We thought this home was the best deal this week. It’s in a great area of the Belmont hills on the west side. Carmelita is known for having a warm micro-climate. For $699,000 this price is hard to beat. It has a larger than normal rear yard which is level–a rare find in the Belmont hills.
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Call us at (650) 508-1441 or email dmorgan@morganhomes.com if you’d like to see this home!
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Anyone who owned a home in the Bay Area back in 1989 must remember the subsequent downturn in the market. That downturn was caused by a loss of Bay Area jobs. Home values fell as jobless homeowners sought to liquidate their mortgage overhead. Companies offered out-of-state relocations packages and early retirement to employees while many others opted to voluntarily move out of state. The latest Bay Area job report indicates that for now at least we are safe from that negative market force called unemployment. The nine Bay Area county population grew 1.4% last year and new arrivals helped buoy the housing market—if not more in the rental sector than homeownership. "It’s evidence that the Bay Area is doing better economically than the rest of the state," said Mary Heim, head of the demographics research unit at the state Department of Finance, which released the new population numbers. This link http://www.sfgate.com/webdb/population/ allows you to see any city’s population growth and it’s definitely worth checking out. Whenever there is a market sell-off due to dire circumstances, such as we are experiencing now in the foreclosure arenas, prices drop. Why? Simply put in order to be the next sale you must have the lowest price and/or be the best home on the market. The housing market today is not unlike that of 1990 in that in many areas folks are forced to sell their homes and prices are dropping. But the Peninsula of the Bay Area has been fairing far better. First, there are far fewer foreclosures on the Peninsula and thus virtually no downward pressure on pricing from that market force. There’s market skepticism and a general reluctance on the part of many to enter the market; and we all know the new tighter lending practices have make it difficult to impossible for many to buy a home if they wanted to. But jobs are not one of the issues facing the Peninsula right now. If the unemployment rate rises dramatically or more simply put, if people start to leave the Bay Area (voluntarily or not)—where more people are leaving than are arriving—it could all change. Clearly a prolonged recession could have just such an impact and tip the precariously balanced local housing market in favor of a drastic sell-off. See our homepage at MorganHomes.com for monthly updated local market graphs and our blog page at Beautifulmountainblog.org for detailed market analysis and commentary.
After reading Kenneth Harney’s article titled “Tight credit hitting specialized areas of 
mortgage market†in the May 3, 2008 Real Estate section of the San Francisco Chronicle, it struck me how far we have to go to return to a more normal housing market. Mr. Harney discusses the multitude of new restrictions on home mortgages which all have one glaring similarity—they make it harder for borrowers to get a loan.
Some of the new loan restrictions affecting home buyers are:
· No more zero down financing
· No more stated income for non self- employed people
· No refinancing a property that had a cash-out refinance within the last six months
Some of the new loan guidelines for investors will also hurt the housing industry. A few of these are:
· No investor shall be eligible for loans on more than four properties in total—the prior limit was ten.
This will clearly have a detrimental effect as housing seen from an investment perspective will be effectively limited to four properties—looks like REIT’s will be getting a second life when the housing market does pick up.
What’s entirely possible is that the market may never see another feverish housing boom–the likes of which swept the country in the last decade. Home affordability is still near an historical low, lending standards have never been tighter—the huge confluence of dual income qualification for loans and higher home values is off the table as that market effect has been played out already (we did an article on that months ago called the dual income trap).
Visit our Real Estate web page for monthly updated Bay Area home sale trends MorganHomes.com
Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this intended to be specific to your situation-consult a specialist for your specific situation.
The San Francisco Chronicle just splashed more bad news about the housing industry all over the front page of the Friday (March 14th) issue. Sales are down-way down. Part of the explanation seems to be that tightening lending standards have made it hard to afford a home since qualifying at artificially low teaser rates is no longer acceptable. Stated income loans are only available for self-employed individuals and Wall Street stopped buying mortgage backed securities so rates are up too.
Of course buyers who have been priced out of the market are now waiting to jump in at the bottom, which only adds to the rapid decrease in sales activity.
Timing couldn’t have been worse for Congress to approve raising the ceiling on federally backed mortgages from $417,000 to $729,950 in the Bay Area. Many buyers considering purchasing a home are enticed to wait out the market a little more to see if rates will drop further.
So if we had a crystal ball, we’d say that when the new higher conforming loan cap goes into effect, it’s just possible that many buyers will get off of the fence. And if they all do that at the same time, there just possibly could be competition once again for housing. The biggest fear if you’re a buyer is you get in the market too early and your home’s value could go down before it goes back up; that’s a horrible position to be in if you have to sell while it’s down. The alternative is to get lucky and time it perfectly, or wait to see values going up and be assured you didn’t get the best deal. I don’t know for sure, but history tends to repeat itself and I’ll bet home values go up again sometime in our future. While everyone’s trying to guess when the bottom is not everyone will get it right.
