Going “Green” is all about image, not substance

It’s pretty exciting this time of year. Don’t you just love coming home to a full answering machine with voice mail messages from your representatives in government? Phone_2 I don’t know about you, but I feel pretty darn important when Bill Clinton calls and asks me to vote for his wife; or it’s Arnold Schwarzenegger himself calling to see if I’ll vote to be taxed a little more so he can balance the budget.

This year it’s the year of the postcard. Funny too, since all of the candidates are claiming to be going “green” this year.

Richard Holober’s postcard is not really a postcard at all. It’s an 8.5” x 11” glossy full page ad where he claims to be supported by the Sierra Club. I wonder how many trees the Sierra Club donated to his cause? At least one of his flyers appears to be printed on recycled paper. But the one with a picture of him standing next to a tree he is claiming to protect is absolutely ironic.

Gina Papan must own interest in a paper company for all the mail I’ve received from her lately.

Jerry Hill is another “Sierra Club" sponsored candidate according to a printed flyer I received from him. In fact, several other candidates who aren’t even running appear to have helped Jerry by sending out print flyers for him. Good for him. I like more mail too.

Perhaps they could all take a page from the Internet playbook and start blogging. Barack Obama has been sending me emails almost daily and I’ve yet to get one single piece of paper mail from him.

It’s going to be lonely around here after the election is over—I know I’ll never hear from any of them again.

Belmont is in need of some negativity

If you’ve been thinking like we have, you’re probably wondering when will the weather get a little warmer.

The wind has been relentless this month. Our Davis weather station located at our home in the Hallmark area of Belmont, has been collecting data since we moved to from Barclay Way in 2001. We’ve been broadcasting it live since January 2002 and it receives more hits than any of our other web pages each month.

A recent software upgrade has allowed us to extract data for analysis and this is my first graph. It illustrates the wind at time intervals for the Month of May, 2008—to date.

Belmont_wind_508

Notice that there hasn’t been one day so far this month that there hasn’t been any wind between the hours of 12:45 PM to 11:00 PM!

The positive ions wind can create may actually have a negative affect on the body by raising stress levels. Ever wonder why lying near a stream or waterfall feels so relaxing? Moving water creates negative ions which counteract the effects of positive ions created by the wind. Try washing your face with water after a bike ride. We hear it’s not just the coolness of the water that feels so good; it’s the positive ions being cancelled out by negative ones that have a calming effect. Admittedly these articles are not from scientific scholars, but sometimes experiencing something for yourself is all the affirmation one needs.

After awhile, the wind begins to grow a little tiresome and we’re just waiting for a calm mild day—I know a lull before the storm.

Bay Area Population Growth Helps Bouy Housing Demand

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.

Crosswalk etiquette, a lesson for Belmont

Is crosswalk etiquette dead or did it ever exist?

View Larger Map

This is our city, Belmont California; and this is our office, Carlmont Associates. Here we are smack dab in the middle of Belmont on the corner of Ralston Ave. and Villa–obviously a big enough intersection to get Google’s attention.

The cross walk you see here is the topic of today’s rant. You see the city installed an illuminated cross walk—you know the ones with the flashing yellow lights imbedded into the street—to assist pedestrians in crossing the road. Well not really to help them get across, but to help them get there more safely by making it easier for them to be noticed.

Clearly in order to get to my office I play the role of both a driver and pedestrian. First, in defense of the drivers, it’s really hard to see people when you are staring into the sunset. Spin this interactive camera around and you’ll see what we mean. It’s much easier to see the lights flashing in the road than to see a pedestrian standing off to one side—especially when they are often obscured by opposing traffic.

Don’t get me wrong–I think these lights are a great idea. Especially since my night vision isn’t what it used to be. But pedestrians take advantage of the "It’s the Law" rule that one must stop for them in a crosswalk. When I’m the pedestrian (which I often am getting to and from our office), before I leap out into the crosswalk and stop traffic like Moses parting the Red Sea, as a common courtesy, I stop to see if the light at the corner of Ralston and Alameda is red or green. If it’s green, I’ll wait patiently and let the cars make the green light and only when it turns yellow will I press the power button to halt all traffic in deference to my presence. Do I have to do this? Of course not. The law is on the side of the pedestrian. Is it the courteous thing to do—of course.

