Arn Cenedella

Archive for the 'East Palo Alto real estate' Category

Possible Solution to Foreclosure Problem – Open for discussion!

On the San Francisco Peninsula, the City of East Palo Alto has been ravaged by foreclosures.

There are currently 89 homes listed for sale and over 70 of these are either REOs or short sales.

The average price in East Palo Alto went from $200,000 in 1998 to over $600,000 by 2007. Tripled!

The current average price is say $250,000.

Most other peninsula cities saw average prices DOUBLE during this time.

I believe the extra run-up in East Palo Alto was due to sub-prime financing that got borrowers into loans they had no chance to pay back on homes way too expensive for them. East Palo Alto probably has the lowest per capita income of any city on the Peninsula.

I believe most of the people who bought homes in East Palo Alto the past few years are good hard-working people who due either to language issues or a lack of financial knowledge unwittingly bought homes and took loans they could not afford. This was done more by a lack of knowledge than any plan to “game” the system.

I am working with one couple recently referred to me. Before meeting me, this couple bought a house for around $550,000 in East Palo Alto about 3 years ago. When the initial teaser rate expired on their purchase loan, they refinanced and now find they can not afford the payments as the rate adjusted again. Making the situation worse, the cost of the refinance was rolled into the refinance loan. The husband works TWO jobs and the wife also works. They have a son in high school who will go to college – something his parents did not.

Their house may be worth $275,000 now and they owe $550,000.

Their lender is Countrywide. For 6 months now, they have tried to worked out a loan modification and have gotten nowhere.

These folks are good hard-working people. They want to pay their bills on time. They are NOT dead-beats. They did not take out $100,000 HELOC to buy a new Mercedes Benz and big screen TV. They fact that they can’t not make the payments has nothing to do with their personal integrity and desire to do the RIGHT thing.

Drum roll – open to comment and critique – here is my solution for folks like these.

If their lender will not agree to a loan modification, these folks should be allowed to walk from their house with NO DAMAGE to their credit rating. The government could then direct FHA to make these folks a loan to purchase a new home for say $275,000. FHA would not hold the foreclosure against them. FHA would qualify them with the STRICTIST standards. The folks may not be able to afford a $550,000 but they certainly afford a $275,000. Let them walk across the street and buy this house. Give them a 30 year fixed rate – use a 31% to 32% qualifying ratio make sure income is documented. These folks will not default on their new loan.

I guess what I am saying, why penalize these folks because the market in their area collapsed? and because the professionals (both loan and real estate) that got them into the house did not do a good job?

This approach would not require any government money and would be financed with the usual FHA MI premiums etc.

The lender would take the loss – not the government – not the US – not us.

This couple would be able to remain homeowners albeit in a different house.

And my sense is if this program would go into effect, I think you would find lenders much more willing to do a loan modification because if they didn’t buyer would walk and buy house across street.

The program might only apply to designated FORECLOSURE DISASTER ZONES – perhaps by census tract.

What do you think?

Taxpayers not on the hook. Lenders take the loss. Buyers are able to remain owners. Win-Win?

Comments please.

EPAToday interview with Henrietta June 2008 – Housing Market Update

Here is a clip of an interview I did at EPA Today with Henrietta on the housing market in June 2008.

I will be doing another market update this Thursday February 9.

Representatives from EPA Can Do will also be on the panel and the topic will be the real estate market and what can be done to keep more people in thier homes and out of foreclosure.

EPA Can Do is a non-profit organization that offers legal assistance to East Palo Alto residents.

First-time buyers – this may be your opportunity to buy!

Yes, the economy is weak and yes, we may not have seen the worst.

But if you feel your employment is secure, if you buy within your financial means, and if you wish to make the San Francisco Peninsula your home, this is a good time to buy.

Long-term, I think we can have confidence that the economy will recover and that our area will continue to be a major employment center.

Prices are down in many areas – especially the more affordable entry-level neighborhoods.

30 year fixed rates are around 5%.

The Senate has passed a proposal for a $15,000 tax credit for home buyers. This is promising. But I caution everyone that this is NOT LAW. The House and Senate will need to agree on the bill and we need to see the exact final form of the bill. Will there be income limits? The current $7500 credit has a $95,000 limit for individuals and a $150,000 limit for couples. Will the new bill contain income limits? This issue will make a big difference in our area.

