Arn Cenedella

Archive for the 'Real Estate' Category

Weekly Market Report 10/21/07

Here is last week’s report from Rick Turley Coldwell Banker President San Francisco/Peninsula:

In the San Francisco Bay Area, buyers are starting to realize that selling prices are just not going to drop precipitously from where they are now in most of the Bay Area.  If a deal is to be had, now is the time to negotiate it, and it seems the negotiating has begun.  Offices in all areas reported increased sales activity and buyer interest, and our more than 600 homes held open were overwhelmingly well attended. Sales activity and buyer activity is reportedly increasing in practically every area. 

Oakland reports plenty of buyers and multiple offers on the better available listings.  There’s a “buzz” in Lamorinda’s steady market.  Buyers are writing offers in Santa Rosa.  The high end homes continue to sell quickly in Southern Marin while Walnut Creek is seeing sales in all price points and in every corner of that market.

Inventory still remains tight on much of the Peninsula.  Palo Alto and West Menlo are starved for fresh, well-priced inventory.  A San Mateo Park home sold for $3.8 million without ever being exposed to the market.  There was an all cash sale in Woodside for $3.1 million. A Palo Alto property sold for $250,000 over list price in a multiple offer situation.  Eight offers are on the table for a $2.7 million “tear down” in Atherton.  San Francisco continues to see good activity in all price ranges with the properties over $1.5 million remaining the most desirable.

We are still seeing year-over-year median-price gains in Santa Clara, Marin, San Francisco, and Contra Costa counties. Bay Area housing remains a solid long term investment.  It makes good sense to get into the market when there is still a good selection of available housing at multiple price points and while interest rates remain low.

Is there a perfect time to buy or sell?

Last week I was at a meeting of my Buffini and Company small group.

One of the agents there does very well in the real estate business. He is in his early 30s married with 2 pre-school age children. They have owned a home on the Burlingame/San Mateo border for many years but now they wish to buy a home in Palo Alto for the excellent schools located in Palo Alto.

The agent was trying to determine if this was the time to try to make the move or would it be worth waiting till spring when the “market would be better”.

This agent now wearing his owner’s hat was trying to come to grips with the fact that his house was not worth what he hoped it was worth. The move would bring him from a lower cost area to a higher cost area.

Our group had a free-form discussion of the agent’s delimna.

Our group as a whole agreed that the market had slowed.

So would it be better to wait till the market got better so this agent could get a better price on his existing case or make the move now?

We considered various scenarios.

If the agent waited and in fact the market did get better (so he could get a better higher price for his current residence) – would he have been better often waiting?

Our group decided NO.

If the market did heat up, the price of the Palo Alto home would probably go up more than his San Mateo home so the difference his sale price and his purchase price would increase. With the current slower market, the agent has a better chance of finding his Palo Alto house at a better price.

If the market continues to cool, would the agent be better off waiting?

Again, our group decided No.

We felt if the market continued to cool, the lower price area would probably drop more in value than the higher priced more desirable area. So again if the market dropped, the difference in his sales price and his purchase price would again probably increase.

Our group decided that whether the market goes up or down over the next 6 to 12 months, this agent would probably be better off making the move now.

Regardless of this analysis, the bottom line was it was time for his family to move into a house and area where “they would raise their family and where their kids would go to school”. When all is said and done, that is the prime consideration.

Even agents can’t time the market.

So why waste any time trying?

One needs to deal with the market as it exists.

I am confident that regardless of what direction the market takes over the next few years, this agent and his family will be happy they made the move. It will be a good thing for his family.

When your housing needs change and/or your financial situation changes and you can make a move for the better, DO IT!

