Author: Brenda Keener
Recent posts
October 13, 2008
One puzzler in the San Jose market is that one of its nicest residential areas shows some of the largest price declines. The community of Santa Teresa is close to several major freeways including highway 85, a very large dog-friendly park, several incredible golf courses, and light rail – yet over 50% of the homes on the market here have shown reductions, with a mean reduction of 8.3%.
Santa Teresa County Park is a big reason to live here – with 1627 acres of pristine parkland featuring beautiful views, picnic grounds, hiking, biking and equestian trails, and even an archery range. And the Santa Teresa Golf Course is a challenging course that is still friendly to those with higher handicaps, like yours truly.
Santa Teresa is a bit further down the road than most of San Jose – and it does get hotter here in the summer. But with 254 homes on the market at an average selling price of $518k, wide upscale residential streets and easy access to recreational areas, Santa Teresa is a great place to find a bargain during this down market. According to Redfin, there are 67 single family homes for sale in this market for less than $600k with three or more beds. Most homes in this area have reasonably sized yards, and nice curb appeal.
Other reasons to live here include close proximity to the new Kaiser hospital, as well as to the upcoming shopping mecca being built on the old IBM site off Cottle Road.
Living here also means that driving to the Gilroy Garlic Festival, Monterey, Pismo Beach, or Hearst Castle is not quite as much of a haul as it would otherwise be!
October 12, 2008
BayareabankREO.com has announced a series of workshops for investors and potential homeowners interested in negotiating with banks to buy REOs, which could be a highly profitable venture to enter, given today’s market conditions.
On Tuesday night from 7PM – 8:30PM, a workshop entitled “Buying Bank Foreclosures Made Simple” will be held at 1067 Blossom Hill Road in San Jose. Subject material will include how prices are determined, how to research REOs, and how to use experts and your research to negotiate with the banks.
These San Jose workshops are held weekly at this Blossom Hill location, and somewhat less frequently in Willow Glen as well. Milpitas workshops are held every third Thursday of the month also.
These workshops are free, and look like they could be very useful and informative if you plan to plunge into the REO market.
October 10, 2008
Not too long ago, I saw a PR video by Paris Hilton that has been watched by millions, developed in response to a comment made by John McCain. She was certainly coached as to what to say, but her compromise position on off-shore drilling made a great deal of sense more than anything said by either candidate! To this I say …..hey……if she can do it, so can I.
If I were the one with the microphone in my face being asked what should be done about the housing crisis, and the economic crisis in general, here is what my response would be:
The crisis we are facing now was many years in the making. It didn’t happen overnight, and it is not going to be fixed overnight. Nevertheless, there are some concrete steps we can take to make sure that things stablize and begin to change for the better.
For the next 3 months, I would freeze all gasoline prices in the US and suspend all futures speculation on oil or petroleum products in general. The futures market drove many of the volatile prices we saw at the pumps. And if other petroleum products are not frozen as well, the oil companies will just raise prices on them to help make up the difference. Imagine a $20 jar of Vaseline!
Next, instead of moving forward with the AIG bailout (whom I think richly deserve their demise), I would announce a new federally backed credit program where gainfully employed families can apply for lower interest rate loans (one point below prime) for everything from $1K to a $100K down payment for a home, and I would suspend the rules about not allowing borrowing for a down payment. After all, many Americans have been forced to use their savings to pay extra gasoline bills and extra medical expenses – as insurance companies have found more and more ways to increase deductables and disallow claims. Unless I miss my guess, this program would cost less than the AIG bailout. Other insurance companies will rise to fill in the prominent AIG gap – maybe even some ethical (imagine that) companies who will work with their customers and actually focus on the needs of the people. And this loan program would help to spur the consumer economy, and consumer spending.
Next, I would start a program just for the unemployed if their current jobs were lost expressly due to the housing crisis. These workers would be given a one time grant of $500 if they add their resumes into a new federal jobs data base for potential hiring by the newly announced federal $1K-20K loan program.
Anyone who lost their home in the last two years due to the rapid adjustment of ARM rates would be given unmistakable priority in receiving the newly announced HUD loans for 3% down. I didn’t see any such provision when I attempted to plow through bits and pieces of the lengthy mortgage bailout program document. Another provision that should be added to this document is additional qualifications for buyers before they are allowed to participate in an ARM loan of any kind, qualifications that include being able to show probable income growth, passing a questionnaire that shows a high level of understanding of what an ARM actually is and what it does, and having the ability to make a payment at the highest levels of adjustment the loan can reach.
