Thanks Franco Folini for the above photo.

The bank is not your friend.  It’s always good to remember that a bank is in business for its shareholders, not for you.  You need to be responsible for your interactions with any bank.  Here’s an example of what I mean.

I received a mailer from my home equity line provider today.  I’m going to quote some of what they say and show you the danger in giving their interpretation any authority in your life.

Let’s start with the opening,

“The long, hot days of summer are here, and you deserve to make the most of them!  Whether you decide to take a relaxing vacation, spend time with family and friends or tackle those outdoor projects —BIGBIG Bank is here to help!”

Okay, this is the set up.  They are telling me I deserve to spend a lot of money and have my home projects completed and they will help me by:

a) Giving me the money as a gift

b) Sending their representatives over to build the back fence for me or

c) Loaning me money from the equity line

You guessed it!

Let’s continue:

“It’s never been so easy to take advantage of your available credit line.”  Trust me, it’s easy, they send me checks at least once per month.

“Simpy use the attached checks (up to your available credit limit) to make purchases, consolidate your bills or take that well-deserved vacation.”  Well, they’ve told me twice that I deserve a vacation, hmmm…I wonder if they want me to borrow money from them to take a vacation?  Perhaps they’ll remind me of this soon.

“And for added convenience, we’ve made the first check payable to you for immediate deposit into your checking account.”  I guess their customers are so lazy that they can’t put their own name on a check.

“Just sign it and deposit it, and make your summer an unforgettable one”.  Honey, remember that summer vacation we took seven years ago on credit and are still paying for? How can I forget?  We keep getting a bill for it every month.

“The summer vacation you’ve earned.” BINGO, third time’s a charm!

“The financial freedom you deserve.”  Just how does owing someone money qualify as financial freedom?  Let me say that again, how does owing someone money qualify as financial freedom?  Beats me!

So, if you don’t pay attention, you will begin telling yourself that you deserve an expensive vacation and hey, it’s not a big problem to borrow for it, look they even put my name on the check.  If you are clear on your financial ambition, it is easy to navigate these offers.  If you are not clear, then it is easy to listen to their interpretation, act from it and rack up debts that damage your wealth.  The bank is counting on you being guided by their interpretation of life (spend, spend, spend, you deserve it!) and not by an ambition that builds your financial future (save, save, save, you’ll need it!).

This is a reminder to those of you who are saving for retirement that these offerings are dangerous to one’s financial health.  Beware of the interpretation and offers you listen to and accept.  Be responsible, hold your ambition. 

As a real estate agent transacting in the East Bay, I am often an observer of my practice and other agents who are transacting around me. I often witness breakdowns that other agents are having with their clients and I believe these breakdowns are a result of the realtor acting for the sake of the transaction and not for the sake of the client’s overall concerns.  I am seeing a shift in client’s demands on real estate agents.  The clients are more and more demanding that realtors play an active role in improving their entire situation as a partner, not as a guide.  Clients want to be actively involved in every decision and they are demanding that the realtor know more about their situation in many domains.  The traditional method of taking clients out and showing them houses that have the right number of bedrooms and baths or a “nice” kitchen is over.

I see real estate agents trying to guide their clients and it is inevitable that clients push back. Guidance implies that a client cannot make a decision for themselves. For instance a dog might guide a blind person across the street.  This is necessary where a person cannot “see” where they are going.  Today, clients want to be educated so they can make the decision, they are not willing to abrogate these decisions to someone else.  They want to “see” what is going on.

Advisorship encompasses much more than just guidance. It is the art of anticipating and listening to a client’s concerns. Out of these concerns an agent can use their expertise to devise a comprehensive and whole strategy in partnership with their client. They can then advise their client on the risks and opportunities that exist for their situation in the specific domain where the real estate agent is expert. Finally, only after the agent and the client are in agreement about the concerns care for, the appropriate standards of care and the subsequent actions to take, can the transaction continue with satisfaction for both parties.

