Reuters – Paulson backs off asset plan; crisis cures at risk 11/12/2008

The U.S. Treasury backed away from using a $700 billion bailout fund to cleanse bank balance sheets of bad mortgage debt, while Europe reported more gloomy economic news, fanning fears of a worldwide recession.

To read the full story, please click here:

http://www.reuters.com/article/topNews/idUSTRE49N5VU20081112

CNN – New home sales tick up 2.7% 10/27/2008

Sales of newly constructed homes rose in September, according to the monthly report from the U.S. Census Bureau, inching up 2.7% from August to an annualized rate of 464,000.

To read the full story, please click here:

http://money.cnn.com/2008/10/27/real_estate/September_new_home_sales/index.htm?postversion=2008102710

Bloomberg – Evil Wall Street Exports Boomed With `Fools’ Born to Buy Debt 10/27/2008

Tom Bosh lowered the telephone receiver into its cradle, making a decision on the way down. “We’re not buying any more,” he told his traders at Bank of New York Co. “Nothing.”

It was May 2007, and Bosh, who managed $25 billion from the bank’s 13th-floor trading room above Times Square, had just hung up on Ralph Cioffi at Bear Stearns Cos. a dozen blocks away. Bosh had invested $50 million in notes from an issuer Cioffi controlled, and he was ready to pull the plug.

To read the full story, please click here:

http://www.bloomberg.com/apps/news?pid=20601206&sid=a0jln3.CSS6c&refer=realestate

Market condition in Bay Area – 10/19/2008

Market condition in Bay Area – 10/19/2008

This mainly keeps track of the entry level SFR in selected cities

Inventory: min. 3 bedroom / 1 bath with 1000 sq ft and above

  max. price Active Pending Inventory Level
(months)
Belmont < $1,000,000

25

10

4.15

Burlingame < $1,250,000

9

5

4.50

Campbell < $750,000

40

9

10.00

Daly City < $550,000

63

50

7.56

East Palo Alto < $360,000

24

43

4.00

Foster City < $1,000,000

9

4

5.40

Los Gatos < $1,000,000

28

7

10.50

Millbrae < $1,150,000

55

43

7.86

Milpitas < $550,000

24

13

5.54

Mountain View < $900,000

17

9

4.64

Pacifica < $580,000

19

14

3.56

Palo Alto < $1,200,000

10

3

3.00

Redwood City < $600,000

24

8

36.00

Redwood Shores < $1,150,000

5

0

1.67

San Carlos < $1,200,000

19

17

2.28

San Mateo < $700,000

51

30

6.65

San Jose < $400,000

611

403

10.18

Santa Clara < $650,000

92

48

7.89

South San Francisco < $600,000

39

26

4.50

Sunnyvale < $750,000

69

27

6.68

CNBC – Brokerage Asks Sellers to Cut 10% off Home Prices 10/06/2008

In an attempt to lure potential home buyers off the sidelines, a nationwide real estate brokerage is asking its approximately 25,000 sellers who have homes listed with its brokers to reduce their listing prices by as much as 10 percent for its first national, 10-day sales event.

To read the full story, please click here:
http://www.cnbc.com/id/27044918

San Jose investment property analysis

This is a typical single family investment property in San Jose.  This is a 3 bedroom 2 bath, with converted garage.  According to county record, it has about 1200 sq ft. (excluding the converted garage).  The purchase price is under $330,000.

The garage is converted into a 1 bedroom 1 bath with living room, it can be rented out separately or the house can be rented to a big family, which is typical in this area.

Assume the purchase price is $330,000 and the mortgage rate is 6.857%, the following analysis is for different % of down payment.


Purchase price: $330,000 with 20% down

Sales Price:

$330,000

% Down:

20%

$ Down:

$66,000

Loan Amount:

$264,000

Interest Rate:

6.875%

Mortgage Payment:

$1,734.29

Prop Taxes:

$310.75

Hazard Insurance:

$100.00

Total PITI:

$2,145.04

Projected rent:

$2,000.00


Purchase price: $330,000 with 20% down, interest only

Sales Price:

$330,000

% Down:

20%

$ Down:

$66,000

Loan Amount:

$264,000

Interest Rate:

6.875%

Mortgage Payment:

$1,513.00

Prop Taxes:

$310.75

Hazard Insurance:

$100.00

Total PITI:

$1,923.00

Projected rent:

$2,000.00


Purchase price: $330,000 with 30% down

Sales Price:

$330,000

% Down:

30%

$ Down:

$99,000

Loan Amount:

$231,000

Interest Rate:

6.875%

Mortgage Payment:

$1,517.51

Prop Taxes:

$310.75

Hazard Insurance:

$100.00

Total PITI:

$1,928.26

Projected rent:

$2,000.00


Purchase price: $330,000 with 30% down, interest only

Sales Price:

$330,000

% Down:

30%

$ Down:

$99,000

Loan Amount:

$231,000

Interest Rate:

6.875%

Mortgage Payment:

$1,323.44

Prop Taxes:

$310.75

Hazard Insurance:

$100.00

Total PITI:

$1,734.19

Projected rent:

$2,000.00

A few years back, it is impossible to put 20~30% down in a property in the Bay Area that would cash flow.  Last time this happens was over 10 years ago, around 1995.  If you miss the boat this time, you might need to wait another 10 years.

Unemployment data – 09/28/2008

County Unemployment rate
(Aug 2008)
Unemployment rate
(2002 Annual Average)
Alameda

6.90%

6.70%

Contra Costa

6.70%

5.70%

Marin

4.90%

4.90%

Napa

5.30%

4.60%

San Francisco

5.90%

6.90%

San Mateo

5.20%

5.70%

Santa Clara

6.50%

8.40%

Solano

7.40%

5.80%

Sonoma

6.10%

5.10%

Data source: California Employment Development Department

The statewide unemployment rate is 7.6%.  Comparing the data in Santa Clara, San Mateo and San Francisco between now and 2002, the current condition is better than the dot.com crash.  I believe one of the reason is that tech firms are thriving; social netowrking companies are doing good, green energy and bio-tech are still creating job opportunity in the Bay Area.