Last but not least, I would increase government tax credits to those who upgrade their homes to wind power or solar power, and create a government funded venture arm with at least a $100M investment budget solely to fund startup companies that are focused in three areas:
- Creating new methods of transportation that don’t involve oil or oil products in any way. It is time to think “outside the boxy electric car”
- Creating alternate sources of energy for large scale industrial processes, or alternatively reducing the energy consumption of these processes
- Finding or creating lower cost methods of expanding preventative medicinal services to millions of Americans – services such as IPTV-based interactive patient monitoring (to eliminate costly visits and predict health crises in those at risk before they consume emergency services), immune enhancing services for the populace (think fortified foods and water), and actually removing the AMA and pharmaceutical companies resistance to herbal products that solve problems less intrusively and expensively.
But alas, I am neither Paris Hilton, Barack Obama, or John McCain. I can only put my ideas out here for my readers to comment on.
Comments anyone??
October 5, 2008
With the housing crunch in full swing in California and many of my friends nearing retirement age, I am hearing lots of dreaming going on. Arizona is a prime place for many former “techies” to relocate to, thanks to great weather, lower property values, beautiful mountains and an almost endless stream of golf courses to play.
As I write this post, I am sitting in the Scottsdale Resort and Athletic Club – looking out at Camelback Mountain and enough saguaro cactii to populate an entire spaghetti Western. It is peaceful, all the buildings are new, and I had no trouble finding a healthy yet inexpensive place to eat dinner (China Lite – a no MSG, low oil and all natural ingredient Chinese restaurant). The terrain is rugged, yet friendly to those who seem hardy enough to conquer its challenges.
As this is a resort town, the property values for newer homes are dramatically higher than for older, resale homes. The median price for resale homes right now in Scottsdale is $595K for a 2,295 square foot home ( in comparison, the median price in 2005 was $525K). Nearby Paradise Valley, with lots of new upscale homes, in contrast has a median home price of $1.656M.
Although I dearly love California, I must say that living in a place that has no earthquakes, no tornados, no hurricanes, no grass to mow and is only one hour away from good skiing is mighty tempting. I may consider coming here myself when the hustle and bustle of Silicon Valley doesn’t fit my lifestyle needs any more. The only real downside is the heat, which could be a bit daunting for those of us who run for cover when the thermometer hits triple digits.
September 28, 2008
When I moved to California from the Midwest – one of the benchmarks I set for myself in order to be assured that I had truly “made it” and become successful was having a pool in my back yard. Many years later, I achieved my goal – but was it truly worth it? Now while I shop for yet another new home, this question again has come up. My kids have an obvious opinion on owning a pool – a house is not a home without one! But from an adult’s perspective, things are a bit different.
The pros to pool ownership are numerous. There is nothing like floating on an air mattress and sipping a Calistoga during triple digit heat. Swimming for exercise is easy, and pool parties are fun and exciting. There IS a downside, however, and one that never occured to me until I owned my very first pool.
Pools require maintenance, and this is not something that you can just skip when money is tight unless you want to grow new strains of green algae in your backyard. And green algae has expensive consequences for delicate pool pumps and equipment. PG&E bills can be heavily impacted by pool pumps, and even solar heated pools require pumping.
Teens love pools, and do crazy things in them. It is impossible to watch your pool 24×7 – and there is CONSIDERABLE liability involved in owning a pool. I used to see lawsuits everytime a teenager did a belly flop off my diving board.
If you have small children – you either need a locking gate or eyes in the back of your head to prevent any accidents. There is nothing more tragic than an accidental drowning of a small child.
Pools also take up a LOT of your lot space, so if you want a nice garden or room to play, better think twice about a pool.
So what is my solution? I am trying to find a community pool that I can just belong to, so I have the benefits without the hassles. I will give up the midnight skinny-dipping for some peace and quiet.
September 26, 2008
More than $5.6M has been allocated to San Jose to help residents purchase and fix up foreclosed homes, out of the $539M reserved for the State of California by HUD.
