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Bay Area home prices rise 18 percent , how much higher can they go?

Monday, August 11th, 2014

By: Blanca Torres
Reporter- San Francisco Business Times

As housing prices inch toward or past pre-recession levels, we have to ask, how much higher can Bay Area home prices go?

Home prices in San Francisco pushed up 18.2 percent in April compared with the previous year, but have gone up a whopping 47 percent over two years from April 2012 to April 2014, according to the most recent S&P/Case-Shiller Home Price Index. The San Francisco figures include five inner Bay Area counties.

“In all recoveries, the market has regained peak values (of the previous cycle) within a year or two,” said Patrick Carlisle of Paragon Real Estate Group. “Once economic recovery begins, the market goes crazy. There’s so much pent up demand.”

We may be past the crest of the crazy. Home price growth is slowing down in San Francisco — April was the first time in 13 months that the region’s housing market grew by less than 20 percent year-over-year. Still, prices are going up.

During the past two decades, Bay Area home prices have followed a similar pattern during economic cycles: They go up, then they go down and then they go up again, but each time they go up, they go up higher than before. And depending where you are looking, we may not be at that point yet.

Prices shot up during the tech boom in the late 1990s then dropped after the bust. They peaked even higher in 2006 before hitting a recession low in 2011. They have been on the upswing again, but as of April, the region as a whole is still 14 percent lower than its previous peak in May 2006.

That’s not true everywhere. Several cities in the region have already zoomed past previous peaks such as San Francisco, Fremont, Berkeley, San Mateo, Redwood City, Alameda, Pleasanton, Menlo Park, Foster City and Lafayette.

Prices will likely continue climbing, but just not at the level they have over the past two years, said Stan Humphries, chief economist at Zillow, a real estate information company. Prices have gone up 15 percent during the last year, according to Zillow’s estimates, and that will slow to about 7 percent in the next year while the historical average is about 3 percent growth per year.

“We predict San Francisco is going to grow at half of its current pace for the next 12 months, but that pace is still incredibly bullish compared to historical averages,” he said.

“We’re seeing more inventory than last year, that’s a good thing,” Humphries explained. “What’s keeping price appreciation so high is that there are not enough homes to choose from on the market, so buyers are bidding up prices.”

Job growth remains the top driver propelling Bay Area home prices, so as long as that continues, home prices are likely to keeping rising, Carlisle said.

Most economic cycles last five to seven years, so it’s possible since the recovery started in 2011, we are only a few years or halfway through the current cycle.

Carlisle still sees the market as “crazy,” with homes selling quickly and buyers bidding up home prices — in May, 29 percent of San Francisco homes sold for 20 percent or more over asking price.

“This has been the most ferocious market I’ve seen in 25 years,” he said.

Factors that would cause home prices to drop would be a decline in job growth or wages and upticks in interest rates. Right now, the average Bay Area homeowner puts 39 percent of their income into their mortgage, but that percentage could up to 51 percent if interest rates go up just two percentage points.

“People can afford things right now, but if interest rates go up, then they won’t be able to,” Humphries said. “Prices could fall or stay flat for a long time until income catches up.”

By Blanca Torres: covers East Bay real estate for the San Francisco Business Times.

http://www.bizjournals.com/sanfrancisco/blog/real-estate/2014/06/bay-area-home-prices-san-francisco-case-shiller.html?page=all

Encouraging Signs of Recovery?

Friday, April 20th, 2012

According to the MLS listing data’s, listings seem to be in a shortage. It’s a seller’s market since there are low inventory and there are more buyers than there are homes for sales, which is a promising signs of a housing recovery. It looks like the housing supply in the bay area is at a shortage. How is this possible? Yes, banks have an inventory of homes on hand but it is not yet released until possibly the end of the year. These properties are not yet release but when they do, it will probably be sold to investors in bulk. So unless you have millions of dollars in cash, it will do us no good. This is good for the institutional investors but pretty much out of reach for individual buyers.

In addition, most people are not selling their home or relocation. But instead are working with banks for possible home modification resulting in fewer inventories for sale on the market. Most of the agents I spoke to at the office with listings in the San Jose, Milpitas, and the bay area are getting a ton of offers on their properties; anywhere from 10 to 35 offers. This is extremely high.

