The Arizona Board of Appraisal has moved to stop Zillow.com from providing online home estimates, known on their web site as “Zestimates”, in the state of Arizona. Arguing that these estimates are actually appraisals, the board is seeking to prevent Zillow from providing “Zestimates” in the state. Zillow states that these estimates are a public service, and not a formal appraisal. In fact, the company has disclaimers on their web site to that effect.

Frankly, I don’t agree with the state of Arizona. There is nothing wrong with online information. At the least, these online estimates are interesting, and provide a point of discussion. In my personal experience, they have not proved to be terribly accurate, especially with “emotional” ammenities such as views, oversized lots, location, and interior appeal. I have had some of the “zestimates” come in somewhere in the general range of value on homes I have sold, but others have been off, sometimes substantially. I had one property in Fremont that had a “zestimate” at $1,030,000, and it sold for $1,500,000. I know this because I had a buyer argue with me feaverishly that it was worth no more than $1.1 million, and kept bringing up the “zestimate”. Obviously, he was way off.

As long as consumers know that a “zestimate” is no substitute for an appraisal or a broker price opinion, then why not allow them. In the interest of fairness, we also had an appraiser tell the owner that the house was worth $1,650,000… he was off too.

As you mght have noticed, posting has been light the past 2 weeks. I am now back from vacation, so look for a slew of activity in the next few days.

By the way, after 5 days in Disney World, I am done with lines. I can’t even stand waiting in line at Starbucks anymore…

I guess that seals it. The National Association of Realtors, otherwise known as the National Association of Real Estate Optimists, is forecasting a nationwide decline in the median price of resale homes of .7% this year (that’s .7%, not 7%, or 70%).

The California Association of Realtors is predicting a 2% decline in resale home values this year in California. Others predict sharper drops.

Keep in mind one thing. Real Estate can be analyzed and studied, and be the source of endless predictions and forecasting. But it is still a local business. Or more accurately, a combination of many “micro-markets”. In Northern California, for example, you have the major metro markets of the bay area. Because of the limited supply of land and the incredibly strong economic engine of the bay area, which is as diversified as they come, demand for housing is constant, and the supply of housing in the metro markets is limited, either by geography, or political will, or both. These markets will always perform well, but are of course subject to fluctuations. And as I have written about several times, there is the other Northern California market, the “secondary” markets where land is plentiful, but where the high paying jobs (hi-tech, bio-med, engineering, etc) are not in abundance. The secondary markets, including Tracy/Manteca, Stockton, Solano County, and Sacramento, have been struggling since the market peaked in 2005, and in general have seen more price erosion than the metro Bay Area. An additional factor is that these secondary markets have seen an explosion of investor activity in recent years, with speculators and small investors comprising a much larger share of the market activity than is the case in the primary markets. This adds greatly to the volatility of the market. And with the recent subprime mortgage troubles, many of the potential buyers for these less expensive areas will have a difficult time obtaining mortgages.

So it is not inconceivable that California as a whole sees a decline in the median price, and the Bay Area remains strong. They really are 2 different markets. In times like this, it is always best to remember the ‘ol law of supply and demand. In the prime bay area markets, there is a steady demand for housing, and a limited supply. While we certainly could see a flat market, or even some price erosion, there is certainly not a market in the country where I would rather own real estate.

Ok, so by now you know what sub-prime loans are. Now the default rate has risen on the next level of loans, the so-called Alt-A loans. Basically, “A” paper loans are standard, traditional loans with normal underwriting made to borrowers with good credit, strong income, and stable employment. Alt-A loans are the next level. They are not the “subprime” loans we have heard so much about, but are riskier loans to people with decent credit, but who are taking on more debt than would normally be allowed given their income. Bridge loans and other temporary loans would fall into this catagory.

Now, it appears that default rates on Alt-A loans is rising as well. This is having an impact because most loans are securitized, or bundled and sold as pools of loans to large investors. Because the default rate is rising, investors are demanding higher yields to compensate for the increased risk. The net result is likely higher rates, at least in the Alt-A catagory.

Alt-A loans are made to borrowers with credit ratings that fall between prime and subprime, or to homeowners who have prime credit but are seeking a somewhat riskier loan.

Such loans made up about 10 percent of all mortgages outstanding at the end of 2006 and made up about 18 percent of home loans written last year, according to Moody’s Economy.com.

Together, subprime and Alt-A loans account for about 21 percent of loans outstanding and 39 percent of mortgages made in 2006.

