Belmont Home Sales – Are We Headed for a Cool Down or Not?

Like a marathon finish before the New Year, Belmont’s home sales hung in there for at least one more month as October’s home sale statistics showed little signs of distress.

It’s actually amazing for us to see just how strong the market is going into what is typically a seasonal slowdown period.

In order to make any sense of Belmont’s housing statistics, we look at year-over-year numbers rather than month-to-month changes which are often influenced by seasonal factors.

Belmont Home Sale Activity-October 2013

SALES

The sales for October were virtually unchanged from last year when 23 homes sold in 2012 and 24 in 2013.

How’s the Inventory?

That’s all the buzz with agents complaining daily about no housing inventory.

 

There are three factors to look at when thinking about the inventory level.

  • The number of new listings
  • The number of sales
  • And the overall inventory level

The number of new listings this October went from 14 in 2012 to 17, the number of sales were up this year by one, yet the overall inventory dropped from 32 to 24 this October.

In October of 2013 the number of available homes for sale was 32, while this year that number dropped to only 24. That brought down the “Months of Inventory” statistic which measure the time (in months) that it would take to sell all of the existing homes on the market at the current rate of sales. Nationwide, that number is still around five months of inventory.

Belmont dropped from 1.39 months last October to 1.04 this year.

With sales staying relatively static, and new listings increasing in 2013, why then does the months of inventory counterintuitively shrink rather than grow?

The answer lies in the number of leftover homes from the previous month which linger on the market. Last year the market was strong, but not as hot as this year, so some of the September homes for sale last year managed to spill over into October causing the overall inventory to increase.

MEDIAN PRICE

The median price this October recorded at $1,135,000 which may have been a seasonal drop from August 2013 when it stood at a record high of $1,239,000, but an increase year-over-year of 16.1% when last October the median price was only $977,500. In both periods the size homes which sold were relatively unchanged at 2,037 Sq. in 2012 to 2,060 Sq. in 2013.

PERCENT RECEIVED—THE SIZZLE FACTOR Hot Pepper 25

So how hot is the market? Just last month we were seeing some signs of a cool fall market but October’s number appear to have staved off the winter housing chill for at least one more month. Could it be the warmer than usual fall we are enjoying? Perhaps. In any case, this October 20 of the homes or 83% sold over the seller’s asking price, while one home sold at asking and only two sold for less.

Last October only 35% of the homes sold over the asking price, two sold at asking and 22% sold for less.

The percent sellers received of their asking price were 100.3 vs. 108.5 in 2013. Hotter than last year, and hotter than last month when the sellers received 106% of asking.

 

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441.

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Drew & Christine Morgan did not necessarily participate in these sales.

Case-Shiller Bay Area Home Price Index Increases Again

Case-Shiller released their home price indices for August 2013 this week which showed continued year-over-year price increases in all 20 cities while thirteen cities posted double-digit annual gains. The data showed that the 10-City and 20-City Composites increased 12.8% year-over-year.

The annual growth rates accelerated for both Composites and 14 cities.

The Bay Area continues to show month-over-month price increases and year-over-year gains, though current indications are the rate of gains may be slowing. Prices in San Francisco increased 0.9 percent in August, down from a 2.2 percent monthly increase in July.

That stands to reason since homes values dipped below where they should have been during the recession and rebounded like a rubber band being stretched too far and released—at some point all of the pent up energy begins to dissipate.

We suspect that, all things remaining relatively similar as they are today, next spring will see strong home price increases in the spring which will should taper off to moderate by summer. After all, at some point the government will stop buying the 85 billion dollars per month of bonds which helps to keep interestRed arrow rates artificially low. We of course cannot predict when that will happen, but when it does, the homeowners which will have enjoyed unprecedentedly low interest rates will be reticent to move—and that will be a defining chapter in the next new market…

But the cycle is nothing new. Having analyzed our local market for over 20 years there’s a distinct pattern. In a strong housing cycle, home prices rise fastest each spring and begin to wane after summer with winter being the slowest period for price growth and sales.

The brouhaha about home values having peaked just because July showed a slowdown in the rate of home appreciation is premature and a misinterpretation of the statistics, in our opinion.

It’s easy when listening to ten second radio sound bites during your ride home to buy into the attention grabbing headline saying home prices are falling, when what they meant to say is the rate at which home prices are increasing has slowed—as well as they should.

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441.

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

What is an Escalation Clause and Relative Bid in Real Estate?