Currently, foreclosures make up for about 29% of the market. Although this is still high, it is an improvement from last month. If or when this drops to around 10% thing will be back to normal.  The good news is that the mortgage rates are still at record low rates. According to Freddie Mac, the 30 years mortgage is currently at 3.90% and 15 years mortgage at 3.13%. Unemployment also dropped from 8.3% to 8.2% from February to March of 2012. This may not seem much but it’s actually an increase of more than 25,500 jobs added.

Due to the low supply of inventory on the market, perhaps this would be a great time to sell if you are looking to relocate or possibly to upgrade.

By Brian Nguyen
Coldwell Banker
(408) 634-6969

Hire a Real Estate Agent or Sell Myself?

Thursday, September 22nd, 2011

When the time comes to sell your home, your first thought is probably, why should I pay an agent to sell my house when I can sell it myself?  For a savvy few, it may be possible, but is it worth it to do a For Sale By Owner (FSBO).

This is my top 5 reasons why you should hire an experienced real estate professional to sell your home and you may think twice before doing it yourself.

1. Legal Risk

Selling a home involves not only purchase contracts, but also many disclosures and escrow paperwork.  Another thing to consider is correctly filling out those forms and executing it so that it is legal and in your best interest.

2. Exposure

When a Realtor list your home, we do not just put up a for sale sign and call it a day. We list and market your home so that every Buyer and Agents will know your home is for sale.

3. Professional Job

This is a professional task and it needs a professional to get the job done right.  When your teeth hurt, you would go to the dentist to get your teeth removed. You can probably pull it out yourself, but wouldn’t that be too risky and painful?

4. Negotiation and knowledge

Realtors know the market and will advise you on the selling price of your home.  As a result, you will get a higher sales price for your home through knowledge of the market and negotiating the best price possible for you.

5. Full Service

You will have more time to spend with your family instead of stressing about learning something new. From the signing of a listing contract to signing the final escrow paperwork and everything in between, we will be there to guide you.

Selling a home is probably one of the biggest thing you will ever sell.  Why sell it yourself and risk making the biggest mistake of your life.  If you have any questions or in need of my service, pleasecontact me today.

By: David Nguyen with Coldwell Banker
1096 Blossom Hill RD STE 200
San Jose, CA 95123
(408) 417-0338
Broker DRE# 01374062

Six Mistakes Housing Investors Make

Wednesday, September 21st, 2011

By: Karen Blumenthal

Traditional investments are delivering low returns, and home prices are at bargain levels. Is it time to consider buying some rental housing?

Investing in real estate right now can be surprisingly profitable, if everything goes well. Rents are climbing in many areas, and more properties may be coming on the market. Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae’s and Freddie Mac’s bulging inventories of foreclosed homes into affordable rentals.

Investors used to aim for rents that were 1% of the purchase price, or $1,000 a month for a $100,000 home—an annual gross return of 12%—says Michael McCreary. His firm, McCreary Realty, manages about 300 properties in the Atlanta area. Today, he says, some of his investors are getting as much as 2% of the purchase price.

In general, though, average returns after expenses are far less, more like 5% to 6% of the property value, says Ingo Winzer, president of Local Market Monitor, a real-estate forecasting firm. But that still is well above what many other investments yield.

Before you start scouring for deals, keep in mind that owning rental properties is time-consuming, expensive and fraught with challenges, and many investors lose money. You will want to avoid falling into one of these common traps.

Mistake 1: Confusing a cheap deal for a good deal.

It is true that you can buy some homes for ridiculously low prices—but that doesn’t mean you can rent them out. Homes in deserted subdivisions aren’t any more appealing to renters than they are to buyers. The same is true for less-attractive properties or those in less-desirable school districts.

Investors from the San Francisco area often look at the Sacramento market assuming they can get Bay Area-like rents, and end up overpaying, says Robert A. Machado of HomePointe Property Management. He uses several resources, including the website FinestExpert.com, to estimate rents. Other experts suggest canvassing apartments nearby to see not just their rates, but whether they are offering special deals, like a couple of months of free rent.

Mistake 2: Overlooking key costs.

