Redwood City—Hit Harder by Housing Woes

Redwood City California may have the best weather as advertised by the city’s slogan “Weather Best by Government Test”, but what it offers in weather it lacks for in housing—stability.

Redwood City has long been known for having a more volatile housing market. With a population of 77,000—double that of nearby towns—its housing affordability depends a lot on where in the city one lives.

Three zip codes separate different areas of Redwood City and last month the median selling price ranged from $480,000 in zip code 94063 to $1,045,000 in nearby 94062.

This graph illustrates the month’s supply of home available for sale. While the adjacent town of San Carlos has only 2.9 months of inventory Redwood City has 5.6.*

Rwc_april_2008

With a median price of only $885,000 as compared to San Carlos at $1,077,000, it’s easy to see why many people choose to purchase a home in Redwood City, but when the market changes, as it did last year, certain areas get hit hard.

It’s somewhat akin to buying a home on a busy street. When it’s a strong sellers market with competing offers for every home, selling a home on a busy street isn’t so difficult. Yet when it was a buyer’s market those homes are often the last to sell and they sell for disproportionately less than their cul-de-sac counterparts.

*The month’s supply of housing is the inventory divided by the homes selling per month. All data was retrieved from the San Mateo County MLS Prolisting.

As always you can see monthly updated graphs on our web page at MorganHomes.com

Belmont’s April Sales Defy the Odds

↑With Belmont’s April home sales behind us we are able to compute the data and there’s a silver lining to the news. For the first time this year homes sales are up over the same period a year earlier. Admittedly, at 21 sales this month compared to 20 last year in April it’s not a huge increase, but any increase is a welcome event given the current state of the market.

↔The days it took to sell a home was essentially unchanged at 13.

↘Last month, nine homes sold over asking, two sold at asking and 10 homes sold under the asking price—on average for $32,000 less. That compares to last year where 13 homes sold for over their asking price, four sold at asking and only three sold under.

↔Of the sellers that received their asking price all of the homes sold within the first 13 days on the market

↔Though the reported median price fell we feel prices are holding relatively steady–accounting for larger or smaller homes selling in a particular period. The median price dropped from $970,000 in 2007 to $930,000 in April of 2008 but the median size home that sold was 165 square feet larger in 2007. At the current price per square foot, that could account for as much as $94,000 in the differential pushing the true median value in 2008 to $1,024,000.

May is typically a very active month in real estate and it will be interesting to see if this month’s event becomes a trend.

As always, full market reports with interactive graphs for Belmont and adjoining towns will be available on our web site at MorganHomes.com when statistical data is available—usually by the tenth of each month.

April_2008_sales

LEGEND:

↔Unchanged

↑Positive market force

↓Negative market force

↗↙Probable trend upward or downward

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Belmont Market Update-March 2008

BELMONT’S MEDIAN HOME VALUE IN MARCH

Belmont’s median price rose $13,000 in March of 2008 to $984,500 from $971,500 in March 2007—a 1.3% increase. As always, we further examine the median size home to see if larger or smaller homes selling during the sample period could influence the numbers. Since the median size home for both periods was essentially the same, no adjustment was made this month.

Belmont_march_2008_stats_2

SALES CONTINUE TO BE DOWN

Only 14 homes closed escrow in March as compared to 28 for the same period last year—clearly underscoring the unease in the housing market and the economy as a whole.

STRIKING A BALANCE

The existing inventory of homes for sale is lower than usual for this time of year which helps bring equilibrium to the supply vs. demand impact on housing prices. Factors which are not as readily born out by statistics can also influence local housing values such as sellers who feel no pressure to sell and hold firm on their price. One indication of that can be seen in the time it takes a home to sell, or the “Days on Market “statistic, (DOM) which has doubled from 9 days in 2007 to 18 in 2008.

Redwood Shores Market Update for March 2008

Notice how the reported median price in 2007 was up 3% over 2006. We adjusted for the fact the median size home which sold in 2007 was 100 square feet larger. Accounting for larger homes selling, Redwood Shores actually experienced a median price drop of 2.27% in 2007, or perhaps better stated swing of 5.27%. In our estimation this is critical information buyers and sellers should know. Yet it is unavailable to the general public due to the enormous time spent performing manual calculations.

