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 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.

According to MLS Listings Inc. data, there currently are 11 active listings for sale in the Mountain View MLS area 209.  The most expensive home on the market (priced at $1,848,000) is a 4 bedroom 3 bath remodeled home by owner/contractor Jack Myers.  It is stunning!  It is located in the Gest Ranch neighborhood which is within the Los Altos School District boundaries. 

The least expensive home in area 209 is a 3 bedroom 2 bath home on a substandard sized lot (approx. 4,977 sf) and a busy street.  It is priced at $759,000.   Currently 8 homes are under contract in area 209, ranging in price from $775,000 – $1,599,500.

Below are July 2009 Statistics for Mountain View’s MLS area 209:

Sales are up slightly relative to the last 3 years.  Listings are down slightly.

Both Average and Median Sales prices have creeped up from last year and are closer to 2005 numbers.

The 20 days it took to sell a home in July 2009 is slightly longer than in 2007 and 2008, but it is about average relative to the last 12 years.

The list price to sale price ratio is slightly under 103%.  It appears that homes are beginning to receive multiple offers and get slightly bid up.  Note: This number should be taken with a grain of salt.  

Why, one may ask?   A home may have been on the market for a period of time with no offers.  The home is pulled from the market and re-listed at a lower price point.  It is at this lower price point that it may receive multiple offers.  Therefore it looks to the public that the home sold quickly with multiple offers when it really didn’t.  That is why buyers should always ask for the “listing” history of the home they intend to purchase. 

The study looked at “towns” with populations under 100,000 residents and ranked them according:

 ”to median income; average commute; distance to highways and airports; per capita venture capital funding; per capita number of small businesses, sole-proprietorships and start-ups; the percentage of the population with bachelor’s degrees or higher; the share of professional-level workers as defined by the Bureau of Labor Statistics (BLS); the percentage of young and educated people, or those 25-34 with a bachelor’s degree or higher; and the percentage of foreign-born residents with a bachelor’s degree or higher. We also measured the per capita number of restaurants, bars, museums and cultural institutions. “

Below is what Forbes said about Mountain View:

Population: 70,960
Location:South of Palo Alto on the Bay Area peninsula.
Median income: $88,736

Strongest categories: While there’s plenty more to Mountain View, the average commute time of 20 minutes is a rarely found pleasure of Bay Area living. Credit Mountain View’s standing as our most active venture capital markets, for an abundance of entrepreneurs running their own businesses, which in turn means they don’t have to commute to bigger cities like San Jose and San Francisco.

Drawbacks:There aren’t a lot of restaurants, music venues, museums or cultural attractions in Mountain View, though it isn’t too far for residents to trek 15 miles into San Jose.

Below is what Forbes said about Cupertino:

Population: 50,572
Location: South of San Francisco and west of San Jose.
Median income: $128,149

Strongest categories:A great start-up environment in the heart of the Silicon Valley and home to a number of semiconductor and technology companies, most notably Apple, Cupertino succeeds as a mix of a place for established businesses and small shops. It ranks in the top 10 for sole proprietors and small businesses per capita.

Drawbacks:While you certainly can’t complain about the warm climate, Cupertino simply didn’t do as well as the top cities on our list even in the categories considered its strengths.

In San Mateo County, Foster City was ranked 10th, Belmont 11th, and Hillsborough 12th.

For those of you who may have missed it, it’s a 4 bedroom 3 full bath home located on the Cupertino School District side of Fremont Avenue in South Los Altos.  At almost 2100 sf and on a lot of slightly over 9500 sf, it’s a great value at $1,428,000.

The home was remodeled and expanded approximately 20 years ago and features a fabulous living room with vaulted ceiling and bay window.  The kitchen is spacious with an abundance of counter space and storage.  Each of the bedrooms are over-sized for the tract.  There is a separate family room with fireplace.  The garage has been extended and has extra storage via a pull down ladder to the attic area.

Children would attend Cupertino Elementary School District: Montclaire Elementary School (956 API) , Cupertino Middle School (915 API) and Homestead High School (846 API).