Knowing the potential rent isn’t enough. Before you buy a property, you should also factor in closing costs of 3% to 6%, the costs to fix up the place and maintain it, and your holding costs. Then add the profit you expect to make (and more closing costs, if you intend to turn around and sell it). Only then can you figure out what you can afford to pay.

Mistake 3: Forgetting that time is money.

In real estate, “time is your biggest enemy,” says David Hicks, co-president of HomeVestors of America, a franchiser whose motto is “We Buy Ugly Houses.” You lose money when your property is empty, whether you are painting it or between tenants. You also lose if you buy in the fall and can’t replace the roof until spring. You may be better off accepting a lower rent than waiting for a higher-paying tenant.

Mistake 4: Assuming you will sit back and watch the rent roll in.

“When you become a landlord, you become a rent collector,” says Mark Kreditor of Get There First Realty, which manages 1,600 rentals in the Dallas-Fort Worth area.

Just like homeowners who can’t pay the mortgage, tenants lose their jobs and stop paying the rent. Evicting them can take several weeks, and some steal appliances or other property. Mr. Kreditor says that once or twice a month, a tenant removes a home’s copper tubing on the way out the door to sell the copper for its meltdown value.

You will need to screen prospective tenants carefully—or pay someone to do it for you.

Mistake 5: Underestimating repair costs.

As with all homes, you will be making lots of repairs. You may find wood rot or mold when you remove that cracked bathtub. Carpet in rental homes typically must be replaced every five years, and you may have to repaint after every tenant. Tony A. Drost, president of the National Association of Residential Property Managers, or Narpm, suggests setting aside six months of expenses so that you will have funds if a major repair is needed.

Mistake 6: Assuming that owning a rental is the same as owning a home.

You might put up with flaws in a home that a renter wouldn’t tolerate. In addition, many states and communities have strict (and complex) laws for landlords, even if you own only one property. A property manager can handle most of the headaches, but you should expect to pay one up to a month of rent for finding and screening tenants—and up to 10% of the monthly rent for management fees.

FSBO Guru Gets Broker Help

Wednesday, August 10th, 2011

Mr. Colby Sambrotto is a founder of a for sale by owner website that advocates selling the home without a real estate professional.  Mr Sambrotto listed the home using the For Sale By Owner (FSBO) method for 6 months without success.  Until he hired a Real Estate Broker to list it with a 6 percent commission.  As a result, the home was sold $150,000. over the listed price.

You may think selling a home yourself may save you money, but is it worth it? Read my article on the top 5 reasons why you should hire an experienced real estate professional.

By: David Nguyen with Coldwell Banker
1096 Blossom Hill RD STE 200
San Jose, CA 95123
(408) 417-0338
Broker DRE# 01374062

Worse tax bite: short sale or foreclosure?

Tuesday, March 8th, 2011
Q: Is there a difference on how you are 1099’d on a short sale vs. foreclosure for California residents? Is a foreclosure more “forgiving”? –Barb

A: Before we delve into a serious subject, I want to share something funny (and tangentially relevant) that happened to me the other day. “My mother sent me a text message that read: If I send you an address, can you tell me whether it is a shortcake?”

I’m pretty sure she meant short sale, and her texting software’s auto-correct function actually transformed it to the much more pleasant confectionery delight.

Anyhow, let’s start from a place of clarity. Internal Revenue Service Form 1099 is the form on which miscellaneous forms of taxable income are reported to taxpayers, who are then required to report this income on their tax returns (and pay taxes on it as required by their financials and the tax code).

In every state, every short sale or foreclosure can give rise to the bank issuing the borrower/former homeowner a form 1099 to report what is called Cancellation of Debt Income (CODI).

The theory is that you were not required to report the money you borrowed as income at the time you took the mortgage, because it was not income — it was a loan. When any portion of that debt is forgiven, whether through a short sale, a loan modification or a foreclosure, those funds convert from a loan to income, and must be reported to the IRS.

Q: Is there a difference on how you are 1099’d on a short sale vs. foreclosure for California residents? Is a foreclosure more “forgiving”? –Barb

A: Before we delve into a serious subject, I want to share something funny (and tangentially relevant) that happened to me the other day. “My mother sent me a text message that read: If I send you an address, can you tell me whether it is a shortcake?”

