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Inside this issue:
Happy Holidays
1
“I Want to Buy an REO”
1
Market Snapshot
2
Market Summary
2
Client Testimonial—Marinovski Family
2
The Great Bailout of 2008: Follow the Dollars
3
Updated NeighborhoodStatistics
4
Share The Newsletter 
4
Property Taxes DueDec 104Catton Properties JoinsSereno Group4
December 1, 2008Volume 3, Issue 4
Quarterly Review
Nicholas French, Broker Associate, CRS
I am sure we agree that 2008 will not be a year soon forgotten: from the stock market and financial col-lapse, to the government nationalizing of the banking system and the national housing bubble affectingthe masses and finally the confirmed recession. There sure are plenty of events to hang our head inshame, but there were also some inspiring events like the Beijing Olympic Games and the Presidentialelection. This is a great time of year for reflection on the many events that have touched your family andan opportunity to appreciate what we have and how we can enrich our lives further.I am grateful for my family, health and friendships. Though it is easy to take for granted I feel fortunate tohave such strong relationships with my family and friends. Especially during the holiday season, I guess itis a convenient time to reflect, I want to express my humble gratitude for your support and confidencethis year with my health and business.We will take the challenges at hand whether in business, family or community and do what we can toimprove our quality of life for our family, friends and neighbors. I wish your family a healthy and prosper-ous 2009.
Happy Holidays
Nicholas FrenchBroker Associate, CRS
369 S. San Antonio RoadLos Altos, CA 94022650 773 8000 (cell)650 247 2999 (office)650 947 3099 (fax)nick@realtornickfrench.com
 
www.realtornickfrench.com
Whether over the water cooler, intranet posting or blog, you may be seeing the REO frenzy and saying, “Iwant to buy an REO too”. I will make a few assumptions that you are probably using for your rationaliza-tion: 1) REO prices are much lower than comparable properties 2) They are easy to buy in the currentmarket climate 3) The house will be ready to go. There is no argument that REO (real estate owned) prop-erties are prolific in some of our local neighborhoods, but what is important to know is that these proper-ties have gone through the foreclosure process and generally were not purchased during the short saleand auction process. This is typically because these properties are either in less desirable areas with fewbuyers, the condition is poor or in some cases the property is too far underwater on financing. In anycase, once the bank receives the property there is little to no improvements or clean-up on the property;literally I see homes with the previous owner’s mail and food still in the refrigerator, there are few disclo-sures about the property and neighborhood and the bank contract often takes away buyer’s rights thatare found in our local real estate contracts. I share my view with clients that if a particular property,which happens to be an REO, is priced below comparable properties it is mainly because the condition ispoor, it does not show well, or there are less qualified buyers in the neighborhood. If there are two simi-lar properties side be side relatively the same whereas one is a standard sale and the other is an REO theprice should be similar and the non-REO property should be easier to negotiate. Banks located in Wiscon-sin dealing with local properties do not have the wherewithal or motivation in most cases. For more infor-mation please feel free to contact me directly at nick@realtornickfrench.com or 650 773 8000.
“I Want to Buy an REO”
Santa Clara County Foreclosure StatisticsYear
 
Notices of Defaults
 
New Trustee Sales
 
REOs
 
SOLD
 2008 9817 5906 3290 2292007 4314 1124 869 1372006 1998 582 69 86
Source: The BlueSheet, Oct 08
Approximately 56% of the current Trus-tee Sales become REOs compared to77% in 2007 and 12% in 2006. The de-crease in 2008 is due to banks negotiat-ing the terms and completing ShortSales
 
 
Depending on which side of the table you sit the good and bad news is that the Santa Clara median homeprice dropped approximately 34% year over year in October. This is definitely a headline, but not a com-plete surprise. Putting real estate history and statistics aside let us just discuss this specific scenario. Withthe price decline came an increase in sales, which means people are buying the lower price homes. This issignificant because the prices in some areas have reached a point to where even the bottom feeders (sothey like to be called) like Donald Trump are out picking up bargain properties: it is the Thrift Store of realestate. This phenomenon did not happen overnight. Over the past few years we’ve been watching anddiscussing the foreclosure rate rise and inventory build-up and slowdown of certain neighborhoods likeCentral San Jose, but the data was not showing the complete picture until just recently.Why is this? I believe it is strongly tied to the fact that the higher end markets in our county were stillselling in good numbers and strong prices. The high end market, if you will, was carrying the county. Itdidn’t matter that the lower end was not sellingbecause when you look at the median or averageprices you see strong numbers and many did notlook at the actual data to see that the sales wereheavily weighted in specific neighborhoods. Overthe past several months we have seen a slowingtrend even in the highest price neighborhoods such as Atherton and Monte Sereno. The great news isthat if you view my older articles you will see that typical real estate cycles end when the high-end proper-ties slow down – they are the last to go down and the first to go up. Data suggests that over time single-family homes will have the largest growth rates comparing the various property types and residentialmulti-unit investment property will have the most consistent, albeit slower rate of appreciation since thevalue is tied to the cash flow generated from rental income.We will see how the government continues to fight this fire. So far it appears they are using strategiesfrom both the Savings and Loan crisis and other recessions. Money is basically free for banks and still theyare hesitant to lend to qualified borrowers. The risk premium (profit) for lenders is currently very high, socurrent borrowers are subsidizing some of the poor decisions made by borrowers in previous years. I willcontinue to keep you up on how the market is adjusting and always feel free to contact me directly.During these cycles there are years of negative or no growth and a handful of double-digit growth yearswhere we see most of our gain. The trick is long-term real estate holdings. Whether it be your primaryhome or a rental property there is an expectation that some years will be golden and others will be diffi-cult, but in any case it should work for your family and portfolio.
Market Summary
Page 2
Quarterly Review
Market SnapshotCrude OilSpeculation
July 11: $147.27Sept 2: $109.71Dec 2: $46.96
Fed Rate Cut
 
