Update on Bay Area Real Estate Market

The current state of the real estate market is exciting. Home values are coming back. Inventory of homes is low; interest rates are still at some of the lowest I have seen in my career. The job market in the Bay Area is better than in the past few years. Homeowners that did a short sale on their home or had their homes foreclosed have become tenants. New hires that have relocated to this area have joined the pool of people that need rentals. This has put an upward pressure on the rental market and has caused rents to go up. People who have been waiting to buy are in the market since now it makes sense to buy versus rent. Investors have jumped into the buyers' pool as the interest rates are low and the rents are up giving them a breakeven or positive cash flow. Banks are selling foreclosed homes directly to investors. These investors are rehabbing the homes and putting them up for sale or they are renting them out while waiting for the market to come back. Homeowners that have been able to hang on to their homes during the downturn and would like to sell their homes are waiting for the prices to come back before they put their homes up for sale. This has kept the inventory of homes at a record low. Low inventory coupled with more buyers have created multiple offers on most homes which increases their sales price. These higher sales prices will in turn increase the value of appraisals and counteract the lower values caused by short sales. Eventually housing prices will increase and will have a positive impact on consumer confidence. Consumer confidence affects consumer spending; which is a major force in keeping our economy going. So, all things being equal, I would say the future of our local real estate market is looking pretty bright!

"Keep Your Home" Glitch

A program called “Keep Your Home California” can provide financial assistance to California homeowners who are in some form of financial distress on their residence. The program is funded by the Federal government and has $2 billion in funds allocated to it. You can learn more about the program and apply for help at www.KeepYourHomeCalifornia.org. Not everyone will qualify.

They have four main programs.
1. Unemployed Mortgage Assistance will pay your mortgage if you are unemployed.
2. Mortgage Reinstatement will help bring your payments current.
3. Principal Reduction will reduce your principal.
4. Transition Assistance will help you relocate to a rental if you can’t stay in your home.

The Unemployed Mortgage Assistance program is one of the largest and most requested programs. They will make your payment for up to six months if you are unemployed, and you don’t have to be behind to qualify.

But some California homeowners are running into a technicality that prevents them from taking advantage of this program, even if they qualify. There is a maximum monthly payout set at $3,000. This means if your mortgage payment is more than $3,000, it won’t cover the full payment.

Many homeowners would be willing to make the extra payment themselves, but that’s where the glitch comes in. Most loan servicers will not accept less than the full monthly payment. Let’s say your payment is $3,100. So your lender would receive one check from Keep Your Home California and then a check for $100 from you.

Most servicers would send BOTH checks back, refusing to cash them. The servicer may accept the checks if they were sent together in the same envelope, but Keep Your Home California only sends checks to the loan servicers, not to the homeowners.

And they aren’t set up to receive and manage checks from homeowners made out to their servicers. They are looking into solutions, but so far haven’t found one to this challenge.

Great News: First time homebuyer credit to be extended & more

A note received from C.A.R.
Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
Nov. 5, 2009Dear C.A.R. Members:More good news for consumers, our members, and the housing market recovery. Following the Senate’s favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. As you may know, C.A.R. and our partners at NAR have worked for months urging Congress and the Senate to extend and expand this crucial piece of legislation. We expect President Obama to sign the legislation in short order.As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.Nationwide, more than 1.4 million first-time home buyers were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers. We expect that number to increase dramatically in the months ahead with this new legislation in place. Thank you to our members who called, wrote, and e-mailed their congressional representatives and voiced their support for the home buyer tax credit. Your voices were heard – today’s vote is a direct result of your actions and involvement.Sincerely,James Liptak2009 President
CALIFORNIA ASSOCIATION OF REALTORS®

