The latest develoment in the efforts to stabilize the economy is the overnight decison to all the government to pump $250 billion into financial institutions, with $125 billion going to nine major banks. The decision was made in an attempt to unfreeze credit markets and give banks the confidence to make loans. Most experts ands economists agree that this is the right move, “”It addresses the biggest problem that banks face, which is a capital crunch, and it attempts to fix the short-term debt markets, plus it reduces the risk of liquidity runs on banks. That’s a pretty powerful first punch.”

What does this mean for the Pleasanton real estate market? Time will tell. Stocks were up again today, a sign of some relief for those invested in any way in the market.

What may be of more immediate effect on our local market is Bank of America/Countrywide’s move to implement a foreclosure prevention program in the wake of a lawsuit settlement against them for predatory lending practices.

“As part of the initiative, Bank of America will cut monthly housing payments, including mortgage, property taxes and insurance, to no more than 34% of gross income. The move is expected to help keep as many as 400,000 troubled borrowers in their homes.”

This kind of loan modification effort will attempt to keep people in their homes and avoid foreclosures, which are much more costly to a lender than restructuring the loan.

Do you have a loan with Countrywide? Don’t wait for them to contact you. Call them and find out if you qualify for loan modification.

Click here to read an article about B of A’s decision.

Read an article about the U.S. buy into banks here.

Even though the median home price has fallen over the past year, this graph is a good snapshot of how much home prices have risen over the past 20 years. As the market continues to correct, or even over-correct in some cases, it’s important to keep these historical gains in mind.

So is the average price the same as the median price? No, average usually refers to the mean, or the arithmetical average of all the values. The average is calculated by adding up all the values and then dividing by the number of values. The median is the mid-point value, determined by ordering all the values from high to low and finding the middle number.

The bailout plan, now re-named the Emergency Economic Stabilization Act has been signed into law.

Although there are many facets to the bill, two sections in particular are designed to address struggling homeowners directly: Section 109, Foreclosure Mitigation Efforts and Section 110, Assistance to Homeowners.

Both of these sections encourage “a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to take advantage of the HOPE for Homeowners Program under section 257 of the National Housing Act or other available programs to minimize foreclosures.”

Modifications to residential mortgage loans, may include the following:

•        Reduction in interest rates    
•        Reduction in principal
•      Other similar modifications

It is important to note that the legislation makes it VOLUNTARY for lenders to make modification to existing loans. The coming weeks should reveal how these two provisions of the bill will be implemented.

However,the most important thing that you can do right now if you need mortage assistance is to reach out to your lender and ask for workout options. In most cases, your lender would rather explore options to keep you in your home than to pursue foreclosure.

 Click here to view a copy of the entire bill.

September 2008 Market Update

 As September 2008 draws to a close there is good news and bad news for the Pleasanton Real Estate Market.  Let’s start with the good news.

The available inventory of single family homes for sale continues to decrease.

Peaking at 276 homes for sale at the end of July, the inventory level has decreased to 248 homes at the end of September. That’s a 10% decrease.  Meanwhile monthly sales have remained very steady over the last 6 months, averaging 53 homes per month.  At the current pace of sales we have about 4.35 months of supply. 

Overall these numbers are very healthy and would give the appearance that the market is doing quite well.  Now comes the bad news.  Prices are down from one year ago.  The median sales price for single family homes was $730,000 at the end of August 2008 compared to $835,000 at the end of August 2007.  That $105,000 represents a 12.57% decrease.

Part of the problem is distress sales.  There are a fair amount of homes currently on the market or recently sold that are in financial distress.  These can be classified in one of two ways:

A.      Short Sale This is a situation where the current owners are trying to sell their home as they are typically delinquent in their payments.  However the current value of their home is less than the amount owed to pay the mortgage loans against the property.  A short sale then is a situation where the owners are requesting the bank to accept less than the amount owed to settle up the debt.  If this situation is not successful, the bank will take the house back in foreclosure.

B.      REO  This is a situation where the bank has already taken the house back in foreclosure and now wants to sell it.  Typically the price is very aggressive as the banks simply want to get rid of these properties as quickly as possible.

This table shows the number of short sales and REO properties as a percentage of all sales activity for Pleasanton since January 2008. 

These distress sales are having a significant impact on our market.  On the one hand they tend to show an increased level of sales which can be misleading since these distress sales are typically priced below market value.  On the other hand, the below market sales tend to pull down house values.

On the bright side you can see that the number of distress sales in Pleasanton is not as great as it is in other communities.  As you can see from the table below, Dublin has a much greater  percentage of distress sales in all categories.

Other communities are even higher still. Livermore for example is at 69%.  Brentwood is at 86%.

So have we seen the last of the short sale and REO properties?  Unfortunately that is likely not the case. A lot of what we’ve seen this year in the way of short sales and REO sales are a result of the sub-prime loans attached to purchases completed in 2005 and 2006. 

There is another large group of what is called ALT-A loans where the homeowner refinanced into a high loan balance with a very low fixed interest rate that will come due in 2009-2010.  Many homeowners may not be able to manage the payments when these loans convert to adjustable loans. 

Foreclosureradar.com reports the following summary for the month of August 2008:

·         The notices of default increased in California by 4.8 percent.  This is the first step in the foreclosure process.  That equates to 42,790 filings.

·         Notices of Trustee sale, the next step in the foreclosure process, decreased by 7 percent. There were 36,292 filings.

·         Properties taken to foreclosure decreased by 8.6%.  There were 26,309 properties taken to sale at auction.   By the way, 96% of properties sold at auction go back to the bank.

      The decrease in the notice of trustees sales and properties taken to foreclosure either means that banks are doing more to modify loan terms with delinquent borrowers so they can get current and remain in the property or a combination that the volume is too great for the lenders to process and/or they are purposely delaying the foreclosure process to push losses into future quarters.