Frequently UnAsked Real Estate Questions

n a competitive real estate market, how do buyers bid aggressively without unnecessarily bidding against themselves? A relative bid—also known as an escalation bid, escalation clause, or “sharp bid”—can be a powerful tool when properly structured. We explain how they work, their advantages and disadvantages, and why both buyers and sellers should understand this often-misunderstood bidding strategy.

Continue reading

Housing Market Shows Signs of A Cool Fall

Have you heard rumblings that our local housing market which has been racing away like a runaway train is beginning to run out of steam, or are you in the camp that there’s still no light at the end of the appreciation tunnel?

Clearly some Belmont sellers are being lulled into believing that our housing market is just as strong as during the spring. We personally encountered two sellers last week who defied all logic and refused to sell their homes unless they received considerably over their asking price. Neither seller has since sold their home.

If a seller markets their home and receives ten offers, it’s pretty safe to say that at least the day they sold their home, they got as much as they probably could. Of course there are variables such as how well their agent handles the negotiations, but absent the variables, the highest price pretty much sets the high water mark for the home’s value on that day.

Assuming that the high bidder is the winner (they aren’t always), if an identical home were to pop on the market a week later should that seller receive more or less than his lucky neighbor down the street? Since the highest bidder now owns a home, the second seller is left with the next highest offer buyers. The question becomes will one of those buyers be kicking themselves enough to pay even more than the last home they just lost?

It appears some Belmont sellers believe that the market owes them as much or more than the last sale. Unfortunately, it doesn’t work that way. The buyer’s determine the value not, the sellers or their agents.

The fall has brought with it a chill in the air which has cooled the superheated housing market seen earlier this year. Most of our evidence is empirical, but ironically the numbers don’t necessarily bear that out. So why do we feel the market has cooled? We are part of a Mastermind group of top producing REALTORS who gather monthly to discuss market trends and best practices. At our most recent meeting on October 17th there was a consensus from our think tank colleagues who are scattered all up and down the Peninsula that indeed the number of bidders is waning. Being in the trenches gives us a unique perspective about  multiple offer situations. Of course this begs the question, is it a seasonal adjustment or is the wind of appreciation beginning to change?

Belmont Home Sales October 2013

SALES

Home sales in Belmont for the month of September 2013 were brisk with 18 sales—just one fewer than last year at this time.

NEW LISTINGS

Last year there were 25 new listing in September as opposed to the 36 new listings which harkens back to the traditionally higher spring listing levels.

INVENTORY

Overall, inventory of homes for sale were still lower than in 2012 with only 33 homes on the market, but with the influx of new listings in September, the Months of inventory increased to 1.83 up from .73 just a month earlier—still lower than the 1.95 a year ago.

MEDIAN HOME PRICE

The median home price increased year-over-year once again from $938,000 in 2012 to $1,210,000 in 2013—a 29% increase, with the size homes selling during the two periods also increasing 22% and inflating the delta.

Days on Market [DOM]

The average time it took to sell the homes which sold in September was 13 days this year, as compared to 28 last year. This is not to be confused with the average DOM for all of the homes which are not selling—that number stands at 34.

PERCENT RECEIVED

Belmont sellers received on average 105.75% of their asking price—besting the 101.98 a year ago but far shy of the 109.5 which seller’s received just last month.

This year, 78% of the homes sold for over the seller’s asking price—up from 58% a year ago, while only 11% received under their asking price, as opposed to last year when 32 percent received less.

Has the market cooled? Certainly. Is it a seasonal adjustment or a foretelling of a market to come? Visit our blog page next week when we will look at the seasonal price and sales trends in more depth.

Disclaimer:
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience helping sellers and buyers in their community. They may be reached at (650) 508.1441.
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
Drew & Christine Morgan did not necessarily participate in these sales.

Are Belmont Home Values Near The TOP–August 2013

Are home values near the top? Thus far this year the media focus has been to highlight the hot local housing market. Now it seems they are looking for any signs of it faltering to present a new angle. And in deed you may have already heard the recent reports from Case-Shiller and others indicating that the market is showings signs of cooling off.

When will it begin to cool? Has it already?

Remember—real estate is local yet media reports often are not. What you might be hearing in the news may not apply to the neighborhood where you live.

With the biggest housing crash since the great depression* still front and center in our memories, it’s no wonder that potential purchasers might be wary of how fast the market has rebounded.

We recently released an article discussing those very points—“What’s in store in Q4”. In it, we delve into why we believe if recent changes in market forces continue, the once rapid rise in home values will begin to wane.

