It’s just that

1) they’re big; an important player in a healthy financial system. If they go down, we’ll all be running around with gold in our pockets

2) they have a  tremendous eposure to subprime & SIVs, the off-ballance sheet vehicles set up to hide the subprime (& other mortgages)

3) we don’t fully know the extent of their problems (and we may not want to know, see #1)

4) we really care about the “subprime mess” spilling into the regular joe’s financial system. It’s already happening, but we’d like it to not get worse…

Anywho, the good news is, they just took in some fresh cash. $7.5 Billion from Abu Dhabi. That’s not a who, but a what - an oil-rich country’s investment authority. That’s right, it’s our gas money!

The bad news is Citi needed it, and may still be short $30 Billion by some analysts accounting.

While not listed as a “short sale”, at this listing price, there are not enough funds to cover the loans, the other payoffs like taxes and closing costs, and the commissions. The seller would need to bring a check in to the closing table to make this work.

 I spoke to the listing agent today and we went through the numbers. He was expecting multiple offers, and for it to sell around 780K, based on the “comp” of 795K (from 18 months ago?!).  At 780K, it’s not a short sale. But, with no description in the MLS for buyers to read, and no offers to date, we can safely assume that we won’t be seeing multiple offers.

On the plus side, this home was completely remodeled by the former seller, and frankly was overbuilt. That seller lost a bit on the deal (it was a rehab deal), and this seller’s loss (if they choose to go short), would be the buyer’s gain. A nice home for an owner-occupier looking to get into the heart of North Fair Oaks.

If you have the time, patience & stomach to buy a short sale, or want more information about this one or short sales in general, give me a call at 650-464-9816.

Patrick Boyle, your North Fair Oaks Resident Realtor

 Citi has a tremendous exposure to the SIVs which have been at the root of the credit crunch for the last 60 days. Likely they just need to stop the hemoraging for a while.

 We just “got the email”

This is a wholesale bakery with a small storefront that we NFO’ers drive by regularly but never stopped in. Maybe because the blinds were drawn, or because we didn’t know what it was - bar, restaurant?

La Biscotteria was started in Belmont & moved to this RWC location in 2002, as wholesale only. They tore down the residential property on the current site and built a great looking retail/residential building that blends perfectly with the environs. From their website history page:

“The all-new La Biscotteria bakery is located in Redwood City, the hometown of its owner and founder, Augustine Buonocore. The business continues to operate as a wholesale bakery but the mystique of the commercial oddity had been dispelled - in October 2003 the exquisite etched glass door opened to the public. In planning for the future, Augustine took the necessary steps to create and launch the La Biscotteria website in January 2005. LaBiscotteria.com is capable of handling both wholesale and retail sales.”

Absolutely check them out. If you go on Saturday for foccacia, pls pick some up for me (I’m on Ninth)!

La Biscotteria, 2747 El Camino Real, Redwood City, CA 94061
1.650.366.2747

http://www.realtyconcert.com/listings/784/2.JPG

Closed Sale 784 SAN BENITO AV, Menlo Park - North Fair Oaks Real Estate

Type: Detached Single Family
Status: Sold
List Date: 07/30/07
Price: $789,000
Sale Price: $779,000
Sale Date: 08/13/07
DOM: 14
COE: 09/13/07
Bedrooms: 3
Bathrooms Full: 2
Approx. Sq. Ft.: 1300
Approx age: 48
MLS#: 742418

This was one of ours - Realty Concert’s listings. Duein part ot the softening market, this was a tough sell. In the end however, we got a bit more than what the sellers were looking for, and the buyers are happy with their new home with its upgrades & repairs we made as part of the sale and sale prep.

Some of the things we worked on to get this one ready for market.

Painted cabinets & new granite counters:  

Painted Exterior:

Upgraded some light fixtures, caught up on all the small repairs & some new ones the Termite company found, and of course, professionally staged the home (all included in Realty Concert’s Listing Service).

- Patrick  Boyle, Broker - 650-464-9816

 The “mess that greenspan made” (a blog of same name) is now being cleaned up with Bernake’s dirty rag.

 This can only mean one thing: the mess is worse than the fix (bailing out overzealous, overleveraged, reckless investors of all stripes, AND risking inflation). Uh-Oh!

 But, if the cut helps some buyer’s confidence, then bring it on!

OUR JUMBO LOAN-DRIVEN MARKET

We have a perfect storm brewing in real estate:

• ARM loans are resetting, with payments going up, and refinancing relief is disappearing due to falling home values and more restrictive loan programs.
• Lenders are foreclosing on buyers not making their higher payments, and Sellers are selling “short” (less than what they owe), driving down values & prices further
• The number of homes for sale continues to grow in most markets

Then, in August, the last element was thrown in the mix:

• Loans have simply disappeared for a large percentage of the home buyer population (not just sub prime buyers), and fewer buyers means even lower values and prices

August 2007 will be remembered for a long time in

At Realty Concert, where we handle both home loans and sales, we see first-hand how the lenders are tightening their guidelines and eliminating entire loan programs. And those are the lenders still in business! The rest are simply filing for bankruptcy. 

100% loans or 0-Down loans are gone. Stated income loans and interest-only loans are more expensive and harder to qualify for. Down payment requirements are rising across the spectrum of credit and deal type. Credit score requirements are rising.

