San Jose Real Estate * Santa Clara County * Richard Gonzalez * Real Estate Broker * Realty World Powerhouse Brokers

Silicon valley Bidding War is Back

This mercury news article takes a tour of  the Silicon Valley housing market and affirms what all full time real estate brokers have been experiencing over the last 90 days. “The bidding war is back”  states the headline in this article and to say the least is a true  statement that describes the current housing environment.

Buyers beware; low ball offers will only end up in one frustration after another because of cash coming in from overseas investors and low interest rate loans.

Other buyers are doing their best to time the market and have been in the trenches for months on end. My suggestion to those of you caught up in this market is stay positive and be persistent.

Read Article Here

NAR report credits interest rates, $8,000 tax credit, affordability, and distressed properties for the increased sales but the fuel for this fire is coming more from the lack of affordable homes causing a flurry of multiple offer activity on the sparse inventory in our area.

Read NAR report: REPORT

Source: Zillow.com

Historical data shows us that Silicon Valley has always been resilient when the housing market has gone south. Now that the Obama plan to help people renegotiate their mortgages has been introduced it comes as no surprise to me that only 6.9% of Silicon Valley homeowners will be able to qualify for this assistance. The question now on the minds of most people is do I continue to sink and hope I don’t drown in debt and bad credit or to I mitigate my losses and try to short sale my property?

Everyone has their own unique situation but forst homeowners will now have to formulate a plan of action just in case they have to give up their home and rebuild(Worst Case Scenario).

I say that only because pride can put you on a collision course with bankruptcy, especially if the banks and investors are not willing to work with you.

If I told you I could wave a magic wand and teleport you into the past you would think I was crazy but ladies and gentlemen its true!

As of October 2008 I can now say that we have all been teleported back to November of 1999, that’s because the affordable areas in Silicon valley have returned to 1999 levels. I recently previewed homes in a San Jose neighborhood and was astonished to see the REO(Bank Owned Properties) activity, to my surprise there were homes selling in the $210,000 to $250,000 range. 80% of activity in this area was REO sales, California is averaging an 80% REO close ratio. Unbelievable to see these prices but so surreal. Investors who have been waiting for an opportunity to jump in are now trying to time the market. I’d say not to wait much longer because at these prices its hard to argue the feasibility of having a positive cash flow property at this point.

The Median home price for Silicon valley has catapulted us back to April 2000 levels and as such reflects what we are seeing from the economic downturn. For some this means not only a loss of their 401k net worth but a loss of equity in their homes, for others its an open invitation to pay attention and get ready for a bottom that may come as early as Q3 of 2009. Silicon Valley and the bay area in general have always been the leading indicator for California. Historically speaking we can count on the Bay Area to rebound first.

The bad news is that we have had an average of a $50,000 loss in the Median sold price month over month where the median Sales price went from $719,500 in July to $550,000 in October.

Median days of unsold inventory for the Silicon valley have creped up to 90 days. We are heading into a historically slow time of the year and as such the number of new listing drop off until we get past the Valentines Day Holiday.

With all the negative news the bright spot is that if you price the property right and can be aggressive then the averages are in your favor. Sales price vs list price average shows a 99% average, great news for those who can be aggressive in their list price. Likewise if you manage to get an offer in the first 42 days you have an 19.3% chance of it closing.

First Time Home Buyers Quest

A first time home buyers quest

I met a nice lady at my little girl’s school who told me an interesting story about her brother and his wife; it was a story about their first time home buying challenges. What struck me during the story was the reference to the lack of communication and professionalism on behalf of the real estate agent they chose, it flashed me back to 2005. Back then clients had to chase down real estate licensees and once they found an agent, they then had to go another twelve rounds trying to find the right home.

Truthfully I can’t see how anyone can successfully run their business by making their clients chase them. That being said and with all the economic challenges our economy faces this is the best time to use the right guide in your quest to owning a home.

Getting back to the story, this nice couple is employed, they are school teachers, and have a good down payment. The frustration for this young couple was lack of communication with their guide and the need for a great referral to a true knowledgeable real estate professional.

Definition of a guide:

To assist (a person) to travel through, or reach a destination in, an unfamiliar area, as by accompanying or giving directions to the person.

Here are some basic steps to prepare you for your journey

1. Ask for a referral to a real estate professional who someone you know recently used for a loan or to negotiate a transaction. Make sure they are a REALTOR and or subscribe to some organization with a code of ethics.

2. The rule of two: Gather your last two years tax returns, most recent two months bank statements, two most recent pay-stubs.

2.1 Gather any retirement, savings, 401k, 403b and anything else that shows you have access to money.

2.3 Many cities in the Silicon Valley have money to loan, most can be used without having to pay back the loan until you sell or refinance your home.

3. Have your mortgage professional pull your credit and give yourself a month or two to fix and/or repair your credit. This is huge because lenders will make a decision based on first impression; you want to give them what we refer to in this business as the “warm fuzzes”.

4. Have a laser like focus on the area where you want to live. The worst thing you can do is go out window shopping in this market.

5. Understand you’re “why”. Do you know “why” you want to buy, where you want to buy, what your motivations are, and the time line you have chosen? You will find that during your home buying process you will need to know you’re “why” otherwise you will find yourself second guessing every decision you make.

Following these simple steps will prepare you for your journey.

Don’t get sidetracked, stay with your guide

I find that buyers sometimes blame home buying frustrations on the real estate professional. Some times changing your guide is warranted,  before making a change ask yourself why you are willing to change your guide and understand how that change can have a positive or negative affect to your home buying experience. Are you doing this for financial incentives or for lack of professionalism? Choosing the first may cost you in the long run. Value is in a knowledgeable professional, not a licensee who is willing to give you a kickback, that takes no skill whatsoever. Who would you rather have as your guide? Crocodile Dundee or an inexperienced guide?

A true real estate professional can guide you through this process by showing your the overall real estate landscape and help you plot your path to home ownership before you begin your quest. The current market environment is full of wonderful home buying opportunities and treasurers but it is not for the faint at heart. Navigating through the pitfalls should be done with the assistance of your trusted professional advisor(your guide). You wouldn’t trek into the jungles of Africa without a guide, would you?