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Steve Buster, President and CEO of Mechanics Bank, is this week’s guest on The Real Story. In his dealings with the small business community, which is the largest employer in the US today, Steve sees the same problems of confidence that have dogged the consumer market for months. Essentially, the small business owner responds quickly to change—and can overcorrect when threatened by tough market conditions. What we are seeing today is the small business owner making staff cutbacks, reducing spending, and keeping his or her nose to close to the grindstone that changes in the landscape may not yet seem apparent.

Steve is willing to predict some light at the end of the tunnel, but he’s not going to put a near-term date on it.  In his view, with real estate inventory still on the books, mortgage resets to come, and with them, more foreclosures, we are still months away from an increase in values. But he does see a stabilization in prices coming, and with it, a return to homebuilding in 2010. The buyer will have the choices of purchasing a foreclosure, a traditional resale, or a new home at that time, and as the foreclosures are picked up and cleaned up, the whole look and feel of their neighborhoods and communities will improve and set the tone for a return to normalcy.

With rental vacancies on the rise, the cost of renting a home in San Francisco has declined in recent months. As layoffs increase, so do the number of people vacating the City for other opportunities or lower rents in outlying areas.

“We’re running a vacancy rate which is unheard of in San Francisco,” said Janan New, executive director of the San Francisco Apartment Association as reported in the San Francisco Examiner. “I don’t know if rents have gone into a total free fall, but clearly they’re coming down.”

You may want to take advantage of this “renter’s market” to move to a better neighborhood or a bigger place, or move out of your parent’s home if you’re part of the post-college, pre-home-of-your-own crowd.  But before you sign that new lease, here are some questions you should be sure to ask:

1.  Will I be happy in this neighborhood?
Make sure the neighborhood is convenient to your work and that you are comfortable with the atmosphere and the other occupants of your building. Does it meet your expectations for safety? Look at local crime statistics for the area and visit it day and night. Is parking an issue?

2.  Who is in charge of maintenance?
Landlords are obligated to provide habitable rental units, which means a reasonable supply of heat, hot water and electricity at all times. General upkeep—including plumbing, paint, carpet cleaning, gardening, etc.–is also often the responsibility of the landlord, but make sure this is clarified in the lease.

3.  Can I tour my unit before moving in?
If at all possible, always view the apartment you’ll be occupying before signing the lease. Look carefully at the condition of the unit—including the appliances. Look for natural light, noisy neighbors, barking dogs and other items that need repair. Document any issues and make sure the landlord is aware of them. This will help avoid any unnecessary deductions in your security deposit. The apartment should be thoroughly cleaned with paint touched up before you move in.

4. Who pays utilities?
Sometime utilities are included in the rent. Again, be sure this is clarified. If the landlord passes utility bills on to his tenants, make sure they are the original bills from the utilities.

5.  Is there a rodent problem?
Rodents such as rats, cockroaches—even bedbugs—are an issue in attached housing. Look for droppings and evidence (traps in the back of closets, etc?)—and ask around.

6.  How old is the wiring?
If you see two-pronged plugs, the apartment probably has older wiring.  his could cause safety and convenience issues, as you’ll need a converter for most electronics and vacuum cleaners.

7.  When and how is the garbage collected?
To you put your trash in the garbage chute and that’s it? Or are you responsible for loading it in the dumpster? San Francisco also has recycling, so you’ll want to know how the system works for your building.

8.  Are pets allowed?
If you have allergies, it’s important to ask if the previous tenant had a pet, so the carpet can be cleaned with extra care. People either like pets or they don’t, just be sure you find out and are comfortable with the answer. Keep in mind that barking dogs are frequent subjects of disputes among neighbors.

9. What are the rules regarding decorating?
Some landlords allow tenants to repaint, especially in a competitive market. Many will deduct from the security deposit if your décor detracts from the ability to rent the apartment again, so be sure to ask.

10.  Are you comfortable with the terms of the lease?
Read the rental agreement carefully and make sure you understand the conditions. If you need to break a lease for any reason, some landlords are flexible and some are not.  It’s more likely that, in this market, you will be held to the term of your lease. If you’re committed to the first year, but not sure after that, ask in advance about the possibility of switching to a shorter term or a month-t-month agreement. Are you comfortable with the rental rate? When is it due? Is there a grace period? What is required for a security deposit and how/when will you get this deposit back when you vacate the building? Are subleases permitted?

A SPECIAL NOTE ON RENTER’S INSURANCE. Most landlords have fire and liability insurance on the building, but not on your belongings. Some landlords require their tenants to have rental insurance. Regardless of what your landlord requires, renter’s insurance is a good idea, as it protects your personal property against fire, theft and vandalism. It could also protect you against a liability lawsuit if you are held responsible for injury or damage to another person or their property. At costs ranging from $10 to $25 per month, it’s well worth it.

