Best Way to Sell A Home

Agents can be their own worst enemy when what they should be doing is finding the best way to sell a home.Frequently Unasked Questions

The real estate business is hard enough without agents making it even more difficult. Many of our clients assume we work 24/7 and the business practices of many agents essentially ensures that we do.

There’s no standardized best practice when it comes to lunching a home for sale. Homes pop up every day of the week and offers are entertained anywhere from before a home even hits the market, to hours, a few days or weeks later.

Take for example our local market where with very little inventory, homes are flying off the shelf. Unless there is some sort of structure to the launch and contract review day, one could never get a day off as every time a home would hit the MLS agents would have to scurry over and get their clients in within minutes or the home might be sold.

Thankfully, many local agents set a date to entertain offers so that buyers and their agents aren’t scrambling to see all of the available homes at a moment’s notice.

Recently, a new standard of practice has started to develop as some agents have begun listing properties before the weekend—holding one weekend of open homes, a Tuesday Broker tour, and listening to offers the following Friday. That equates to 7 days on the market. And while it brings some semblance of order to our otherwise chaotic trade, it’s not the best course of action to get the seller the most for their home.

The first issue is the earnest money deposit. Listening to offers on Friday is fraught with anxiety as our contracts default to 3 business days to deposit the buyer’s consideration (deposit) into escrow. A Friday offer date means the buyer’s deposit money doesn’t even hit escrow until Wednesday of the following week—five days after contract ratification. Even if the buyer’s agent changed that in the contract to 1 business day, the deposit is still not due until Monday after a weekend of new open homes. It’s not unusual to see a buyer get cold feet or see a better home over the weekend and decide not to deliver the deposit. No agent wants to find themselves trying to resurrect a highest offer a week later yet they continue to put themselves and their sellers at risk.

Another issue is sufficient market awareness and, the mere practicality of seeing a home, analyzing the recent sales in the area, reviewing the reports and making an informed offer. Most buyers today spend more time choosing their washer and dryer than they do actually buying their home—it’s an unsustainable pace and will invariably lead to lawsuits.

Anecdotally, we’ve encountered many buyers during our first open house praying that we will be open one more weekend as their spouse was out of town for the week. If you market your home for less than one week you’re potentially missing out on interested buyers who may be unavailable during that small window. And imagine the frustration when buyers who take just one week off to get away during their year long home search are out of luck when the ideal home gets listed by one of these agents the week they are away.

Our research indicates we’ve received some of our highest and best offers often from a buyer who saw the home at the second open home. On a home we just listed and sold with four offers in 11 days, had we heard offers before the second open house we would have missed out on two of the suitors (bidders) who came through the second weekend.

But who is to say our strategy works the best? The numbers do. We consistently outperform other agents with the percentage over the asking price we net our sellers. And it’s not because we under price our listings. We do this by sticking to a formula with proven results. We’ve also never had a buyer voluntarily back out of one of our listings once in contract. We contribute part of this success to slowing down the process and not putting people in a foot race. We think that market saturation is good for sellers and buyers as the sellers get maximum market attention and buyers have more time to digest whether a home is right for them before they get into escrow.

The numbers below represent all of the homes sold in Belmont year to date. Notice that there’s a sweet spot where too many days on the market and a home gets far less, and too few not enough.

Sellers who marketed their home on average for ten days received more than agents who took offers too soon. It’s also interesting to note that of the 67 homes which have sold thus far this year, the highest over asking a seller received was 46%–marketed for 10 days. In fact eight of the 14 homes which sold 20% or more over asking were listed for greater than 10 days but less than 14.

Median
% over Asking Days on Market
>20%

10
15-20 %

9
10-15%

12
5-10%

8
0-5%

34
< 100%

33

mortgage-rates27-300x300

 

Many agents banter about claims that they will sell your home for more money in shorter period of time—but we have the numbers to back us up. We base our system for marketing homes on a proven strategy that nets our sellers consistently more than the other top agents in our territory. Our listings are all on the market for 11 days which accounts for two weekend of open houses, one broker tour and offer date after the second set of open houses. To find out what else we do, contact us directly to learn more about our progressive services.

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 or emailed at info@morganhomes.com.