Consumer Alert: Loan Modification Scam Alert

This is a news release taken from the State Bar of California

STATE BAR TAKES ACTION TO AID HOMEOWNERS IN FORECLOSURE CRISIS

MEDIA CONTACT: Diane Curtis 415-538-2028 diane.curtis@calbar.ca.gov
San Francisco, September 18, 2009 — The State Bar of California, alarmed by the number of lawyers preying on vulnerable homeowners, today identified 16 attorneys who are under investigation for misconduct related to loan modification.
“In my 21 years in attorney discipline, I have not seen a crisis of this magnitude. It is truly unprecedented,” said Interim Chief Trial Counsel Russell Weiner, who is waiving investigation confidentiality in favor of public protection. The waiver, allowed by law, is used only occasionally, but Weiner said the seriousness of the problem demanded a strong reaction by the bar in order to protect consumers. This is the first time the names of more than a few lawyers being investigated have been made public.
“The number of attorneys using their law licenses to essentially take money from unwary but trusting consumers is astounding,” Weiner added. “There are literally thousands of victims who have lost money they could not afford to lose. Under the circumstances, the need for public information and protection is paramount.” Those attorneys being named by the State Bar have allegedly taken fees for promised services and then failed to perform those services, communicate with their clients or return the unearned fees, Weiner said. Some attorneys misrepresented the services they could provide. “It appears these attorneys may have significantly harmed their clients who were already facing great financial pressure and the possible loss of their homes.”
About one-quarter – almost 800 cases – of the active investigations in the Office of Chief Trial Counsel (OTC) are related to foreclosure complaints. The office has experienced a 58 percent increase in active investigations over 2008 due in large part to the huge increase in complaints against attorneys offering loan modification services. “Our office is aggressively investigating these cases and is working proactively with law enforcement,” said Weiner.
In March of 2009, the State Bar created a special team of investigators and lawyers to handle the growing number of complaints received about attorneys offering loan modification services. OTC found that many of the offending attorneys are associated with firms that use telemarketers or phone banks to sign up clients without regard to the facts of the individual case or whether or not the client can be helped, Weiner said.In many cases, the attorneys work with untrained non-attorney staff engaging in the unlawful practice of law by offering legal advice to prospective clients. OTC also is investigating the non-attorney staff for possible referral to law enforcement.
In recent months, OTC has obtained the resignation of three attorneys who were offering loan modification services. Those attorneys chose to give up their licenses to practice law rather than face disciplinary charges and possible disbarment. In addition, OTC lawyers are preparing to put some attorneys on inactive status pending the filing of formal disciplinary charges
Weiner warned consumers to take special caution when seeking legal representation related to loan modification. “Consumers should not be comforted by advertisements that claim the attorney is a member of the State Bar of California,” he said, noting that all attorneys practicing in California on a regular basis are members. “Such membership does not mean the attorney has any special knowledge, experience or expertise in the area of loan modification. In fact, it appears that many of the attorneys offering these services have little or no prior experience in the area of loan modification.”
The following attorneys have received a significant number of complaints related to the loan modification services they were hired to perform. They are entitled to a full and fair hearing on any charges that may be filed in the future. No discipline may be imposed unless and until the State Bar proves allegations of misconduct by clear and convincing evidence.
▪ David Arase, Bar No. 233705, Arase Law Firm and National Housing Assistance
▪ Stephen Burns, Bar No. 113371, Legal Group Network
▪ Robert Buscho, Bar No. 122556, United Law Group
▪ Nicholas Chavarela, Bar No. 251632, Rodis Law Group and America’s Law Group
▪ Steven Feldman, Bar No. 103676, Feldman Law Center
▪ Eric Johnson, Bar No. 224065, Avantgarde Group
▪ Paul Lucas, Bar No. 163076, Lucas Law Center
▪ Brandon Moreno, Bar No. 233750, U. S. Foreclosure
▪ Jeffrey Nemerofsky, Bar No. 213014, U.S. Advocacy Law Group and U.S. Financial Products
▪ Gregory Paiva, Bar No. 207218, Law Offices of Gregory Paiva
▪ Adrian Pomery, Bar No. 249664, U.S. Foreclosure
▪ Ronald Rodis, Bar No. 181873, Rodis Law Group and America’s Law Group
▪ Mark Shoemaker, Bar No. 134828, Advocates for Fair Lending
▪ Marc Tow, Bar No. 78429, Marc Tow and Associates
▪ Michael Yellin, Bar No. 255050, A Fresh Start Loan Modification
▪ Sean Rutledge, Bar No. 255938, United Law Group
The State Bar suggests that consumers be wary of attorneys offering loan modification services under any of the following circumstances:
Advertisements of the office do not expressly identify by name the attorney who is responsible for the business.
Office staff will not readily identify by name the attorney responsible for oversight of the business.
The attorney in charge of the office is too busy or not willing to meet personally with prospective clients.
The firm advises a consumer to stop paying the existing mortgage.
The business, through its advertisements or claims of its representatives, makes claims that sound too good to be true, such as claims of a 90 or 100 percent rate of success in obtaining loan modifications, or claims that a reduction in the mortgage principal is likely to be achieved.
The business demands payment of a large fee, even before obtaining a prospective client’s basic income and expense information, and information about the existing mortgage and present home value.
The attorney responsible for the business is not licensed to practice law in the state where the consumer resides.
There are legitimate loan modification services and ethical attorneys that are providing the promised services for their clients. Two places to start in the search for loan modification assistance are: HUD Housing Counselors, 800-569-4287, http://www.hud.gov/counseling; and HOPE NOW, 888-995-HOPE, http://www.hopenow.com.
Consumers can also find qualified attorneys through a State Bar-certified lawyer referral service that can be found on the State Bar’s Web site (www.calbar.ca.gov), or by calling the State Bar’s Lawyer Referral Services Directory at 1-866-442-2529 (toll free in California) or 415-538-2250 (from outside California).
Consumers having a problem with the attorney handling their loan modification may contact the State Bar at 1-800-843-9053 or visit the State Bar’s Web site at www.calbar.ca.gov to find a complaint form.
Founded in 1927 by the state legislature, the State Bar of California is an administrative arm of the California Supreme Court, serving the public and seeking to improve the justice system for more than 80 years. All lawyers practicing law in California must be members of the State Bar. In September 2009, membership reached 223,000.