Here are some resources to explore your rights and obligations as a renter in depth:
dca.ca.gov
rentalprotectionagency.com
hud.gov/complaints
sftu.org

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The question of the day:  Has the Obama plan sufficiently thawed the frozen credit markets to make home loans available again?  According to Chris George, president of CMG Mortgage and a director of the California Mortgage Bankers Association, consumers are only seeing a slow return to normal.  It turns out that consumer confidence, a term that we regularly bandy about, isn’t the only indicator that we ought to be watching.  The confidence of investors is also key to our recovery.  Money sitting on the sidelines isn’t back in the system, and sideline sitting has become as popular a parlor game as Wii Fit this season.

Recently released data from Jeff Meyers at Meyers Builder Advisors shows consumer confidence increased in May to an eight-month high, after hitting rock bottom in February—the lowest level since 1967.  One of the changes that Chris George notes in his talk with The Real Story today is the return of multiple bids on resale homes in some markets in both Northern and Southern California. That says a lot about consumer confidence that if we’re not at bottom, price-wise, we’re getting pretty close.  With the advent of new, higher conforming loan limits (a buyer can borrow up to $729,750 at the best loan rates) and a new lower baseline of pricing that reflects how foreclosures have hit prices in the last few months,  those folks who have good credit and a positive view on their employment future can start looking at homes that were outside of their personal affordability index at the start of this downturn.  A little silver lining in what has been a very dark cloud.

Located just across the estuary from Jack London Square, the “island city” of Alameda is an easy escape from the hustle and bustle of the Bay Area.  From Oakland’s Civic Center, take the Webster Tube and emerge in a place where a neighborly welcome is alive and well.  Next time you have a few hours, get out and explore.  Here are 10 things about Alameda you won’t want to miss.

1. Park Street Shops
Stroll and browse to your heart’s content.  Park Street has always been the Island’s commercial district, and today it’s as lively and eclectic as ever.  Antiques, vintage clothing, natural foods, furniture and more.  Park street is the setting for the annual Park Street Art and Wine Fair, held every September.

2.  The New Zealander Restaurant & Pub
If you’ve always wanted to eat something bigger than your head, order the Aucklander 3 a.m. White Lady Special.  Imagine a 1/2 lb burger topped with a tower of condiments:  melted New Zealand cheddar with ham, pineapple, an over-easy fried egg, pickled beets, sliced tomatoes, grilled onions, green onion, garlic and baby greens.  It’s a tower of pure Kiwi power.  Normal-size burgers, sandwiches, pub pies, even vegemite sandwiches make every trip to this friendly pub an adventure.

3.  Robert Crown State Beach
This 2.5-mile strip of sand on the west shore of Alameda affords spectacular views across the bay to San Francisco.  In the late 1880’s, this beach was the site of the amusement park and public swimming pools that made Alameda a popular day-trip destination. Sit and watch the kite surfers, watch the sun set over the City, or take a jog on the bay trail that runs the entire expanse of the beach.  Crab Cove Visitor Center has displays on wildlife and ecosystems—and is the venue for a free summer concert series.

4.  Alameda Theater
Restored to its 1932 splendor, the historic Alameda Theatre is now part of a seven-screen cineplex.  You see some really wonderful Art Deco architectural details in the historic lobby and auditorium.  Adjacent are six additional new auditoriums, providing a great selection of first-run films. Parking is plentiful in the multi-story garage, part of the recent renovation.  Plans include a café and bistro, still in the works.

5.  Ferries
The island of Alameda is served by two ferry companies:  The Alameda Harbor Bay Ferry, which runs from Bay Farm Island to the Ferry Building, and the Oakland Alameda Ferry, with stops at Jack London Square, Alameda (on the channel near the Bayport community), the Ferry Building, Pier 45 and Angel Island.  Both are popular with commuters who work in the Financial District and live in Alameda.

6.  Fourth of July Parade
Characterized as a modern Mayberry neighborhood extravaganza, the parade has horses, floats, marching bands, mariachis and souped-up lawnmowers.  Eclectic and enjoyable, this parade receives raves from revelers of all ages.

7.  USS Hornet Museum
Moored at Alameda Point, this World War II-era aircraft carrier of the Essex class is now a museum to the ship’s many missions.  This vessel took part in many Pacific battles of the second World War, served in the Vietnam war and later served as the rescue ship during the Apollo space program.  Today, the carrier is a National Historic Landmark and a museum with fascinating exhibits that trace its legacy.

8.  Victorian Homes
Alameda has the highest concentration of Victorian Homes on the West Coast, classic examples of Queen Anne, Italianate and Gothic Revival architecture built in the late 19th Century. The Alameda Architectural Preservation Society and the Alameda Museum host a Legacy Home Tour on September 27th—self guided with docents talks.

9.  Rosenblum Cellars
Not a vineyard in sight, but wonderful zinfandels, syrahs and petit sirahs come from Kent and Kath Rosenblum’s shipyard winery.  Their Main Street tasting room occupies a historic railroad station and features a relaxed, friendly atmosphere.

