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.

Belmont Gets Blasted With Rain! (With Video)

OK it will be all over the news but here’s the local Belmont scoop. Just as a back-up to our weather station which uploads to the internet, I have this visual aid in our backyard because I guess I am a geek for starters (I also have triple redundancy for my hard drives now), but it did help when the circuit board stopped measuring rain earlier this year.

 The first picture is one I took when I left for work and the second is when I came home at lunchtime.

Blog am Rain pm

(You can click on any image to see a larger picture.)
 
Our weather station reported the following (see below). Notice the rain rate at 2” per hour at 11:52 and 36 MPH winds at 8:06 AM. It was raining cats and dogs.

Now we are up to 18.82 inches for the year (July-June), 3.82 for the month and 3.15 just since this storm event!

 Remember you can always view the weather station on our web site live 24/7 from our Hallmark area home.

Home 3 24 2011 (2)

The weather at work was amazing too as you see this poor pedestrian trying to maneuver around a small pond on Ralston Avenue whilst the cars pay scant attention to him.

How to Pay Less Property Tax By Carrying Your Tax Base

If you’ve thought of moving but are frightened at the prospect of your property taxes increasing we have a few propositions for you—60, 90 and 110. You may already be aware of these but we have some new information which might make them more attractive.

Most homeowner’s are keenly aware that buying a new home means having their property tax base increased to 1% of the purchase price. For those of you who have owned a home for many years this alone can make a move financially impossible; for many, it means they couldn’t afford to buy the home they already own.

A BRIEF HISTORY

Proposition 60 enacted into law in 1986 allowed for the one-time transfer of your current home’s tax base to a replacement property of equal or lesser value after the age of 55 of either spouse, providing that the replacement property was located within the same county.

Proposition 90 passed by the legislature in 1989 allowed counties to voluntarily extend the transfer into their county to all 58 California Counties.

Proposition 110 passed in 1996 extends this relief to permanently disabled people, whether 55 or not.

The problem for most people wishing to benefit from this tax base transfer is they are limited to moving within the county in which they currently reside, or moving to one of only a handful of reciprocal counties (Alameda, Los Angeles, Orange, San Diego, Ventura, San Mateo, and Santa Clara).

Fortunately, another very desirable county in the Sierra foothills was added to the list—El Dorado. Their legislature passed a resolution into law on December 10th 2009 taking effect February 15th of 2010 allowing anyone in the 58 California counties to transfer their tax base to El Dorado County.

There are rules you must follow or your transfer will be denied so before you consider a move you will want to read several of the helpful publications which exist, and/or consult with your tax or legal advisor. The State Board of Equalization offers some easy to understand  “Question and Answer” publications as well as a pdf containing many test case scenarios.

If you’ve been holding back on making a move to retain your home’s current tax base it’s nice to know you now have some great options. And if you’re not familiar with this Gold Rush era county, you owe it to yourself to check it out.

There are many cities within El Dorado County which offer a great quality with life. Located around Folsom Lake with its endless water activities, El Dorado County extends all of the way to South Lake Tahoe. The many towns in between including Placerville,  offer affordable housing options—from award winning retirement communities to cities catering to the first time buyer and neighborhoods that rival homes the Peninsula has to offer—including Hillsborough—all at a fraction of what it costs to live in the Bay Area.

Visit the on-line version of this newsletter at MorganHomes.com and use the underlined links in this article to read more.  If you are not comfortable with the internet, simply give us a call and we’ll mail you out some more information.

 

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.

 

Can San Mateo Survive a Tidal Wave?

San Mateo County Market Snapshot–Are We Treading Water?   

Those of you who follow our market updates know we put our hometown, Belmont, under a market microscope every month to get a glimpse as to where the market appears to be headed.

Of course that really is living in a Petri dish when it comes to the real estate market as a whole.

Real estate is very local—what goes on in even one part of a city could be entirely different from another. That said eventually positive market trends trickle down and negative ones up.

As evidence of this phenomenon one can go back and look at our charts from 2007 when Palo Alto was still doing famously yet Daly City may as well have slid into the ocean (many homeowners probably wish it had).

 

Today we visit the numbers—year over year—for San Mateo County as a whole, hoping to see some trends that will give us an inkling as to where consumer sentiment is, as reflected in sales, median price, etc.

