Real Estate Updates & Trends

An article in the Los Angeles Times mapped out House price declines from data provided  by Research Institute for Housing America, the Mortgage Bankers Association, and the Census Bureau in the Los Angeles Times . The Vallejo-Fairfield area  had an average  house price drop over three years from 2006-2008 of over 62%. and was ranked third nationally.  Stockton was number one. Modesto was  number 2. For the 4th highest drop you have to travel all the way over to Cape Coral-Fort Meyers, Florida.  S&P Case-Shiller home price indexes for October noted that San Francisco, Los Angeles, and San Diego all had positive price increases in the past year. However, not all areas are experiencing price increases, for example : Boston dropped .02% over the past year. Michelle Lodge, CNBC.com Writer reported on CNBC that  Boston Properties owner Mort Zuckerman is pessimistic about residential real estate. I don’t agree with Mr. Zuckerman as it relates to residential property outside of Boston.  I don’t think Boston home values have dropped as much as California values have dropped as Boston isn’t even in the top 32 cities that have lead the decline in home values for the past three years.

What does this mean for the investor or first time home buyer?  O_P_P_O_R_T_U_N_I_T_Y!

Positive cash flows can be had on residential properties given the near record low interest rates. For buyers that’s like buying a home for a 1991 price!  Remember when we thought gasoline was high at $1.15 gallon in 1991?  

Here is an example of an approved potential short sale in Vallejo, California: 3 bedrooms, 2 baths, 2 car garagewith RV parking-no rear neighbors-immaculate inside and out. Only $150,ooo!  It should rent for no less than $1500-$1800.  Payments would depend on the down, but call your lender to run the numbers and you’ll soon see it has a positive cash flow with depreciation and potential equity growth ,….its almost a sure thing.  There’s more than one property available, too.

The median price is slowly moving upward again. Once winter is over, I expect it to continue to move up as the economy improves.  The year 2011 is expected to be slow and steady in the number of home sales per California Association of Realtors” Leslie Appleton-Young, Chief Economist. She further stated that the median price of homes is also expected to move up about 10%. (assuming no sudden shock to the economy) Meanwhile,  the supply of homes that are available for under $300,000  is shrinking to less than a five month supply.  Homes over a million have a 10 month supply.  There is no hidden inventory or shadow inventory per Bill Quinn, Home Loan Manager of Bank of America. They are processing foreclosures as quickly as they can in California.

In summary, if you have been waiting for the bottom of the market. It looks like you missed the opportunity, but its pretty close, and your timing might still be near enough to the bottom, along with historically low interest rates if you take action now.

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Market Conditions for real estate are improving for Benicia, California, located in Solano county about 35 miles northeast of San Francisco. The bottom appears to have been reached and home values are slowly rebounding.  It is good news if the current trend continues for all homeowners and local governments, as increasing values will help with local tax coffers, and provide government services that have been curtailed or downsized. 

The number of foreclosed properties has also dropped, which is most likely reflected in the temporary halt of foreclosures by the banks last month.  Bank of America confirmed that they are presently slowing the foreclosure process in the area. 

Meanwhile HUD has announced a new website for current market conditions by metro areas. (http://www.huduser.org/portal/MCCharts/marketReports.html )    The site was under construction when I checked it out on November 23, 2010.

Here are the latest statistics for Benicia, California as provided by BARIES mls.

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By Rick Dillion, certified Short Sale Foreclosure Resource

A Foreclosure Recovery Forum was recently held by the Federal Reserve Bank of San Francisco www.frbsf.org/community/issues/toolkit .  The goal of the forum was to provide a graceful exit from the home with the least amount of disruption and damage to the home owner‘s life.  When foreclosure is unavoidable, there are several options for giving up the property. The most common is a deed-in-lieu or a short sale or a combination of both. These options give the homeowner more control and time to prepare for a transition. Lender approval is needed to exercise these options.  It is also important for the homeowner to negotiate the liability for the difference between what is owed to the bank and what the sales price is. (Will you be sued later by the bank or not for the difference?)  It would be wise for the homeowner to hire an attorney to interpert the bank  contracts and to negotiate for the homeowner.)  The home owner’s attorney might even be able to negotiate a “cash for keys” from the bank with the understanding that the homeowner will leave the home in good condition.  “Cash for Keys” should be a available for FHA and VA type loans. Fannie Mae(fanniemae.com) is now also offering some home owners a lease for 12 months with a deed-in-lieu.