The home is in close proximity to Grant Park (a 4.5 acre city park), the Foothill Crossing Shopping Center (Trader Joe’s, Peet’s Coffee, Starbucks Coffee etc.), and Rancho San Antonio County Park.

Below are pictures of the property:

1701 Penny Way map
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In the summer, there are outdoor concerts where locals come with folding chairs and food to enjoy the music.  There are also meeting/classrooms and a large multipurpose room with stage available for rent.  Dogs are allowed on leash.  Note: I’ve been there numerous times when dogs were running off leash.  However, their owners picked up after them.  See below for pictures of the park.

2-5 year old play area

5-12 year old play area

Picnic tables and barbecue area

Soccer field (notice the dogs off leash in background)

3 basketball hoops (I think they are going to resurface the courts)

Grant Park dedication plaque 6/21/1991

There may not be too many more opportunities to enjoy the fields of flowers at the Pumpkin Patch as Summerhill Homes is developing the 15 acre parcel into a 54-unit single family home subdivision. 

I go by this site almost daily.  Today, I decided to stop and smell the flowers (actually take pictures).  I hope you enjoy them as much as I did taking them.

The complex features a nice swimming pool with showers which is located between building 605, 607, and 609.  Note:  during the summer and early fall, the units in these buildings receive constant pool related noise.  Located between buildings 613, 615, and 617 is a children’s play area, gazebo and small field.  Lastly, there is a larger grass field located between buildings 606, 608, and 610.

The buildings themselves are three stories tall and teh front doors are accessible via an exterior stairway (there are  no elevators).  There is second entry into each unit via an interior stairwell that exits at the ground level parking area and garages.  Note: most units have a single car garage (some garages are attached to the building and some are detached along the exterior of the property).  There are additional assigned parking spots as well as guest parking spaces.

The interiors of the units were originally built with the same amenities.  Most are still in their original state, but more and more are being remodeled.  Originally, the kitchens had white tiled counter tops, maple cabinetry and white GE appliances (gas stove-top).  The bathrooms where originally constructed with maple cabinets and a solid surface, all-in-one counter top and sink.  The showers and tub surrounds where also an all-in-one unit.  The master baths featured large soaking tubs.  The flooring was either linoleum and/or wall to wall carpet. 

A nice feature of this complex is the large in-unit laundry area that houses a full size side by side washer and dryer (most are electric dryers).  No stack-able unit here!  The condos have decent sized decks (corner units are smaller) that are plumbed for air conditioning units.  Note: when the complex originally was built, not many buyers ordered the A/C units.  More and more owners are adding the A/C units.  They are especially useful for owners of the tops floor condos that get quite warm in the summer/early fall.  Lastly, for those of you who like real wood fireplaces, the condos at Compass Place have them.

Given the choice, buyers prefer the units located in the odd numbered buildings because they are further from the traffic noise generated from highway 101.  Buyers also prefer the higher numbered buildings because they are farthest away from Fair Oaks Avenue and its traffic noise.  All things being equal, the most preferred buildings are 615 or 617 and the least preferred are buildings 101 and 102.  See development map below.

Most condo buyers prefer end units however at Compass Place, the end units do have some drawbacks.  For example, the decks on the end units are quite small and the view from the condo, in part, looks directly at the building next door.

I like the top floor units best because of the vaulted ceilings and there is no one above you, but they do have some minor drawbacks.  The top floor units tend to get more traffic noise (both from highway 101, Fair Oaks Avenue and aircraft noise).  As I already mentioned earlier, the top floor units are significantly warmer in the summer (and winter which is good).  Lastly, buyers have to climb three flights of stairs to access the top floor units.

All-in-all Compass Place condominiums have appreciated well over the years and have retain their value fairly well in the last two market corrections.  However, there is currently one unit for sale that is a short sale.  According to MLS records the owner bought the unit in late December 2005 for 500K and it is currently on the market for $519K. 

Below are sales statistics compiled for the last six months at Compass Place. 