Weekly Market Watch

Here is this week’s market watch report from Rick Turley, Coldwell Banker San Francisco President:

 This report makes several good points:

 

1. Housing is a good long-term investment.

2. Housing is not just an investment but offers so much more.

3. Property values on the Peninsula have held steady and in some cases increased.

4. The current opportunity may present an excellent long-term buying opportunity.

 

 

It is perplexing and frustrating to continue to see news reports with people who could be considered little more than “real estate pundits” talk about only one side of the current real estate story. 

This week, the controversial stock market analyst Jim Cramer of Mad Money told viewers of The Today Show that “If you buy a home now, you will lose money.” He went on to add “there is no money and no programs for first time home buyers.  Down payment money is the biggest issue in the market, because young people don’t have any.”

Housing is a good long-term investment – it’s not a day-trading activity.  As we witness the steep increase in foreclosures among housing boom “flippers” who secured sub-prime, adjustable rate loans with no money down, we see the folly of playing the housing market like the stock market. 

Homes are not stocks. Most people stay in their home for about 6 years – they buy for the long haul to create a home for their family, not to buy, then turn around and sell six months later. Owning a home isn’t just about investment, although that’s certainly important. It’s also about building community, a place of your own, and having a part of the American Dream. For people who want to buy a home to live in, this is truly a great time to buy a home.  In some areas there may be more to choose from, mortgage rates are historically low and the economy is strong.  There are some investor opportunities out there as well, but it’s important to remember that the criteria regarding these buying decisions are different between the investor and the homeowner. 

In our area we have seen steady appreciation in home values over the last 30 years.  Regarding the median prices in many parts of the Bay Area and Silicon Valley, most specifically in San Francisco and the
Peninsula, properties are not only holding steady, but actually increasing. The case could easily be made that waiting for prices to drop may make the realization of home ownership steadily more difficult.  Signs aren’t pointing to bargain basement pricing ever becoming the norm in our markets, though price is now, as always, an important consideration. Smart buyers are buying.  Smart sellers are selling.    

Witness the number of buyers visiting our more than 600 homes held open last week.  A
Berkley listing was seen by almost 100 visitors.  A
Walnut Creek listing received four offers and sold for three percent over the current asking price.  In

San Mateo
Park, a home received five offers and the lowest down payment among them was 50 percent. 
Palo Alto continues to report 100 percent multiple offers.  One
San Francisco office notes that the $2 million-plus market is “on fire.”  The upper end markets are clearly not sending a negative message – in fact, quite the opposite.  Last week San Francisco Van Ness closed both sides of a $7M property in a two week long escrow, and in the same week Woodside opened a new sale for $12M, sold by a fellow CB Menlo Park-El Camino agent, and the following day Woodside opened another $13M sale.  Again, the message is quite the opposite of the doom and gloom which make headlines.

I encourage people to get the facts from an experienced real estate professional, the person most qualified to discuss the merits of home ownership.  Not from a stock broker on television. Now more than ever, there is immense value in working with a real estate agent affiliated with a full-service brokerage, the professional who can guide clients through the financial elements of the real estate transaction from negotiating price to serving as a guide to the mortgage market.  At Coldwell Banker Residential Brokerage, we also have a strong, in-house mortgage partner in
Princeton Capital who can identify appropriate financing options for customers. 

Have a great week.

Rick

 

Rick Turley

President, San Francisco/Peninsula

Coldwell Banker Residential Brokerage

tel 415.437.4505

[email protected]

The Media – The Sky isn’t falling (part 6)

Gary Watts made the following comments about the media which just loves to bash the real estate market any time it gets a chance – and most of the time it just makes the chances up.

The Media

Remember Y2K, Mad Cow Disease, West Nile Virus, Killer Bees, SARS, Bird Flu and now Housing?
Today’s media plays up bad economic news more than ever, which leads to misconceptions about economic realty. Our economy is extremely strong, with a 2nd Qtr. growth rate of 4%; corporate profits are superb; and personal income is growing more rapidly than spending – thus pushing up the personal savings rate!  All the while, the world economy is exploding.  However . . .