The short sale process is becoming more streamlined and standardized under HAFA guidelines.  Check out HAFA at www.makinghomeaffordable.gov/hafa.html or www.realtor.org/government_affairs/short_sales_hafa or see my earlier blog about short sales and  HAFA.

The Mortgage Debt Relief Act of 2007 generally allows taxpayers t0 exclude up to $2 million as income form the discharge of debt on their principal residence in correlation  with a foreclosure or mortgage forgiveness by the lender. The homeowner should consult their tax professional to check into the tax issues.

Bankruptcy is another option for the homeowner. The homeowner should contact a bankruptcy attorney.

For Tenants: Tenant Rights- Go to www.rentalforeclosure.comto find out if the property you are renting is at risk or in foreclosure. The general contract rule is that the tenant has to pay rent until the property is sold at a trustee sale and to the new owner which is the lender after foreclosure. Seek legal advice prior to signing any documents and to find out what the laws are for your state. Y can also check out A realtor representing the lender or servicer may set up new payments. Check out www.nlihc.org for more information. Also check out www.Tenantstogether.org (but please don’t sue the real estate agent as is recommended on the web site)

Resources for new housing:  www.rent.com, for approved housing counselors www.HUD.gov, for Community Action agencies call 2-1-1 for food, shelter, and financial assistance. You can also call a local United Way Office for support, too.

For Employment: Your community may or may not have a non profit program called SparkPoint that can help you find a job, build your career, manage your credit, get free tax help, keep your home, and locate child care. Call for local information (for American Canyon, Ca (707) 980-7024.) Want to start a business but have poor credit or a foreclosure or at risk of a foreclosure. You might be able to get a loan to start your business at www.workingsolutions.org.

For Investors:  The government has not been so kind to investors. Few options are available. Governor Schwarzenegger vetoed legislation in mid October 2010 that would have given protection to investors and the people who had refinanced their homes. Unfortunately, I believe that is a grave error. I understand that the California Association of Realtors will sponsor and make another attempt next year.  

My story:I purchased a home as an investment in November 2005. It was a fixer upper and my wife and I are hands on. After putting in many late nights, laying tile, replacing kitchen cabinets and upgrading appliances, painting, new carpet, and investing well over $40,000 more than we paid, we put the home on the market.  After 24 months and many price reductions later (we were chasing the market down) we finally accepted and offer and our net return for our investment was a loss of $125,000.  Why did we sell at a loss? Our loan adjusted from $2500 month to well over $5200 month. Rent couldn’t cover it. We were depleting our savings, and yet we had worked hard for many years to establish a stellar credit rating and we wanted to keep it.  Besides, if we walked out and let the bank foreclose, we would have been seen by the IRS as given debt relief, and we would have had to pay taxes on the debt relief, or the bank could also file a suit and then collect the difference on what they sold the home for, and for what we owed them.  Only those folks in similar situations can truly understand the stress this caused. Many sleepless nights and unkind words to one another. We opted to end it all by simply doing a short sale, but instead of the bank accepting a short sale we took the $125,000 from our bank account which was a considerable amount of our life’s savings and paid the bank what we owed.   I know that is not an option for most small investors but the short sale can be an option to get out of some of the debt.  If you are seeing your life savings going out the door or perhaps you have a job loss , and you can’t make the payments anymore, do a short sale. If you owe $500k but in the current market it is only worth $250k, then sell it for $250k and you are $250k out of debt and potential tax liability for that amount.  Have your agent or attorney negotiate the short sale and attempt to get the lenders to waive the remaining debt as a condition of accepting the short sale. Be sure and have an attorney read the documents sent over by the lender and also consult a tax advisor. 

Can you recover your losses? Yes, since we were able to preserve our credit we purchased another investment home at the current market rate with a rather good positive cash flow.  Potential for growth in equity is a plus. It actually has increased in equity about $30k. As more and more people come to California (California, Florida and Texas lead the nation in population growth) the demand for housing will outstrip supply which will result in equity growth due to greater demand.   If you purchased a home at say $300k (yesteryear’s market) why not purchase a similar home at $150k (today’s market)?

