so that the seller pays out of proceeds or the buyer pays at closing.   For the most part the inspection companies will charge more to bill escrow and most real estate agents and loan officers prefer these fees stay out of the escrow to keep the purchase as clean as possible.  This is the same for repairs.  If the seller replaces the roof and doesn’t want to fork out cash until the deal closes, some companies will charge escrow and the seller can then pay out of the proceeds received from the sale at the time of closing.

It is important to understand your cost no matter which side of the deal you are on.  Commissions to the real estate agents are typically paid by the seller or in the case of a short sale the short sale lender(s).  Loan fees are based on your lender, if you don’t have one, find one and they can provide a good estimate on fees related to the loan you qualify for as a borrower. As a seller or buyer you can ask your real estate agent to prepare an estimated cost sheet.  Keep in mind, this is estimated.  Prorated items such as insurance, property taxes, and interest on the loan are determined by the closing date.  The buyer will initially pay a prorated property tax based on the seller’s rate and then receive a supplemental tax bill after the deal closes at the new rate.  For Santa Clara County we use 1.25% of sales price as an estimate for new property tax rates.

Buying a home can be a bit overwhelming to some and it is always best to consult with a professional in the local area to understand all your considerations.  If you have questions about closing costs or other real estate matters, contact me for a no-hassle, no-obligation consultation.

The HARP program has been around for awhile but one of the biggest limiting factors regarding its application is the loan to home value ratio could not be greater than 125%.  In other words as long as your home only lost 25% of its value in the last 4 years you could qualify.  Obviously, many home owners have lost more than 25% and some took out second mortgages that decreased their value up to 50%.  With the revised guidelines, there is no loan-to-value ratio limit.

To qualify for the program you must meet three basic requirements:

1. You must be current on your mortgage and have not been over 30 days late in the last year.
2. Your loan must have been initiated prior to May 31st, 2009
3. Your loan  must be backed by Fannie Mae or Freddie Mac

The biggest challenge to the program for Bay Area homeowners is few of the mortgages made prior to 2009 were backed by Fannie Mae and Freddie Mac.  You can determine whether or not your loan(s) is owned by Fannie Mae or owned by Freddie Mac by entering your loan account number on these web sites.  Also recognize this must be your primary residence and the program only replies to senior liens not home equity lines or second mortgages.  Also, recently maximum loan limits for the Bay Area were reduced from $729,750 to $629,500.  There are efforts to revert this back to the higher limits but the bill currently faces the House of Representatives and many do not believe it will pass.  This means your first loan can not exceed $629,500.  There are also alternative programs if your home is not owned by Fannie Mae or Freddie Mac to refinance or reduce your monthly house payments.

Also, items to consider when refinancing any loan.  You want to protect yourself by maintaining a non-recourse loan if possible.  Also make sure you understand the cost of refinancing any loan verses the benefit.  Finally, if you are behind on  your mortgage and have exhausted all possible solutions to refinancing  current loan(s) you may want to consider short selling the home to avoid foreclosure.  If you want to learn more about short sales or want to discuss your options with no obligation or cost contact me.

No wonder the consumer is confused about where our real estate market is heading.  One headline reads “More Foreclosure Activity”, another reads “Home sales up 19% year to year”, and don’t even bother listening to the news because everything is negative, negative, negative!
That is why you need local market information!  Thank goodness, you know me!

So here is the local scoop.

Out of 27 zip codes within San Jose:

SIX had an increase in price per square foot in July and August over 2010.

NINE had an increase in median sales price on average 15%! Highest increase by zip?  95112 – downtown with a nearly 23% increase over last year! (#2 Willow Glen, #3 Santa Teresa)

ELEVEN had an increase in volume of sales with 95130 increasing nearly 50% over last year.

Some of you have heard me say it but here it is again;  Investors are buying homes.  Willing to buy without leverage, all cash because they believe the potential upside is there.  With nearly 30% of them paying all cash, it is hard to believe this is the whim of speculators.  Consider the fact that your leveraged dollar is now at or below 4% because of interest rates, and that affordability is at a 30 year high for  San Jose. There are opportunities for those who truly want a home.  You will either be a home owner building equity or you are a renter building equity for these investors.

