What’s in store for Bay Area housing demand and values?
Continue readingThe two prior years have been like a bad roller coaster ride for buyers, but that may all be about to change.
How Much Should I Bid to Win the Home?
How Much Should I Bid to Win the Home? You’ve found the ideal home, and now it’s time to make that offer. The offer to beat the other five offers you hear the sellers may be receiving.
When trying to determine an offer price, where do you start, or stop? Of course, your agent should be armed with the recent sales in the area to help you understand at what price the home you’re interested in could sell for.
Remember that in most cases, the buyer that was willing to pay more for the home than any other buyer is the one that typically wins the bid. So, you can forget about saying you don’t want to overpay in this market. By definition, if you won the home in a multiple bidding situation, you probably overpaid. But relax, now your home will be the sales comparable for the next buyers, that likely will now have to pay more than you did. Think of it to some degree like musical chairs, get your home before the music stops. The sooner you get into an appreciating market, the sooner you get to begin enjoying the appreciation, instead of bidding against it.
How to Set a Fair Price
Deciding what to offer can be a nail biting experience. You don’t want to lose the home, but you also don’t want to be blindly bidding against yourself. How much is too much? When you can’t afford anymore is one good threshold. But assuming you’ve looked at what the market bears for like properties, it’s likely that you’ll already know where you think the home should sell. So, pick a price and stick to it. Ask yourself, at what price am I willing to let go of this home? That way, if you win the bid, you’ll be happy and if you lose, you’ll at least know that going any higher just didn’t make sense. Remember, you have to sleep at night so you’ll have to live with whatever decision you make—choose wisely, and remember, sometimes you just have to let a home go if you are up against an overzealous buyer.
How Much Does the Home Need to Appraise For?
Lenders typically want you to put down 20% to have some skin in the game so to speak. Though as lending trends are beginning to loosen, some 10% loans are available.
Let’s say the offer you are going to make on the home you like is for $1,000,000. If you were putting down 20% that would be a $200,000 down payment and the lender would put up the remaining $800,000. Now the home must appraise for full value-—$1,000,000, as the lender will only lend 80% of wherever the home appraises. And that’s what makes sellers nervous—especially if your offer price is a new high water mark for the neighborhood. But if you could put down 25%, the home would only need to appraise for $937,500, giving both you and the seller some breathing room and peace of mind.
Here’s how the calculation works:
“X” = ((Offer price – Down Payment) ÷ .8) or (80%)
Where “X” is what the home must appraise for given the Down Payment.
So in our above example,
$1,000,000 — $250,000 = (25%)= ($750,000 ÷ 80% ) = $937,500.
We also wrote an article about Contingencies, which explains what happens when a home doesn’t appraise
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. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomesand on Twitter @ https://twitter.com/morganhomes
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
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 interest
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.
Housing Price Increases – Is There Any End in Sight?
Looking at the home sales in Belmont during the first quarter, one can see from this spreadsheet that every seller who listed their home received over their asking price. They were only a few exceptions. One was a home that was a short sale which we took out of the mix since those list prices are arbitrary, one was an off-market sale. We discounted any home that had been listed since last year to reflect the more robust 2013 season.
[click on the image for larger print]
The percent that sellers are receiving over their asking price is mind boggling. It all has to do with the short supply of homes and the large numbers of buyers trying to take advantage of the historically low interest rates.
Of course that could change. Interest rates could rise making homes more expensive, or with rising prices, more “Equity Sellers” will develop as homes which were under water can now be sold for a profit. More inventory of homes means more competition for sellers as buyers will have more homes to choose from.
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.
Peninsula Housing Recovery–For Real or Dead Cat Bounce
Are we bouncing along the bottom or is the housing recovery in full swing?
Continue readingBay Area Housing Reports Show Some Median Price Stability
Just to bring you up to speed on the Bay Area housing market, we’re bringing to your attention a neat little gadget that allows you to see where values are relative to a prior point in time.
The chart we’ve included is based upon data from the Federal Housing Finance Agency’s web site for the San Francisco MSA (Metropolitan Statistical Area), but you can plug in the area where you live and even compare cities.
You’ve no doubt heard of the Case-Shiller report that uses repeat sales pairs to track the median home value more accurately. Essentially they track the same house selling over a period of years. Their methodology can be read here.
Well the U.S. government also tracks repeat home sales pairs to help Freddie Mac and Fanny Mae follow the markets across the country. On their web page they have this really neat calculator where you can input what you paid for a home and it will calculate what the home should be worth today based upon the median trend.
Note for the San Francisco MSA which incorporates San Francisco down to Redwood City we’re beginning to see a leveling off of the free fall that has befell the Bay Area since June of 2006.
We expect seasonal buying and selling trends to continue to vary home prices on a monthly basis but the overall median home price trend will no doubt be relatively flat for several more years to come. Jobs will drive the housing prices in the future, and we’re still running in double digit (11%) unemployment rates in the Bay Area.
Sellers—if you are going to try and wait for prices to dramatically rise you should be prepared to sit in your home for quite a few more years. In others words, if you want to move on in life, now’s as good a time as you’ll see for awhile.
Buyers—since values will probably be flat there’s no reason to rush out and buy a home if you are worrying about missing the bottom, but remember, if interest rates rise your monthly payment will go up dramatically.
Now for the inevitable disclaimer: 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.
Case-Shiller study finds Bay Area Home Prices up 11.9% in February 2010
Case-Shiller released their report on repeat sales pairs for the 20 major MSA’s (Metropolitan Statistical Areas) across the country. San Francisco faired rather well, climbing 11.9% over last year in February. Phoenix lost another 1.64% but faired far better than Tampa Bay, which sank another 6% over last year.
No doubt many of these areas saw sales figures buoyed by the Federal Tax stimulus plan that rebates first time home buyers up to $8,000 and resale buyers up to $6,500. Additionally, the shifting of the majority of sales from lower priced homes to a more even mix has helped raise the median price point substantially.