 The media says real estate is going down, yet July’s prices for single-family homes in California were up 3.2% from last year. From August of last year, the Bay Area’s median home prices rose 4%.
The media reports that foreclosures have now exceed the 1996 peak in the Bay Area, but they fail to mention that more than 495,000 homes and condos have been built in the Bay Area since then!
The media reported 53,942 notices of default for the 2nd Qtr – a near record high. They compare this figure to the 1st Qtr. of ’96, when 61,541 notices were filed -  but fail to mention that 2 million more homes have been built in California since then! (The lowest number was 12,417 – 3rd Qtr. of 2004.)
The media and the financial markets have greatly over-reacted. There are only $70 billion of loans with late payments, yet the financial markets have lost over $1 trillion in value! 

In on of my earlier posts, I lamented the over-reaction to the sub-prime crisis.

$70 Billion of loans are late on payments – it doesn’t mean anyone lost $70 Billion !

Say the lenders only recover 80% of all loans which are now late in payments, the lenders will have lost 20% of $70 Billion or $14 Billion. A lot of money no doubt – but I wonder how many Billions the lenders made in the past few years on sub-prime mortgages - I bet it well exceeds $14 Billion.

 And if my math is right, the loss in the financial markets of $1 Trillion ($1,000,000,000,000) over the potential loss to sub-prime lenders of $14 Billion ($14,000,000,000) is SEVENTY ONE times the potential loss to the lenders.

That is absurd !

Over and out until next time.

A historical perspective – The Sky is not falling (part 5)

Gary Watts, a real estate economist, recently gave several conferences to San Francisco Bay Area Coldwell Banker agents.

 Here are some of his comments:

 Brief History of Real Estate

We are in the 24th month of the current housing downturn. Historically, housing downturns average 27 months so we may be near the end. Although there has been a significant decline in sales volume, the Bay Area’s home prices have continued to show small amounts of appreciation – excluding the Napa, Solano, and Sonoma areas. With the Fed cutting interest rates in the near future and the financial markets calming down,  shortly money will begin to flow back into mortgage securities.  It may be wise to give our client’s a little historical perspective about real estate cycles.

1970 to 1980:

                “The goal of owning a home seems to be getting beyond the reach of more and more Americans. The typical new house today costs about $28,000.” – Business Week – 1969

    In 1972, interest rates were 7%, but these rates would not be seen again for over 24 years.
    In 1973, OPEC doubled the price of oil, banks had a run on deposits and, for approximately 8 months, there were no lenders who were in a position to make loans to any home buyers.
    By the late ‘70s, both interest rates and the inflation rate were exceeding double digit numbers.  
    By the end of the decade, California home prices experienced a yearly return in excess of 11.5%!
     
                “The median price of a home today is approaching $50,000 . . . housing experts predict price rises in the future won’t be that great.” – National Business – 1977

1980-1990

 In the early ‘80s, inflation hit 21.5% and home loans were reaching 18%! 
 A recession was taking place and job losses were increasing – leading to home foreclosures.
In 1984, California home prices had their first decline since the Depression – they declined 0.10%!
   
                “The golden-age of risk free run-ups in home prices is gone.” – Money Magazine – 1985

The savings and loan scandal hit the financial markets but the government bailed them out in 1988.
By the end of the decade, interest rates had decreased to single-digit (9.5%) rates.
From ‘86 to ‘89, California home prices rose 46% and ended the decade with a yearly return of 7.95%! 

1990 to 2000:

On Nov.11, 1989 the Berlin Wall came down and, by January of 1990, Congress cut the defense budget.
In a short period of time, a lot of highly-paid workers in defense and manufacturing had lost their jobs.
California home prices declined from 1990 to 1996 by less than 2% annually, for a total of 12%. 

