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• Silicon Valley Foreclosure Inventories Record Low; How Does This Impact Your Home Search? (Siliconvalleybrokerblog.com)
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06085 – Foreclosure Inventories

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

#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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Related articles

• The Facebook IPO Could Set Silicon Valley’s Real Estate Market On Fire (businessinsider.com)
• Why the City of San Jose has Money Burning in Their Pocket For Homebuyers (Siliconvalleybrokerblog.com)

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*

Pilot could open the door for more

The thought of a bank or investor willing to write off a portion of your mortgage can be very attractive but it does come with it’s challenges. Over the past four years there have been attempts to have principal reduction included in modifications and up to now there have been a few clients that I am aware of to have received this opportunity.

Most have had loan amounts under the conforming amount of $417,000. My concern with this decision by Bank of America is for homeowners who have made payments on time. How are they going to feel knowing their neighbor received a principal write down? The taxpayer is most likely going to carry the burden of this move towards principal reduction. This may also be the beginning for future programs but will they make a significant impact in our community?

Santa Clara County may not have an opportunity

The conforming loan amount makes it easy for Fannie Mae or Freddy Mac to offer this in most cases.  Bank of America is a servicer, they don’t own the paper on the loans they service. Fannie and Freddy inventory is primarily located in areas where homes sold under the conforming loan amount. Santa Clara County would most likely not see much activity from this pilot program.

“The program will be funded from the $699.6 million the California Housing Finance Agency received from Treasury Department‘s Hardest Hit Fund last year. A spokesperson for the CalHFA said there is no set amount of loans BofA is targeting, but the bank will be soliciting eligible homeowners soon.”

Related Article: Bank of America set to write down principal on California mortgages (Housingwire)

The General Plan over the next 30 years

On Friday March 25th I attended the 2011 Industry Summit given by the Santa Clara County Association of REALTORS. Among the presenters was Sam Liccardo, San Jose Councilman and Co-Chair for the General Plan Task Force in the City of San Jose. Mr. Liccardo gave a preview of the tentative plan for San Jose that will be presented in 2012 for approval by the city.

Envision San Jose 2040 details the plans San Jose is working towards over the next 30 years and there are substantial changes that will affect the way we live in the Silicon Valley.

General Plan Projections

The plan for San Jose primarily focuses on real estate, jobs, transportation, schools, and retail. The following list highlights some of the specifics in the general plan.

• Adding 400,000 people to the current million plus population
• Planning for a 120,000 new hosing units(4,000 per year)
• Target green tech jobs
• Rail – San Jose Dirdon Station will be a major artery for BART, The Bullet train, and connection for light rail.
• Improve transportation methods – Express Lanes for busses in key areas

Major Attractions

Attracting jobs and professionals to San Jose especially when there is competition from San Francisco. San Jose will create a competitive advantage in the following ways;

• Create urban environments for a professional work force that creates an urban experience (Downtown high rise lifestyle)
• Diversity – San Jose is a melting pot of cultural backgrounds attracting international appeal
• Our neighborhoods – Families can live in a suburban environment yet be close to high tech jobs and access to entertainment
• Developing more charter schools and embracing the success of local school districts
• Low crime rate – Traditionally San Jose has always enjoyed being one of the safest places to live

Challenges

Of course there are always challenges in developing a plan of this magnitude.

• Cost to build housing in San Jose is too expensive at this time and can create a housing shortage once we work though the current surplus
• New rental housing is currently being built with rents in the mid $2,000 range creating an affordable housing shortage
• Opposition to urban high rise construction and the need to educate the community about high density housing

Village Concept

San Jose would like to create more retail/housing areas known as Village concepts similar to Santana Row. Santana Row has indeed created a prime example of how you can mix housing and entertainment in one location. Advantages include;

• Mixed use with ground floor retail
• Access to restaurants and entertainment
• Village concepts also reduce the need to get into your car and drive to to these locations

Development Over the Next 2-3 Years

Some of the immediate changes we can expect in the near future include;

• Construction of more downtown high-rises for high density housing
• Bus Express lanes in 2012-2013
• Construction and Expansion of San Jose Dirdon station

Affordable housing is on the chopping block while much attention is directed towards the state deficit and Governer Brown looks for ways to bring spending under control.

I wanted to bring this to your attention before the decision by our state legislature on the budget is finalized. Redevelopment agency funds are now at stake and this really affects the ability for many people to become home owners in Santa Clara County.

• The question is should we stop affordable housing in our area and focus more on rental property housing?
• Does this eliminate home ownership for families who want to have a place of their own in San Jose?
• Does this also create a void for housing programs that can’t be reinstated?

The Mercury News wrote an article that addresses this problem.

“After federal funds, the money from the redevelopment agencies is the second-biggest source of funds in California for such housing. Since San Jose created its housing department in 1988, the city has spent $834 million building 21,702 units, with an additional $3.2 billion coming from private investors.”

Related articles

• Brown’s plan to eliminate redevelopment agencies could kill affordable housing program
  (mercurynews)

06085 – Foreclosure Filings

Foreclosure is a Reality in 2011

The federal government has provided relief programs to help those who would like to modify their loan and the Obama administration efforts continue but there have been recent attempts by federal legislators to kill HAMP. As you see in this chart investors are also throwing in the towel and my sense is that those people who haven’t made a mortgage payment in 18+ months are now going to have to come to grips with the reality that foreclosure is on the near horizon.

Cancellations have dropped indicating that modifications and/or a short sales continue to be a challenge for some homeowners. REO numbers also indicate that banks are steadily foreclosing in Santa Clara County.

06085 – Foreclosure Outcomes

Affordable Market Hit Hardest

The chart below shows the $300,000 to $500,000 real estate market has been impacted the most in February.

06085 – By Est. Market Value

Related articles

• Santa Clara County February Home Sales Surpass Same Month Last Year (prnewswire.com)
• Realtor group seeks to ease short-sale process (sfgate.com)