I’m pretty sure she meant short sale, and her texting software’s auto-correct function actually transformed it to the much more pleasant confectionery delight.

Anyhow, let’s start from a place of clarity. Internal Revenue Service Form 1099 is the form on which miscellaneous forms of taxable income are reported to taxpayers, who are then required to report this income on their tax returns (and pay taxes on it as required by their financials and the tax code).

In every state, every short sale or foreclosure can give rise to the bank issuing the borrower/former homeowner a form 1099 to report what is called Cancellation of Debt Income (CODI).

The theory is that you were not required to report the money you borrowed as income at the time you took the mortgage, because it was not income — it was a loan. When any portion of that debt is forgiven, whether through a short sale, a loan modification or a foreclosure, those funds convert from a loan to income, and must be reported to the IRS.

Any lender that wipes out debt in the context of a loan restructuring or a foreclosure has the right to issue the former borrower a 1099 form on the deficiency amount: the difference between what the lender recoups on the property through auction sale, short sale or a reduced loan balance, and what the borrower owed on the property. (The lender may not do it, but has the right to — and most lenders do.)

As a result, in foreclosures involving equity lines or loans or refinance loans that resulted in cash out (i.e., were not used to purchase the home or to refinance a purchase loan), that bank may not issue a 1099 because that line or loan has not been forgiven — the bank retains the right to pursue the borrowers for those funds in California.

Early on in this housing crisis, it was widely believed that a short sale would generate income tax while a foreclosure would not. This was largely misinformation, misinterpretation and misunderstanding of the relevant tax rules, largely due to the fact that we had simply seen very few cases of short sales or foreclosures until this wave of foreclosures came four years ago.

I think the (incorrect) belief was that a short sale was elective while a foreclosure was not. In fact, in 2006 I actually represented a would-be buyer on a property where the sellers decided to let the home go to foreclosure vs. closing on our short sale, out of the false belief that they would incur a great deal of income taxes on a short sale and none on a foreclosure.

As we now know, several years into this housing crisis, both foreclosures and short sales involve 1099s and cancellation of debt income. However, under the Mortgage Debt Forgiveness Relief Act of 2007, the IRS is not charging income tax on most mortgage debt forgiven through short sale or foreclosure — especially on a borrower’s primary residence, and with a few other conditions — so long as that foreclosure, short sale or loan mod occurs before the end of the 2012 calendar year.

While there was a brief period of time during which California’s state tax law did not align with this temporary federal tax exemption, California’s law now mirrors the federal law.

A couple of points of note: Lenders are taking a long time to foreclose now — 16 months after no payments, on average nationwide, and much longer in some areas. Many homeowners considering a strategic default vs. a short sale should at least make an effort at a short sale, especially given that there’s no guarantee that a foreclosure will occur before the end of 2012 even if they stop making payments now.

Unless the Mortgage Debt Forgiveness Relief Act is extended, former homeowners who lose their homes after 2012 could be subject to income taxation at their regular tax bracket on the deficiency amount — sometimes hundreds of thousands of dollars.

There are a number of other exceptions to this taxation that apply at all times, though, including an insolvency exemption for those with a negative net worth, that may apply to many upside-down homeowners — more detail is available at the IRS website for the Mortgage Debt Forgiveness Relief Act.

To be fair, I must mention that many experienced short-sale listing agents advise borrowers to stop making payments before requesting a short sale, too, as a number of major lenders and loan servicers do not seriously consider any sort of loan workout requests from borrowers who are current on their loans.

Before you make a decision about whether to attempt a short sale or let your home go to foreclosure, consult with a tax professional and get fully briefed on how the relevant tax laws will affect you.

REThink Real Estate

By Tara-Nicholle Nelson, Thursday, March 3, 2011.

Inman News™

http://ht.ly/47tXX

Short Sale Anti-Deficiency

Tuesday, March 8th, 2011
What is SB-931?