“Last month absentee buyers – mostly investors – purchased 21.3 percent of all Bay Area homes sold, up from 20.5 percent in July and 17.8 percent a year ago. The peak was 23.4 percent in February this year, while the monthly average since 2000 is 13.8 percent. Absentee buyers paid a median $242,818 in August, up from $240,000 in July but down from $260,000 a year ago.
Buyers who appeared to have paid all cash – meaning no corresponding purchase loan was found in the public record – accounted for 27.5 percent of sales in August, up from 26.3 percent in July and up from 25.6 percent a year ago. The record was 30.5 percent this February, while the monthly average is 11.9 percent since 1988. Cash buyers paid a median $245,000 in August, the same as in July but down from $272,727 a year earlier.  – DataQuick”
Here is the link to the August report.  Recognize, even a report on the BAY AREA is not a good local gauge.  If you have questions about specific neighborhoods, please let me know.  I am here to help!

Some more interesting charts for the San Jose area (Click on image to enlarge!)

“More than 30,000 California families will face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011.

Regionally, Marin County would be impacted the most, with more than 12 percent of home sales rendered ineligible under the lower GSE loan limit, followed by Contra Costa (11.5%), San Mateo (10.7%), San Francisco (9.9%), Monterey (8.8%), San Diego (8.2%), Sonoma (7.9%), and Santa Clara (7.8%) counties.  Under the lower FHA loan limit, San Francisco County would be impacted the most, with more than 14 percent of home sales rendered ineligible, followed by Santa Cruz (13.9%), Orange County (13.3%), Marin (13.2%), San Mateo and Ventura (both at 12.7%), Santa Clara (12.2%), San Diego (11.9%), Alameda (11.8%), Riverside (11.5%), and Contra Costa (11%) counties.  (According to analysis by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).  )”

If you agree that FHA loan limits matter to our housing market and the future of Bay Area home affordability, will you take a moment to let Congress know?
Please contact your elected representative in Congress today and ask them to co-sponsor HR 1754 the “Preserving Equal Access to Mortgage Finance Programs Act.”  This legislation enjoys bi-partisan support in the House and is our only chance to preserve the existing loan limits that are so important to stabilizing the housing market.
Please click here to send your message to Congress today!
For more information on the data collected.

Click on image to enlarge.

Answer:

There is no way of predicting short sale timing.
1.) Is it HAFA pre-approved? With an agreed upon list price? Or was this the list price the agent/seller chose?
2.) Is it one lender or more? Are there other liens? (HOA, garbage, mechanics?)
3.) Is the loan(s) being short sold portfolio loans (owned by initiating bank) or by investors? Was it previously a CountryWide loan?
4.) Is there mortgage insurance attached to the loan?
5.) How does the offer price compare to other neighborhood sales? Will the bank believe the offer price is a fair price based on recent sales or will they counter at a higher price?
6.) How on top-of-it is the agent? Do they call weekly (sometimes more)? Is the file complete? Does the agent provide a weekly update to buyer’s agent?
7.) Did the seller provide all the appropriate paperwork? Are they working well with bank and agent to answer any request in a timely manner?

I have had Bank of America short sales with two loans approved in less than 45 days – non HAFA.  With HAFA 60-90 days. (Strange as HAFA was suppose to shorten timelines.).

I would suggest you try to get some word on whether or not  the NOD (Notice of Default) has been issued, whether or not the short sale negotiator has actually been assigned, and whether or not the foreclosure process is on hold. The next notice to the seller will be a Notice of Trustee Sale (the actual foreclosure sale at the court house steps). Sometimes banks will not allow this to be postponed until 2 or 3 days before the sale. No rhyme or reason to all that they do but with short sales, anything can happen and the more you prepare yourself for the “speed bumps” that are possible the better you will be able deal with the short sale transaction.

“The number of $500,000-plus homes sold dropped 25.4 percent month-to-month and 19.2 percent year-over-year, while sales below $500,000 fell 17.1 percent month-to-month and increased 3.5 percent from a year ago.” Data Quick

But now, that has been reduced to $625,500.  This means the buying pool for FHA loans will be reduced.  In February 2010 nearly 20% of all loans were FHA in the San Jose/Silicon Valley area.  Prior to 2009, the number of FHA loans were 0% because the conforming loan limit was $417,000.  So, some are predicting a 3-5% reduction in buyers being able to afford over $700,000 for the remaining of 2011.  There are movements in Congress to extend the higher limits but lenders have already stopped accepting applications.