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.

Housing Market Cooling Down?

Are Belmont home values or sales tapering off? Are we in for a cool down?

This month we look at April 2014 sales for Belmont to see if home sales or values are waning.

There’s much speculation even among our colleagues as to what is happening in our market and how sustainable our current housing environment may be. Most agents believe that we cannot continue at this pace but beyond that there seems to be no quorum on where the market will go from here.

Rather than guess what may happen next we like to watch what is happening to see if there’s a pattern.

Each year our housing market endures seasonal fluctuations at various times which affect the inventory levels, the number of sales, the number of new listings and even the percent a seller receives. Varying market conditions weigh more heavily on the median home price and the days on market.

When we look at April’s number for 2014 we’re comparing year-over-year numbers for the same period. This way we can objectively analyze where we should be in the seasonal sales cycle and dispense with any hyperbole about whether the market is “cooling down” or “heating up”.

Whenever there’s even a slight shift in the wind of inventory or sales from one month to another it’s second nature for agents to think the market has shifted into a cool off phase, when often it’s nothing more than a seasonal fluctuation which should be expected.

Looking at the important statistics we track each year, we went back to the beginning of when our Multiple Listing Service retained records—1998.
The question at hand is not whether April sales or listings are up or down as compared to March, the question is how do April’s numbers compare to every other April?

In analyzing the April markets, we allowed for a small adjustment when looking at the numbers for each April to avoid comparing dissimilar markets and to eliminate a wash-out of statistical values. We not only compared ever April since 1998 to April of 2014, we also compared every hot April market and every slow April market.

APRIL 2014

 

[click on the picture for a larger view]

PERCENT RECEIVEDHot Market vs slow
In each case April 2014 indicated an intense market. For example, the percentage a seller receives of their asking price in April has averaged right around 103% since 1998. In slow markets April’s percentage received has been a paltry 99.6% and in hot markets it has skyrocketed to 105.69%. This April it stood at 114.09%–8.7% higher—and 8% higher than the previous high in 2006 at what was then the peak of the market.

NEW LISTINGS
The number of new listings which have come on the market in April of each year has averaged 35. In a slow market Belmont averages 39 new listings for sale and in a hot market 32. The previous high listing count was in 2005 when 43 new listing hit the market. This year there were only 25–a low not seen since the slow down in 2007 when there were only 23. The current number of new listings hitting the market is statistically aligned with that of a slow market–not a hot one. Remember, this is April under a microscope. Lower than typical inventory could serve to continue to put upward pressure on values.

MONTHS OF INVENTORY
The time it would take to sell all of the homes currently on the market at the current rate of sales is referred to as the “Months of Inventory”. It’s designed to provide a useful ratio between listings and sales. Expressed as in terms of “months”, it’s a good indication of the strength of any housing market. April’s months of inventory has averaged 2.44 months over the past 16 years. In slow years it has averaged 3.73 months and in hot markets averaged 1.54. In April of 2014 it stood at 1.0–an all-time low with April of 2005 coming in second at 1.21 months. Nationally, this number stands around 6.3 months.

When sales are down from March to April, or the number of new listings rises incrementally—as they did this March to April when three more homes came on the market, it’s less important than where they should be historically.

The most interesting pattern we observed was when we filtered out for hot and cool markets. We notice that periods of hot and cool markets seemed to last about three to four years each before a correction. The last correction began in 2012. Has the market peaked? Statistically speaking, April should soon…

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 or emailed at info@morganhomes.com.

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.

 

 

 

Belmont Home Sales Off To A Frenetic Start

 

It seems the Belmont housing market is off to another strong start in 2014.

In every category we track, homes sales in February of 2014 were stronger than in 2013.

Belmont February 2014

SALES

Sales were at a dead tie with last year. Considering there were fewer homes to sell, that’s a strong indicator of the urgency on the part of buyers to get a home before the prices (and/or interest rates) rise any further.

[click on the image for a larger picture]

NEW LISTINGS

This February Belmont had 20 new listings compared to 23 in 2013.

INVENTORY

The number of available homes for sale this February was only 14—down from 17 last year during the same time.