(Click on the picture for a full size illustration)

Go to our web page at MorganHomes.com and click on "How’s The Market" to read more interesting stats on Redwood Shores.

Rws_median

Belmont’s Market Report-February 2008

February sales data for Belmont is available but there’s not much to talk about. There were only five sales (homes that closed escrow) in the month of February. That means only five sales were consummated in January. That’s down more than 50% over last year. While that may sound like a huge percent decrease, it’s important to remember in terms of actual units, it means eight fewer homes sold.Graphtrends

The median price decrease could make headlines though. It dropped from $900,000 a year ago to $750,000 for the same February period. Of course with only five sales these numbers are easily skewed. In fact, the median size home which sold in February 2007 was 1,680 square feet in size compared to this year’s five sales where the median size home was only 1,010. That’s more than enough to explain the difference in the median year-over-year price change. If one was to account for this differential at the going cost per square foot the adjusted median price would be $ 1,122,000 for 2008.

In February, the average home took over 40 days to sell and the seller received only 96% of their asking price.

In every category we measure—the time it takes to sell a home (DOM), the number of new listings vs. sales, the percentage the seller received of asking—the performance was markedly down over last year. Yes the real estate market has slowed and if we were to measure it as we do the economy, you could say it’s in a recession.

Bel_208_postcard

Adjusted Belmont Real Estate Median Price

Belmont

It’s interesting to note that in the last two years, for the first six months virtually the same number of homes sold—94 in 2006 and 92 in 2007.

After the July news of the mortgage industry financial issues, the overall uncertainty of the market, and undoubtedly with anticipation that homes values may drop, 2007 saw only 127 sales as compared to 167 in 2006 for the second half of the year.

Can one believe the reported median price for Belmont?

The MLS system reported the aggregate Belmont real estate median home price in 2006 to be $925,000. That rose to $945,000 in 2007 or a little over 4%. Further analysis reveals that the median size home which sold in 2007 was 95 square feet larger.

Understanding the median home sold in Belmont during 2007 sold for $548 per square foot and the median size home sold in 2007 was 95 square feet larger, this could account for as much as $52,000 in the reported median sale price for 2007. Which means the actual median price in Belmont was closer to $892,000 or a decrease of 3.4%.

But it matter less what happened for the entire year if the market incurred a sudden and radial change later in the year. In other words, even if the market went up 10% for the first six months if it dropped 15% in the second six months the current value as of December is more important.

Looking at Belmont’s median home price at the end of December in 2007 as compared to December of 2006, we see that in 2006 the median home price was only $850,000 and at the end of 2007 a whopping $1,025,000. Applying the same logic and adjusting for whether larger or smaller homes sold during the two periods, we see that in fact the median size home sold in 2007 was 370 square feet larger. Using our above price per square foot number of $548/sq. ft that eliminated $202,750 of apparent appreciation and means the true median price would be closer to $822,000 in 2007 as compared to $850,000 in 2006 or a 3.2% decrease year over year.

·         This report has been revised with the release of additional data. Sources used in data analysis included Multiple Listing Service searches and REILPro Statistics.

Belmont Real Estate-December Sales 2007

December 2007 Belmont Market Report:

All_bel_dec_sales_2

↑Belmont ended the year with 17 sales in December as compared to 14 in 2006 and off the high of 25 in 2005.

That’s a glimpse the local market may be settling down.

↑Of those 17 sales, eight sold over the seller’s asking price, two sold at asking and seven homes sold under asking. We indicate this to be positive since it underscores the market is still healthy in certain segments.

The average time it took to sell a home was 39 days. Of the homes which sold over asking 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 their home 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.

New_listings_in_belmont_2005_to_200↓Inventory remains higher than usual for this time of year.

One of the factors which helped keep inventory levels in check was the paltry number of new listings to choose from in the spring and summer.

Hello 2008!

We’re busy compiling the numbers from 2007 to see where the housing market ended compared to 2006. Of course the peninsula market fared relatively well compared to many California cities and that of other states.

Why did certain areas do better? We look at understanding the issues which caused the current market conditions to predict which areas will be impacted more than others.