Active listings consist of Short sales, about 30% of the market while REO/bank owned homes are about 10%. Highest demand areas are currently good school areas which is driven by parents trying to find homes before the school year starts.  As always, the best homes, in pristine move-in condition, in the best neighborhoods, i.e. schools, are selling first for the most money with multiple offers.

But where are the deals? Talking with investors, even the court house steps are not providing many deals.  An investor I spoke with last week told me the banks are pushing prices up even on homes that need a lot of repairs.  This means the flipper is having to cut back on the amount of work completed on a home before it goes back on the market.  Buyer beware, as many flippers are cutting corners and even though it may have granite, there may be major repairs needed underneath.

Bottom of the market?
Looking at different neighborhoods around San Jose here are the “bottom of the market” dates.

Alum Rock - April 2009 – since then Alum Rock has regained nearly 20%
Berryessa - Had a double dip – once in May of 2009 and a second in January 2011.  Since January 2011 – it has gained 13% in Avg Sales Price (ASP).
Willow Glen - Low Dec 2008, but now up 30% from that point in ASP.  However, Willow Glen’s higher end is being hit hard and the average will see some ups and downs.
Central San Jose - Rose Garden and downtown – Has not regained much after bottom of Feb 2009.
Almaden Valley neighborhood – hit bottom in April 2009 but has regained about 15%.

Other steady climbs up since December 2008? Los Gatos, Sunnyvale, Cupertino, Mountain View Palo Alto, Campbell, Cambrian Park, and  Saratoga peaked in April and now up and down on average sales price.  These areas have already re-gained half of what was lost with the housing bust.

Where are the neighborhoods with “deal” opportunities? These areas are “bumping along the bottom”  Why?  Longer commutes to tech hubs, less than 900 API scoring schools, lack of “bedroom community” – cute little downtowns and demand for larger houses is slowing as energy cost are expected to rise.
Blossom Valley -
Santa Teresa -
South San Jose -
Morgan Hill -
Milpitas -

Want to look at real estate trends in Santa Clara County yourself?

What is keeping us in a warming market? IPOs, (read job potential), Low Interest rates (4.2%!!), low supply, and high demand.

What is keeping buyers and sellers on the fence? The debt-ceiling… politics – has everyone stepping back and re-assessing.  European challenges and changes in GSE backing and FHA loan limits have some with their hands in their pocket fiddling with their money and not quite ready to pull it out and spend it.

However, daily calls from investors and money from China continues to place non-leveraged, all cash offers on the table.   Anyone that has lived in the Bay Area for over 10 years sees this as the best chance to afford a home due to prices and rates.

What do you think?

Finding a home in the Silicon Valley has always taken market knowledge, a commitment to the process, and a leap of faith.  That hasn’t changed.
As you are thinking about your real estate decision, know that I am here, every day, in the trenches, sorting through data, looking at homes, nosing out deals, and keeping an eye on your goals.

If you listened to the debates, why should property taxes go to big developers? Pet projects like parking garages in Los Angeles and high rises in San Jose, were considered foolish in a time of economic recession. Makes sense to stop providing subsidies to wealthy builders. Or so it seemed at first glance. But redevelopment money is not just for big developers.  Redevelopment money was  intended to rebuild neighborhoods by providing encouragement to builders to take a risk. Redevelopment money was meant to fuel jobs in areas of the county where there were very few jobs to be had. Redevelopment money was meant to provide an opportunity for lower income families to own a home. Redevelopment money was meant to support public servants like teachers and firefighters the ability to afford a home in Silicon Valley when their salaries alone where not enough.

The Governor was successful at making sure developers did not get subsidies. But what he also did is gave teachers and other public servants no choice but to accept foreclosure. Why? If a teacher is facing a hardship, loss of job (teacher cuts), divorce, or health issues and can no longer pay their mortgage they would normally have the option of a short sale. However, many teachers and other public servants like fire fighters, police, and paramedics, utilized redevelopment funds to provide down payment assistance through low interest loans when buying a home. But now, the redevelopment agencies are closing and per the San Jose short sale manager for these loans, there is a moratorium on these negotiations for short sales or loan modifications normally processed through the department. Which directly leads anyone who has one of these loans into potential foreclosure. In a short sale, all lien holders must be willing to approve a short pay off of the note. So even though the senior lien holder might approve the short sale, if the second lien is owned by the City of San Jose through redevelopment funds, there will be no approval.

