Today the U.S. Senate passed the $700 billion financial bailout plan with some “sweetners” that make it probable that Congress will also approve the plan this Friday.

In the meantime, the DOW dropped 348 points today (the lowest closing level since June, 2005).

On a national level we are seeing dramatic and very turbulent changes taking place in our economy, which are historic in scope and proportion – without precedent in our lifetimes.

The Federal government has virtually nationalized Fannie Mae and Freddie Mac. More federal intervention could be ahead, perhaps the most extensive since the 1930s, as the White House and Congress appear to be deciding that
taxpayer money should be used to buy troubled mortgage backed securities from Wall Street firms and banks.

There is much turmoil in the national financial sector.  Stand-alone large investment banks are no more. Legendary firms such as Bear Stearns and Lehman Brothers are history. Morgan Stanley and  Goldman Sachs have morphed into bank holding companies. Merrill Lynch will become part of Bank of America as has Countrywide. Indy Mac, Washington Mutual and several other financial institutions are history or soon will be. And now Citigroup has agreed to buy the banking operations of Wachovia”.

What does this all mean for real estate in Saratoga?

Let’s start with financing.  The “jumbo conforming” loans (up to $729,750) are still the hottest loans in the Silicon Valley market, but this is NOT where the action is at in Saratoga because of high median values.  Mortgage rates for non-conforming loans (above $729,750) jumped to 9% for some lenders this week as I predicted in September.

Even in this uncertain market there is plenty of money to lend to “qualified borrowers” who have sustained a good credit rating and have sufficient down payment (25%+).

Strong mortgage lenders, such as Wells Fargo, earlier this week quoted a rate of 7% for a 30 year fixed non-conforming loan (requiring a banking relationship with a $50,000 balance and auto-debit of monthly payment) for loan amounts up to $1.5 million with 75% loan to value ratio and 720+ FICO scores.  Believe it or not, Wells Fargo still has a mortgage under 5% up to $3 million loan amount.   Call John Shapiro at 408-741-1111 for more details.

On the home value side, Saratoga home sales are always about pricing well to meet market support.  Last week a home on the corner of Wardell Rd. and Saratoga-Sunnyvale Road sold at “auction” above the $1.399 million “list price” and just closed at $1.525 million; however, it must be pointed out that this same property was continuously on the market 234 days, originally listed at $1.898 million over a year ago and only got action when the list price was dropped half a million!  Reportedly, there were five prequalified potential buyers.

On the other hand, a beautiful 5,700+/-sf home on Hidden View Lane in Saratoga, (which has been on the market intermittently since 2002 and priced as high as $6.25 million) finally sold in September at $3.55 million.

A lovely 4,900+/-sf home on Villa Oaks, which was on the market in 2000 priced as high as $5.875 million and did not sell in 2001 even when dropped to $2.899 million, just closed escrow at $3.2 million, after being on the market only 4 days when listed at $3.288 million.

A 2,000+/-sf golden triangle home on Edinburgh listed at $1.595 million just sold for $ $1.671 million.

My conclusion is that real estate in Saratoga is a “good investment”, particularly homes priced under $2 million and there is still a market for luxury homes that are priced well.

Rick Bonetti, Alain Pinel Realtors