The delinquency rate for Alt-A mortgages remains much lower than the rate for subprime mortgages, but it has been rising. In February, 2.6 percent of Alt-A loans were delinquent by 60 or more days, up from 1.22 percent a year before, according to FirstAmerican LoanPerformance. By comparison, 12.44 percent of subprime loans were delinquent by more than two months, up from 7.84 percent.

Reports that Wall Street, which made millions of dollars securitizing mortgages in recent years, is becoming more wary of Alt-A by putting loans back to lenders or by bidding less for them could be an indication that default rates will worsen before they improve.

The problems in subprime mortgages started late last year when big investment banks started returning delinquent loans to lenders. Many of those lenders have since filed for bankruptcy protection.

So far so good in Pleasanton and the Tri-Valley. A strong Spring selling season has made the prime bay area markets, such as the penninsula, S.F., south bay, East Bay, and Marin, vibrant and solid. The secondary markets, namely the central valley and the Sacramento valley, are struggling, and are much more likely to be impacted by the mortgage troubles.

Courtesy of the New York Times.

The U.S. economy added 180,000 jobs in March, dropping the national unemployment rate to 4.4%, which is a 5 year low. This is certainly welcome news for the national economy, which has been struggling with a real estate slump. Wages were also up, registering a solid 4% increase over March of last year.

“For most people, the job market is still hitting on a lot of cylinders, especially for people who are willing to upgrade their skills. It is not leaving a large number of people stranded,” said John Challenger, chief of Challenger, Gray & Christmas, an employment research firm. “But there are pockets where people are having a difficult time,” he said.

Those include people looking for work at factories, where jobs in March were cut for the ninth straight month. Makers of autos, furniture, clothing and textiles all eliminated jobs last month. Another soft spot: residential construction, a casualty of the housing slump.

But there were many more job winners than losers. Construction jobs led the way, especially for contractors and for commercial building. Retailers, health care providers, educational services and leisure and hospitality companies were among those boosting their payrolls.

While real estate has taken its lumps, the economy continues to show strength. This certainly is the case in Pleasanton and the East Bay, which continues to show solid job growth and a reasonably strong real estate market, ulnike many markets nationally.

Courtesy of Yahoo News.

This is not a surprise to anyone who has been following the real estate market in Pleasanton, Dublin, Livermore, and San Ramon. The National Association of Realtors reported that pending sales of existing homes rose .7% in February as compared to January, and the index came in at a higher level than analysts expected.

Jon Basile, an economist with Credit Suisse of New York, said Monday’s data “gives a feel that existing home sales has stabilized because they are higher than the lows of last year. At the very least, housing demand is not getting any worse.”

This is a welcomed dose of good news on the national real estate market, which has been battered lately by the gloomy outlook for subprime lenders and some homebuilder stocks. Does this mean we have bottomed out? That, as they say, is the $64,000 question. Some expect more pain in the real estate market this year.

Higher delinquencies among subprime borrowers with damaged credit will put downward pressure on home sales this year, said David Lereah, NAR’s chief economist.

“Problems in the subprime mortgage market will become more apparent over time, and they will modestly depress the overall level of improvement in existing-home sales we expect as the year progresses,” Lereah said.

In the East Bay, look for strong job growth and stable interest rates to help counter the negative effects of the higher deliquencies and woes in the subprime market. If there is one thing that the Pleasanton and Tri-Valley real estate market has proven, it is that there is constant and consistent demand for housing in this area, and when prices slump, it creates value and opportunity for buyers looking to get into the market or move up.

Courtesy of Cnn.Money.com

Okay. I admit it. I am not a huge Rosie O’Donnel fan. I have liked some of her stand up work, and her bit parts in movies seemed to be above average. But why comedians, and actors, and musicians feel compelled to share their political views is beyond me. Generally, they just end up looking ignorant, and sometimes just downright wacky.

Rosie’s wild proclamations on the TV show The View recently about a 9-11 conspiracy was just too much to take. Apparently, Rosie has a degree in civil engineering that we all did not know about. To quote Rosie, “I do believe that it’s the first time in history that fire has ever melted steel. I do believe that it defies physics that World Trade Center tower 7—building 7, which collapsed in on itself—it is impossible for a building to fall the way it fell without explosives being involved. World Trade Center 7. World Trade [Center] 1 and 2 got hit by planes—7, miraculously, the first time in history, steel was melted by fire. It is physically impossible.”