In this brief situational description we can see that guidance is only a piece of the advisory process. We have seen tremendous evolution in other professions.  It used to be that the patient did everything that the doctor said without question.  Today, it is customary and expected for the patient to consult carefully with the doctor, to seek second opinions, to do their own research, to ask pointed questions and to move forward only when they are satisfied that they understand what is occurring.  We see this same philosophy moving into the Real Estate profession as the numbers have gotten so big now that clients must understand what is going on before they move forward.  With the numbers getting bigger, the risks are more significant so we can expect to see this change continue and intensify.

If you are purchasing a home, find a realtor who will work with you on your entire situation and who knows that you need to have a good understanding of what is happening before you move forward.  Start with these questions: What standards of care and for which concerns must you design and act for?  What are the concerns that will be affected by this decision?  Who are the experts you need on your team for you to successfully avoid problem?

Be willing to ask these questions and be demanding to work with a Realtor® who will engage fully in this inquiry with you.  There is a lot riding on your decisions.

Thanks to Laughlin for the photo.

Early withdrawals from a 401(k) can be disastrous to your retirement funding.

Talk to a professional about other options before you raid your 401(k). There are two negatives to pulling this money out early. The immediate penalty and taxes are one. The other is the loss of compounding interest over many, many years.

June 16, 2007
YOUR MONEY; The Nest Egg: Nibble
Early At Own Risk
By SHIRA BOSS
Conventional wisdom says not to pull money out of retirement accounts except for actual retirement. Most Americans have enough difficulty building up a nest egg, and cracking it prematurely could mean living on cat food (slang for Social Security) later.The Internal Revenue Service usually charges a 10 percent penalty for taking money before retirement age. What rattles financial planners most is that taking money early means investments earmarked for later in life vanish before they ripen through many more years of compounding.

‘’I would tell someone to work at Starbucks'’ before using retirement money (more…)

Screen Shot of EveryScape Union Square Demo Navigation

I just finished reading some of my favorite technology blogs and I came across a new internet technology that looks like it has a real potential for the real estate industry. Many of you have already seen Google’s new maps that incorporate a street view feature. It allows the user to place themselves in a location on a Google Map and then brings up a window with a rotatable 360 degree panoramic picture of the location. It is a great way to look at where you are going before you leave the comforts of your home. I highly suggest taking Google’s new street view for a spin.

Yet, a new company called EveryScape, is using Google Maps technology to take neighborhood virtual tours to a new level. They are developing a new technology that will allow the user, as they say, “escape into the real world.” They have a great demo of their interactive 360 degree environment on their site. It allows the user to walk through a neighborhood and to highlight company’s websites and locations in the environment. In the working demo on their home page you can tour the Bay Area’s historic Union Square in San Francisco.

I can see how this could be extremely powerful tool for the real estate industry. Can you imagine how consumers housing preferences could be altered by taking a virtual stroll through a listing’s neighborhood before viewing the home in person? It will be exciting to see where these new technologies lead us.

There is a new real estate opportunity in town. Well, it literally may not be in town for long. A new cruise ship called The World is selling condominiums aboard a cruise ship. They are offering that the Ship will set sail and continue to sail around the world. You can join the cruise at any port on the itinerary and if you purchase a “residence” you can enjoy your very own space while traveling from port to port.

The World has a set itinerary for the next 2 years. Ocean residences as they are called are starting at $3,800,000. I wonder if the value of your residence will fluctuate on the annual itinerary of the ship? They will also rent you a residence from $1,200 to $4,200 per night. Sounds like an expensive vacation to me. Especially if you consider you can get a 7 night stay on Royal Caribbean Cruise Lines for approximately $800. It will be interesting to see how these ocean residences fair in our changing markets. My guess is that if you have $3.8 million dollars of disposable wealth, then you are not concerned with the future value or liquidity of your ocean residence.

It’s getting louder and louder that retirement is a concern that people must begin to act on.  When someone declares a financial ambition, amazing things begin to happen.  First of all, the world appears differently to them because of this new concern.  They spend differently, they save differently, they put their attention on skills, people, offers and actions much differently than before.  The declaration of how much one needs to accumulate to fund their old age will produce a different way of seeing the world. 

How much will you need at retirement? 