According to Barbara Boxer and Diane Feinstein, this amount is not nearly enough and is an insult to the state. They have pointed out that California is receiving less assistance than Florida even though we have nearly twice the number of foreclosures! However, the residents of San Jose seem happy to have some of this HUD pie to work with. A plan is being created to help buyers to purchase vacant homes, and return them to their former glory.
The program being considered would provide help for the downpayment, and some remodeling work. Income limits have been established - according to the Mercury News, the income limit for a one person household is $88,600 and $126,600 for a family of four.
On Monday, HUD will be publishing rules for how to spend the grant money, and communities will not be given their allocation until HUD approves plans in place. Although San Jose’s plan won’t help current homeowners facing foreclosure, it should help solve the problem of vacant, untended properties dragging down neighborhood property prices – and morale.
September 22, 2008
Even the blissfully upscale town of Saratoga is not immune to the downward price pressure seen in the South Bay due to market conditions – and many incredible mansions have prices that are now spiraling downwards towards earth! Here are a few of the bigger reductions in price seen this week:
15550 On Orbit Drive: Recently reduced from $2.895M to $2.295M (a whopping $600K reduction), this home has five bedrooms on 9.8 acres with a creek and a waterfall, plus views of five counties! The price is still in orbit, but is heading down to normalcy.
13973 Quito Oaks Way: This upscale rancher was recently reduced from $1.48M to $1,295,888. It has 2323 square feet, a nice circular driveway, a gas BBQ in the kitchen, and of course – a Saratoga address.
13431 Quito Road: A more “down-to-earth” home, it features 4 beds and 2 baths in 1832 square feet of living space. Originally priced at the “outer reaches of Saratoga” price of $1,099,000 – it has been reduced to $899K.
Saratoga will always be a great place to live – and these reductions make it more affordable for us mere mortals. When the market comes back up, Saratoga will be sure to follow. One caveat is that Saratoga was notoriously overpriced relative to other upscale areas such as Los Gatos and Cupertino – so I do not see a return to inflated values. Look to Saratoga’s near neighbors when planning what your potential ROI will be.
September 20, 2008
If you are looking for a better place to park your money than a bank or the stock market – and haven’t lost the faith in real estate investments yet, then good for you! You do have a much tougher task than in years gone by in making sure that you maximize your investment by watching out for issues that can limit or stall ROI growth. No longer will all homes in a sector or city be swept up by the tide of rising home values!
By watching the market over the last year, I have learned that property appreciation (and depreciation) is no longer homogeneous across a city or area, but is now much more specific to individual neighborhoods. School systems tend to drive property values to a great degree, but in many areas, there is a wide gap in property values even within the same school district. For example, in the city of Cupertino – homes next to Collins Elementary school and homes in Rancho Rinconada are all zoned in the Cupertino High School area, yet the homes in the older Rancho Rinconada area have appreciated much less and sell for less.
What are some things to watch out for when selecting a neighborhood to invest in?
a) With gas prices at an all time high and showing no signs of dropping, close proximity to public transportation and freeways is critical to the working professional. Homes that are close, without being too close, to transportation and major highways will appreciate more than those that are inconvenient.
b) Avoid neighborhoods with heavy traffic noise. This degrades home value, and only worsens over time.
c) Neighborhoods in a state of decline, with many foreclosed homes reeking of a lack of care are also to be avoided. Even though cities are working to try to make sure vacant homes are not simply abandoned, who knows how long this situation will continue?
d) Neighborhoods that look like every driveway is a parking lot are also to be avoided. Old trashy cars parked in the front yard drive down property values. The same goes for old trashy RVs, boats, lawn mowers, etc.
e) Run, don’t walk, if you see groups of teens wandering the streets with nothing to do. This goes double if you see any wearing gang colors.
f) Any neighborhoods with a combination of older, run down homes and newer or remodeled homes are to be avoided. In the thriving market, these neighborhoods would have gentrified. Now, the gentrification process will most likely be slowed or halted due to economic conditions, driving down the prices of the newer homes to match the older ones.
g) Avoid graffiti strewn neighborhoods
In general, the best investment homes are the ones in nicer neighborhoods where prices have gone down uniformly – with good school districts, and where yards and home facades show obvious pride of ownership. So called “bargains” with location flaws will not be bargains in the long run.