AUGUST 2013—For now, the numbers are in for Belmont for August 2013 (Septembers will be out soon), and there’s no sign of a let up in our fervent housing activity—at least according to the numbers for August.

Belmont Home Values Aug 2013

[click on the graphic for a larger picture]

MEDIAN HOME PRICE

Most notably is the pace of the median home price in Belmont. It stands at $1,105,000 which is a 20% increase over last year during the same time. We’re the first to look at the size of homes selling in the two periods to see if perhaps larger or smaller homes sold and skewed the median home price. But what we found was that in August of this year the homes that comprised the sales mix were 16% smaller and yet cost 20% more. Also interesting to note was that the median home price in Belmont has been over the million dollar mark for the last four consecutive months—in fact had the median home price not dipped just below that threshold in April of this year, it would have been over the million dollar mark every month so far this year. Contrast that to the historical median price trend in Belmont which has never had consecutive months over the million dollar mark.

Summary—Belmont homes values have hit a new high.

SALES

August of 2013 saw a 55% increase in home sales and paradoxically a 70% decrease in new listings.

MONTHS OF INVENTORY†

That brings us to the inventory which was down 131% from August of 2012 resulting in a record low “Months of Inventory” factor of .73, down from 2.6 months in 2012.

DOM [Days on Market]

The average time it took to sell a home which closed in August was 17 days, down from 31 in 2012.

PERCENT RECEIVED OF ASKING

This August 80% of the sellers received on average $130,000 or 9% over their asking price as compared to 44% of sellers receiving $60,000 or on average 2% more than asking in 2012.

In short, the inevitable slowdown in the RATE of appreciation is news but it hasn’t appeared in the statistics yet. If you talk with a Belmont REALTOR® you’ll no doubt hear they think the market has cooled off a bit. We’ll look at September’s sales to see if that’s true, because July sales, (which resulted in August statistics), didn’t bear that out and neither did our first-hand experience.

Sellers of homes in Belmont should know that the majority of the rebound in equity has already occurred. The rate of appreciation will slow as the market forces we discuss on our blog begin to kick in. If we’re right and they do, the housing market will become much more sustainable—we have our fingers crossed.

*http://en.wikipedia.org/wiki/United_States_housing_bubble

†Months of inventory is the time as measured in months that it would take to sell all of the homes currently listed for sale, assuming no more new homes were listed.

Disclaimer:

Drew & Christine Morgan are REALTORS with RE/MAX and a NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience helping sellers and buyers in their community. They may be reached at (650) 508-1441.

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Drew & Christine Morgan did not necessarily participate in these sales.

What Does Q4 Have in Store for Our Local Housing Market?

Is it a bubble?Now that the media is hyping our local market once again with horror stories of multiple offers, and media proclaimed “Bidding Wars”, our attention turns to watching for signs of a change in the tempo of sales and/or over asking offers. Everyone knows the Peninsula housing market is red hot, and has been for more than a year now. The question now becomes, “When will it change?”

Some Pundits are already predicting a crash in what they perceive as an overheated housing bubble. Of course if they continue droning on about a market crash their theory eventually may come to fruition, but for now their bubble is more akin to a hot air balloon with scant facts to back it up.

The Case-Shiller report by Standard & Poor’s is a good macro-barometer of our Bay Area housing market and the nation as a whole. The Case-Shiller report, most recently released on September 24th 2013, showed an increase in the 20 largest housing markets across the country. In our area or “MSA” (Metropolitan Statistical Area), which includes the Napa, San Francisco, San Mateo Alameda and Contra Costa Counties, the index had risen 25% from July 2012 through July 2013 [Case-Shiller reports are delayed by three months so the September reports was actually for July].

Economists, like the National Association of REALTOR’S Lawrence Yun, have warned that prices have been rising “too fast” and at these double-digit rates of appreciation are “unsustainable”. We couldn’t agree more. The current rate is unsustainable in the long run, but we believe that many factors already in play will mitigate the danger of a bubble. But let’s take a small step back. Part of the reason that home prices have increased so dramatically is that in many areas they were below reasonable market values for so long that just returning to normal would be a huge increase. Many areas saw homes values plummet below the cost of construction. Home prices have not reached the May 2006 peak where the SF MSA stood at a whopping 218—24% higher than today. At the current rate of price increase home values would reach the peak seen in May of 2006 in one year from now.

We don’t believe that will happen—not even in the crazy Bay Area real estate market. Why?

