The latest Foreclosure Radar data shows a continued decrease of foreclosed inventory in Santa Clara County as we head into the spring months. The chart below shows an all time low of properties going back into the market. Most likely fueled by bank modifications, short sales, or alternative disposition like auctions and bulk sales of foreclosed properties.
Forclosureradar.com posted its most recent findings today indicating that Bank Owned inventory continues to tighten. Furthermore the report indicates that California is among the high foreclosure activity states that is seeing a slowdown in foreclosure inventories. Santa Clara County bank owned inventories have slipped to a new low of 1939 for February 2012 as compared to the previous year.
Bank Owned
Bank owned activity has certainly made it easier for investors to benefit from the foreclosure activity while first time home buyers have had little luck in competing with investors to pick up these opportunities. The map below shows the bank owned inventory as of today for the City of San Jose alone. There are more than 7,000 properties that are 90 days or more in the foreclosure process for Santa Clara County.
Impact on your home search
For this reason I continue to think that short sales are the best opportunity for patient home buyers who want a good deal and are willing to work within the constraints of short sale timelines.
Relates article:The Foreclosure Report – February 2012
While the rest of the nation waits for a recovery it is apparent to me that the housing recovery has begun in the Silicon Valley and the first few months of activity in 2012 may be an indicator of what’s in store. All real estate agents I have spoken to have all expressed the same opinion, the market is on fire and we can’t get our buyers into a home. Multiple offers are putting pressure on most buyers to come up with creative ways to find a home. In the mean time I have come up with seven reasons why the market is ON FIRE in the Silicon Valley.
#1 Data
$600 k and below is on fire. The California Association of REALTORS most recent data concludes that $466,000 is the entry level price for Santa Clara County. Affordable housing can be a leading indicator of the market.
#2 Investors
Investors are out and cash is not a problem. With the new year a surge of investor activity has flooded the market. Most are looking for rental properties because they know that rental activity has increased in the area. The increase is a combination of foreclosed home owners and regular renters. There just isn’t enough housing to meet the demand.
#3 Low Rates
History has always showed is that rates and prices of housing have always been on opposite sides. If the rates are high, home prices have been low and vice versa. This is the first time that both rates and home prices are on the same side, low rates and low prices.
#4 DAP
Some Down payment Assistance Programs(DAP) are going to expire at the beginning of 2013. The City of San Jose has received a 23 million dollar grant from the federal government(NSP2) to use for revitalization of communities and some of the monies are also targeted towards helping first time home buyers(see related articles below). The city is doing everything they can to get the word out but there is a good chance that we may run out of time before this monies are used. This is creating a sense of urgency in homebuyers who have been sitting on the fence.
#5 Short Sale Tax Breaks
Federal and State tax shelters for deficiency are going to expire at the end of 2012. This is really a positive for homebuyers looking for a home in a market where the inventory is low. Sellers who have exhausted all options of modifying their loan terms and are going to be forced to list before foreclosure.
#6 Facebook IPO
I continue hearing the same message from buyers and other agents. Facebook has created a sense of urgency as though Facebook millionaires are going to buy up every home in the Silicon Valley. The point is that Facebook has also increased the demand for real estate and home buyers are feeling the pressure(see Related articles).
#7 Word On the Street
Real estate practitioners love to share opinions and this market has created a fire storm of stress induced agents that are frustrated with multiple offer after multiple offer situations. REALTORS® are doing everything they can to have an advantage when making an offer.
How can a homebuyer compete?
There are strategies for buying a home and in my next post I will outline some of those strategies that a homebuyer can consider to better prepare themselves for a market that is absolutely ON FIRE!
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July 1st 2011 was the the day we finally closed a 605 day short sale for a client who tried to modify and could not qualify. As a result the sellers decided to proceed with a short sale but for a multitude of reasons we ended up going through through six different buyers and a dozen price reductions.
August 2009 was a turbulent time with most banks as they began shifting their short sale servicing systems from fax based processing to uploading documents into a task based system. Bank of America began shifting to web based short sale submissions because they just could not keep up with lost paperwork, missing documents, and lack of support staff. Soon most banks began making their own shift to prevent the endless duplication of effort.
What I Learned and What You Should Know
Through all of this I decided it was important to share the five most important changes that prevented us from closing in less than six months instead of almost two years.
1. The buyer and their agent must be totally committed to the process by putting earnest money in escrow.
2. Always have a backup offer in case the buyer backs out.
3. Investors need to know that your agent knows the value of your neighborhood. Make sure your agent knows how to prepare a broker price opinion to support the value of the purchase contract.
4. Banks and investors are always changing guidelines and requirements for submission of short sale packets. I have a network of short sale specialists that check in with each other to stay on top of recent changes.
5. Sellers must be willing to be patient with the short sale process. The sellers of the property mentioned in this post experienced a roller coaster of emotions all the way to the very end.
The Moral of The Story
Change will always be part of the short sale process, it really has improved and the success rate continues to climb from 20% to 70%. There are too many details to document in one blog post. In short, the process has improved and it can and will continue to get better.
Check out my video update for the Santana Row area neighborhoods. Find out how long it takes to sell a home in these neighborhoods and what the market is telling us about the recent sales.
Sold Data*
(See Video update)
Available Properties Data*
Total Avilable Properties: 104
Total Available Days on Market: 93
Average List Price: $647,847
Accepted Offers (Pending Properties)*
Total Accepted Offers(in contract): 87
Average Days on Market: 67
Average List price for accepted offers: $499,633
Median List price for Available and Accepted offers: $574,800*
* Source: mlslistings.com
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