As proof of the “huge” default rate of high end mortgages in Los Altos, the author writes “In Los Altos, Los Altos Hills and the most expensive neighborhood in adjoining Mountain View, defaults in the first five months of this year edged up to 16, from 15 in the same period in 2009 and four in 2008.”

Additional “proof” comes in the form of an increase of the number of legal notices posted in the local newspaper (from 1 to 5).  Holy cow Batman!  Given this explosion of local high value defaults, I’m suprised that our local real estate market hasn’t imploded.  Here is why it hasn’t.

Slightly more than 400 homes sell each year (according to our local MLS – data taken over the last 12 years).  There are over 10,000 homes in Los Altos, Los Altos Hills and the most expensive neighborhood of Mountain View.  A couple dozen defaults in any given year doesn’t describe a huge default problem, especially when many of these are cured and/or the property is sold before the property goes through foreclosure proceedings.  If my math is correct, defaults are less than 4% of the 12 year average of homes sold in a year and less than 1/10th of one percent of all housing inventory available.  Give me a break!

I also question the author’s definition of rich.  I may be wrong, but I think he equates rich to the amount of debt one carries.  I don’t think “rich” folks are those who leverage themselves to the hilt.   Definitions like speculator, dreamer, or gambler come to mind, but not rich.

The truly rich are those who have a high net worth (assets minus liabilities).  If I were to use Los Altos home buyers as a definition of rich, I would say that the rich are more prone to purchase real estate using a higher percentage of cash than the average home buyer.   When they buy with higher percentages of cash down, they are more able to withstand a downturn in the market.  Should they become unemployed, they are more likely to have enough equity to sell the property without the home going into foreclosure proceedings.

The author also writes:

“Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.”

and later:

“Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.”

Based on the above, one would logically conclude that the author provides solid data that supports this premise. I can’t speak for Orinda or the other areas mentioned in the article, but I have a pretty keen sense on what’s going on in my hometown.  Let’s look at the five homes scheduled for the trustee’s sale (or at least the five that I think he is writing about).

1. Bought in 2001 – Bought the home for lot value and built a new home, lived in it for 6 years, put on market to sell in July 2009.  Ratified two contracts, both fell apart.  Property currently listed for sale as a short sale.
2. Bought in 2006 - as new construction - house is under contract as a short sale
3. Bought in 1999 – remodeled, house put on the market in February 2008 – house is under contract as a short sale.
4. Bought in 2005 – built large estate to sell.  Property went into contract 3 times, but couldn’t close the transaction.  There are rumors of litigation between the investors and builder.   Home has been on and off market since October 2006.  Currently an active listing.
5. Bought late 2006 – new construction.  Now a short sale listing.

Three homes were bought as investments with the intent to build and sell.  They timed the market wrong and lost.  The other two were home buyers who bought and over-leveraged themselves.  All are trying to sell the property.  Some will be successful and others won’t.  But are these people purposefully dumping their financially draining properties?  I’m not convinced.

What about the other 400 plus home buyers who bought homes in Los Altos and it’s surrounding areas in the last year, last two years etc., who aren’t.  They have huge mortgages, yet they aren’t walking away.  Why not write about them?

The New York Times should be writing about how home buyers who live in relatively affluent areas like Los Altos or Orinda continue to pay their mortgage payments despite a decrease in property values.  One would think that it doesn’t make financial sense, yet they continue to keep their mortgages payments current.

A few may not be able to handle their mortgage obligations, fall behind and are forced to sell.  But are their numbers truly out of the ordinary.  I think not.  But I guess a local prospective doesn’t sell newspapers nationally.

By the way, in this week’s addition of the Los Altos Town Crier, there were only 2 notices of defaults advertised.  I guess that means that defaults on high value mortgages in Los Altos are down substantially.  Hooray, our market is strong again!

The 2010 Los Altos Art and Wine Festival includes the work of hundreds of artists , three stages of music, street performers, a KIDZONE with TV entertainers and storybook characters, foods from around the world, great beer and wines from several Santa Cruz Mountain wineries.  Attendance is expected to surpass 100,000 people for the weekend. 