Unit Number    Beds    Baths     SF      List Price     Sale Price 

609   #201            3           2      1250   $554,000      Available

609   #306            3           2      1300   $545,575      Available

608   #104            2           2      1058    $519,000     Available

607    #101            2           2      1058    $514,950     Available

610    #303           2           2      1160     $508,000    Available

606    #201           3           2      1250     $559,000    $554,170

610    #202          2            2      1160     $529,000    $529,000

615    #302          2            2      1160     $529,000    $529,000

609    #102          1            1        867      $430,000   $412,000

According to their website:

“The CrimeReports.com service provides law enforcement agencies with an affordable and easy-to-use Web-based service for managing and controlling the sharing of crime data with the public, in near real-time. Community members can then access their neighborhood crime information for free, empowering them to make informed decisions to help improve the safety of their families, friends, property and the community at large.”

In California, currently only four police departments have provided information to be posted on CrimeReports.com.  They are the Los Gatos/Monte Sereno police department, the Fremont police department, the Palo Alto police department and the San Jose police department.  Since I once lived in West San Jose, I ran a search using the address of a home I owned in the Strawberry Park subdivision located near Saratoga Avenue and highway 280. 

I first entered the type of crime I wanted to search for.  The type of crimes one can search for range from quality of life crimes like drunken disorder and traffic stops to violent crimes like robbery, burglary and homicide.  I chose to check and see if crimes like vehicle theft, burglary and homicide have occurred.  I set the date parameters for my search at 14 days and came up with the following results: 

According to the results, my old neighborhood had one “theft” crime reported within the last 14 days and it occurred on the 700th block of Saratoga Avenue.  Within about 1 mile radius of the property, there were a dozen or so crimes reported and most of them were property thefts.  I ran another search going back six months and the grid lit up like a Christmas tree.  The good thing is that most of the crimes were against property not people.  The bad thing is I had no idea whether my old neighborhood had a lot of crime. 

I had no base line to differentiate between what was a high crime neighborhood and what was not.  So I compared my search data with that of a neighborhood that I knew had a reputation as being a high crime neighborhood.  The results of the search made me feel a lot better about my old neighborhood.  Given that I lived in Strawberry Park for almost 10 years without any concerns, I knew first hand how safe it was and still is.

There is an interesting statistic bar above the map that tells how many total crimes occurred as compared with the parameters the user has set up.  For example, I searched for violent crimes and came up with 15 violent crimes out of a total of 159 crimes (see below).

According to the stat bar, between 2/23/08 and 2/25/08, there were 159 crimes committed and of these, 15 were of the violent category. 

In an effort to protect the victims, CrimeReports.com lists only the block on which the crime occurred, not the actual address.   Although listed as a search category, CrimeReports.com currently does not post information about California sex offenders on its website.  Yet other states do.  I wonder why?  Lastly, CrimeReports.com is only available in 15 states and only in a few cities within these states.  There is an area on the website where you can invite your local police department to participate.  If your city is not represented and you feel this service might be beneficial, you can contact your police department through CrimeReports.com and it might become a city that will post its data online.

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Blossom Valley Estates includes 209 homes that were originally constructed from 1954-1957.   Over the years as families grew and their needs grew, houses were remodeled or expanded.  According to county records, the average Blossom Valley Estates home has grown to approximately 1570 sf.  The largest home, located at 1771 Fordam Way, tops out at just under 2,800 sf..  1760 Lemontree Court boasts the largest lot at slightly more than 16,000 sf.  See map above for the streets that makeup the Blossom Valley Estates neighborhood.   Lastly, the majority of homes (approximately 165) are 3 bedroom, 2 bathroom. 

Sales in the Blossom Valley Estates subdivision from January 1, 2007-December 31, 2007

 Street Address         Square Footage        COE Date          Sales Price

1107 Cuesta Drive             1280                            3/14/07              $1,080,000

968 Cuesta Drive               1600                            4/20/07             $1,245,000

835 Sladky Drive               1475                             6/1/07                $1,230,000

1709 Peartree Lane          1524                            11/14/07              $975,000

933 Sladky Drive               1280                           12/6/07                $1,213,000

1778 Fordham Way           1400                           12/18/07              $1,260,000

Currently there is one home in Blossom Valley Estates:

1852 Orangetree Lane

3 bedrooms, 2 bathrooms – 1850 sf

Listed by Eric Fischer-Colbrie of Intero Real Estate