Even more illogical is the fact that the closure of redevelopment agencies was meant to save the state money. But if a teacher is forced to accept foreclosure over a short sale then not only does the state loose any potential chance to recoup money on the junior redevelopment funded lien but now they have a public servant who has damaged credit and more likely to sink further into financial challenge and need welfare help. This simply does not make sense.

When a home owner submits for short sale approval they must provide every possible financial statement to support the fact they can no longer afford this home.  Two year tax returns, bank statements, monthly bills, 401k, pay stubs, and a personal letter describing their hardship.  Too bad we as tax paying citizens are not provided the same full disclosure when decisions like ending redevelopment agencies are made.  This is not a decision that only effected “fat cat developers”.  This decision effects many more average Americans than any of us most likely realize.  This public policy change has now landed on my and my clients’ doorstep and this blog post is the first step to my response to our state government in regards to this issue.

re·sil·ience noun /ri?zily?ns/   The capacity to recover quickly from difficulties; toughness.

Truthfully, it summed up a majority of peoples’ lives over the last three years.  The capacity to recover has been and is being tested in every possible way.  In early 2008 we recognized the real estate world was changing.  Sometimes changing so fast, it was difficult to sit down at a kitchen table with a seller and explain that their house value had not only decreased but was actively decreasing at a rate of 2% – 5% per month.

In 2009, the reality of AS IS became clear as REOs and short sales hit the market and buyers looked at me puzzled by the definition of this new market’s  affordability.  Yes, you may now get a deal but you have a ton of work to do before you can move in.  Furthermore, the return of FHA loans into the California market sent agents reeling into new requirements applied by appraisers and underwriters.  But, as professionals do, we recovered and quickly became experts at anticipating issues and added to our daily calendars meetings at homes to provide the out of town appraiser with comps and data related to our local market.

Moving into 2010, buyers saw the tax incentives as a way to hedge their bets against predicting the bottom of the housing market but were still very surprised when their offer was 1 of 8 on the REO they found.  The “believe it or not” speech I gave over and over to first time buyers explained how their offer was beat out by all cash. Even when they had offered over a half-million for the home.  My clients showed resilience in finding the right home and it seemed to make receiving the keys just a bit more special to many of them.

Resiliency is not only required on each spoke of the real estate industry wheel (loan officers, escrow officers, painters, etc) but of our customers who have given up after draining their savings account, their retirement account, and maxing out their credit cards in futile attempt to save their home.  After working with many home owners, feeling their stress, their shock, their embarrassment, and their defeat, I find myself part counselor and part miracle worker.  Resilience is a gift  I try to provide my clients when I help them move on to their next home and leave all the daily phones calls from the banks behind.  I haven’t lost a client to foreclosure yet and hope I never have to give that news to anyone.

I would like to believe that our country  knows the definition of resilence.  Because the one true enemy to resiliency is the seemingly never ending beating our  hope is taking.  I meet clients everyday that tell me, if they could just catch a break, they could bounce back.  The right attitude burdened with a never ending, always changing, challenge can certainly wear even the “Suzy Sunshines” of us down.

In speaking with friends, getting up each day, staying busy, making the best of each moment is a resilient testament.  The long haul, has become a very real truth to many of us.  A test of determination.  A test of integrity in who we are as professionals, Americans, and humans.

So when you set out today, whisper the word RESILIENCE to yourself.  Take the hits the day will offer and rebound.  Take the gifts today brings and celebrate.  Help others see possibility as well.  At the end of the day, the week, the year, the decade, it will be about recovery.

- Los Gatos, Willow Glen, and Campbell have nice little downtowns with walk to coffee, dining, and some entertainment. From a resale standpoint all work well. Los Gatos has the higher ranked schools. Victorian and Bungalow architecture prevails in Lost Gatos. Willow Glen probably has the most variety of architecture and is most convenient to mass transit (Cal Train to the San Francisco) and the airport.  Both have access to great parks with Little League Baseball and Soccer groups.  Also the Los Gatos Creek  trail connects Willow Glen, Campbell, Cambrian, and Los Gatos and is great for weekend bike trips or running.

- Cambrian is close to Los Gatos, convenient to the highways (particularly 17 to Santa Cruz) and also have good resale and strong schools. Some pockets of larger lots and a couple of new developments but mostly ranch style homes. Cambrian Park and Camden are more spread out and do not have a centralized downtown area but have an incredible back drop with the Santa Cruz mountains in view.