What’s already in play to slow the engine of appreciation and avoid another economic train wreck?

  • More homes are being built as companies try to meet the new housing demands—this takes pressure off of the tight inventory
  • Interest rates will begin rising making homes less affordable—this will put pressure on price increases and most certainly limit over asking offers
  • More equity sellers are being created every day—more inventory will mean less upward pressure on prices
  • Investors are taking a break—as interest rates rise and unbelievable deals once had from the recession are gone, investors look for other opportunities outside of housing. Less competition for homes will help keep a lid on housing inflation.

According to the Case-Shiller study, “Since April 2013, all 20 cities are up month to month; however, the monthly rates of price gains have declined. More cities are experiencing slow gains each month than the previous month, suggesting that the rate of increase may have peaked.

Morgan Brennan who writes for Forbes Magazine on U.S. Housing markets, summed it up best in her article back in June titled “3 Reasons The ‘Bubble-Like’ Surge in Home Prices Won’t Last“. And since we agree with her sentiments, rather than re-invent the wheel we rather encourage you to read more about her theory.

 

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441.

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Bay Area Home Prices Rise But Interest Rates May Dampen Values

The price of homes in the Bay Area rose 25% or more in the last year. So how does one cope with the rising tide of home values? For that, we offer you a new way of looking at the circumstances.

Perfect Storm

When gas prices shot up close to $5.00 per gallon a few years back, a friend of mine was waxing on about how much more it now cost him to put gas in his car. He was puzzled when I told him I wasn’t spending any more at the pump than before. “Why not?” he exclaimed. I told him it was simple, when I arrive at the gas station I pump $50.00 of gas into my car, whatever the price of gas—so it never costs me more than $50.00 at any visit to the gas station.

While at first this may appear to be lacking in the critical thinking department, the only real dilemma is that of course with less gas in your tank, one can’t drive as far.

We bring this up because our local real estate market will soon be suffering the same fate. Buyers will be forced to decide if they are willing to pay more for the same home, or settle for less home to keep their payment the same.

Why Higher Interest Rates May Change the Landscape—The Wall Street Journal reported on Friday that Wells Fargo—the nation’s largest market for refinancing and purchase mortgage loans—was cutting its staff by another 2,300 jobs nationwide. The reason? Wells Fargo owned 30% of the mortgage market until recently when the bank’s market share dropped this quarter to 23% of mortgage originations, according to Inside Mortgage Finance.

Refinance as a percentage of mortgage applications were 54% in the second quarter, down from 69% in the year earlier period—and Wells Fargo is assuming it will get worse. So if the nation’s largest mortgage lending institution is betting that refinances will continue to wane due to an inevitable rise in interest rates, it begs the issue to consider the impact this will have on our local market.

Buyers have enjoyed relatively inexpensive purchase money loans enabling them to afford more home and rationalize bidding thousands of dollars over the seller’s asking price.  But with home prices rising 26% in the Bay Area year-over year, buyers have already had to make a choice between paying on average 26% more for the same home they could have bought a year earlier, or settling for a home 26% smaller.

This summer, interest rates are already over 1% more than where they were a year ago; and we expect they will continue to rise. Buyers will either learn to set their expectations lower, or pay more to remain competitive.

If you own a home and have been considering a move, you may have been reluctant to sell when values appear to be rising at an exponential rate. But the days of double digit appreciation may already be waning. Conditions are very favorable for selling your home today, but whether or not they will remain so, or get better or worse, is a guess at best. It is yet to be determined how rising rates could alter the glorious real estate landscape sellers have enjoyed over the last year. If high demand continues along with low inventory levels, it might be possible for multiple offers to remain a norm with over asking bids. But if the higher median home prices have created more enough equity sellers, and inventory increases as demand diminishes—a  direct result of challenging affordability with higher rates and prices—many seller’s may have wished they took advantage of the perfect storm in 2013.

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA with RE/MAX Star Properties. with more than 20 years’ experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441.

 

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Are Silicon Valley Home Values Returning To A Normal We Once Knew?

 

Is Silicon Valley Returning To A Normal We Once Knew?