Visit our web page at MorganHomes.com for detailed housing market analysis and I promise, no rants.

And just one more reason real estate sales are down…

After reading Kenneth Harney’s article titled “Tight credit hitting specialized areas of Knotmortgage 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.

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Renters Hit Hard As Prices Climb

You’ve got to admit, renters have had a hard time. After being squeezed out of the homeownership market for years they now face getting squeezed out of the rental market as well.

But more to my point…ever notice that plane crashes come in three’s? Do they, or does the media just report them that way? Ever notice after a plane does crash you hear nothing but planes crashing all day. Are planes suddenly dropping out of the sky in some fit of protest? Hardly.Puzzled

I’ve also noticed a distinct pattern to the San Francisco Chronicle’s Sunday Real Estate section. Each week they organize this section into a theme. Last week’s “theme” was the bad news for renters with headings such as these: “Bay Area rents still rising”, (James Temple, Chronicle Staff Writer, Friday, April 18, 2008), “Apartment rents throughout West still rising”, (MICHAEL LIEDTKE, AP Business Writer, Thursday, April 17, 2008), “A look at apartment rents in western United States”, (The Associated Press, Thursday, April 17, 2008).

The San Francisco Chronicle’s recent reports on the rental market have been rather telling in regards to the overall housing picture. With more buyers unable or unwilling to buy, competing with homeowners thrust back into the rental market due to either voluntarily or involuntarily leaving homeownership, it will be just a matter of time before rising rents and lower home values make owning vs. renting a no brainer. I’ve seen it before and I’m sure I’ll see it again.

But then I read what appeared to be an op-ed piece by Marcie Lewis of Bankrate.com. That headline read “Rental Market Hit by Mortgage Crisis”. I thought I was going to read more of the same—doom and gloom for renters. But the piece ended by stating the opposite of what all the other articles had to offer about the dwindling supply of rental units by saying:

“Other homeowners have opted to rent out their entire home because they’ve relocated, but can’t sell the home for enough money to pay off their debts, which might include a home equity loan or line of credit in addition to a first mortgage. This trend increases the supply of rental housing.” (Lewis 4/2008, p K11)

And…

”Many cities experienced a boom in conversions of apartments into condos, but now, due to lower condo prices, some builders and owners have opted to rent out units they’d intended to sell. This trend also adds to the supply of rentals.” (Lewis 4/2008 , p K11)

So wait a minute; do we have more available rental units or less? I guess they’ll follow up next week with the answer.

Belmont Buyers–Now’s Your Chance

                                                                                                                                            Dsc_3909hallmark_2007Lots of large homes are on the market in Belmont while the inventory of homes for sale is  reaching a high not seen since 2003. Just 22 of the 52 homes for sale are listed under $1,000,000; while the median home currently for sale is just over 2,000 square feet, the median home in Belmont is only 1550 square feet.

And Inventory levels have hit near all time highs. There are currently 52 single family homes on the market and only twice in the last ten years has there ever been more—both times the U.S. was in a business cycle trough—the 2001 recession and again in 2003 during a mid cycle slowdown. We expect inventory level to grow even more in May and June of 2008.

In the past ten years there never has been a month with fewer sales than last month—March 2008 where Belmont had only five sales, except for the month before when there were only four sales. Normally, Belmont will have on average 23 per month; percentage-wise that equals only 18% or normal.

If you’re a Belmont seller and trying to sell during the peak period to obtain the highest price that window of opportunity has already passed. If you are a buyer interested in Belmont, there’s plenty to choose from and we expect favorable buying conditions to continue for at least the next year and probably well into 2010. But timing the market can be a fool’s game. While waiting for home values to drop interest rates may rise, offsetting any monetary gain.

Plenty of buyers have been waiting years for an opportunity such as the current buyer friendly market conditions to purchase a home—well, now’s their chance.

The Numbers Just Don’t Jive with many Buyers’ Sentiment

Buyers have bought one thing–that’s the media’s pounding that home value are falling. Indeed they are in a lot of areas, but if you want to live in San Carlos, CA and are waiting for prices to drop, don’t hold your breath too long.