- Blossom Valley and Santa Teresa are most suburban with most developments being built in the 70s. If you are looking for larger homes with a an extra bedroom or more yard, this is a good starting point. There is a new shopping mall supposedly being built at the junction of Cottle and 85 that is suppose to be like Santana Row.  However, recent economic changes have placed that on hold.  Of course the foothills of Santa Teresa have a great deal of hiking /biking trails with the 1000s of acres in Santa Teresa Park.

- Almaden Valley another large suburb with some very large homes and good schools. There is also the Los Alamitos bike/walking trail that goes along Almaden Valley and ends up at the great park of Almaden Lake. There are several condo/townhomes near Almaden Lake.  The Oakridge Mall (now called West Valley)  is also nearby.   Convenient to Highway 87 and 85 for commuting up the peninsula.

- West San Jose nestled between Cupertino, Campbell and downtown San Jose really boast convenience being near major highways and the great dining and entertainment of Santana Row. A great deal of Ranch homes in this area with some newer condo/townhouses around Winchester and Payne.  The Moreland school district has some high scoring schools and this neighborhood is convenient to Hwy 280, Hwy 17, and San Tomas Expressway for commuting.

- Burbank has a pocket of older homes along San Carlos and 280 corridor tend to be smaller and quaint. This area is being revitalized and is an up and coming neighborhood. It is also  convenient to Santana Row without having two many large homes.   Great spot for starter homes and currently a great deal of money is planned for this area with a another live/work development slated for the area near Mel Cotton’s Sports shop.

- Rose Garden - large, beautiful homes with the tendency toward large lots. Mature trees, neighborhoods with good neighbors and the convenience of being near the up and coming area of The Alameda and the convenience to downtown San Jose, Willow Glen, and Hwys 280 and 17.  Schools are not the highest scoring but you also have the option of Bellarmine School.  This is an elegant neighborhood with very stunning architecture.

- Downtown San Jose is an up and coming downtown with more and more dining and entertainment to be had. Convenient to museums and mass transit. Many new developments in the downtown area for town homes and condos. Metro living coming up.   Convenient to the light rail, Cal Train, very walkable and within moments from San Jose State University and the grand Marin Luther King Library.  High rise living is available in The 88, AXIS, and City Heights condominiums.

- Naglee Park – Downtown San Jose  near the San Jose University without being too near. Older homes, Victorians and Bungalows with wonderful old tree lined streets and a diverse group of neighbors. Convenient to downtown without the tall buildings.  This is a beautiful bedroom community with lots of character and vintage architecture of Tudors, Craftsman, and Victorian homes.

- North First and Japan Town has  some great new developments over the years. Nestled up close to the technology companies and the airport with convenient mass transit. Homes tend to be older and lots smaller over all.   Lots of redevelopment money is being spent on this area and it has the potential to be a great designation for those looking for quaint bungalows and mission styled homes.

- Evergreen and Silver Creek where the incredibly active retirement community of THE VILLAGES presides. They have 3 golf course and over 100 different clubs and activities to choose from. Evergreen has a community college and some up and coming schools.  There are some new developments within Silver Creek and Evergreen and as you get further up into the hills some incredible views of the valley.

- Alum Rock - a quaint area near HWYS 101 and 680 corridor with older small homes in the valley and then larger more prestigious homes as you move into the foot hills. Not many restaurants or nightlife and traffic can be a challenge on Alum Rock Ave. Lots of hiking/biking in the hills and mass transit by Capitol Expressway.   Light rails at Capitol Expressway is a new and great addition.

- Berryessa – Has lots of town homes and newer developments. Lots of diverse dining spots and grocers and convenient to mass transit.  Mixed in with ranch homes up against the hills and is a great option to commuting to the tech community of Cisco and Samsung.   There are some high scoring schools and some older block neighborhoods built in the 1970s.

- Morgan Hill offers more home and you  for the dollar. The downtown is cute and offers some dining and limited shopping. Cal Train runs parallel to 101 so their is convenience to San Francisco. 101 can be a challenge in regards to the commute. Again, lots of hiking biking possibilities  along the Coyote Trail and in Henry Coe Park. Lake Anderson has some wonderful communities developed.  Morgan Hill and Gilroy offer more new housing developments as they have the land.