September 19, 2008
Prices have dropped below even the wildest expectations of potential buyers, yet the summer increase in sales is drying up rapidly in the face of the failures of financial stalwarts AIG, Merrill Lynch, and Lehman Bros, as well as the bailouts of Freddie Mac and Fannie Mae.
Rewards could be handsome for investors with the guts to face these events and move forward – yet the risks include losing everything if the markets actually collapse.
From the San Jose Mercury News, Chief Economist for Quicken Loans, Bob Walters was quoted as saying,
“Whenever there’s turmoil, it’s a natural human emotion to go into a defensive mind-set and choose to do nothing.Buying when everyone else is afraid and selling when everyone else is greedy tends to be beneficial over time. But why don’t more people put it into practice? It’s hard to do. It’s hard to buy when you are scared, and it’s hard to sell when you’re greedy.”
What risks do home buyers face? There is wide spread speculation that global markets are in a state of collapse that rivals that of the Great Depression of 1929. If so, then reaping ROI from a home purchase now may never happen, as the entire currency structure could change. But how likely is this? The US economy is among the strongest in the world, and emergency measures such as a temporary halt to all short trading have been enacted. If it is inconceivable that the US economy could collapse, and I believe it is, then opportunity for upside still exists as it is inherent to a democracy.
The other question that defines risk is how long will it take for the market to recover? The Great Depression was a ten year span – should we expect another ten years to go by before our investments bear fruit? In my opinion (and I am no economist but have had the great fortune to study Economics under one of the greatest profs in the world), the answer to this can be found by studying the difference in transaction time between the two eras. In the late 1920s, the Internet with its lightening speed transactions did not exist. Deposits were made to banks by hand, and the US mail carried most sensitive material as faxes did not exist. The pace of life moves much faster today – which means the near catastrophes we are experiencing now happened quickly, and a recovery can also happen quickly.
The biggest impediment to a speedy recovery is the red tape associated with the buyout logistics, and the renewal of consumer confidence in the traditional markets. My best guestimate as to the length of time we will take to recovery is then five years, not ten as in the Great Depression.
But I do believe we have entered into a Depression – and all attempts to call it anything else are attempts to head off the impact by pretending it isn’t happening.
If you review the history of the Great Depression, many businesses emerged as did the Phoenix from the ashes – portending that those who have the courage and strength to fight the fear and continue to invest will eventually reap even greater rewards for their leap of faith.
Some examples of businesses that actually increased advertising spending during the Great Depression include Kelloggs, Proctor and Gamble, and Chevrolet. All flourished and won out over competition during and after the Depression. Radio advertising saw a huge growth spurt during this time as well, showing that there is money to be made even in a down economy by driving or even spotting key trends.
In conclusion – yes, things are bad. But hiding will not solve anything, and by investing and not losing heart if things continue to worsen before getting better – savvy capitalists stand to show even stronger profits when this mess is behind us and school children are writing papers about the “Great Depression of 2008″.
I suggest taking the plunge, but only if you are looking for a healthy longer term investment. Short term thinking is part of what got us into this mess in the first place!
September 16, 2008
After a dry spell in which very few FSBOs were posted, there are now several on Craigslist.org that look interesting enough to write about! A series of posts complaining about realtors inappropriately flagging Craigslist ads suggest that foul play may have been afoot. It will be interesting to see the number of FSBO sales tracked over time against the number of FSBO Craigslist ads to see if there is any correlation.
All speculation about the resurgence of ads aside, here are some of the FSBOs that looked the best. First of all, this one is slightly overpriced at $775K, but it is tough to beat the commute location of 1952 Bohannon Drive in Santa Clara. A 3/2 with almost 1750 square feet, it has a hot tub, room for an RV or boat, and two patios. It is also a single story home with reduced Santa Clara utilities, making it more cost effective from that standpoint.
A quaint little cottage in the Santa Cruz mountains complete with white picket fence is listed as an FSBO this week – for $517K and nothing down, you can own 1/3 of an acre and a 2/2 home located at 25111 Soquel San Jose Road. The second bed and bath are located in the garage, which is separate from the main house.
Yet another one worthy of note is a 3/2 condo on the fairway of the Boulder Creek Golf and Country Club which would be perfect for retirees who want peace, quiet, and golf. The views are beautiful, and Los Gatos or Santa Cruz are each only 30 minutes away. The condo itself has a one car garage, and the complex has a pool as well.