This is all good but I would like to bring it down to a personal level.

Some former tenants of mine (Rick and Beth) moved to LA a few years ago. Rick and Beth now want to move back and I met with them on Saturday January 17 to look at homes in East Palo Alto and east Menlo Park. We looked at 5 homes and found a real cute 2 bedroom 1 bath at 2230 Poplar Ave. listed at $199,950.

There were several offers and Rick and Beth went above list price a little but we had seller – a bank – pay all their closing costs.

Their total cash outlay to purchase will be about $10,000 and their monthly payments will be $1255 loan, $50 for insurance, $234 property taxes, and $100 mortgage insurance – total monthly payment $1639 per month.

So $10,000 plus $1639 per month buys a 2 bedroom 1 bath single family home on a 5000sf lot.

This house has fresh paint, carpet, vinyl, and new windows.

So basically with little cash outlay (I mean it costs $4000 to move into an apartment around here) plus basically a rent payment, Rick and Beth will become homeowners.

I believe it is reasonable to assume that in 5 to 10 years, this house will be worth more than the $225,000 paid for it. Do you agree? And even if it isn’t, they will be owners instead of renters. They can fix the house and yard up the way they want and enjoy living in this house.

If East Palo Alto isn’t for you (my first home was in East Palo Alto, BTW), then there are other areas where you can buy single family homes for under $500,000.

A home just closed in White Oaks San Carlos where I have lived for 23 years for $680,000.

That is a great price!

So first-time buyers, get moving to take advantage of the current opportunities.

I am confident – if you buy now - in 5 years you will be grateful – you did. 

One of my favorite loan agents, Linda Lunsman of Princeton Capital, handled the loan for Rick and Beth. Linda helped get their offer accepted since she knew the listing agent and got Rick and Beth’s FHA 3.5% down loan approved in 8 working days.

Rick and Beth will be moving into their home before the end of the month. Trust me, they are ecstatic!

I have been in the real estate business since 1978 and I have plenty of professional contracts that help my clients in all aspects of a purchase or sale. These allied professionals would include several excellent lenders, contractors, inspectors, accountant, landscapers, painters, and flooring contractors. I also offer property management.

Contact me if you wish to get started in a low-key no-pressure but professional manner.

Get moving you will not regret it.

What does Zillow Q4 2008 report say about the local market?

During my 31 years in the real estate business selling properties up and down the San Francisco Peninsula, I am often asked what is so special about Menlo Park or Palo Alto or Los Altos?

Why are homes more expensive in these areas compared to San Carlos (my home for the past 23 years), Redwood City, Belmont, and Mountain View?

The data below taken from Zillows Q4 2008 reports for the San Francisco MSA and the San Jose MSA may give an answer.

On a quarter Q4 to quarter Q3 comparision:
Menlo Park home values up 1.2%
Palo Alto home values down -0.4%
Los Altos home values down -2.9%
while Mt. View is -7.1%, East Palo Alto is -16.7%, Redwood City is -8.4%, San Carlos is -7.3%, and Belmont is -9.4%.

The year to year data is similar Menlo Park up slightly, Palo Alto and Los Altos down slightly, and the other cities down a fair amount ranging from -4.9% to -37.3%.

As I have told my clients “when times are tough, the more desirable markets hold up better”.

But for those doomsayers out there, please note for EVERY CITY except East Palo Alto, the 5 year and 10 year annualized change are ALL POSITIVE. So even after two fairly tough years, home values in these San Francisco mid peninsula cities has gone up over the past 5 to 10 years.

Average increases over 10 years at about 6% per annum. East Palo Alto had a 10 year annualized increase of 5.3%.

A $500,000 property purchased in any of these cities 10 years ago – on average – would be worth $909,000 today.

Say this property was purchased with 20% down or $100,000 10 years ago, the current equity of $509,000 would represent a 17.67% return on the downpayment. This is a “broadbrush” calculation for illustration purposes.

Of course, if the market should continue down for another year or two, the 5 and 10 year annualized returns would be reduced. But I think this data does show the strenght of our local market in the worst economic conditions most of us have ever seen in our lifetimes.