Optimism in the local Bay Area real estate market

Finally, the moment we have all been waiting for(at least for real estate professionals) has arrived. Or should I say the market trend is positive.

We are finally seeing buyers crawling out of the woodwork. Lenders are seeing more loan applications for getting pre-approved. More buyers are showing up at open houses.

This is good news for the sellers that have been struggling to sell their homes in a market that was sloping downward. We are even seeing wonder of wonders, should I say the M-word, "Multiple Offers".

Now, don't get me wrong, this euphoria is being seen in some areas. Most markets in the Bay Area have yet to catch up.

And most importantly the lagging news media has yet to catch up with this phenomenon.

So all you folks who have been waiting on the side-lines for the market to hit bottom before you make the "Buy" decision, "It is Time". Get into the market now or the market may leave you behind.

I had made the bold prediction that the market would pick up within the first three months of the new year. I hope this prediction holds true.

Fed funds rate cut and its effect on mortgage rates

Big news last month when the Federal Reserve (The Fed) cut interest rates. But what rates did they cut? They did NOT cut mortgage rates. In fact, the Fed cannot cut mortgage rates, at least not directly. The Fed recently cut the “discount” rate only, but has not (as of the date I write this article) cut the federal funds interest rate.

But what’s the difference between the two? The discount rate is the rate at which banks can borrow money directly from the Fed. Banks borrow from the Fed when they have an urgent need for liquidity (cash in hand). The federal funds rate is what they pay when they borrow from another bank. This type of loan is most often used when banks want to lend more money to consumers. Both of these types of loans are very short-term loans, often just overnight.

The Fed does not set interest rates on mortgages, car loans, credit cards, etc. But by setting a target rate for the federal funds rate, most banks try to fall in line around that number. Remember that the federal funds rate is the one that is related to getting more money into the hands of consumers, so that impacts you directly.

So by lowering the discount rate, which really only affects a bank’s liquidity, but not consumers directly, the Fed is saying that they recognize there is a problem, but they are taking a measured approach to trying to solve it. The general consensus among Fed watchers is that a reduction in the federal funds rate might come in September. This should result in a lowering of mortgage rates, which will help our real estate market.

By the way, if you’d like to see something hilarious (and at the same time scary), go to www.YouTube.com and search for “Cramer on rate cut.” This financial “expert” has a meltdown on TV screaming for the Fed to lower the federal fund rate.

Short Sales up, may be a great time for first-time homebuyers.

We are seeing more and more short sales. Short sales are sales wherein the property is listed and sold for less than what is owed on the property. These are distress sales and we are seeing more of these now than even a couple of months ago.

People that find that they are in a situation where they are having trouble making their mortgage payments should talk to a real estate professional before the situation escalates to the point where they have to loose their home or have their credit damaged.

Homes are being sold at deep discounts in many areas. There are many good deals to be had on starter homes in Fremont, Milpitas, and some pockets of San Jose. This may be a good time for first-time homebuyers that have been waiting on the sidelines for the bottom of the market to drop.

There are still good first-time homebuyer programs that these people can avail of. A popular one is getting assitance of $6500 at 0% towards their downpayment. Please call or email for more info.