DAYS ON THE MARKET (DOM)

The average time it took a Belmont home seller to sell their home this February was only 11 days, down from 17 last year.

PERCENT RECEIVED

Sellers for Belmont homes received on average 109.32% of their asking price compared to last February when they received 107.37%—still far above the state average.

MONTHS OF INVENTORY

The total months it would take to sell of the current inventory dropped from 1.55 months last February to 1.27 months this year. The national average is 5 months of inventory.

All indications are for another strong year—as we predicted. Next report we’ll wrap up Q1 with March’s numbers.

If you are considering a move this year, the spring time is a great time to get top dollar with competitive offers.

WRAP-UP

SELLERS—

GOOD NEWS—you can sell your home quickly at the right price. Most homes are selling over asking if priced according to our current market conditions—that is to say most homes sell for +/ 10% over asking so pricing at what your homes is worth makes it overpriced to buyers.

Not all agents get you the same results—interview wisely.

BAD NEWS—this seller’s market won’t last forever. More homes are coming on the market because more sellers have equity to move. The days of paying too much for a home and windfall profits are nearing the end.

BUYERS—don’t think if you read the above that you can wait out the market. That’s a fool’s game as although the rate of appreciation will wane, it’s still in positive territory for the foreseeable future.

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 or emailed at info@morganhomes.com.

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.

Belmont Home Values–Are They Sustainable in 2014?

Belmont Home Values for 2013–A Market Re-Cap

This year-end summary is where we bring you the re-cap for Belmont Home Sales. To say the least, Belmont sellers had a good year. After watching their home values drop for five years in a row (until 2011), they finally enjoyed some relief in 2012 and in 2013 as Belmont home prices reached a new high never seen before.

Here’s how it all stacked up.

This graph shows the median price in Belmont from 2012 through 2013. Many postulate about whether the market has returned to its previous high. To answer that, we looked at the median home trend in Belmont going back to 1998. Belmont’s median home price was over the million dollar mark for every month last year—save March. The closest we came to that was back in 2007 when we hit a period over the million dollar mark only twice. In many areas of the east bay and the country as a whole, they are still shy of the highs seen in 2006.

Belmont Median Price Trend 1012-2013

MEDIAN HOME PRICE

The median home price in Belmont last year, as reported by the Multiple Listing Service [MLS] in aggregate form, was up 19.5% from $949,230 in 2012 to $1,133,917 in 2013.  But not all areas fared the same.

 

 

 

 

 

 

This map show which areas of Belmont increased more year-over-year than others. If this seems odd to you, read the post we did on Which City is More Affordable—Belmont or San Carlos where we discuss some of the idiosyncrasies that have an effect on micro-regional values.

Belmont 2013 areas median Adjusted

 

If you’re like us and you are wondering why some areas of Belmont saw so much more appreciation than others, we took another step and looked into the size of homes selling in the respective areas during the two periods to see if that could account for the variance.

The red percent displayed on the map is the raw median price reported by the MLS and the blue percent is an adjusted percentage taking into consideration that either smaller or larger homes sold in the two periods.

These are our findings:

 

Areas

2012

2013

Variance

Raw Increase

Adjusted
Hallmark

2150

2280

6%

30%

24%
Skymont

2020

1830

-9%

20%

29%
Belmont CC

1840

1870

2%

15%

13%
Carlmont

1800

2029

13%

40%

27%
Sterling Downs

1190

1220

3%

27%

24%

 

This of course would indicate a raw median home price in Belmont of 26% and an adjusted one of 23.5%–much closer to the numbers reported in aggregate form from the MLS.

INVENTORY

The big brouhaha last year was over the lack of inventory. There were only seven fewer homes listed for sale in 2013 but 23 more sales than in 2012. Of course, this created fewer homes for buyers to choose from, which then led to bidding competition and prices going up at exponential rates.

DOM (Days on the Market)

The time it took to sell a home in Belmont last year almost dropped in half from 2012—from 37 to only 21 days.

PERCENT RECEIVED OF ASKING

The “Sizzle Factor”, or “How Hot Is the Market?” reached a new high with the average Belmont home seller receiving 108% of their asking price compared to 102% in 2012.