Thanks Lanadena for the photo

One key component of many financial plans is the funding of college education costs for children. As usual, the earlier the cheaper to accumulate these savings. Also, tax efficiency is important. Knowledge is key so if you have the concern for accumulating for college, then I recommend studying the information on this site.

www.savingforcollege.com

Thanks Mandie for the photo

In the interview posted previously with Ben Stein, he says that the average savings for retirement is something like $50,000. Let’s put some meaning to that.

Let’s assume this ‘average’ person is 10 years away from retirement. At a 7% compounding rate, this $50,000 would grow to $100,000 at retirement. If that sounds like a lot, then you may be suffering from lump sum illusion. Let me cure you of that.

Using the rule of 25 (in this case 1/25), we can see that this means that the retiree can pull $4,000 per year from this portfolio. That’s $333 per month. The average person has enough savings to produce $333 per month in retirement. If you are the average person, could you live in the Bay Area with that income? Okay, throw in $1,800 per month in Social Security and now you are up to $2,133 per month gross income or $26,000 per year. Could you live on $26,000 per year?

Ben Stein’s perfect portfolio
Money maven Ben Stein doesn’t joke with Fortune readers about retirement.
By Ellen Florian Kratz, Fortune writer
June 13 2007: 9:17 AM EDT
(Fortune Magazine) — It’s no longer possible to win Ben Stein’s money. But there is one thing we can gain from the actor-cum-economist: financial advice served up with a dose of humor. Fortune’s Ellen Florian Kratz asked Stein to answer Fortune readers’ questions about retirement and added some of her own regarding his homebuying addiction and his dislike of Treasury Secretary Hank Paulson.

What do you recommend for a portfolio distribution in light of the collapsing dollar and peak oil?- Joseph Scheppe, Morgantown, W.Va.

First of all, I don’t know that we are at peak oil. What I generally recommend for the noncash portion of your portfolio - and this has been unbelievably successful - is a mix of various index funds and exchange-traded funds [ETFs], with roughly 25 percent in an S&P 500 index fund from Vanguard or Fidelity; 25 percent in a Vanguard or Fidelity total stock market fund; 25 percent in EFA, which is an ETF for developed overseas markets; 15 percent in EEM, an emerging-markets ETF; 5 percent in ICF, the ETF for real estate investment trusts; and 5 percent in XLE, which would be your energy fund.

I’m not a big lover of bonds because I think the risks involved in buying long-term bonds are tremendous, and the payment from short-term bonds is trivial. That said, you should have 20 percent of your portfolio in cash. I would say if you can get 5 percent or more on your cash in a CD or savings account, go for it. That way, you have it to tide you over if you lose your job or your health worsens.

How do you find a balance between the gratification of material desires today vs. investing for future retirement?- Jerilyn Dever, Los Angeles

(more…)

Thanks to pbo31 for the photo

The National Association of Realtors has just adjusted its forecast for the real estate market downward. This comes off of the June 5th news, that Federal Reserve Chairman Ben Bernanke told a group of bankers via satellite, “On average, over coming quarters, we expect the economy to advance at a moderate pace, close to or slightly below the economy’s trend rate of expansion.” This news was contrary to the expected interest rate cuts the markets was expecting this summer, and residential interest rates went up sharply this week.

So, how does this all relate to the Bay Area real estate climate. I would first, recommend you read my past post entitled California Real Estate Data Study Part #2. This will show you that historically interest rate hikes have caused stagnation in our Bay Area markets, but not a tremendous amount of depreciation. Nationally I expect we will continue to see subsidence in the real estate market, but locally I expect this news will have a more moderated effect.

But, the proof is in the pudding, so check out Curbed SF blog’s opinion to see how San Francisco is doing. There article illustrates nicely that our high-end desirable property market still has some legs.

Take a look at some new heat maps released by Altos Research. They show varying amounts of price reductions. Brightest red is 50% price reductions the darkest is 10%. The darker the red the less price reductions and in essence the stronger the market in that zip code. Looks like Alameda and Contra Costa counties most affluent neighborhoods are still very strong for spring sales.

