December 10th–Property Tax Deadline

Today, December 10th is the last day to pay your property taxes in California. Many people wait until the December 10th deadline to pay their property taxes though they are due November 10th, becasue there’s no penalty until after the December deadline.

Taxes

The fiscal year for California property taxes runs from July 1st through June 30th of each year, which is why your property taxes cover those specific dates. There are two payment vouchers, one for the first installment and another for installment numbers two. Installment number one is collected in arrears in November as it covers the time period from July 1st through the end of the year. This payment is due November 10th and delinquent December 10th of each year.

The second installment is due on February 10th but the tax collector gives you and additional 30 days to make this payment as it is not delinquent until April 10th.

For those trying to get all the airline miles possible, there’s an easy on-line payment option but be aware that a 2.5% surcharge will be applied for this convenience.

Lies,Damned Lies, and then there are Statistics…

The article titled "California’s October home sales slide 40%" reported by Inman News today evokes thoughts of Mark Twain’s famous saying there are "Lies, damned lies, and statistics".

Though the number of homes which sold is easily tracked, calculating the true median home price is a little more elusive. The size of homes which sell in a particular period can greatly influence this statistic. The median price has been used quite often as a benchmark for home values since all things being equal, roughly the same size homes sell each month. However, current lending conditions affecting first-time home buyers have skewed these numbers and in fact a disproportionate number of larger homes are selling; and since larger homes sell for more, this has created the appearance of an increase in the median sale price in certain areas.

For example, one of the cities sited in the article as one of the 10 cities and communities with the greatest median-home-price increases in October 2007 compared to October 2006 was Redwood City at 20.6 percent. But if one examines just the single family homes which sold in those two periods, it reveals that in October 2006 the median home price was $810,000 and a year later $1,100,500-a whopping $290,000 more! Pretty exciting news for sellers until you look further at the data and realize that the median size home sold in these two periods also grew; from 1330 sq. ft. to 1760 sq. ft. Calculating the price per square foot which homes sold for in October 2007 ($600.00) and applying that to the difference in the size of homes sold (400 Sq. Ft.) for these periods reveals that $240,000 of the $290,000 increase was simply due to larger homes selling-still an increase, but hardly worthy of making the news. And of course if this scenario is played out across California as a whole, one wonders if the 9.9% median home price dip isn’t actually much steeper than reported?

*Data retrieved from the REIL MLS system for San Mateo County.

Belmont Market Update-November 2007

November’s numbers are in and there are no real surprises. Last month’s momentary increase in the median price in several cities like Belmont and Redwood City (as previously discussed) was due to an inordinate number of larger homes selling in October. This month, the opposite was true as the median size home sold was smaller than the median home in Belmont so it gives the appearance that the median home value dropped.

As seen in this graph, the price per square foot that the average Belmont home sold for was up—again due to smaller size homes selling (smaller homes sell for more per square foot than larger ones).

Bel_per_sq_ft_11_2Belmontnovember_2007_7

Several key market indicators you might want to watch…

↑The number homes sold in Belmont was up from last month and closer to the typical winter selling pattern, though still less than past markets. We’ll give this one thumbs up for performance.

↘The percentage the seller received of the asking price was down from last month’s 100.28% to 97.78 and down from last year’s 101.07%. In fact, one has to go back to December of 2003 to see this low a number. One thing that contributed to this swing was several homes sold which had been on the market for quite some time. Seller’s nearly always get less for their home if it has sat on the market for awhile so this skewed the number s a bit—we give it a down arrow just the same as a sign of a weakened housing market.

Bel_med_sq_sp_112007_2

↔The average home sold in 44 days—again up from last month’s 29 and up from last year’s 32. However, two homes sold for significantly over the asking price (one for over $100,000)—a clear sign the market is still alive on the Peninsula. While 13 homes sold under asking they were on the market for on average 50 days! Another five sold for the asking price and even they averaged 40.6 days on the market—an anomaly. Given the fact that so many homes which were “stale” on the market still sold for so much, we opt to put this market indicator in the “no change” category as it could go either way.

All Belmont Sales as reported in the Multiple Listing Service for November 2007. (Click on the picture for a larger version).