Have we reached the top of the pricing curve? Compared to last month, single family median price showed some flattening in the Home Counties. Median price was up 9% in San Benito County, 4% in both Santa Clara and Santa Cruz Counties, up 1% in Monterey County, and dropped 9% in San Mateo County. July 2013 Median prices are still in double digits compared to July 2012. Monterey single family median price is up 50% compared to last year, San Benito is up 45%, Santa Clara up 21%, San Mateo up 15%, with Santa Cruz up 5%. The flushing through of the distressed market in the Salinas Valley may be helping Monterey County get back to healthier trends.July 2013-graph

July’s single family sales were fairly consistent to June totals. In July, Monterey County sales rose 9%, Santa Cruz 8%, Santa Clara 3%, and San Mateo sales were up just 1%.  Compared to July of 2012, Monterey, Santa Clara, and San Mateo County sales remained flat, but there was a 10% gain in San Benito County, and Santa Cruz County sales jumped a whopping 28%. Rising interest rates may be slowing the “sale train” a bit, but we still hear a lot about multiple offers.

Compared to June, July single family inventory rose slightly in all Counties except in San Mateo where it dropped 3%. Inventory was up 12% in Santa Clara County, 6% in Santa Cruz County, 3% in San Benito County, and up 1% in Monterey County. While still significantly down from July 2012 levels in all Home Counties, inventory is gradually getting back to healthier levels, and we are seeing an unseasonal bump in properties on the market for this time of year.

Compared to June, July single family inventory rose slightly in all Counties except in San Mateo where it dropped 3%. Inventory was up 12% in Santa Clara County, 6% in Santa Cruz County, 3% in San Benito County, and up 1% in Monterey County. While still significantly down from July 2012 levels in all Home Counties, inventory is gradually getting back to healthier levels, and we are seeing an unseasonal bump in properties on the market for this time of year.

 Re-printed with permission courtesy of the California Association of REALTORS.

Drew & Christine are local Belmont REALTORS and homeowners with more than 20 years experience.

Drew & Christine Morgan
REALTORS | Notary Public
(650) 508-1441

Disclaimer:

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Why Waiting Out the Market May be a Fool’s Game

Should you buy a home now, or wait?

Let’s face it; nobody wants to purchase a home at the peak of the market. And most buyers would love to imagine they got a good deal. But with today’s local market conditions, that’s a tall order to fill.

The internet has changed the way buyers search for homes. Gone are the days of buyers waiting for their REALTOR to call each week with the latest new listings. Today, buyers have more-or-less unfettered access to the Multiple Listing Service where agents cooperate by sharing their inventory of homes for sale.

There is a small selection of “off-market” or “Pocket Listings” which we discussed in an earlier article. How do you find these? For that, you still need a REALTOR.

The larger question is should you purchase a home today, or wait for more inventory or prices to decline?

This graph for San Mateo County illustrates that as of June 2013 we are still not back to historic high home values—though in select neighborhoods on the Peninsula we just recently surpassed previous historic highs.

 

San Mateo Home Values

Today’s buyers are snapping up homes with a frenzied sense of urgency—and they’re paying top dollar to do so. Why?  Because interest rates are still very favorable and increase a buyer’s ability to pay over the seller’s asking price—but the trend is about to change and probably for good. We predict that in Q2 of 2014 mortgage interest rates will probably be a full point higher than they are today. And that’s not pure conjecture; the Federal Reserve has not only signaled they have overtly stated that when unemployment reaches  6.5% it will begin raising the federal funds rate—and they have already begun easing up on purchasing bonds to artificially keep rates low. In this article we discussed how much more one would pay interest over the life of a  home loan when rates return to normal levels–and the numbers are staggering.

If the entire country’s housing market was rebounding at the same rate of homes on the Peninsula, one can easily see that the Fed would have already reacted and raised rates.

Buyers are locking in lower than historical trend rates and in most cases paying well over what a seller is asking for a home because money is cheap.

Should I wait for More Favorable Conditions?

Have you been lulled into thinking these historic low rates will continue? Then take a moment to read this eye opening post we did back in March. Trying to save more money for a down payment at this point may be futile as home prices are escalating at a rate that the average buyer could never keep up with in monthly savings. Once interest rates begin to rise to normal historical levels, any perceived savings—even if the market cools off—will be quickly negated in interest higher payments.

We’ve been in business for over 20 years selling home on the Peninsula and we’ve experienced several recessions so the trends and cycles are obvious to us. Timing them is more difficult, but from everything we have seen, we believe it would be better in today’s environment to jump in and get a home today, rather than bet on more favorable conditions in the near future. If you are still sitting in the sidelines, you are betting against the odds—that unprecedented low interest rates will continue, and that home prices have already hit their peak and will soon decline. Barring any unforeseen catastrophe, that’s not a bet we would take right now.

 

 

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441.

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.