The current list price to sales price ratio average for single family homes in  San Jose is 98%
(Based on Sales since January 2011 to now)

Here is an excerpt from the article by Lee Adler: (or Complete article link)

“There’s just one problem with that. Other price indicators that are not constructed with the Case Shiller’s large built in lag, passed the 2009-2010 low months ago. The FHFA (the Federal Agency that runs Fannie and Freddie) price index showed a low in March 2010 that was broken in June 2010 and never looked back. That index is now 5.6% below the March 2010 low. Zillow.com’s proprietary value model never even bounced. It shows a year over year decline of 8.2% as of February. Zillow’s listing price index shows a low of $200,000 in November 2009, followed by a flat period lasting 6 months. As of March 31, that index stood at $187,500, down 6.25% from the 2009-2010 low for data.”

“Another weakness which the Case Shiller shares with all price measures is that they do not account for the false price reports resulting from the two home-buyers’ tax credit programs in 2009 and 2010.  Aside from the fact that the credits distorted the market by pulling demand from the future and induced people to buy who may never have otherwise been in the market, the buyers did not pay what the sales prices reflected. You as a taxpayer, via Uncle Sam, contributed $6,500 to $8,000 of the purchase price. As a result of that, the amounts that buyers actually paid were overstated by that amount.”

“The Wall Street Journal originally reported the evidence of this uptick in early April (Are Home Price Declines Easing?).”

“A criticism of using listing prices is that they do not represent actual transaction values. Sellers may be unrealistic. However this data has correlated well over time with subsequently revealed sales data. Sellers have been so beaten up in recent years that they have become more realistic about where there offerings should be priced. Spreads between listing prices and sales prices don’t vary that much over time. Therefore the listing price data is usually a good barometer of current conditions. Sellers get instant feedback from their agents about market conditions, and their pricing has been a good barometer  of that.”

“This is the only real time barometer we have, and it has proven to be reasonably reliable. It told us immediately last August that the market was cracking. That reality was not revealed in the conventional    pricing measures until late October-November news releases, and the true depth of the decline wasn’t revealed until February and March of this year. By then the decline was apparently ending. Now we are seeing evidence that prices have bounced since February.”

For more local housing trends, check out Home Values.  You can select specific neighborhoods and see trends.
Of course, if you have questions, let me know.  I am here to help you with your real estate decisions.

Interesting to note that of the 600 reported bank owned homes in San Jose, only 200 homes, 1/3, are listed for sale on the MLS (Mulitple Listing Service). Obviously, there can be some time between repossession by the bank and introduction to market but it would certainly be nice to have 400 more homes for my buying clients to choose from in the market place.

Reality prevails and we know that not all 400 will come to the public market.  Some are being sold wholesale in bundles for 20 cents on the dollar.  Others are purchased on the court house steps by “flippers” and re-sold as  a private sale.  These flippers are making money.  The consumers paying for it are the clients who want “new” in a valley full of 1960 homes.  They kindly pay the flipper for installing granite, new tile, and laminate flooring.   In some ways, flippers are doing better now in this economy because there are more contractors hungry for work.

But I am ahead of myself, because we haven’t counted the pending sales.  There are actually 250 pending sales indicated as bank owned on the MLS. So now we are down to about 150 bank owned homes unaccounted for in the market.  But wait, there’s more. In April, to date, 163 homes have been sold that were indicated as REO.  Hmm…now there’s an issue.   I am going to chalk that number up to the fact we don’t know exactly how Foreclosure Radar counts bank owned and how far this particular map goes back.  It could simply be an update issue.

But the reason of this post is to say, there are bank owned homes available for sale in San Jose. There are  200 homes that need to be absorbed. Absorbed before the 446 short sales become REOs.  There are almost as man short sales in contract, waiting for the lender’s response as there are active homes for sale.  Yes, there are 1,992 homes for sale in San Jose, and 1,726 pending short sales. Considering the statistics that only 3 out of 10 short sales make it to close of escrow, that would leave about 500 homes that will be back on the market due to TFT (Transaction Fell Through).

Where are the deals?  The deals are in low demand areas.  Homes that sit in the flight pattern of San Jose International Airport, homes on busy streets or next to highways, and low performing school districts.  What a deal. But rentals are needed and investors with all cash are buying up homes at an alarming rate.  Most of the uptick (nearly 30%) in March for home sales can be credited to all cash buyers.  Now they will be landlords to displaced home owners around the city.  Let’s hope they are kind and provide fair market rents.