Belmont Central Elementary School Wins Coveted “Blue Ribbon” Award

Another affirmation of Belmont’s commitment to academic excellence was demonstrated as School_award_2Central Elementary school was recognized as a “Blue Ribbon” school–part of the national “No Child Left Behind” program for achieving academic excellence. Belmont’s Central Elementary School was selected out of a possible 120,000 public and private schools nationwide—one of 24 which earned this honor in the state of California. Belmont’s commitment to the finest education is one of the many reasons so many people choose Belmont as their home.

The criteria for such a distinction is:

“The NCLB-Blue Ribbon Schools Program is a 24-year-old program that encourages states to nominate public kindergarten through grade twelve schools that are either academically superior or demonstrate dramatic gains in student achievement. California public schools were chosen from among the 2006 California Distinguished Schools. Private schools were nominated by the Council for American Private Education.”

“…the school must show a student proficiency level that places the school at the 90th percentile in English-language arts and mathematics in the highest grade tested when compared to other schools in the state.”

Congratulations to Belmont and the staff of Central Elementary School as well as the many volunteers, families, and organizations such as Belmont’s School Force for earning this high honor.

Mark your calendar: The best meteor shower of 2007 peaks on Friday, December 14th.

My Brother and I have a long history of watching asteroid showers from our roof top as children. Today, they still excite us as we enjoy the "fireworks" that the heavens offer us so many time a year. This particular show appears to be a good one–though they have promised such before and we’ve been disappointed,. Yet unlike the Fourth of July fireworks which have been less than spectacular in years past, these folks really have no control over the outcome. Here’s to hoping the sky is clear.

Click here for the full story… http://science.nasa.gov/headlines/y2007/03dec_asteroidshower.htm?list192695

Happy watching,

Drew

The Dual Income Trap

Elizabeth Warren, A Harvard Financial Law Professor writes in a very revealing article titled “The Middle Class on the Precipice” wherein she examines the dilemma now facing dual income families as spouses no longer have the added ability to enter the work force if even to temporarily buoy a family’s income. Scales_copy

Ms. Warren’s assertions can be seen as they apply to this year’s increase in foreclosures. In the 1970’s many households were single breadwinner families who purchased their home based upon a single income. This of course meant that if the sole money earner lost their job the other could fill the income void with temporary employment. Now that families are reliant on dual incomes, and qualify for their home loan based on two incomes, a loss of either income can be catastrophic if sufficient reserves do not exists.

Where will the next infusion of income growth come from? It seems highly unlikely that another source of income as significant as when dual incomes materialized will could arise in the future; leading one to speculate that the rapid increase in home values as experienced in the last 30 years is unlikely to continue at the same pace.

  • Housing is a necessity yet also very much a part of one’s financial portfolio—especially in the Bay Area. Own a home and let your equity develop.
  • Over the long term home ownership continues to be a sound investment. Buyers who are looking to purchase their first home should consider their job security.
  • There are better opportunities than in recent years but the days of 7-15% appreciation are over for now and flipping a home in a year almost impossible.
  • Qualifying on a dual income bases means you’re also reliant on two incomes and should also be considered.
  • Having to move due to job relocation or layoffs could put a financial hardship on a new homeowner if values have declined or not risen enough to cover selling costs.

Buyers—Should I Stay or Let it Go?

Much of the current real estate media attention has been focused on foreclosures and sub-prime lending practices. The media’s relentless impending doom stories have certainly rattled the nerves of the many would-be buyers. The question is should a buyer stay in the housing market hunt or let it go?

Ruggia0014c_2

Buyers tend to fall into at least one of three groups; buyers who believe the market will go down and are waiting on the sidelines, ones who can no longer qualify for a loan due to tighter lending guidelines, and buyers who see the new opportunities to own a home.

The Buyers who can no longer qualify for a home loan are probably better off not trying to get in over their head anyway. Stretching the ability to repay a loan is a recipe for disaster and many of the people who find themselves in foreclosure are probably wishing they had never bought in the first place.

The buyers who are aggressively looking for a home and seeking the market’s opportunities will most likely fare the best in years to come; buyers who wait until the media gives them the “all-clear” sign, will find they waited too long. Warren Buffet of Berkshire Hathaway, arguably the best investor of all time, states very succinctly in his business model that investors “…will understand that volatility provides investment opportunities and will use market drops to make good purchases." Mr. Buffet has also been quoted as saying “A good investor learns to insulate himself from market emotions and to make a distinction between market price and intrinsic value.”