I recenly did this anaylsis for a client who wondered if their home values have dropped. They bought in an excellent area of San Carlos four years ago and paid the then prevailing purchase price in multiple offers of $885,000 for a three bedroom, two bath home which is approximately 1650 square feet.

The follwoing is my brief analysis for them:

The home which just sold on your street is not a bad comp, but it’s not the best either. Logically it’s the same size, in near proximity and (I suppose) condition, yet it is lacking the very things that attracted throngs of buyers to your house when you bought it—character. People pay dearly for that in San Carlos.

Have the values gone down recently? Everyone believes they have but the numbers do not bear that out. Your home might have sold for more in 2005/2006 but that would probably have to do with the overbid process which has diminished, but not disappeared. Unless you are planning to move soon I’d just hang in there and it will almost certainly be even higher in the next few years.

I have included data going back to 2004 when you purchased your home. I specifically targeted sales comps that were 3 bed 2 baths and between 1500-1600 square feet. I know when you bought your home the seller claimed it was 1650 and it may be (look at your appraisal and you’ll get a better idea), but the county has it at 1540 so that is the range I used for comparison. If your home is indeed larger, than you’ll be in even a better position than my data suggests.

I hope this helps you understand our fickle market.

Some interesting facts:

The median price for comparable homes has been going up since you bought your home. Notice that the exact same size homes sold in 2004 and 2007 making the appreciation data extremely accurate. This data concludes a 26% increase in the median home price from 2004-2007; which if applied to your home’s purchase price would suggest it to be worth $1,115,000. Straight-line appreciation numbers are flawed though in part because the reason homes have gone up in value that much is the typical homeowner will put in excess of $100,000 into their home. Factoring that in, the appreciation levels are almost half so if you’ve done nothing to your home you would be closer to $1,050,000. Don’t even try and follow the numbers exactly because I’m factoring in a slight bump for the intangible “WOW” factor of your home’s appeal.

Median Price

2004

$825,500

2005

$977,000

2006

$996,500

2007

$1,042,000

You purchased your home at $885,000 in March of 2004 when the median price for the 3/2’s was $825,500.

Your home was probably larger than the median home at the time. At 1540 sq. ft. your home sold for $574 per sq. ft. and it was truly 1650 sq. ft. it sold for $536 per square foot. The median at the time was $532 per square foot:

2004

2005

2006

2007

$ per Sq. Ft.

$532

$639

$633

$686

But the median home size was also smaller—smaller homes sell for more per square foot:

2004

1560

2005

1530

2006

1570

2007

1560

Notice how the median price for comparables homes is more-or-less in step with the median appreciation:

Scl_median_graph

In summary, depending on the current condition of your home and the improvements you may have made, your home is probably worth $1,050,000 on the low side to $1,150,000 on the high side.

IF WE AREN’T ALREADY IN A RECESSION, WE COULD BE SOON

Bad_news A front page article in the Sunday edition of the San Francisco Chronicle titled "Lenders Retreat as Market Plummets" (Sam Zukerman-staff writer April 6, 2008) may frighten some people into cashing their home equity line checks fast.

The article states that many banks such as Bank of America, Country Wide Financial and Washington Mutual are freezing homeowner’s equity lines in fear of losing more money to foreclosures. Let’s hope Wells Fargo continues to believe in the Bay Area like Bank of America used to.

This could spell a downward spiral as lenders cut back on honoring equity lines that might just be the thing which could keep some folks from losing their homes. The opportunity to tap into existing equity to forestall a foreclosure, even just pay the bills may be just the shot in the arm credit worthy people might need yet now many banks appear poised to pull the plug.

Of course bank don’t want people spending their equity line of credit like they used to-especially if home values in their area have dropped significantly; but cutting them off may just send many more of their customers to the front of the foreclosure line.

IF WE AREN’T ALREADY IN A RECESSION, WE COULD BE SOON

This could spell more doom and gloom in the economy as less available cash for spending-or simply knowing that emergency cash flow could be cut, will likely be the nail in the coffin for economic growth this year.

It’s a calculated risk on the part of the banks-at least we hope they have calculated it. They don’t want to throw good money after bad but by freezing equity lines when people need them most they could mean they end up taking back more property than if they left these loans in place.

Allow Me to Think Out Loud…

Thinking 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…