This year I am pouring wine for Kings Mountain Vineyards from 3:00 pm - 6:00 pm on Saturday.  The booth is located at the corner of Main and Third.  Click 2010 Los Altos Art and Wine festival map to find the Kings Mountain Vineyards location.

Naumann Vineyards (State and Second), Roudon-Smith Winery (Main and Second), Page Mill Winery (Main and Second), Thomas Fogarty Winery (Main and Third) and Fernwood Cellars (State and Fourth) will also have representatives pouring wines this weekend.

You must have a wrist band to partake in any of the refreshing adult beverages.  No wristband, no beer or wine.  When you purchase a wristband, you receive a commemorative wine glass or beer mug.  Once you have the glass (wristband) you can visit any of the wine or beer booths and purchase a “pour” of your favorite beverage.  The cost of each “pour” ranges from approximately $4.00 – $7.00. 

Note: If you don’t have a wristband, you won’t be served.  In prior years, patrons would bring old art and wine glasses in an attempt to buy a drink without paying for the glass (wristband).  Patrons can bring old glasses, but unless they have purchased a wristband, they won’t be served.

Lastly, I can get pretty hot at the festival, so please leave your pets at home.

To all my past and current clients, please stop by the Kings Mountain Vineyards booth (Saturday between 3:00 – 6:00) and say hi.  I’d love to see you and buy you a glass of wine to thank you for your continued support.

The higher end of the market is still tough.  Five homes priced above 2.5 million are under contract with the highest coming in at almost 4.2 million.  Only four homes closed escrow above 2 million in May, with the highest selling at 2.75 million.

Thirty single family homes closed escrow in the month of May.  Note:  On average, we see 40 homes close escrow in the month of May.

Lastly, twelve properties had multiple offers and sold above their asking price.

Click Los Altos Real Estate Market Update – May 2010 for a detailed 24-month history of home sales activity in Los Altos. Note: all data was taken from our local MLS and is deemed accurate but not guaranteed.  For a more detailed look at your neighborhood, click on the below links:

Real Estate Market Update for South Los Altos - May 2010 

Real Estate Market Update for the Highlands Neighborhoods of Los Altos – May 2010 

Real Estate Market Update for the Country Club Neighborhoods of Los Altos – May 2010 

Real Estate Market Update for North Los Altos – May 2010 

Should you have any questions about your home and/or it’s value relative to our current market, please contact me directly at 650 917-4250.

Just shop at Whole Foods - Los Altos on May 25th anytime from 8AM-10PM and 5% of the net sales goes to LAEF.  It’s pretty easy.  No coupons or fliers are needed.  Restock your pantry, buy picnic supplies, update your emergency food supplies, fill up your wine rack, eat lunch or dinner at Whole Foods Los Altos! 

According to LAEF’s website, the mission of LAEF is:

The Los Altos Educational Foundation works to raise funds and to provide financial support as a supplement to the resources of the Los Altos School District for the purpose of funding academic and enrichment programs, and improving the overall education of students in the schools of the Los Altos School District.

The Los Altos Educational Foundation (LAEF) is a 501(c)(3) not-for-profit organization, Tax ID# 94-2862793.

Click here to see the programs that LAEF has slated for funding this academic calender.

Join LAEF’s Facebook page.

Thanks for supporting our local schools!

The life span of a typical short sale listing in Los Altos/Los Altos Hills goes as follows:

• The property is originally listed at a price very close to the debt on the property plus the transaction costs and maybe a little profit
• The property sits on the market for quite a looong time with no activity
• The Seller realizes that they are financially bleeding from every Orifice
• The property is re-listed at a below market value in an effort to induce offers
• The Seller receives multiple offers which are reviewed and submitted to the bank/investor(s)
• Everyone waits to see if a deal can be worked out.  Some are, but many aren’t

Below is a graph of short sale properties that are currently or have recently been on the market in Los Altos/Los Altos Hills.  I have included the original list price, current approximate debt and list price when the property ratified a purchase offer with the seller.

