Oakland Holiday Parade Saturday December 5th @ 2 PM

The 10th annual Comcast America’s Childrens’s Holiday Parade will be on Saturday December 5th  starting at 2PM. Curious George. The Raggs. Clifford. Berenstain Bears. Bob from Sesame Street and Santa will all be there to delight children of all ages! The parade starts right near the 12th Street BART station and just west of Lake Merritt and the Crocker Highlands/Lakeshore neighborhood. Click Here for a link to a Google Map of the starting location.   Get out and enjoy one of the premier parades in the country!

One in four borrowers is underwater

A recent article in the Wall Street Journal reports that despite recent indicators that the housing market is improving, a new report shows that one in four mortgage borrowers are underwater, meaning they owe more on their mortgage than their home currently is worth. According to First American CoreLogic, nearly 10.7 million households had negative equity in their homes in the third quarter, accounting for about 23 percent of all U.S. homeowners.

Most homeowners, however, still have equity, and nearly 24 million owner-occupied homes do not have a mortgage, according to the U.S. Census Bureau. A study by credit-scoring company Experian shows that approximately 588,000 borrowers strategically defaulted on their mortgages last year, even though they could afford to pay—more than double the number in 2007.

Homeowners with negative equity are more likely to strategically default if they live in a state where the bank cannot pursue their assets in court, according to a study by the Federal Reserve Bank of Richmond. California is an example of a state with anti-deficiency laws protecting homeowners from personal liability under certain circumstances.

“Borrowers who are less than 20 percent underwater are likely to maintain their mortgage if their loan is modified and the payments reduced,” said an official with Citigroup’s mortgage unit. “Beyond 120 percent, the most effective modification is a complete loan restructuring, including a principal reduction.” Loan modifications will be key in providing incentive for many homeowners to stick out this tough market.

Many of the lower price point neighborhoods in Oakland were heavily hit with foreclosures, particularly in the later of 2007 and into 2008. Many of the higher priced neighborhoods were not heavily affected by the influx of foreclosures, but there are some signs that the market in theses neighborhoods are changing as well. For example in the Crocker Highland and Lakeshore area of Oakland the average price per square foot in October of 2008 was $407. In October of 2009 the average was $394. The average price per square foot reached the lowest at $240 in January of 2009.

As stated above most homeowners do have equity in their homes. But the phycology of the real estate market is often affected by what the focus is on. How the banking industry responds to homeowners who are finding it hard to find a reason to stay in their homes because their mortgage is $200,000 over the value of the home, will in my opinion, have an impact on the real estate market in 2010.

Crocker Highlands Boy Scout Pack 295 Helps Alameda Food Bank

Boy Scout Helping to Collect Cans for the Alameda Food Bank

The Crocker Highlands Boy Scout Pack 295 helped to canvess the Crocker Highlands Neighborhood for food donations for the Alameda Food Bank to help provided those in need with food over the holiday season. Thanks to the help and hard work of the Troop 295 boys and their parents , the troop was able to contribute over 2500 can (items) to the Alameda Food Bank!!!

The weather and the economy made it more challenging for the Scout effort, but Pack 295 came through and thanks to the hard work and generosity, many families in the Bay Area will be having a happier Holiday season.

Great job Pack 295 and thank you to the generous donations from the neighbors in Crocker Highlands!

A very Happy Thanksgiving

Mortgage Rates Remain Below 5%

The Sacromento Bee Reports rates on 30-year mortgages stayed below 5 percent this week but remained above the record set earlier this year, Freddie Mac said Thursday. The average rate for a 30-year fixed mortgage fell to 4.83 percent, down from 4.91 percent last week, the mortgage company said. Last year at this time, 30-year mortgages averaged 6.04 percent. The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities to try to lower rates on mortgages and loosen credit. Rates on 30-year mortgages traditionally track yields on long-term government debt. It will be interesting to see if the mortgage rates hold and how it will affect the real estate market for 2010.

First Time Home Buyers Seminar at Bench and Bar in Downtown Oakland

A Mixed Market For CA Real Estate in 2010

CAR President Jame Liptak recently reported that California’s housing market continued its strong sales rebound this year, resulting from the continued pace of distressed properties coming to market. This follows two years of double-digit sales declines in 2006 and 2007. Looking ahead, we expect sales to moderate to a more sustainable pace.”

“After experiencing its sharpest decline in history, we expect the median price to rise modestly next year,” Liptak added. “2010 will mark the beginning of the ‘new normal’ for California’s housing market. This ‘new normal’ likely will feature a steady stream of sales driven by distressed properties in the low end of the market, coupled with moderate home-price appreciation.”
 
“Housing in California has become a tale of two markets,” Liptak said. “The low end continues to attract first-time buyers and investors, with a resulting shortage in the number of homes for sale. Sellers at the high end, however, continue to be challenged by the ability of home buyers to secure financing as well as their concerns about where prices are headed. While demand from first-time buyers for low-end properties will continue throughout next year, sales could be impacted if discretionary sellers do not return to the market by the second half of 2010.

“With distressed properties accounting for nearly one-third of the sales in 2010, inventory will be relatively lean, under six months during the off-season months, and a roughly four-month supply during the peak season,” said C.A.R. and Vice President Leslie Appleton-Young. “We expect the median price to decrease slightly through the remainder of 2009 and into next year, then rise before leveling off next summer. For the year as a whole, home prices are forecast to reach $280,000.”

“Although it appears at this time that lenders are closely monitoring the flow of distressed properties onto the market, there could be an exertion of downward pressure on home prices should a heavier than expected wave of foreclosures come to market next year,” she said.