SALES

New Listings

Current Inventory

Closed Sales

Average DOM

Average Sales Price

Median Sales Price

% LP Rec'd

Total $ Vol

 2011   545

1400

233

74

786,509

587,500

96.48

182,470,145
               

2010   484

1156

229

82

840,235

650,000

97.17

192,413,866

2009   530

1452

163

74

683,900

553,750

97.20

110,791,806

 

 

              

It’s easy to see that the ripples of consumer uncertainty could easily capsize the boat of recovery if the tides of low interest rates come in too fast. Cast-of-gilligans-island

Sales are certainly better than the low of 2009 and remain steady as they did in our Belmont example. But as in the Belmont report the median price showed a decline in home values since last January. That’s not necessarily a bad thing, especially if you are a potential home buyer and it doesn’t mean values are still dropping, just that they did drop year over year.

Interest rates are going up, and have done so rapidly in the last few months—around ¾ of a point. That hurts the ability for people to qualify for a home and with less demand there’s a potential for prices to decrease further.

But as we cautioned ourselves, we are comparing 2010–a year of government sponsored tax rebates to 2011 without. Let's see if our minnow of a recovery can weather the storm without a life raft.

Thanks for checking back in with us. 

*Data San Mateo County MLS.

Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this response in tended to be specific to your situation-consult a specialist for your specific situation.

 

 

Belmont Home Prices Decline Further

We’re only one month into 2011 and already things are interesting.

Belmont home sales in January 2011 remained brisk. There were twelve homes which closed escrow in January, one more than last year but eight more than in 2009.

It appears a small trend has developed indicating January 2009, as suspected, was the low point for real estate.


 Glass But we aren’t out of the woods yet. Depending on who’s talking to you—a glass half full or half empty person—we’re either headed into a slow recovery or its lull in the action before a double dip. Never mind the glass is completely empty person—they’ll always be waiting for the “right time” to buy a home yet never do.

The definition of a double dip is when things get worse than they were at the trough of a business cycle. Considering how bad things were at one point in this last cycle, we find that implausible—that the state of affairs could get worse but hey, we don’t read tea leaves either. Of course that’s not to say things can't remain in a state of unsteadiness for years to come.

Within this recovery there will undoubtedly be micro swings in prices and sales which are highly dependent on consumer confidence, and of course interest rates. The media will predictably pounce on these blips on the radar screen—stay tuned.

January bel 2011

Click on the chart to see a full-sized version. And yes, those are Green Bay colors…

NEW LISTINGS

The number of new listings for Belmont in January 2011 stood at 24—six more than in 2010. The inventory levels for these same periods were 38 for 2011 and 35 for 2010.  The more interesting stat is the months of inventory—how long it would take to sell all of the homes at the current pace and inventory levels—a ratio if you will.

In January of 2009 it stood at over 10 months, and the last two January’s have seen that fall to just around 3 months. On a national level the country would be thrilled to see those numbers—the nation is hovering around the 11 month levels—six months defines a stable market.

Why then did prices still fall? Simple. Consumer confidence remains weak.

Sales are on the rise because sellers have become realistic about their home’s value, not because demand has increased. The months of inventory has remained low because many sellers aren't selling their homes. In Belmont, when inventory levels reach more than 50 homes for sale we experience a buyers’ market. Yet with inventory levels currently at 38 homes for sale, why then is it not a seller’s market?

Well the short answer is it is and it isn’t. Seller’s are managing to create a faux seller’s market by listing homes low and creating a bidding war, and keeping inventory levels low (no it’s not a conspiracy it’s just that a lot of sellers either can’t sell or won’t until prices go back up). The truth is buyers can be pickier in some instances; but with inventory levels this low it means it may take a long time to find the home they want.

Did Sellers get their Asking Price?

In January 2011 five of the 12 sellers lowered their asking price by on average $43,000 in order to attract a buyer. In 2010 that number was four sellers for an average of $65,000. Here’s the kicker—in 2010 all 11 homes sold for under the seller’s asking price; for on average $50,000 less, while in 2011 only seven homes sold for less than asking and only $30K (we threw out the one that was ridiculously off base).

So prices are up right? Nope. Sellers are just more sensible.

The median price for a Belmont home in 2011 was $745,000—down from $850,000 in 2010 and the size homes selling in 2011 were a smaller which compounds the difference.

The median size home sold in 2011 was 106 square feet larger than in 2010. This means that even if the median price was unchanged, the size home you could buy for the same money increased 6%. Now let’s factor in the $50,000 median price decline which adds another 5.8% drop in value and you’re looking at almost 12% price decline year over year.