It is interesting to note that it seems as you move away from the heart of affluent neighborhoods, the reductions get worse. This is the pulling in effect of a slowing market. Basically, buyer’s would rather live closer to where they work (which is most likely an urban center like San Francisco). If they can afford to live in Albany then why live in Antioch? As the market slows more inventory becomes available closer to the urban centers and this weakens outlying areas.

As we have noted with many of our clients each home is individual and it is a must that it be evaluated individually for sale. In other words, seeing your property on a heat map is not enough to declare that it is liquid or illiquid.

Maybe the owners of 4355 Harbord Drive would like to call one of these agents for some advice. At least Zillow has increased the properties value by $147,000 since we last wrote about this home back in February. But wait… Our market has been fairly flat since February?

What will they ban next? Maybe the word faultyzestimate?

 
Thanks to SuperFantastic for this photo.

What do they have in common?  Did you ever ask yourself how many times someone had to read the warning label on a pack of cigarettes before they got the message that these things aren’t good for you?  Well, here’s a warning label that we see repeated over and over and we just hope that at some point people start paying attention that credit card debt is not good for you.  I’m not moralizing here, sometimes it is necessary to use a credit card to purchase something that is needed but the plan needs to be to pay it off as quickly as possible.

MBA (6/5/2007 ) Palaparty, Vijay
Nearly half of Americans, 48 percent, are not comfortable with the amount of household debt they have, according to a national survey commissioned by LendingTree, Charlotte, N.C.

Fifty-four percent of those surveyed in the study, Living with Debt, report not having a financial plan. However, individuals continue to view homeownership as an important part of their overall financial equation.

(more…)

The Saul Zaentz Media center was recently sold for $20,000,000. Long known by the neighborhood as Fantasy Studios the building was sold to the San Rafael based Wareham Development Inc. This is one of the largest real estate deals to happen in the first half of this year.

The media center evolved from a record label that specialized in Jazz and blues. The label named Fantasy Records was the first record company to record Dave Brubeck, Lenny Bruce and Creedence Clearwater Revival. In September of 1967, Saul Zaentz acquired Fantasy Records and in 1971 Saul Zaentz built the Fantasy building at 10th and Parker Streets. In 1972, Saul Zaentz and his partners ventured into feature film, producing Payday and followed by One Flew Over the Cuckoo’s Nest, Unbearable Lightness of Being, At Play in The Fields of the Lord, Mosquito Coast, Amadeus and The English Patient. The latest film, “Goya’s Ghosts“, starring Natalie Portman, will be released in 2006.

For the time being it seems that Wareham Development Inc. will keep the building as a media center. Chris Barlow a partner in the Wareham venture said, “You see the opportunity to create a world-class media center. We see great opportunity with the confluence of technology and a move towards digital filming.” Many of the current tenants will stay including Steven Okazaki’s Farllon Studios which is an anchor tenant. Yet, some of the smaller tenants seem dismayed by the sale.

Already Wareham Properties has created a courtyard in the middle of the building, made renovations to the lobby and upgraded to its technical amenities. Complete renovations are expected to finish in June. Vacancy in the building is hovering around 12 percent and Wareham hopes to find more filmmaking tenants by reaching out to the community Barrow stated in the Contra Costa Times, “We’re looking to reach people at the major film festivals. We’re also hoping word-of-mouth also goes out.”
 

The S/P Case Shiller home price index numbers were posted on May 29th. Looks like the San Francisco and Bay Area numbers were up. See the graph here.

As per the Macro Markets website, here is the definition of the S/P Case Shiller Home Price index:

The S&P/Case-Shiller® Home Price Indices are designed to be a reliable and consistent benchmark of housing prices in the United States. Their purpose is to measure the average change in home prices in a particular geographic market. They are calculated monthly and cover 20 major metropolitan areas (Metropolitan Statistical Areas or MSAs), which are also aggregated to form two composites – one comprising 10 of the metro areas, the other comprising all 20. The indices measure changes in housing market prices given a constant level of quality. Changes in the types and sizes of houses or changes in the physical characteristics of houses are specifically excluded from the calculations to avoid incorrectly affecting the index value.

This uptake in the index has been deemed small, but I would say it does reflect the large amount of positive activity we have been seeing currently in the market.