The foreclosures and short sales provide opportunities for patient, confident home buyers. Confidence is one of those things sorely lacking in this current housing market by the average home buyer.  Interesting to note that investors, who have no emotional connection to the purchase, see it as a time to buy.  Willing to place hard cold cash on the bet of future return.  I would encourage new home buyers to attend local real estate investment group meetings.  They may find confidence in listening to investors who are buying up distressed homes everyday without hesitation.  Speculation or savvy thinkers?  Only time will tell.  I am grateful they continue to absorb REOs and help to provide stabilization to the housing market in San Jose.  Buy on!

Disclaimer:  Statistics and information is deemed reliable but not guaranteed.  Data is based on information from Foreclosure Radar and the local Multiple Listing Service on April 28th, 2011.  Any use or duplication of this blog material requires permission from the author: CJ Brasiel Certified Distressed Property Expert and Short Sale Negotiator.

First up, the Housing Trust of Silicon Valley.  A non-profit which has been around 10 years and was formatted by leaders of the community.  The objective was to assist families and individuals to purchase homes.  In January 2011, the organization received $4 million dollars to assist over the next two years.  There are several programs offered from this group.  The Purchase Assistance Loan (PAL Program) related to Neighborhood Stabilization Program consensus neighborhoods.  This program allows buyers to purchase foreclosed homes in San Jose.  Maximum gross income of every individual in the household (over 18 years of age) begins at $86,950 for a single person up to a $163,950 for 8 individuals.  Home buyer do not have to be a 1st time home buyer but must intend to occupy the home. Borrower must also complete 8 hours of HUD related education.  If the home owner moves out and rents the property loan must be repaid.  This is a deferred loan of 20% of the purchase price up to $50,000 at 0% interest rate.  For more information about this program go to the web site or contact me.

Other programs from this organization include the Closing Cost Assistance Program (CCAP) and Mortgage Assistance Program (MAP). The CCAP program provides a deferred loan up to 3% of purchase price up to $15,000 for down payment and/or closing costs for first time homebuyers.  The loan is repaid at time of sale or 30 years (whichever comes first) at a simple interest rate of 3%.   The MAP program provides 17% of purchase price up to $85,000 in a simple loan that is at a rate of 1.5% over the first loan rate. This program is designated for first time home buyers and requires a minimum of 3% down.

City of Santa Clara also has the First Time Home Buyers Program (FTHB) and the Below Market Program (BMP). Currently, these redevelopment funds are at risk through Governor Brown’s policy but for the county these assets have already been moved into the Santa Clara County Housing Authority and the program is fully funded for 5 years.

The First Time Buyers program are for homes located in the city of Santa Clara and available through CHASE and METLIFE home loan lenders.  The program provides $75,000 down payment assistance.  This is a deferred second loan with no interest or payments within first 5 years.  The home buyer is required 3% down.

The Below Market Program allows 10% of units in new for-sale housing development with 10 or more units to be affordable.  Home owners are allowed to sell their home after 5% to the open market with an equity share program.  After 20 years they are completed vested and can sell without equity share.

CalHFA has provided long standing assistance for many home buyers over the years.  This program was established nearly 30 years ago to help first time home buyers with buying their first homes.  This is a 30 year fixed loans that can go up to 102% of home value which allows home buyers to use money for closing cost as well.  The CalHFA FHA loan program limit is $417,000.

This must be a single family home with no “income potential” add ons to the home (extra kitchens,studios etc).  The home buyer will not be allowed to utilize CalHFA for properties that have been flipped.  No matter how long ago the property was transferred to the investor.  The rate is  3.25% simple interest (does not compound) and is deferred for 30 years.  Which means there are no payments but there is no penalty for pre payment or early pay off.    Borrower must contribute 1% of their own funds.  This is a great program for first time buyers that are struggling with down payment.  For more information about eligibility see the CalHFA or CalHFA down payment assistance visit the web site.

MCC Program provides tax credit for borrowers with home buyers that utilize the home is a primary residence.   The program allows tax credits for the home borrower’s federal income taxes currently up to 15%.   There is a potential for a recapture tax if the home buyer sells the home within 9 years.  Even then the recapture tax is based on borrowers financial situation at the time of sale.  The homes must be in designated target areas within San Jose.  If you want to see if you are eligible, which areas homes are located, and which lenders and brokers can help see the following website.