If you are a buyer you need to know that any potential savings you might reap by waiting to see if values decline further could easily be wiped out by an increase in interest rates. Now’s not a bad time to consider getting off the fence…

 

* Data extracted from the San Mateo County MLS

Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this response in tended to be specific to your situation-consult a specialist for your specific situation.


 

Case-Shiller Reports Measureable Home Price decline in October 2010

I was awakened from my long winter nap by the predictable sensational reporting of the latest Case-Shiller home price indices.

The latest press release by Standard and Poor’s states:

New York, December 28, 2010 – Data through October 2010, released today by Standard & Poor’s for

Home Price Indices, the leading measure of U.S. home prices, show a deceleration

in the annual growth rates in 18 of the 20 MSAs and the 10- and 20-City Composites in October

compared to what was reported for September 2010.  The 10-City Composite was up only 0.2% and the

20-City Composite fell 0.8% from their levels in October 2009. Home prices decreased in all 20 MSAs

and both Composites in October from their September levels. In October, only the 10-City Composite

and four MSAs – Los Angeles, San Diego, San Francisco and Washington DC – showed year-over-year

gains. While the composite housing prices are still above their spring 2009 lows, six markets – Atlanta,

Charlotte, Miami, Portland (OR), Seattle and Tampa – hit their lowest levels since home prices started to

Fall in 2006 and 2007, meaning that average home prices in those markets have fallen beyond the recent

lows seen in most other markets in the spring of 2009.

The index showed a decline in the Bay Area from October to September’s numbers but a year-over-year increase for the same period.

What does this mean? It means that compared to last year home values are up in the San Francisco MSA (metropolitan statistical area) which includes San Francisco down to Redwood City. It also means that the values dropped from September to October. How much? 1.9% to be exact. Not what I would call earth shattering  and I certainly wouldn’t describe it as one of our local TV stations did as “Bay Area Prices Plummet”.

Later in the evening a competing station had the headline “Bay Area Prices up”, referring to the year over year statistic.

Neither news headline tells the whole story.

The much ballyhooed double dip in fact did occur but it was much more pronounced in other parts of the country and more akin to a glitch than a dip—and likely it was caused by the cessation of government subsidies which helped to prop up home values in 2009.

 

SF MSA

Case-shiller October 2010

 

The information contained in this newsletter 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. 

 

Belmont ( 94002) Home Prices for May 2010


Belmont “hit one out of the park” last month as 34 homes closed escrow. One has to go back to May of 2002 to see activity like that. Baseball Of course unlike baseball all the “teams” did relatively well as the last minute rush to capitalize on the $8,000 government tax credit lured at lot of new buyers to the closing tables.

But there’s sort of this snowball effect because many of the homes sold in Belmont didn’t even qualify for the $8,000 tax credit. Only 12 of the 34 homes had sale prices below the $800,000 cap. Yet the attention the tax credit received in the media probably buoyed the confidence of fence sitting buyers.

Belmont May 2010 

(Click on the chart of a full sized window)

 MEDIAN PRICE

$848,800—Homeowners are you depressed? It was $967,500 just one month ago! Think back—last year in May the median home in Belmont sold for $840,000 and for that you got an 1845 square foot home. This May you got a 1710 square foot home and in April it was 2418 but lest we not forget it cost you $967,500. The change in square foot may be a better indicator of value—here’s why: The change in square feet between May ‘09 and May 2010 was 135 (7.3%) which is probably closer to where values dropped year over year. Forget about April’s $967,500 benchmark for the year—there were some big homes selling that month and it threw the numbers way off.

DOM

The Days on Market (or the time it took to sell a home) went from 45 last May, to 44 this April and only 26 this May. So homes sold faster. What does that mean? Sellers are getting more realistic about prices and more buyers entered the market. That’s about all those tea leaves are telling you.

% Received of asking

Sellers in Belmont received 99% of their asking price (after price reductions). This is kind of a worthless statistic since homes invariably will sell close to asking once they are lowered to the right asking price. How about if we were to look at last May (98%) and last month (99%) see—statistically no change. Now let’s look at what seller received before they lowered their price—what percent did they get of their original asking price? Turns out at 99.84% it tells us very little accept that not a lot of bargaining goes on in our market. What we do learn is that only 4 people had to lower their asking price to get a sale—the reason for the small differential. But if we look at sellers who accepted less than their asking price we see a different story. Fifteen of the 34 sales received on average $26,000 less for their home while three homes received their asking price, the other 16 sellers received on average $21,000 over their asking price.

Now that the tax credit is over will the flurry of home sale activity be akin to radio silence? Stay tuned for our June update.