What can we expect in 2013? Probably more of the same. The median home price rate of appreciation should slow, as many homes which were under market value have regained much of their lost appreciation. We’d take a guess that appreciation will be closer to 14%-16% on average for Belmont—down about 5% from what we will imagine was the height of appreciation increases in 2013—we’ll see.

The factors to watch which could alter this trend will be the waning bond purchases by the FED which will serve to raise interest rates and may take away the ability for buyers to bid so much over the asking price in the latter part of 2014.

This begs the initial question of are these homes values sustainable and the answer is that depends. If the economy continues to improve and the rate of appreciation slows, than the short answer is yes—for now. But recent developments in China’s economy could have an impact on the rate of future appreciation and the U.S. economic rebound. Remember, what started the whole Bay Area recovery was jobs. If that changes, the game we know today could be over very soon.

 

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 or emailed at info@morganhomes.com.

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 Home Sales Smash Records! December 2013 Market Report

Welcome to our Belmont home sales year-end report. In Part I we close out December’s sales, and in Part II we recap the year and the look deep into our crystal ball for what may be in store for the housing market in 2014.

PART I

Let’s start with December sales:

December was a strong month for Belmont home sales, as winter home sales go. We contrast these sales to the same time last year to avoid any seasonal anomalies.

Belmont December 2013

SALES

Belmont had 18 home sales in December—one less than last year and five more than 2011.

MONTHS of INVENTORY

At the current rate of sales, compared to the existing inventory and new listings, the time it would take to sell all of the homes in Belmont dropped to an astonishing low of .28 months—that’s a little over a week of inventory. To help put that number in perspective, San Mateo County is running at 2.2 months and the country as a whole is at around five months.

Which part of the equation changed since last year? The number of new listings year-over-year was unchanged and sales were relatively unchanged but the inventory level was already at only five homes for sale going into December this year as compared to 12 last year so the appearance in the rate in which inventory was depleted was exacerbated.

MEDIAN HOME PRICE

The median home price rose to $1,086,000—a 16% increase over last December and essentially unchanged from the prior month. What did change is that in 2012, for $939,000 one could get a 2,150 square foot home while this year, at the new median home price of $1,086,000, one could purchase a home only 1,625 square feet in size. So for 15% more, buyers in 2013 bought homes that were 32% smaller than in 2012.

DOM (Days on the market)

In 2012 it took 54 days to sell the homes that closed in December while this year that number dropped to only 19.

Hot Pepper 25PERCENT OF ASKING

And now we get to the Sizzle Factor—what percent homes are selling of the asking price. It’s a great measurement of just how hot the Belmont housing market really is.

In December of 2012 Belmont homes were selling for 98.83% of the seller’s asking price. This December Sellers grossed 107.6% of their asking price. At a median home price of $1,086,000 that delta is huge! It represents sellers netting on average $95,000 more for their home in 2013.

PRICE REDUCTIONS

In 2012 42% of the listings that sold had price reductions of on average $158,000, while in 2013 only one lone seller had to lower their initial asking price by $30,000.

In 2012 58% of the homes sold for an average of $44,000 under the seller’s asking price and 37% sold for on average $37,000 more.

In 2013 83% of the sellers received on average $99,000 over their initial asking price while only two sellers settled for on average $12,500 less.

In Part II we’ll take a look at Peninsula home values on a more macro level and discuss what may be in store for 2014.

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of 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 a Relative Bid in Real Estate?

Relative Bid Offers–Safe or Insane?

Among other tactics used in multiple offer situations, is the use of relative bids, also referred to with somewhat of a negative connotation as “Sharp Bids”. This tactic is sometimes Frequently Unasked Questionsemployed in purchase agreements for real estate when competing buyers are vying for a property.

Here’s how a relative bid might work. A buyer wishing to avail themselves of this tactic should prepare their offer with an initial stated offer price, and a caveat that their offer shall be “X” amount higher than the highest verifiable offer up to the buyer’s desired price cap—the highest the buyer would be willing to go in a worst case scenario. That’s the correct way to prepare a relative bid—a baseline, the overbid, and a cap.

What are some of the advantages and disadvantages of relative bids?

