Maureen Kennedy

That's the deadline for submitting an application for a downward adjustment in your property assessment (resulting in a reduction in property taxes). Two great resources are:

--the county assessor's site, which includes all the forms and deadlines, and

--this video</a> from the state Board of Equalization, which walks through the process piece by piece.

Remember that only your ''Prop 13'' property tax will be affected by a reassessment; the other charges on your bill (for instance, city and school parcel taxes; and 911, East Bay parks, library bond payments) won't decline. And if you, like we, bought your home a dozen years ago, your assessment is unlikely to have increased in the intervening years to current market value, much less to higher-than-current value.

I'm happy to run comparables for you to build your case, or to see if an appeal is worth it; just ask.

This is likely to be the first year that Piedmonters have a prayer of arguing for a tax reduction, given that prices had not yet dipped by January 2008 (this year's assessment is based on Jan. '09 value). Let me know if you were successful last year!

2Q09 Market Update

After several years of steady prices (sales prices had been quite flat at around $600/sf since our market peak in November of 2005), and a winter and spring of very few sales and prices all over the place, this spring market makes the market direction clear: Prices are down as much as 16-18 percent compared to a year ago (see detailed spreadsheet at the bottom of the page).

I think our market has been affected by several factors unique to our high-end market. First, market distress has been focused below our price range, but those sellers are our move-up buyers. If they are having trouble selling, they have trouble turning around and buying. This pattern applies to less-expensive homes in Piedmont as well--their owners were very frequently the buyers of more-expensive homes in town.

Second, Piedmont buyers are often in law, finance, and corporate management, and each of these sectors is under great stress in today's economy. If high-income colleagues are being laid off, is now the time to commit to a Piedmont home and a hefty mortgage?

And third, Piedmont homes typically involve large mortgages, which are much more difficult to secure these days. Even if a buyer had a 50% downpayment for a $2 million home, securing that million dollar mortgage is not a piece of cake (but definitely can be done!).

There are plenty of reasons to buy in Piedmont, however, and these are arguments I lay out every time I market or hold open a Piedmont home:

--Props B+E passed, securing funding for our great schools and insulating them to a large degree from the state's budget woes;

--our free public schools offer great alternatives to private schools and their perennial inflation increases;

--our 911 services are exclusive and just a few blocks away, so no need to worry how long an ambulance will take to respond to a heart attack;

--our ''it takes a village'' lifestyle is very comforting to many; and

--our Census-tracked demographic mix (everything from typical commute times, to proportion of working moms, to ethnic and racial diversity) is more attractive to many households than similarly high-end communities through the tunnel, for instance.

Clearly, these arguments have traction. Our home prices have fared well by comparison (meaning in part, that if you purchased last summer, your investment here did better than your old home elsewhere would have). Average prices for homes in Alamo and Blackhawk sit at $376/sf for 2Q09 (a 34% decline from 2Q06), compared to $509/sf for all of Piedmont's market this past quarter. And the number of successful sales is down 55% in those towns, compared to our sales, which are down only 25% compared to 2Q06.

Looking only at Piedmont, the average home price was $1.401 million this past quarter, compared to $1.714 million for 2Q08 (based on data from the MLS). On a per square foot basis, the average, as noted, is $509/sf for 2Q09, compared to $605/sf in 2Q08. Homes are selling in an average 38 days, and a few more homes sold this last quarter, compared to the second quarter of last year.

Not too bad when placed in national context (see next post) and in light of the highest unemployment rate in a generation. Looking regionally, prices in Oakland were up 14.1% in May compared to April (but down 63.6% compared to May '08 [we saw a sneak preview of May data recently at the Oakland Assoc. of Realtors]); those in Alameda County more broadly were up 6.1% in April over March (but down 25.1% compared to April '08); and those in San Francisco were up 7.7% in April over March (but again down 23.2% compared to April '08).

Overall homeowner affordability is up dramatically in California compared to the recent past--moving from a point where only 25% of homes were affordable to someone with a median income in the state, to very near the national average of 70% affordability.