Now, I’m no civil engineer either. I am not qualified to weigh in on engineering topics such as the strength of steel and structural failures in buildings. But fortunately, Popular Mechanics, a popular engineering and science publication, consulted with experts who are qualified to examine the events of 9-11 and in March 2005 published a definitive explanation of the events of 9-11, including the collapse of WTC 7 (they have since expanded the story and published a book Debunking 9/11 Myths: Why Conspiracy Theories Can’t Stand Up To The Facts, by PM editor-in-chief Jim Meigs. It is difficult if not impossible to read this article and have any lingering doubt that these conspiracy theories, and Rosie in this case, are full of hot air. For those interested in science and facts, it is fascinating.

BTW, according to Popular Mechanics, it was not steel melting that caused the collapse of these buildings. The fire did not melt the steel, it weakened it, rendering it unable to handle the load of the building above it. Read the article, as it explains it very clearly. Of course, facts and evidence are not nearly as explosive (forgive the pun) as wild conspiracies and CIA plots.

This from the Contra Costa Times today:

East Bay cities such as Berkeley, Brentwood, Clayton and Walnut Creek experienced a nearly 25 percent drop in median home prices from February of last year.

Walnut Creek’s median home sales price dropped to $519,000, according to DataQuick Information Systems, making it lower than the median home price for Martinez, Brentwood and Pinole.

Before you panic and put your home on the market, please take a deep breath and relax. As we have discussed several times on this blog, median home price tells you… well.. what the median home price was for a given period of time. Although it is used extensively by the media, it is not necessarily an indication of increases or decreases in values. It can be impacted by factors that have nothing to do with whether market values are going up or down, especially if the sample size is relatively small (for example, taking the median home price for an individual city). This from the article:

But many say those statistics can be misleading because DataQuick’s numbers include condominiums and both resale and new single-family homes.

“There were two condo conversions going on in Walnut Creek,” said John Karevoll, a DataQuick analyst. “It looks like those tugged the home median price down.”

Walnut Creek is known for its mostly resale housing stock and condominiums which can cause “bounciness,” Karevoll said. Condominiums, especially older resales, can drop prices quickly just as new homes give prices a jolt upwards. He said this can make a city like Martinez, which has a significant number of new homes and fewer condominiums, seem to have higher prices.

“People really should be looking at the broader trend,” he said. “If a new housing tract is open, home sale prices will go up.”

Smaller numbers also can create bigger swings in price. In tiny Moraga and Orinda, which had about a dozen sales each and rising prices, one home can push down or pull up the price hundreds of thousands of dollars, said Micky Gill, an agent with Century 21 Hosking Associates in Walnut Creek.

In the case of this article, the median home price in Walnut Creek is higher than of Martinez, Brentwood, and Pinole. If the relative values were less, I would expect to see gridlock in the streets of Walnut Creek, as throngs of buyers from Martinez, Brentwood, and Pinole would be beating down the doors of available homes in Walnut Creek and bidding frantically to snag one of these “bargains” in this “less expensive” area. Sure. And if you believe Walnut Creek is less expensive than these cities, I know of some swamp land you might be interested in as well.

A good rule of thumb is to take everything the media says with a grain of salt. Find local sources of information for the real story on what is happening in your market (like this blog, for example), or talk with professional brokers in your market to get an accurate take on the market.

Now, go get that For Sale sign out of your yard, calm down your wife and kids, and relax. Besides, if you really want something to get excited about, The Sopranos starts Sunday night.

Read the whole article.

The early Spring real estate market continues to show some strength, although inventory is surging in all price brackets. Pent-up demand from buyers who decided to sit last year’s market out hoping for lower prices continued to propel the market in March, although sales did dip some from the frantic pace of February. Overall, inventory is trending up, and sales slipped slightly for the Pleasanton real estate market as a whole. (Click on graph to enlarge)

In the under $1 million price bracket in Pleasanton, inventory was up to most, rising sharply as more homes come on the market. Sales slipped to below the levels seen in January and February. Compared to March 2006, the sales and available inventory this year is almost identical. (click on graph to enlarge)

For the $1 million to $2 million bracket, inventory at the end of March in Pleasanton trended up for the 4th straight month, with pending sales showing gains over February as well. (click on the graph to enlarge)

For the high end market segment in Pleasanton (over $2 million), inventory trended up after a fairly flat Dec through February. Pending sales fell sharply after a strong surge in March, which is not unexpected. (click on the graph to enlarge)

As inventory in Pleasanton surges this Spring, the key question is how much buyer demand is in the market, and is it enough to absorb the increase in inventory. Interest rates remain relatively low, and prices are certainly down from their peak in 2005, so buyers many of the buyers sitting on the fence have decided to jump in. As always, we’ll keep an eye on market trends and let you know the latest.