There is also a Santa Clara County Down Payment Assistance Program for low income borrowers.  It allows up to $40,000 down payment assistance for borrowers looking into Alum Rock neighborhood and Burbank areas of San Jose.  It is a deferred loan on properties up to $570,000 value with 3% simple interest per year for the first four years and drops to 0% interest starting the first year to maturity.  Maximum annual income per household ranges from $56,500 and $93,650.  This is a HUD based program and applicants can learn more at web site.

Santa Clara County also offers a Home Rehabilitation Program for primary residences up to $100,000 for 3% simple interest to repair the home.  Items that can be repaired incude roofs, fumigation, furnace, plumbing, and electrical work.  The loan must be repaid by 30th year or when the home is sold.  To see how to qualify for this program visit the county web site.

The City of Sunnyvale Homebuyer Programs consist of a Below Market Program and the First Time Homebuyer program. You must live or work in the City of Sunnyvale and the home must be located in Sunnyvale.  This is a loan program that allows the borrower to borrow up to There are income limits and the first time home buyer must not have owned a home in the last 3 years.

The Below Market Program has homes available in DR Horton Lotus Community available.  These are 3 bedrooms for $250,000 and are anticipated to be available by October 2011.  O’Brien Homes on 920 Duane will be condominiums for 2 and 3 bedrooms for $344,000-$430,000 which are anticipated to be available October 2011.  The Town Center homes will be 1,2,and 3 bedrooms between $290,000 and $390,000 and are anticipated October 2011.  For more information on these new developments see information on the web site.

City of San Jose Home Ownership Program.  Project Specific Loans for Neighborhood Stabilization Program (NSP) and Building Equity & Growth in Neighborhoods (BEGIN).  They also have City-wide Loans through the Welcome Home Program and the Teacher/Public Service Assistance Program.

The Neighborhood Stabilization Program allow private developers to purchase foreclosed homes in targeted neighborhoods.  Homes are renovated to meet health and safety codes which include green upgrades as well.  These homes are then sold at fair market value.   These homes are available to those who work in San Jose,  currently live in San Jose, must attend an 8-hour education class, previously submitted and offer on NSP home, first time buyer, and in order which offers is received.

The BEGIN Program has certain homes available for first time buyer and provides up to 20% of sales price down payment assistance to new home owners.  Some of the developments include THE 88, AXIS, VILLA FONTANAS, MODERN ICE, and THE WORKS.

Welcome Home Program up to $25,000 loan amount, no monthly payments, 3% simple interest, deferred for 30 years or until home is sold.  Home must be located in within City of San Jose.  Maximum purchase price is $481,650 and is limited to low-income households and require a city inspection.  The city inspection is looking for illegal conversion and other safety issues.

Teacher Homebuyer Program (THP) provides up to $50,000 toward the purchase of a home.  Buyer must be full time income in K-12 San Jose public school teacher or credentialed staff.  This is a deferred payment at 3% simple interest for 40 years or until home is sold.

Home buyer programs and home owner assistance through the http://nhssv.org/

CalSTRS – California State Teachers’ Retirement System Home Loan Program.  A great program for teachers, community college instructors and anyone who had a retirement account through CalSTRS.  The new home owner must live in the property after purchase and the property must be located in California.  The borrower can not own another property.  Allows eligible borrowers to borrow with 3% down and no mortgage insurance. The max loan limit is $417,000 and for the first 5 years the payments are based on the 80% loan.  After 5 years, the payment increases to cover the full loan amount payment.  This is a 80% fixed rate loan for 30 years and a 17% fixed rate loan for 30 years.  The borrower must place 1% of their own money but can have 2% gifted of the total 3% down payment required.

The HomePath program provides foreclosed homes to the buying public through a system that allows as little as $500 down.  Financing is 97% but the the borrower can use other programs mentioned above to qualify.  The advantage of this program is there is no appraisal and there is no mortgage insurance.  There is also a first look period of 14 days that allow buyers who intend to occupy the home a chance to purchase first.  After 14 days the bidding is opened up to investors and non-occupant buyers.   First time investors can use 75% of rental income to qualify.  We are starting to see more of these homes come available in San Jose and greater Silicon Valley.

Disclaimer: Details of each program are not included in this post and the only way to be sure of the whether you as the buyer/borrower qualify is to talk with the entity offering the program.

Of  course almost every city has a Below Market Program and first time buyer down payment assistance available for buyers.  It is always good to check with the local municipality to see if you qualify for any of these programs.  For a complete list of city programs follow this link and click on the neighborhood city links.