Sep 07 - 5.25%Oct 08 - 1%
NASDAQ 
Dec 1, 97 - 1630.72Mar 24, 00 - 4963.03Dec 1, 08 - 1398.07
Dow JonesIndustrial Avg
May 30 - 12,638.32Jul 15 - 10,962.54Sep 4 - 11,220.96Nov 20 - 7,552.29Dec 1 - 8,149.09
Our experience with Nicholas French was superb! Nicholas is very dependable, professional and knowl-edgeable. His diligence and attention to detail is an asset to any home buyer. He knows his business andthe area very well and was able to find us the home that we love. The entire process went very smoothlyas Nick has taken care of all details. We would highly recommend him to others!
 
October Area New Available Pending
2007 C. San Jose 98 343 382008 C. San Jose 104 337 952007 Cupertino 56 69 452008 Cupertino 68 127 23
Client Testimonial—Marinovski Family
 
Page 3
Volume 3, Issue 4
The Great Bailout of 2008: Follow the Dollars...
SAVING WALL STREET 
Term-auction facility
$1.6 trillion in loans to banks so far in exchange for otherwise unwanted collateral. The Fed in-creased its monthly auction limit to #300 billion in October, up from $20 billion when the Fed beganthe program
Dollar swap lines
Unlimited dollars to 13 foreign central banks to provide liquidity to foreign financial institutions. TheFed lifted its cap after raising it to $620 billion in October from $24 billion in December
Bear Stearns
$29 billion in a special lending facility to guarantee potential losses on its portfolio. With the lendingfacility, JPMorgan was able to step in to save Bear from bankruptcy
Lending to banks
$70 billion lent on average every day to investment banks, after facility opened to non-commercialbanks for first time in March. $92 billion a day to commercial banks
Cash injections
$250 billion allocated to banks from $700 billion rescue package in exchange for equity stake in thefinancial institutions in the form of senior preferred shares
Citigroup
$300 billion in troubled asset guarantees and $45 billion in cash-injections to prevent fourth-largestbank from failing
Fed rate cuts
Down to 1% in October 2008, from 5.25% in September 2007
SAVING MAIN STREET 
Stimulus checks
$100 billion in stimulus checks made their way to 140 million tax filers to boost consumer spendingand help grow the economy
Unemployment benefits
$8 billion toward an expansion of unemployment benefits, to 39 weeks from 26 weeks. Some statesmust now offer 39-week benefits after an extension act was passed in November
Bank takeovers
$15.5 billion drawn down so far from the FDIC's deposit insurance fund after 22 bank failures in 2008
Rehab foreclosed homes
$4 billion to states and municipalities in assistance to buy up and rehabilitate foreclosed properties
Student loan guarantees
$9 billion so far in government purchases of student loans from private lenders. Higher borrowingcosts made student loans unprofitable for a number of lenders, many of whom stopped issuing theloans
Money-market guaran-tees
$50 billion in insurance for money-market funds. The Fed then began to lend an unlimited amountof money to finance banks' purchases of debt from money-market funds. The fed then agreed topurchase up to $69 billion in money-market debt directly. In October, the Fed said it would loan upto $600 billion directly to money-market funds, which was extended for six months in November
Housing rescue
$300 billion approved for insurance of new 30-year, fixed-rate mortgages for at-risk borrowers. Thebill includes $16 billion in tax credits for first-time home buyers. But lenders have been slow to signon
Deposit insurance
$250,000 in insurance for interest-bearing accounts, up from $100,000. The FDIC also issued unlim-ited guarantees on non-interest-bearing accounts and newly issues unsecured bank debt
Consumer loans
$800 billion extended to consumer loan-backed securities, including $200 billion for assets backed bycredit cards and car loans and $500 billion in mortgage-backed securities. The Fed will also buy $100billion of Fannie Mae and Freddie debt to try to make loans cheaper
SAVING CORPORATE AMERICA
Business stimulus
$68 billion in tax breaks to corporations to help loosen the stranglehold on businesses trying to fi-nance daily operating expenses
Fannie Mae, Freddie Mac
$200 billion to bail out the mortgage finance giants. Federal officials assumed control of the firmsand the $5 trillion in home loans they back
AIG
$152.5 billion restructured bailout, including a direct investment through preferred shares, a easierterms on a $60 billion loan, and new facilities meant to take on the company's exposure to credit-default swaps
Automakers
$25 billion in low-interest loans to speed the industry's transition to more fuel-efficient vehicles
Commercial paper facility
$271 billion in corporate debt purchased so far by the fed since its so-called Commercial Paper Fund-ing Facility opened. The Fed allocated $1.4 trillion for the program
Source: CNNmoney.com
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