While this may sound like welcome news to those critics of the loose lending standards of the recent past, what it does for our “jumbo loan” market is to dramatically cut purchase power for many buyers, if not knock them out of the market altogether.

Theses loans, in particular the Interest-only and stated income loans, were used to boost purchase power for regular buyers, not just sub-prime buyers. Buyers responded in turn by bidding up prices beyond all historic trend lines. Homeownership rates reached historic highs of 69% (see chart) as the industry made loans to people who traditionally would not have qualified for loans (sub-prime or not).

Many ask if this is just a sub-prime issue. We hoped that it was, but no longer. Now that some of those sub-prime buyers are defaulting (only some), the lending market is worried about all the other fancy “free money” loans, and has shut down the party. No more free money.

As a result of the new lending guidelines we could loose up to 50% of our potential buyers at the prices they would have paid; up to 20% from sub-prime loans (which were used by more buyers than people assume), and up to 30% of the “Alt A” loans (the larger purchase price low down & stated-income buyers.)

Of course, this must translate into price adjustments – how much remains to be seen and will depend on the locality and the price point. The non-jumbo market is still lending (under 500K), but some jumbo loan areas will see a further 20% + price decline while some may get away with 10% drop. Other areas may simply lock up and not sell for some time (central valley).

OPTIONS FOR SELLERS

Some select markets are still in multiple offer situations, such as Palo Alto,

In much of

We operate MLS-2.com (a map-based listing site), which is giving us some visibility into the buyer support out there. The “Bargain Hunter” page on MLS-2.com has been one of the more popular features since its launch last October. It filters out listings with 10+% price drops, short sale listings, and “motivated seller” listings.

Many buyers from MLS-2.com call us about “short sale listings” they find on the system, and we’re seeing that they are priced very low, and that there are often multiple bids on these. That tells us there is demand for homes priced “below market value” and hopefully indicates a floor or support level.

For those sellers who need to or would really like to sell in 2008, they should start now. The longer a seller waits, the more likely the full impact of the news will have permeated the entire homebuyer mentality and serious concessions will need to be made to sell a home.

The main concern is time on market, and as inventory builds and time lengthens, starting fall ’07 to finish up in spring ’08 would be preferable to starting in spring to end much later, at a lower price.

So, how is it done? The home will need to stand out in a sea of competitors and any serious buyers will need to be seized upon quickly. A buyer’s financing will need to be vetted by a professional prior to any contract negotiations.

Sellers will need to “motivate” buyers in addition to offering their homes for sale. Although this is the job of the Realtors, many fall short in this regard and need a little help. We have a few strategies to pull this off. Call for details.

Sellers will more than ever put their best foot forward with presentation. Staging and repairs will be more critical in the coming year, and those who understand this will do better than their competition.

In fact, we may see a return to a more traditional market where sellers will need to make certain repairs as part of the sales contract so the buyer can finance these. If the buyer needs to put much of their money into the down payment, they won’t have cash left for repairs or upgrades. Buyers will gravitate to those listings where this is not an issue. Realty concert has contractors who will defer their labor charges until a buyer is found in escrow to help offset the burden on sellers (seller pays for materials at time of repairs). Call for details.

Short selling is an option for those who home is valued less than what they owe in loans, but it’s not guaranteed and there may also be tax consequences. Call for details if you or someone you know may need to consider this.

A strategy that some should consider if interested in trading up is to sell now, rent for a while, and buy later.

OPPORTUNITIES FOR BUYERS

It goes without saying that we’re in a buyers market, and the trend will continue. Job growth is still strong, and the local economy is strong. The Bay Area is a great place to live, and buyers still want to live here.

Buyers also want a “deal.” This may be a great opportunity for buyers to get into the market. Buyers that are vigilant may be able to score a great deal on a bank owned home or a short sale. MLS-2 is a good tool for that. Call for details on how to work that market.

Homes that have been foreclosed upon may be the best buy, but they may not be the ones many buyers want to live in. Later, owners of better properties, who in past downturns have hung on to weather the storm, may start to sell at lower prices.

Lastly, we do not believe prices will decline to the level where rental investment properties will “cash-flow.”

OPTIONS FOR REFINANCE CANDIDATES

Start early if you have a loan resetting and you want to refinance out of it. Loans up to 500K will become more liquid in the coming months. Jumbo rates are currently higher than they would be outside any liquidity crisis. Simply waiting a few more weeks may produce lower rates on these loans. Call for details.

Declining values combined with lenders’ increased equity requirements will prevent some borrowers from getting a new loan. In that case, trying to negotiate directly with the lender for new terms is an option.

Patrick Boyle

Broker, Chief Economist

Realty Concert            Cell: 650-464-9816

2. ”Know Your Rights: the terms of your loan should always stay the same, no matter who holds your loan. It’s important that you thoroughly review the details of your mortgage agreement. The interest rate and the type of loan you get should not change in a transfer. If your lender does sell your mortgage, you should receive a letter from the company within 15 days that outlines the new mailing address and payment deadline.”

3. ”If you have paid off your loan in full, and you want a mortgage satisfaction documents from the company when it’s no longer in business, go to your State Attorney General’s office.”

4. “Negotiation will still be hard. The servicer - the company you make your monthly check out to - may not think it’s worth its while to negotiate with homeowners to lower monthly payments.”