                        “A home is where the bad investment is.” San Francisco Examiner – 1996

In the following 3 years, California home prices rose 19.7%, wiping out all the losses of the early ‘90 and ending the decade with a net gain of 9.35%.
From 1995 to 1999, the Bay Area’s median home prices rose a whooping 25%.
The median price of a home in California has not declined since 1996, and the 38 year average rate of appreciation for homes in California is 7.75%! 
 
          Source: Researches by QTVN (regarding interest rates), U.S.  Dept. of Commerce, CAR

The Sky isn’t falling ! (part 4)

NAR in its most recent statistical update estimates that 5.336 Million homes will be sold this year.

Everyday we read in the newspapers how terrible the real estate market is.

I have consistently maintained that while the market has slowed it is not a disaster but rather just a return to a more normal market.

Let’s look at US homes sales over the past 10 years.

Here is the data:

Over the past 10 years, on average 5.205 Million homes have been sold per year.

So assuming NAR’s projections are correct; the number of homes sold in 2007 shall be slightly above the 10 year average number of sales.

This certainly is not a collapse but more a return to a normal market.

It would not suprise me if the NAR projection for 2007 sales is reduced from the current 5.336 Million estimate. Even if this should comes to pass, the number of sales will be basically average for the past 10 years.

Looking more locally – i.e. to the San Francisco Peninsula – August is typically a very slow month for homes sales – Sales typically pick up once Labor Day is over. It willbe interesting to see what happens in the next few weeks.

In a follow-up post, I will provide California sales data for your consideration.

The Right Attitude

I just received an email from my former assistant, Mary.

Mary and her husband moved to Arizona recently and they had their first child a few months ago. Like many younger couples, they had some consumer debt but they very much wanted to own their own home.

Please read this email and look for how they turned a supposed NEGATIVE into a POSITIVE for them. They used the fact that the AZ market was very very slow to their benefit - they found a good house they could afford – worked a deal to pay off their debt as part of the sale – and now are HAPPY homeowners.

Here is Mary’s email:

Hi All!
 
Thought you’d like to know that we are now proud homeowners! We just bought a 3 bed, 2 bath 1-story home on the southeast side of Tucson. It’s about 10 years old and had been on the market for over a year! (Not because there’s anything wrong with the house, the market is just really bad here.) We’ve got a 2 car garage, great landscaping, quiet neighborhood with a park and a hot tub with no heater. Yup, you read that correctly. Basically we have a round pool that bubbles. And with the deal we made with the sellers we were able to pay off the majority of the remaining debt we have and so it’s a sure thing that I will be able to stay home with Amy. In fact, starting Oct. 1 I will be watching our niece and nephew full time…….so I guess technically I’m still working.

That’s what it is all about ! Yes, the market is slow – use that to your advantage and get a house now – while selection is good – and you can actually negotiate with a seller to get a good buy. Yes, prices may drop a little further – but in the long run, you will ahead of the game.

It’s very rare – a balanced newspaper article about real estate

This unusual event took place in this Sunday’s September 9 New York Times.

The headline in the article was “It’s Time to Take a Deep Breath“.

How true !

The following points were made by Ben Stein:

1. The sub-prime mortgage industry helped many individuals to buy a home – without the sub-prime mortgage industry many of these individuals would not have been able to buy a home. Owning a home is the bedrock of the American Dream.

2. There is plenty of blame to go around – the sub-prime issuers and the bundlers of sub-prime mortgages – certainly share some of the blame. But many borrowers also faslified their loan applications and failed to do their own due diligence of their terms of their loans.

3. The time to buy real estate is when it it is down.

4. The Federal Reserve Board is on the case and they have stepped in to prevent further panic in the financial markets.

5. The US economy is very very large and it can not be derailed by anything we have seen right now.

I believe all of this is true. It is an issue – it is a problem – but it isn’t the end of the world. Our housing market and economy will get through this and hopefully we will have learned some lessons while we do.

A look back in time……

 

 

I am holding open my new listing at 125 Mission Drive, East Palo Alto this weekend.