The media often uses Zillow data to paint a bleak picture of the real estate market.
Using Zillow’s own data, I believe one can make reasonable arguments that our market is doing pretty good all things considered.

If there are any stock market guys out there, I would be interested to see 5 and 10 year annualized stock market returns after the current collapse.

Consider real estate in your retirement accounts. Want to learn more, just let me know.

Foreclosure Opportunities #2

There are 42 homes currently priced under $300,000 in East Palo Alto and east Menlo Park.

Here is list of homes and asking prices.

Most of these homes are REO or short sale foreclosures.

Lenders are anxious to get these homes sold and “off their books”.

2035 Ralmar Ave., East Palo Alto $239,900

A new bank-owned property has just come on the market.

3 bedrooms 1 bath priced at $239,900.

West of 101 right next to Menlo Park Willows neighborhood.

This property was purchased for $640,00 in April 2006.

Property listed with Athena Chilicas Coldwell Banker Woodside.

Call me and let’s take a look!

Investor Alert – SF Bay Area homes break even with 20% down

For many years, I have had numerous clients contact me looking to buy rental real estate on the San Francisco Peninsula that would “break even” with 20 % down. Until now,  I would say “that is not possible – you need 40% down to “break even” on a single family home.

Banks and have other lenders price their foreclosed homes very aggressively.

Multiple offers are not uncommon.

Let’s look at sample purchase for $250,000.

$250,000 less $50,000 down (20%) leaves $200,000 loan.

$200,000 at 6.5% has a monthly payment of $1,264.

Property taxes will be $250 per month.

 Insurance will be $75 per month.

Total monthly ownership cost $1,589.

Your typical 3 bedroom home in these areas will rent for $1800.

In a Section 8 program, the County will pay 80% to 90% of the contract rent leaving only a small amount to collect from the occupant tenant.

Buy San Francisco Peninsula real estate and break even with 20% down.

You used to have to go to Texes to get cash flow – now you can get it right here.

Contact me and let’s get started.

Mission Palo Alto townhouse newly listed – $449,000

I have just listed 120 Mission Drive, East Palo Alto for $449,000.

This 2 story end unit townhouse contains 1580 square feet of living area and 2 garages ! – 1 attached and 1 detached – and a huge side yard. Located west of highway 101, this property is only minutes from downtown Palo Alto and Stanford University.

2 bedrooms 2.5 baths living room with vaulted ceilings and wood-burning fireplace, separate dining room and den.

I was an original owner at Mission Palo Alto and lived there from 1980 to 1986.

Check the virtual tour out!

Call me if you would like to see this property – it is an excellent value for the money.

Los Altos Market Data

Dave Blockhous of Coldwell Banker Los Altos recently did an analysis of the current Los Altos market. In this post, Dave compares market activity (number of sales and listings & average and median prices) over the first six months of the past couple of years. His analysis comes to much the same conclusions as my analysis of the San Carlos, Menlo Park, and Palo Alto markets did: The number of sales are down from years past but the average and median prices have remained stable or increased slightly.

A Tale of Two Cities

In previous posts, I have indicated that the strenght of the market is a function of the price range involved.  In my opinion, the market in 2007 has been strong properties priced at about $800,000 and above and weaker for properties below that price range.

To illustrate this point, let’s look at inventory levels in two cities, San Carlos (where the average price is about $1,200,000) and East Palo Alto (where the average price is about $600,000).

San Carlos

San Carlos inventory levels typically bottom out in January of each year. As with Menlo Park, the inventory level in January 2008 is higher and in the two preceeding Januarys.

East Palo Alto

Unlike most cities on the Peninsula, the CURRENT inventory level is HIGHER than at any point in the past 3 year. This graph clearly indicates the weakness in the East Palo Alto market. The inventory levels have been increasing since January 2007.

I believe the East Palo Alto inventory level is indicative of the damage the “subprime” crisis has done to the entry level market on the Peninsula. I would venture to say the overwhelming number of buyers who purchased the past few years in East Palo Alto obtained “subprime” mortgages. These mortgages are not available at the present time. Hence, East Palo Alto homes are not selling and perhaps many owners in East Palo Alto have put their homes on the market as the loan payments are no longer affordable.

Kevin Boer a Palo Alto real estate agent has looked at inventory levels from Burlingame to Los Gatos including Palo Alto.