Maybe buying before that happens would be a good idea. If rates do go down further, one could always refinance…
There are great deals to be had on appliances right now. 
Everyone knows that the U.S. economy is driven to a large degree by consumer spending. Tighter post-Christmas spending patterns create a need for stores to offer up sales and financing deals to lure consumers back to the stores. Check out Best Buy and Circuit City to see the amazing deals one can get right now!
This year with consumer confidence low, the average consumer will pull back even more. That translates into great deals for the savvy (or fortuitous) consumer who’s waited to buy. On big ticket items such as plasma TV’s and refrigerators it’s not unusual to see low or no interest rate financing options today—even free delivery.
When will these offers end? They’ll end when consumers return to more bullish spending patterns. When will that happen—of course no one knows. The only indication will be when you are no longer offered deferred or low interest finance rates and deep discounts—watch the ads.
How does that translate into real estate? Actually, perfectly. The same forces are at work and the same indicators available. You’ll know when was the best time to buy just after it passed.
Live your life.
*The information contained is educational and intended for informational purposes only. It does not constitute legal advice, nor does it substitute for professional advice.
Median Price Methodology:
The methodology of reporting median home prices varies depending on the source. The MLS uses the aggregate method of calculating the median based on the preceding twelve month sales. We discuss why in a changing market this system is flawed at best.
Standard & Poor’s methodology is perhaps the most accurate, but it relies heavily on past sales and is therefore better suited for looking at historical trends than illuminating current market conditions. 
We employ another approach which is to examine the most recent month’s sales, and adjust for larger or smaller homes selling to help mitigate wild fluctuations in median price results.
For example, the MLS reported Belmont’s median value for 2007 to be $945,000; yet looking at the median price reported at the end of December it stood at $1,035,000; a significant difference and an overall upward trend from the previous three years.
What You Hear About Median Home Values May Be Completely Wrong
The Multiple Listing Service for the Bay Area peninsula has launched the December sales stats and there is some compelling evidence that Bay Area homes values dropped slightly over 2006.
The median home price is the midpoint at which half of the homes sold for more, and half sold for less. Of course if smaller or larger homes are selling then these numbers are easily skewed—especially with a small market sample.
San Mateo County posted a reduction in the median home price to $885,000–a $40,000 (4.3%) decline over $925,000 in 2006.
This statistic could be wildly inaccurate though. Simply put, there’s no easy way to determine if the size homes which sold in a given year were larger or smaller than a previous year’s. Intuitively, given a large sample–totaling all sales for San Mateo County for example, one would expect the median size home to remain relatively constant and thus portray an accurate picture of the median home values. But unique market forces such as the ones we are currently experiencing are just the sort of thing that could skew those numbers. If for example, more first-time buyers purchased homes, the median size home included in the sales calculations would undoubtedly be smaller and thus skew the median price lower.
The Multiple Listing Service (or MLS system) which essentially retains all agent related transactions has its own inherent flaws. They derive the median home value by taking the median price for every home sold in a given year. If the housing market has a dramatic shift during the course of the year, it’s entirely possible that the median home price reported has nothing to do with the home values at the end of the year on December 31st. In other words, it matters not whether home values climb for the first quarter of 2007, if in December they’ve dropped dramatically. The MLS median price is more a measurement of the average median value rather than the true median price at the end of the year.
Last year was a prime example of why reporting the median home price in this fashion is erroneous at best. In Belmont for example, there were 94 sales in the first six months of 2006 and 92 in 2007–virtually unchanged. However, the next six months after the July mortgage issues came to light, there were only 127 sales in 2007 compared to 167 in 2006. It’s a strong indication that the market changed in the second part of the year and why measuring the median values at the end of the year, rather than reporting the aggregate is a methodology more suited to a changing market.
In a small market sample such as the town we live in, Belmont, Ca, it’s even more imperative that one adjust for the median size of homes which sold. We incorporate this onto our calculations and low and behold an entirely different picture emerges.
Days on Market and Price Received Correlation
Though the nation’s mortgage industry is tumultuous at best, the peninsula market in the Bay Area is faring much better.
Last month 17 homes sold as compared to 14 in 2006 and off the high of 25 in 2005.
Of those 17 sales eight sold over the seller’s asking price, two sold at asking and seven homes sold under asking. 
The average time it took to sell a home was 39 days. Of the homes which sold over asking however, they took only 18 days to sell and on average sold for 3.61% over what the seller was asking. Seller’s which received their asking price took on average 40 days to sell, and homes which sold under the asking price averaged 56 days on the market and sold for 5.26% less than their original asking price.
Clearly, pricing a home correctly remains a crucial factor in getting the most for a home. These numbers illustrates a swing of almost 9% in what a seller received between a home priced to sell quickly and one which lingered on the market.
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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. 
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.