Therein lays the dilemma. Is there any intrinsic value in Bay Area homes or are the prices overinflated?

Much has been made of possible housing bubble and many would claim it has burst while others feel the air is slowly being let out. Looking at historic trends in real estate we see that indeed the California and the Bay Area in particular outperform the country as a whole in housing appreciation.

Uscabay_area_median

This graph illustrates the median home price in the United States since 1968 as compared to California’s—the Bay Area was included as of 1982.

As one can see California has outpaced the country and the Bay Area outpaced California. It’s interesting to note that California and the Bay Area are more-or-less in step with each other while both clearly have grown faster than the country as a whole. But is this value real? Why does the Bay Area command these high home costs and can it continue? This is the very sort of data which leads many to conclude that California as a whole, and particularly the Bay Area, cannot sustain the price discrepancies with the rest of the country.

The Dual Income Infusion:

Twenty years ago, more and more California families became dual income families which increased their incomes by 75% and the ability to pay more for a home; and since a larger percentage of California families earned two incomes at higher pay, California began to outpace the rest of the county. Additionally, the advent of technology rich companies in the Silicon Valley infused a great deal of wealth to the Bay Area perhaps forever altering the discrepancy in home values. This added ability to spend more on housing is easily seen in the above chart discrepancy between the cost of a home in California vs. the country as a whole.

Where will the next infusion of income growth come from? It seems highly unlikely that another source of income, as significant as when dual incomes materialized, will develop–leading one to speculate that the rapid increase in home values experienced in the last 30 years is unlikely to continue at the same pace.

Buyers who are looking to home ownership should consider their job security. There are better opportunities than in recent years but the days of 7-15% appreciation are over and flipping a home in a year is currently all but impossible. Qualifying on a dual income bases means you are also reliant on two incomes and should also be considered. Having to move due to job relocation or layoffs could put a financial hardship on a new homeowner if values have declined or not increased enough to cover selling costs.

Locally, there has already been a slight decline in home values but we feel if economic conditions remain the same—or improve—this will be a short-lived adjustment. The market rebound will likely be slow to moderate with less aggressive growth and a healthier more sustainable market.

Housing is clearly a necessity. If you feel your job is secure and you have the wherewithal to afford housing now is an excellent time to entertain the possibility.

Read tomorrow’s article on The Dual Income Dilemma

San Mateo County Posts Higher October Median Price

We’ve updated the housing data through October of 2007 and there were a few surprises in the month of October.

↑The median single family home price home price rose 7% in San Mateo County, up $75,000 to $1,075,000 over September’s $1,000,000 median price and up 13,7% over October a year ago when the median home price was $945,500.

Smc_graph_3

↓Fewer sales mean homes are staying on the market longer. Last October a home sold in 39 days—this year 41.

↑The average home sold for 98% of what a seller asked, up 2% from last October.

↓Total available homes for buyer’s to pick from was 1,738 as compared to last year’s 1,441

↔What is not available is what size homes sold. Clearly all indicators are that larger homes must be selling (surprisingly that data is not tracked by any group) since it’s clear the market has slowed some.

It’s not the bloodletting the media has portrayed it to be but nevertheless some buyers continue to wait on the sideline hoping for lower prices and others are taking advantage of the softer market with more choices and less competition.

You can read more about what accounts for the seemingly incongruent market data on our blog. BeautifulMountainBlog.org

·         Source-Multiple Listing Service for San Mateo County

Belmont Market Report-October 2007

While the media is quick to jump on any story which appears sensational, one wonders why the sharp increase in Belmont’s median price of over 19% last month wouldn’t have raised any eyebrows.

Don’t miss this month’s article explaining how this data needs to be interpreted.

We publish these graphs each month in order to keep Belmont homeowners apprised of the market. Of course you are always welcome to visit our web site MorganHomes.com for more detailed graphs and of course our blog for insightful analysis.

And if you are a Belmont resident, help us go green and sign-up for monthly reports. We’ll take you off of our snal mail list and dobate a dollar to school force!

(Click on the picture for a full zized view)

Belmont_october_sales_2007