10.  Alameda Point Antiques and Collectibles Fare
The main runway at the former Alameda Naval Air Station becomes a bargain-hunters paradise on the first Sunday of every month.  With more than 800 dealers, it’s billed as the largest antiques and collectibles show in Northern California.

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When Chris George talks about the options open to homeowners in resetting their loans, people tend to listen.  As the president of CMG Mortgage and a director of the California Mortgage Bankers Association, Mr. George has had 27 years in the business—giving him a unique perspective on the California homeowner and how different market cycles help create different mortgage products.

Chris is the first to admit that in this last cycle the  homebuyer often chose a loan that, in essence, borrowed against future equity—equity which, in this market, never materialized.  When you read about the current plan to reset ARMs (Adjustable Rate Mortgages), what it comes down to is an understanding that an adjustable rate loan is not in itself a bad product.  The fact that it was sold at a time when it appeared that appreciation would always increase gave a lot of people the ability to purchase “too much house” for their income.

In an ARM, the monthly payment charged to the mortgage holder doesn’t cover the interest that is due.  So that unpaid bit of interest accrues and is added to every month, to be paid off against an appreciating home when the loan comes due.  The problem with the ARMs in this recession is that many homes not only have shown no appreciation in the years following the height of the market, but they have actually decreased in value.  The balance now owed is in the reset, meaning that payments might increase as much as 150% to 200%.

Starting June 1, a 90-day moratorium on foreclosures begins in California, a “time-out” to enable lenders and buyers to talk and put into action more choices than foreclosure.

Just as the Bay Area has spawned artisanal bread, cheese, coffee and chocolate, it has been fertile ground for micro-distilleries. Throughout the Bay Area, spirits are being distilled in small batches by people passionate about their craft.  The martini boom of the 1980’s made drinking spirits more popular and there was a nation-wide wave of new distilleries beginning in about 2000.  The highest concentration of these (and there are about 100 in the nation) is right here in the Bay Area.

Hey wait a minute.  We’re talking spirits, here.  Hard liquor.  Can you really tell the difference?

Discerning palates of the over-21 variety say,  “Yes, yes, yes.”

“Micro-distilling is part of the food renaissance,” according to Bill Owens, president of the American Distilling Institute in Hayward, as reported in The Gazette (Colorado Springs, CO). “Think coffee, beer, wine and bread. They have all been improved in quality. Micro-distilling is just one more area to be added to the list. These producers of small-batch spirits are pushing taste buds forward.”

Unlike mass-produced spirits, small-batch distilling is a hands-on process that involves both art and science.  Emphasis is placed on the quality of the raw ingredients, which directly influences the taste of the distilled product.

If you’re interesting in “pushing your taste buds,” here are five Bay Area micro-distilleries:

Anchor Distilling, San Francisco. There’s a great reverence for history at this distillery, which is a sister operation of the Anchor Brewery, established in 1896.  Products include Old Potrero rye whiskeys and Junipero Gin. www.anchorbrewing.com.

Distillery 209, Pier 50 in San Francisco. Founded by vintner Leslie Rudd, Distillery 209 was conceived when Rudd found an old gin still in his hay barn. Gin remains the focus, and the product fuses juniper berries with citrus, exotic fruits and spices. www.209gin.com.

Charbay, St. Helena. Thirteen generations of the Karakasevic family bring their knowledge and tradition to their process.  In addition to infused vodkas, they produce Grappa Di Marko merlot grappa; Nostalgie, walnut liqueur, pastis, Charbay rum,Tahitian bean rum, hop-flavored whiskey. www.charbay.com.

Essential Spirits, Mountain View. This micro-distillery boasts a state-of-the-art Alambic still, the kind of pot still used in the Cognac region of France.  The firm produces bierschnaps, an aromatic spirit distilled from ale, grappa, brandy, gin and rum. www.essentialspirits.com.

St. George Spirits, Alameda. Producers of Hangar One vodka, St. George Single Malt Whiskey, De Profundis 20-year-old Bartlett pear brandy, fruit and grape brandies, Agua Perfecta eau de vie in pear, raspberry and cherry varieties—all sourced from local fruit. www.stgeorgespirits.com.

Sources:
www.slashfood.com/2007/11/30/micro-distillery-movement-in-us-kicks-into-high-speed/

www.nytimes.com/glogin?URI=http://www.nytimes.com/2007/11/25/us/25distilleries.html&OQ=_rQ3D2Q26adxnnlQ3D1Q26orefQ3DsloginQ26refQ3DusQ26adxnnlxQ3D1196346092-DHjEkFmA8cMIlUIjSkOVTQ51&OP=74951b9aQ2F_W.Q2F_Q20jBY(jji-_-yyx_Q25Q25_-v_kY_-vQ204Yi4Q3FQ3F.(4.YLNiwQ3F

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