This 2 bedroom 2.5 bath 1580sf end unit townhouse is listed at $520,000.

Virtual tour at: http://www.uBuildTours.com/tour.php?mls=749880

The first home I ever purchased is just 5 doors down at 130 Mission Drive. I became a proud homeowner in September 1980. I was the first buyer to move into the newly built Mission Palo Alto complex. PG&E had to erect a temporary power pole so I could move in. My loan was approved at 11.75% fixed 30 years but my rate lock was going to expire shortly and my townhouse wasn’t quite finished – big surprise – the builder was about one month behind schedule. Fortunately, my family and I had a good relationship with our banker at Wells Fargo, Wayne Spielman. (Back then, buyers went down to their local bank to get their mortgage). Wayne agreed to fund the loan despite the unit being unfinished with some funds held back in escrow pending completion of the townhouse. Rates had started up on their way up to 18% in those last few months of 1980 into early 1981.

I lived at 130 Mission Drive until 1986 when I was able to move and buy a home in San Carlos where I still reside. I paid $107,500 for 125 Mission Drive – sold it in 1988 for about $125,000 and now it is worth $500,000. Oh well, hindsight is always 20/20 – one does what one can at the time.

It doesn’t seem like it was 27 years ago when I bought my first home. I was all of 26 and had been in the real estate business about one and a half years. Where does the time go?

Over these past 27 years, I have been married, raised my two sons, went through a divorce, and left my father’s real estate company (where I started in the real estate business) to go to work at Cornish & Carey where Wendy McPherson was manager – which was several years later bought out by Coldwell Banker.

The real estate industry has changed greatly over that time, too. When I first started each agent had their own “little black book” where there was one listing to a page – where we entered prices changes and pending/closed sales by hand – when the “hot sheet” came out twice a week. Each City had its own Board of Realtors and their own lock box key. I probably had 6 or 7 keys at one time. Fax machines were new. Were fax contracts legal? Enforceable? Everyone wanted to know. Cell phones – had did I ever conduct business without one? Contracts were 1 or 2 pages – now they are 10 pages. Back then, the entire transaction file could be put into a thin manila folder. Today, transaction files run several hundred pages each. There is one mls for the entire peninsula – one keysafe key opens properties from San Francisco to San Jose. Agents and the public are updated instantly as to new listings and sales. Virtual tours – Craig’s list – wow – what a long strange trip it has been J

Many agents have been fearful of the changes technology has brought to the real estate industry. Over my 29 years in the real estate business, I have tried to incorporate this advances into my business in order to provide better service to my clients..Despite the advances in technology, the real estate business is still all about relationships. It’s the personal touch – the building of trust and rapport – it is about taking care of one’s clients.

 

How has your business and life changed over the past 27 years?

      

Homeownership is so much more than a financial investment

Real estate is a tangible asset - home ownership provides a place to live – a place to put down roots. It allows you to create a living environment you find most desirable – you can maintain and/or modify the interior and the exterior of your property in a way that brings you the greatest satisfaction. ”Pride of ownership” is more than a slogan. The emotional benefits of having a place to call your own are significant.

Recognition of these emotional benefits is the primary driver behind most decisions to purchase a home. In my experience, buyers purchase on emotion and then justify rationally.

Certainly, home ownership is a smart financial decision also.

Tax savings due to the ability to deduct the cost of interest and property tax paymentsoften can bring the cost of ownership down to levels similar to what it would cost to rent a similar house in the same neighborhood.

In addition, the ability to leverage one’s investment is a key to building financial wealth. If you purchase home with 10% down and the property appreciates 10%, you have actually made an 100% return on your initial down payment investment.

I have owned my home for over 21 years and through the many personal changes and challenges life often brings, my home has been my “safe haven” – my “Rock of Gibraltar” and an the best financial decision I have ever made.

I would suggest when it comes to buying a home : Try it, you will like it !