The actual numbers are below.

Sellers, a home’s value is not based on its loan balance.  Price it to the market and try to move on.

If you are thinking of buying a short sale property, check out the amount of debt on it and the number of lenders involved.  It may make sense to pass on it if there is too much debt or more than two lenders.

The Renovation, Repair, and Painting Rule applies to all firms and individuals who are paid to perform renovation, repair, and painting projects that disturb paint in pre-1978 housing and child-occupied facilities.  This includes home improvement contractors, maintenance workers, painters and other specialty trades.

Those doing the actual work will need to follow three basic lead safe work practices:

1. Contain the work area
2. Minimize work related dust
3. Clean up/cleaning verification

The National Association of Realtors has produced a series of short videos that discuss the RRP rule and its applications.  Click here  to see the first video in the series that describes the RRP rule.

When selling a home, interior and exterior painting typically adds the highest return on investment.  Sellers who opt to paint are going to face higher costs due to contractor compliance related expenses.   According to the EPA’s website, in addition to a certification fee of $300, a training fee of approximately $200, contractors will also see increase in the costs associated with compliance (ie. containing and minimizing dust etc.).  

Sellers may also need to plan ahead because finding a contractor who has completed the compliance and certification training may prove to be difficult, at least initially.  As of the writing of this post, there are 14 contractors within a 10 mile radius of Los Altos who have completed the certification process.  To find local contractors who have been certified, click here .

Lastly, there are exemptions to the RRP rule:

• The home or child occupied facility was built after 1978.
• The repairs are minor, with interior work disturbing less than six sq. ft. or exteriors disturbing less than 20 sq. ft.
• If the house or components test lead free by a Certified Risk Assessor, Lead Inspector, or Certified Renovator.
• If the property owner is conducting the RRP work themselves.

For further information regarding lead hazards and home renovations, click on the following brochure.

It is unknown how quickly Congress will move to reinstate this federal program when they return to Washington on April 12^th.  As such, we are facing a minimum of a 2 week gap in the availability of this important federal program.

Buyer Tip: check to see in there is any effect on the funding of your loan with your lender prior to removing the financing contingency.  Otherwise you may up a creek without a paddle or a boat.

Giant Oak Tree Falls in Los Altos

Originally uploaded by David Blockhus

I was taking my dog on a walk this morning and came upon this
beautiful old Oak tree that fell over in the recent rains. The tree
came down in the 900 block of Springer Road in Los Altos.
Fortunately, it appears that the tree grazed the house.

Below are additional images of the downed tree.

[View with PicLens]

The higher end of the market saw an increase in activity in March.  Three single family homes priced above three million sold, including one home that sold close to six million.  This all cash deal closed within a week of being listed.

Thirty four single family homes closed escrow in the month of March.  Note:  34 closed sales is the 12 year monthly average of closed escrows for March.

Eight properties had multiple offers and sold above their asking price.

Click los altos real estate market update – March 2010  for a detailed 24-month history of home sales activity in Los Altos. Note: all data was taken from our local MLS and is deemed accurate but not guaranteed.

Should you have any questions about your home and/or its value relative to our current market, please contact me directly at 650 917-4250. Thanks for reading.

Measure A is a bond measure that will be put to the voters on the June 2010 ballot.  It would fund new classrooms and green renovations at our local high schools.  According to a recent demographic study, enrollment in our local high schools will increase by slightly over 25% (approximately 900 students) over the next ten years.

Click for a FULL TEXT BALLOT PROPOSITION OF THE MOUNTAIN VIEW-LOS ALTOS UNION HIGH SCHOOL DISTRICT BOND MEASURE ELECTION JUNE 8, 2010

For those interested in further information about Shoup Park, Click on the following link for a post I did on the park.  http://siliconvalleyrealestateinfo.com/shoup-park-often-mis-pronounced-always-fun.html

View Shoup Park in Los Altos, CA in a larger map