The main disadvantage is that most real estate agents do not know how to handle relative bids and/or write them for their clients. In fact, one of the largest reals estate companies in the Bay Area disallows their agents from employing or even entertaining this type of bid for fear they might muck it up and end up in a lawsuit.

To us, that’s throwing the baby out with the bathwater.

One specious argument against relative bid offers is that your relative bid may place you at an offer price above an inferior offer, perhaps rife with contingencies. A logical and practical rebuttal to this is that sellers use inferior offers all of the time to counter lower price offers with superior terms to match higher price offers which they have no intention of accepting.

The advantage for a buyer is they are no longer bidding blindly against themselves. Say for example a home is listed for $900,000 and there are 17 competing offers, as there were for a home we recently listed in Redwood City. Buyers have no real idea how high to bid to secure the property and in many cases bid far higher than the next closest bidder—effectively bidding against themselves.

A relative bid allows them to offer a specific amount higher than the highest offer and have control over how much they over bid in a multiple offer situation—but only if it’s done properly.

Is it legal? Absolutely. In fact another large company (with whom we have previously worked) in the South Bay actually recommends to their agents that they make the option of a relative bid known to their buyers to avert a claim of a lapse in the agent’s fiduciary duty—by not explaining all potential bidding options to one’s client.

For a seller the advantage is that they may get a higher price than they would have should they choose to invoke the relative bid offer, since typically relative bid caps are the buyers “best and highest” price they would possibly entertain—their worst case scenario if you will.

As a seller and a buyer, wouldn’t you want to know that you have all the tools available to you when buying or selling a home? At RE/MAX, we are not only allowed to accept and write relative bid offers, we have used them to our advantage in several strategic and crucial situations—much to the satisfaction of our prevailing clients.

 

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.

 

 

 

 

Multiple Offers and How to Win the Housing Bidding War

Multiple Offers and How to Win the War

With increasing bidding wars in real estate, bidding on a home in the Bay Area can be a challenge at best with exceedingly frustrating closer to the norm. It’s reminiscent of the ugly Cabbage Patch Doll fights that broke out in department stores in the early 1980’s where there were more parents head hunting Cabbage Patch Dolls for Christmas than the stores could produce—one of the more shallow behavioral moments in our nation’s history.

We recently sold a home in Belmont which we listed at $900,000. We received four offers the first week. The seller chose to accept the highest non-contingent offer—not the highest offer. There was a higher offer at $1,003,000 which they did not entertain due to an inspection contingency. Last year when another agent had this home listed for sale, the sellers had two buyers rescind their deals and the sellers wanted to avoid that frustration again. They decided they were willing to accept $27,000 less for their home for the peace of mind of knowing they had a sure deal.

We think they made the right decision. Because it’s not just peace of mind they were getting, they were also getting $76,000 over their asking price—more-or-less a sure thing. Had they opted to roll the dice and the higher offer rescinded, to resurrect the $976,000 offer a second time around would be difficult. In all likelihood they would be relegated to an offer down around their initial $900,000 list price. Gambling on $27,000 when they stood to lose $76,000 just didn’t make send to them—or us either.

Last September, with multiple offers well established as the norm, we wrote an article for our blog site discussing the pitfalls of contingencies in an offer. In the last year nothing has changed except we have more empirical evidence that contingent offers often lose in a multiple offer situation, and sellers get less for their home if they have to re-market the property.

Now if your parents won’t help you with the down payment unless you promise to include a contingency, there are alternatives but they relegate you to homes where nobody else is bidding—which also means they are overpriced. Better to explain to Mom and Dad that the market has changed since they bought their last home.

So here’s the lesson about contingencies—think about it—in the above scenario, the high bidder had to make their offer $27,000 more and as it turns out it cost them the home as the seller didn’t take their offer. So how much does a contingency in an offer cost? Would the seller have accepted a contingent offer $50,000 or more above the next highest offer?

NOTE: We’re aware that many agents admonish their clients to not forgo contingencies and the genesis of their fear is to insulate them from any possible repercussions after the sale. The California Association of REALTORS recently held a seminar with the top CAR attorneys discussing exactly how to write non-contingent offers since the standard of practice in our area has evolved to embraced such practices.

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.

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.