Andrew Hartland's Blog

HIGHLIGHTS

- Market in a frenzy.

- Sales price to list price over 100% to 100.6%. Palo Alto’s sp/lp ratio was 108.6%.

- Home inventory won’t be increasing any time soon.

Low inventory and high demand are pushing the local real estate market to the extreme with buyers waiving contingencies, property inspections and even appraisals.

The last few months of multiple offers has forced the sales price to list price ratio for single-family, re-sale homes up to 100.6%, a level we haven’t seen since May 2010.

Prices have followed with the average home price now at it’s highest level since July 2008.

The high end of the market, however that is defined in a particular city, is on fire. The low end of the market is being driven by investors with cash and is also totally out of whack. The middle market, the move-up market is soft because the entry-level homeowners are still underwater.

What’s next?

That’s hard to tell because inventory is incredibly low. Home inventory is at its lowest point since December 2004. We don’t see that changing much in the near future for several reasons.

First, there is not a lot of new home building going on, which is necessary to relieve the pressure.

Second, many existing homeowners aren’t going anywhere. If they have good jobs here, where would they go?

Lastly, forget about phantom inventory. As of March, the banks owned 1,757 properties in the county. That number includes homes AND condos. There are currently 1,552 homes AND condos actively listed for sale.

Even if the banks put all their inventory on the market, it’s only five weeks worth!

We’re stuck with this market for at least the next year.

APRIL MARKET STATISTICS

As was to be expected, the largest price increases for single-family, re-sale homes were in Los Altos, up 19.7% year-over-year, Palo Alto, up 22.8%, Morgan Hill, up 17.2%, and Mountain View, up 10.6%. These are the median prices.

Even more telling is the sales price to list price ratios. Palo Alto weighs in at 108.6%. Mountain View and Cupertino were at 104%. Los Altos was 103.4%. The county as a whole was at 100.3%. Even San Jose was at 100%.

Home sales were down 3.9% year-over-year, and that’s not a function of low demand! Home sales have been lower than the year before for the past five months.

The condo side of things isn’t much different. Inventory is at its lowest level since January 2005, The median price for condos was up 22.6% compared to last April. The sales price to list price ratio was 100.9%.

This is an extraordinarily tough market for buyers. It’s important to be calm and realistic. If you don’t know what to do or where to begin, give me a call and let’s discuss your situation and your options.

Go to my on-line site SCVReport.com for the full report, plus a city-by-city breakdown.

- Mortgage Debt Relief Act to Expire at end of year.

- The median price for homes was up 4.4% year-over-year in February.

- The number of properties owned by the banks was down 15.6% year-over-year.

Once upon a time, when a homeowner did a short sale, the IRS counted the difference between what the bank took and what the homeowner owed as income. Not much incentive there for sellers.

In 2007, the federal government enacted the MDRA that allows qualified taxpayers to exclude that “income”.

The law will end December 31st.  You must close the short sale by then.

Other qualifications include:
· Good for up to $2,000,000 in forgiven debt.

· Only works for principal homes.

· The tax rule can be applied to debt used to refinance your home, provided the principal balance of the old mortgage, immediately before the refinancing, would have qualified.

See “The Mortgage Forgiveness Debt Relief Act and Debt Cancellation” for additional information. Use this link: http://tinyurl.com/5pe43f.

If you are upside down and are having problems making your payments, it’s time to do something. It’s going to take a long time before an upside down property becomes positive.

FEBRUARY MARKET STATISTICS
For fifteen months the median price for single- family, re-sale homes has been lower than the year before. But, in February, the median price was up 4% year-over-year.

Even better, the average price was up 11.9% compared to last February, reflecting that more $1MM+ homes are selling.

Home sales were down 3.4% year-over-year. Condo sales were down year-over-year by 3.9%.

The median price for condos was up 5.1% compared to last February.

Inventory of both homes and condos continues to be weak. Home inventory was down 23.3% compared to last February: 1,389 homes actively listed. Condo inventory was down 70.8% year- over-year.Pending home sales were up 22.9% year-over- year. Condo pending sales were up 12.8% year- over-year.

HIGHLIGHTS

- HARP being expanded.

- Foreclosure starts surge in August.

- Home and condo sales outpacing last year.