For information about reassessments and property tax reductions, read on-----

Ten homes sold in the first three months of 2009 in Piedmont in an average 65 days, compared to 16 last quarter and 11 in the first quarter of 2008 (see details at the page bottom). The average price of a home was $1.867 million ($570/sf), a dramatic rise from last quarter's figure of just over a million. In contrast to then, nearly half of this quarter's homes sold for over $2 million. Two of the sales were REO or bank-owned properties, and most of the high-end homes had been on the market for several months.

Let's get real, though--it's folly to base conclusions on so few sales in such a small town. These homes included some that offered much more square footage than the tax record reflected, one whose buyers paid nearly $100,000 of the sellers' costs (I've adjusted that effective sales price in the attached spreadsheet), and several with fabulous grounds or major structural issues. What does average mean in that context?

Of more interest to me have been new developments on the appraisal front. A number of you have received notes from your home equity line lender reducing, freezing or even eliminating your line of credit. Our neighbors in the surrounding communities have been seeing these notes for the last several months.

In some cases, lenders are trying to get out of this market. In others, lenders happily go back to thestatus quo ante when you push back a bit with thoughtful comparables from your deeply experienced local realtor. In others, your current lender, or perhaps a new lender you choose, wants an appraisal before they'll up your limit again (and if you're right and the value is there, ask in advance that the lender pay for the appraisal).

On the appraisal front, beginning around April 1st, new rules went into effect strengthening the arms-length relationship among lenders, mortgage brokers, and appraisers. Among the myriad effects and implications is that appraisals for Piedmont homes are increasingly done by out-of-area appraisers.

I saw an appraisal last week that included a Piedmont-Side-of-Montclair (i.e. Oakland) home among the comps. A deeply experienced local appraiser says that with so few homes closing in Piedmont, and with lenders understandably super-sensitive about value, they are willing to trade off ''true'' comparability for recency. Thus, a '20s stucco home with lots of traditional detail in a great central location was compared exclusively with recently closed homes that all happened to be ranch style, and most were located up in the Montclair-Side-of-Piedmont area (i.e. Piedmont). One recently closed home in a great location across from a park in town did not ''appraise'' for its contract price, even though the highest of the three offers garnered with just one open house was (drumroll please....) at asking price.

Maybe the differentials among prices for older homes vs. newer homes, and homes on wide streets vs. homes on narrow windy streets, and homes with Bay views vs. homes without Bay views, and homes with easy walks to all schools vs. homes that require a carpool are just over the top. Maybe it is more about square footage. But these factors have formed the warp and weft of the Piedmont real estate market for generations. We may be at a flexion point in property valuation and things may go back to a new normal shortly, but for those purchasing now, refinancing to today's great rates, or trying to protect a home equity line, the situation is clearly driving many crazy.

I'll never forget talking to the mother of a parent at our child care center in Washington DC a dozen years ago. She'd grown up in Piedmont and raised here children here. We mentioned where we lived and she said, ''ah, that's a good street'' and went on to clarify why she thought that was the case, with remarkable specificity. She was thinking back to 1979.

One final note--our MLS has signed on for detailed market analysis from Clarus Market Metrics--email me if you'd like the Piedmont-wide trend graphics over the past two years and I'll send you the multi-page pdf document. If you get ready to buy or sell, we'll narrow down the analysis to your portion of the market to help in pricing or development of the offer.

Ten days ago, the Treasury Department announced two housing programs for households having difficulty paying their mortgages. The programs target two different groups:

--those who could handle payments if only they could refinance to today's low interest rates, but can't because their first mortgage is more than 80% of the current value of their home, and

--those who need more drastic action--a modification to their loan terms--to stay in place.

The refi program is called Making Home Affordable and the loan modification program is called (drumroll) the Home Affordable Modification program. Both help only owner-occupants; neither will help those who realistically can't afford the house they own, even with near-term assistance.

The Making Home Affordable Program

To qualify for the refi program, owner-occupants must:

--owe no more than $729,750 in a first mortgage on the home;
--that loan must be owned by Fannie Mae or Freddie Mac (see this site and this site to see if Fannie or Freddie owns your mortgage);
--that first mortgage must be no more than 105% of the current value of the home (for instance, it might be $105,000, on a home now worth $100,000--until 3/4, your loan amount could be no more than $80,000 on a home now worth $100,000. That change in policy is huge.).