The jolt that knocked over the housing house of cards was interest rates and adjustable teaser rates indexing to higher levels. In the past five years many investment properties were purchased with adjustable loans. This enabled an investor to break-even on their mortgage payment vs. the rent they could charge. With properties appreciating at levels from 20-50% per year, it’s easy to see why so many investors jumped at the chance to buy in a new development. A new home often means great financing (available through the developer); purchase incentives, literally no maintenance issues; in fact many speculators purchased unfinished homes and re-sold them six months later at completion for a tidy profit.

The first shoe to drop:

When interest rates began rising many speculative investments became less lucrative. As investors began selling off properties in droves, inventory grew and home values dropped.

The second shoe to drop:
Owner occupied homeowners also found themselves in difficult situations. Many had qualified for their loans based on a teaser start rate. Once the rates fully adjusted, they could no longer afford their home (the practice of qualifying people for a loan at the teaser start rates has been discontinued by every lending institution we know). Faced with lower values, many could not sell their home for what they owed. The result was an increase in foreclosures and short sales.

Both of these groups faced similar dilemma, as they could either no longer afford to own their home, or it no longer made financial sense. Forced with foreclosure, the need to sell, or the desire to liquidate, the market was flooded with the mortgage carnage crisis as evidenced by the staggering inventory levels.

Areas that were hit hard and will continue to see a downturn in values in 2008 have the following in common:

·         Rampant growth spawned by increased demand

·         Speculative ownership

·         Over development of new housing projects

·         Room for expansion into new developments and housing units

·         An abundance of sub-prime loans

This is precisely why the Peninsula should fare better than other areas.

·         There is little room for expansion

·         Few new development has occurred in the past five years as compared to areas with growth potential

·         High paying jobs are plentiful

·         Low rate of speculative ownership

·         Few sub-prime loans

Of course not to be overlooked or under appreciated is the desire to live in the technologically and culturally rich Bay Area.

However, it’s entirely possible we are on a precipice which could collapse at any time. What is impacting the Peninsula is the rising cost of energy–especially gasoline. What could have an incalculable impact would be a prolonged recession and loss of local jobs; either of these would undoubtedly bring a decrease in home values to the Peninsula. So much of the values in the Bay Area rely on the perception that it’s a great place to live. A natural disaster (such as a large earthquake) or terrorist attack would also have a detrimental economic effect on housing. Buyers who are sitting on the sideline and not availing themselves of the current conditions are essentially betting on any one of the former conditions manifesting in the near future.

Who’s buying a home right now? With appreciation levels essentially stalled for the time being, savvy investors will take advantage of other’s misfortunes and home buyers previously priced out of the market will seek opportunities in the less competitive market conditions.

Help Us Go Green!

Help Us Go Green!

Greenworld

Help us continue to decrease the need for environmentally demanding postal mail while enriching our schools—all while keeping abreast of Belmont’s housing market and local issues.

For a limited time, for every verified email address we receive on our Newsletter Form we’ll donate $1.00 to Belmont’s School Force.*

As Real Estate agents and homeowners in Belmont, we are directly involved with fielding questions about the local schools. The importance of quality education, beside the obvious responsibility of providing education as a social benefit, has a direct bearing on a city’s quality of life which translates indirectly into higher home values. Whether a homeowner has children benefitting from the great education Belmont’s schools provide or not, supporting the local schools is one of the least expensive and best investments a homeowner can make to increase property values.

The Belmont/Redwood Shores school district continues to excel and part of their success is attributable to Belmont’s School Force™, a non-profit organization founded in 2001 which concentrates their efforts on improving the quality of education in our schools through fundraising for programs which would otherwise be discontinued.

Our commitment to minimizing the impact we have on the environment is accomplished through available communication technologies such as our e-market updates and newsletters; our local Belmont blog, BeautifulMounatinBlog.org and our market reports web site MorganHomes.com.

We’re running a business and part of our advertising campaign is to remind people of our services. We currently mail our Belmont Market Report, and the Morgan Report real estate update, to thousands of Belmont residents. With the prevalent adoption of high speed Internet access and quality HTML e-mail delivery options, our goal is to replace our postal mailing with e-mail and significantly reduce paper consumption and our costs so we may continue to offer aggressively discounted fees to our clients—it’s a win-win situation for everyone including Belmont’s schools!

* Certain reasonable restrictions apply such as being limited to one email address per household, the email must be a verifiable, working email address and the request must come from a current Belmont resident so we can remove them from our mailing list—that’s it!

Sign-up now!

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.