Senate Bill 931 is now a California Law which went into effect on January 1, 2011.Itprohibits first purchase money lenders from obtaining a deficiency judgment against the borrower(s) after the lender approved a short sale and that short sale was consummated. This new law applies to first purchase money trust deeds encumbering one to four units of residential property.
It is unclear what the new law is with regard to refinancing. It seems to come down to the interpretation of the status of the loan (i.e., recourse loan), and at the head of all the confusion on this issue is one of the largest lenders that believes they have a legal right for a deficiency judgment on refinance short sales.

While SB 931 may not have gone far enough on this particular point, the verbiage however is clear that lenders can seek damages for fraud or waste by the borrower(s).

Tenants Have Rights Even After Foreclosure

Saturday, December 12th, 2009
Q: I read the other day that a condominium building in Washington was recently foreclosed on. I rent a condo unit in a new building from the developer and am concerned about my rights should I face the same plight. Do I have any rights in the District?

A: Yes, as a tenant, you have a number of legal rights. The landlord-tenant laws in the District are perhaps the most tenant-oriented of anywhere in the United States.

First, as long as you continue to pay rent and are not violating the terms and conditions of your lease, you have the absolute right to stay in your unit. And this right is applicable irrespective of whether there is a foreclosure. What tenants do not understand is that even if their lease term ends, it automatically becomes a month-to-month tenancy. I often joke that tenants in the District literally have a life estate in the property.

The law is different if the lender forecloses and the occupant is the owner. In that case, no such tenant rights will apply.

Another right is available to tenants under a law commonly called TOPA — the Tenant Opportunity to Purchase Act. Under this law, if you live in a single-family house, a co-op or a condo, when the property owner wants to sell, you must be provided a TOPA notice.

Oversimplified, there are two forms available to landlords: one for use when there already is a third-party contract to buy the property, and one for use when the landlord intends to sell but has not yet received a purchase contract. The tenant has 30 days from the time an offer of sale is received to advise the landlord that he or she is interested in buying the property. If such a statement of interest is presented in writing to the landlord, the tenant has an additional 60 days in which to try to negotiate an acceptable contract with the owner. If a contract is entered into, the tenant has 60 days thereafter to settle. However, if a mortgage lender needs additional time to process the loan and provides a written statement to the owner, the tenant has an additional 30 days in which to go to closing.

The law — and the rules — are complex, and you should consult your lawyer for advice.

If a third party is the successful bidder at a foreclosure sale, tenants are not entitled to receive the TOPA notice. However, if the lender ends up owning the property after the sale and subsequently decides to sell, the lender must provide the tenant with the appropriate TOPA notice.

But what if you are not interested — or financially able — to exercise your TOPA rights, and you wish to remain a tenant? You still have rights, but they may be limited.

As long as the term of your lease has not expired, you have the right to stay in the unit. If an investor was the successful bidder at the foreclosure sale, that buyer cannot evict you just because he wants a higher rent. In legal terminology, that buyer “takes subject to the existing lease.”

However, if the buyer actually — and honestly — wants to live in the unit, he must give you a 90-day notice of his intent to personally use and occupy the property. In no event, however, can you be asked to leave until your lease term is up.

There are no similar protections in Maryland and Virginia. And although the D.C. law is unique, to some extent it became a model for a new federal law. On May 20, President Obama signed into law the Protecting Tenants at Foreclosure Act of 2009.

This law allows tenants in properties that have been foreclosed on to remain in the properties for at least 90 days from the date the successful bidder gives a notice to vacate. Unlike the District’s law, if the buyer intends to occupy the property as his or her principal residence, the 90-day notice will take effect even if the tenant’s existing lease term has not expired. In other words, a bona fide purchaser can break the lease.

But the federal law does not override state or D.C. laws that provide longer notice periods or contain additional tenant protections.

Whenever a law is enacted, there are many questions left for the courts to resolve. For example, the new federal law states: “In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property . . . ” Does this apply to situations in which a condominium association forecloses on a delinquent homeowner?

More important, does this new law protect tenants even if they are delinquent on their rent payments or are otherwise in default on the terms of their lease?

Time will tell. But this new law has a sunset provision: It is scheduled to expire Dec. 31, 2012.

By Benny L. Kass
Saturday, November 28, 2009

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/25/AR2009112504195.html?wprss=rss_realestate