Because lenders already have most of the info they'll need to review a refinance request, it's assumed that the refi program will go into production very quickly.

A client told me recently that Countrywide offered a similar interest rate reduction after just a brief, proactive ''I don't have a problem now but may have one in the future; what should I do?'' call. And that was a month ago. I've heard estimates that a short sale or default typically costs a lender a minimum of $50,000, so a judicious refinance may create big savings over that possibility.

The program currently is scheduled to lapse in June, 2010.

The starting point is a nice step-by-step eligibilty tree here.

Home Affordable Modification Program

This is a bigger deal--the lender and the federal government together will split the cost of reducing the interest rate or the principal on a loan until payments represent no more than 31% of an owner's total income.

To qualify, owners must:
--be having difficulties meeting their mortgage payments (but don't have to be delinquent);
--must have a first mortgage under $729,750.

How it works:

If you qualify and can demonstrate hardship (through bills, tax returns, pay stubs with declining income, layoff notices, etc.), your lender will reduce your mortgage payment down to 38% of your total income. In turn, the federal government will further reduce it to 31% of total income. This lower payment will stay in place for 5 years, after which your interest rate will creep back up at 1% increase per year to today's rates (as if you refinanced today). The payment reductions are achieved through a combination of interest rate reductions, and, if necessary, amortizing the loan over a 40-year period rather than the usual 30 years.

Both the lender and the homeowner would get incentive payments if the modification takes place before the homeowner misses a payment, and if the loan, after modification, stays current. You may wonder about your second mortgage; you're eligible for either of these programs even if you have a second mortgage; lenders in the loan modification program get incentives for convincing the second mortgage holders to remove their lien (that is, forget the loan. Without this program, the argument goes, the second mortgage lender would lose everything anyway if there were a foreclosure).

Here is the Treasury summary of the program, and here is a step-by-step eligiblity tree.

Borrowers with high debt loans may be required to undergo credit counseling.

This program is scheduled to lapse in December, 2012.

The government factsheets are emphatic that borrowers should NOT need to pay for consultant help for either of these programs. A list of Oakland area HUD-approved housing counseling agencies can be found here. The feds urge that you be patient in pursuing either of these remedies--they estimate 10 million households will be helped by the two, but I imagine many more households will be applying, asking questions, and tying up the line.

If you think neither of these programs is likely to be helpful for your circumstances, call me (and then call your accountant or tax professional) to discuss the idea of a short sale. In a short sale, we assemble a detailed package of material for your lender, put your home on the market for its current market value, sign a contract at close to that price, and then work to convince your lender(s) to absorb at least a big chunk of the amount outstanding on your loan(s). This is an instance where all my experience running federal mortgage programs in the Clinton Administration comes in very handy!

It's a complicated process, particularly if you have both a first and a second loan (and thus two lenders to negotiate with). However, we've heard of short sales involving hundreds of thousands of dollars in concessions on the part of lenders in the East Bay Hills.

I probably sound like your mother when I say it may make more sense to get going on the process rather than avoid it for a few more months, and live with the stress.

As always, let me know if I can help, or if you want to talk through some options!

It's that time of year again--the Cost vs. Value report is out. Each year Realtor and Remodeling magazines jointly pull together a metro area-by-metro area analysis of the cost of various improvements (add a deck, upscale kitchen renovation, basic bath renovation, etc.) and their relative worth if/when the house were to go to market.

Nationally, owners should recoup about 2/3s of the cost of their investments, across improvements and across regions. As you get closer to the Bay Area, though, the ratio improves, and, if you believe the numbers, goes positive for most improvements in the Bay Area. As has been the case in past years, "midrange" remodels pencil out more positively than do "upscale" remodels, though note that in some of our neighborhoods, buyers will frown if they feel a remodel was done with shortcuts and budget-savings paramount in mind.

Read the national report here, and email me (Kennedy@MaureenKennedy.Net) for a copy of the San Francisco Bay-specific results.