The Home Affordable Refinance Program, or HARP, is being revamped. It was originally aimed at a housing market that had an estimated 5 million struggling homeowners. Unfortunately, HARP’s original terms and limits were so restrictive that the program, to date, has reached fewer than 900,000 mortgage holders. The major restriction eliminated any homeowner whose existing mortgage represented more than 125% of the loan-to-value of their home.

The revamping of HARP will let borrowers whose mortgages are backed by Fannie Mae and Freddie Mac refinance those underwater mortgages, presumably no matter how far their home’s value has fallen. In fact, current loan-to-value ratio on the existing mortgage must be greater than 80 percent.

And, mortgage holders can’t double-dip; that is, if they already have an earlier HARP loan, they can’t get another at the even better rate of 4%. The new terms also eliminate the need for yet another property appraisal in calculating LTV, and the program’s end date has been extended.

The plan, announced last week still has certain eligibility limits. For example, your mortgage has to be a Fannie Mae or Freddie Mac instrument, owned or guaranteed by one agency or the other, and you must not have missed any payments in the last six months (since April 24, at present), or have more than one missed payment over the last year.

The FHFA, or Federal Housing Finance Agency, which currently controls Fannie, Freddie, and 12 other Federal Home Loan Banks – located in Atlanta, Boston, Chicago, Cincinnati, Dallas, Des Moines, Indianapolis, New York, Pittsburgh, San Francisco, Seattle and Topeka – is expected to announce the final program parameters by November 15.

This is a much needed expansion of the program. Unfortunately, there are over ten million homeowners underwater and this new HARP will only be available to 10% of them.

MARKET STATISTICS

Sale of single-family, re-sale homes fell 4.9% in October from September, but were up 2.4% year- over-year. Year-to-date, home sales are up 0.5%.

Condo sales were up 3.8% from September and up 12.5% year-over-year. Year-to-date, condo sales are up 11.1%.

The median price for homes was down 13.9% year-over-year. This is the twelfth month in a row the median price for homes has been lower than the year before.

The median price for condos was off 4.1% compared to last October.

Inventory of both homes and condos continues to be weak. Home inventory was down 25% compared to last October: 2,014 homes actively listed. Condo inventory was down 44.2% year- over-year.

Go to my on-line site SCVReport.com for the full report, plus a city-by-city breakdown.

If you would like to search for properties in the Santa Clara Valley, go to my online search form at: MLS Search

If you find the Santa Clara Valley Real Estate Report useful and know someone else who might, please feel free to forward this e-mail to them. There is also a four page printable version with more articles here:
Printable Report.

- In Santa Clara County, notices of default and notices of sales have been declining for the past year.

- Median price for homes was up 3.4% from April, but down 4.5% year-over-year.

- Home sales off 19% from last May.

Two years talk of phantom inventory was all the rage. There are three components to phantom inventory: first, all the property the banks owned that hadn’t been put on the market, second, all the property on which a notice of default had been filed but had not yet gone back to the banks, finally, there are strategic defaults. These are the property owners who are underwater, meaning they owe more on the property than it is currently worth and have decided to walk away.

Last month, JPMorgan Chase analysts determined that strategic defaults were declining. In their analysis, they found 60% of all defaults were strategic by the middle of 2009, and that this had declined to 30%.

It is important to note these are national figures.

In Santa Clara County, notices of default and notices of sales have been declining for the past year.

County Statistics
Sales of single-family, re-sale homes fell in May, an unusual occurrence, falling 3.1% from April, and down 19% year-over-year.

The median price for single-family, re-sale homes in Santa Clara County was up 3.4% from April, but down 4.5% year-over-year. This is the seventh month in a row the median price has been lower than the year before.

Pricing momentum…
while still positive, has been trending down for the past seven months and now stands at +2, a decline of three points from the month before.

Sales momentum…
turned down last month and dropped four points to –9.

Pending momentum…
a harbinger of future sales, while still positive, has also been trending downward. Last month the number was +1, a decline of four points.

More Statistics…
Year-over-year, home inventory was down by 3.4%.

Pending inventory was down, year-over-year, for the seventh month in a row: 5.4%.

The sales price to list price ratio rose 0.2 of a point to 99.6%.

In the condo market…
The median price for condos was down 17.6%, year-over-year.

Condos sales were down 14.1% year-over-year.

Pending condo sales declined last month, falling 9.6% compared to last May.

Inventory increased for the twelfth month in a row, up 1.2% year-over-year.