A Request for help: If you know of any resource for someone facing foreclosure. Please provide input. I’ll add it to this article.  Thanks, in advance.

Solano County Assessor-Recorder Marc Tonnesen was our guest speaker  at our Solano Association of Realtors meeting on Wednesday September 22, 2010.  He stated that the home values that his department assigned are based on the values established as of January 1, 2010 and therefore, may not be the current values for   home when you receive your tax statement in the next few days.  Also keep in mind that tax values have nothing in common with market values. He often gets calls from home owners who claim that their home is worth more than the tax bill. He will agree with you that your home’s market value is usually far greater.

So how has Solano county faired in tax revenue during this recession? (*Officially declared over per President O’bama and his economic team.)

Tax revenue in  Benicia- in 2008 was up 5.13% ,in 2009 it was down 5.13%, and in 2010 tax revenue is projected to be down 2.78%. In summary Benicia since 2007  Benicia did better than the rest of the county having only lost about 13%. Dixon-in 2008 was down 1.38%, in 2009 down 6.46%, and in 2010 down 1.30% for about 10% total in less revenue . From 2007-2010 Rio Vista was down overall about 17%. Vacaville was down over 11%, Vallejo was down approximately 29%.

What this translates into is another  reduction in taxes for the schools which gets about 52% of the revenues. Since the recession began the county budget has decreased 22% overall. Furthermore over 1,000 commercial and private individuals are appealing their taxes and over 4.5 billion in potential asset value is at risk. Major appeals from Biopharma, Wind farms, and Quarry make up 81% of the risk value of pending property tax appeals.  Per Solano County Assessor-Recorder Marc Tonnesen, the appeal process can take up to two years. Needless to say losing another potential  4.5 billion would have a huge impact on the local economy.

There is some good news. Foreclosures have driven  home  values downward,  but the rate of foreclosures has held steady since August 2009 instead of increasing.  There is a lot  shadow inventory (Foreclosed homes being held by the banks and not on the market), but the bottom of the real estate market may have finally been reached. If true, it will turn gradually increase tax revenues as the home market recovers. This  welcome relief for all except the potential home buyer who didn’t take advantage of the low prices and low interest rates. As tax revenues increase we can expect better schools, roads, parks and recreation and the essential government services that have made Solano county and the overall SF Bay Area the best place to live.

Marc Tonnesen welcomes you to call 707-784-6210 or t e mail him at Assessor@SolanoCounty.com or to visit, during normal business hours on the second floor of the Government Center located at 675 Texas Street, Suite 2700, F airfield, Ca.   You may also visit:   www.solanocounty.com/depts/ar/home.asp if you have questions about your real property taxes.

Keep in mind that his staff  has also been cut but he and his team will do all they can to respond to your needs.

*Do you agree with President Obama and his economic team that the recession is over?

Summer has come and gone and the kids are off to school. For us in Northern California it means a change from dry to wet conditions. I would usually say hot to cool, but this summer was unusually cool with the exception of a few days.  So, what needs to be done before winter comes? Cleaning the leaves and debree out of the gutters is what comes to my mind first.  Then weatherstripping around the doors and windows. If you can walk your roof (don’t walk on tile) check the flashing and vents for water tightness and apply a water proofing compound as needed.  You might call PGE or a heating service company (HVAC technician) to check your heaters and vents, too.  Don’t forget to change the filters. Apply paint where needed to exposed or weathered wood surfaces.  If you have a sump pump under your home, give it a test run to see if its working. If the chimney hasn’t been cleaned for a while, call a chimney sweep to remove soot and creosote.  Call tradesmen to help you now.  Its hard to get a roofer to come out on a cold rainy winter night when there’s a drip coming through the skylight. Yep, happened to me once-glad I had a tarp in the garage for such an occasion.  Maintainence on your home will help maintain its value.  Well that, and a recovery in the real estate market and our economy.

Please feel free to add suggestions and share ideas for getting ready for the winter months ahead.

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