“The wild cards for 2010 include foreclosures, loan resets, the labor market, and the California budget crisis, as well as the actions of the federal government,” Appleton-Young said.

Click here to read the full article

Median Home Price In CA 1970-2009

Median Home Prices have fallen to levels seen in the early 2000’s. Statistically over time, real estate in CA has appreciated in value and considering real estate as a long term investment, in this current market, is the best bet for most home buyers.

When it comes to Short Sales, Wachovia Does it Right

If you have not heard about short sales yet in this transitional market, here is a brief overview:

 A short sale is when a homeowner sells the property for less than the current mortgage. For example if you purchased a home 3 years ago for $900,000 and based on the current market conditions you can only sell for $750,000, you are “selling short”. The terminology is similar to the stock market concept of selling stocks for less than they were purchased.

 

The concept is pretty basic, but the execution of short sales can be anything but. You the seller may be willing to walk away from the property, but in these scenarios, the banks holding the loan must also get involved and this is were it can get complicated. The banking institutions must approve the short sale before escrow can even begin. This approval process can be excruciatingly slow in some instances. I have seen some approvals take upwards of 8 months. 8 months is a long time and essentially by taking this much time, the buyers who initially came to the table have often long ago found something else and now you have a property that has been stagnating on the market for 8 months. Typically these properties sell for much less than they would have if the approval process was say 2 weeks instead of months.  

Every bank seems to have a different process for dealing with short sales and honestly many really don’t have it down. One institution that has is down is Wachovia. They have streamlined the process and have the players in place to allow approvals for the short sale to occur even before the buyers come to the table.  There is a local group, dedicated to short sales, and these transactions do not differ much from a “normal” transaction where the seller is not selling the property short. This local group will actually meet with the homeowner and determine if a short sale is even viable before coming to the marketplace. Not only does this save the homeowner a lot of time and headache is also ensures that any buyers that do come to the table will not likely walk away due to overly lengthy short sale approval process. This also helps in the marketing of the property from the Real Estate Agent view point. A short sale that can close in a typical escrow period is a short sale is a great marketing point for the property.

If you are in a situation where a short sale is your only viable option and you have a Wachovia loan, you are a step ahead of the competition.

Banks Taking Loan Modifications Further

In an article from the Wall Street Journal, banks and loan investors are starting to bit the bullet and lower the principal due on home mortgages for some borrowers. Loan modifications typically involved only a temporary reduction in the interest rate of the loan or an modification of the time period the loan is due. Part of this due to the Obama administration encouraging banks to help keep homeowners in their homes. Part of this economic plan has provided incentives to banking institutions to find solutions to help homeowners. At the same time, banks now have more flexibility to modify loans because of their success in stabilizing their balance sheets and, in some cases, raising fresh capital. Banks can afford “to take the pain up front,” said Kevin Fitzsimmons an analyst at Sandler O’Neill & Partners LP in New York. “If they want a legitimate chance of salvaging something out of the loans, they are better off taking the loss now.”

It will be interesting to see if the banks are more agressive about principal reductions, along with loan modifications. In the Bay Area many homeowners are in homes that have, in some cases, lost 50%-60% of their value from the frenzy back in the early to mid 2000’s.

It could also have a stabilizing effect on the real estate market. If homeowners are able to neogotiate affordable payments, this could potentially help to reduce the number of foreclosures and short sales in the marketplace.

What every buyer and seller needs to know about appraisals in today’s market

The real estate market in Oakland right now can feel pretty schizophrenic right now. There are homes selling in days with multiple offers and others are sitting languishing on the market. The portion of the market that appears to be the most active is the first time home buyers in the lower price points. Many of the buyers are utilizing FHA financing that allows them to put 3.5% down and are also being more conservative about the price point where they are looking.

Right now the market for first time home buyers is brisk. There are lot of properties on the market, but the reality for many of the first time home buyers using FHA financing, purchasing a bank owned property with lots of deferred maintenance is just not an option. There are specific guidelines for FHA financing that requires the property to meet minimum requirements of health and safety before the loan can fund. These leaves a lot of the bank owned properties out of the running.

I am currently working with a buyer using FHA financing. We ran into competition on every house that she was interested in and were outbid on every offers submitted. Finally after submitting a backup offer we were in contract. Things are moving forward and then the appraisal… Even though this property was on the market for only 1 day, and we actually were the back up offer for the property, the property appraised for $70,000 less than the offer price.

The difficulty with appraisals is the appraisers are required to look at the past. What has sold in the last 3-6 months and in this changing market, the appraisals do not always reflect the reality of the current market. In addition the lending community has changed its guidelines to become much more conservative than in years past.

There are solutions to the problem, but typically either the buyer or the seller ends up not being too happy about the situation. The buyer can bring cash to the table to make up the difference. For example if the buyer offered $450,000 for the property but the appraisal came in at $400,000 the buyer would bring $50,000 to escrow to make up the difference between the offer price and the appraisal price. Often times this is not even a viable option.

The other option is the seller could agree to adjust the price from the offer at $450,000 to $400,000. This is usually not a great option for the seller.

One solution is for the buyer and seller to meet in the middle with a price reduction and the buyer bringing some money to the table.

Another option is the buyer and seller agree to call it quits and the buyer moves on and the seller tries to sell to another buyer.

Every situation and every house and every process of buying and selling will be different. It is important to be aware of all the potential issues, take deep breath and see what the best and most viable solution(s) are.