Belmont Home Values Break New Records – Home Sales Report for May 2013

It’s time to do the numbers, and I can hear the jingle playing in my head “We’re in the Money”–a little ditty from NPR’s Market Report segment which they play when the stock market is up. As each month goes by it seems Belmont home values keep setting new high water marks–not that we’re insensitive to the woes of buyers. We represent Buyers too and we know how frustrating it can be to secure a home in today’s market. The inherent problem for buyers when timing the market is that when housing prices are down, typically so is the overall economy and nobody feels much like taking on an enormous mortgage when coworkers are being laid off and empty cubicles are selling for pennies on the dollar on Craig’s list. Finally, when the economy picks up and everyone feels happy again they all starts to buy at the same time and drive up prices with overbidding. Add to that the sense of interest rate lock urgency and you have a market running full speed ahead. It’s no longer how much a home will sell for, it’s how far over asking will it go.

Belmont Home Values
Can You Save Fast Enough?

This month just about every positive indicator for sellers was up. In fact they were all up except the days on the market [DOM] or the time it took a seller to sell their home—that statistic was down which really means it was up for sellers—another positive sign.

So let’s begin by dispensing with any question of where the market is today—it’s clearly rebounding and doing so at a pace like we’ve never seen—and we’ve seen a lot of ups and down in our 20+ years of selling homes.

What’s driving this rebound at a clearly unsustainable level? Ironically, the good news may be is it’s a temporary influx which may soon be abating. The days of government intervention in the market by keeping interest rates artificially low with bond purchases may be numbered—at least that’s what Wall Street thinks. When we wrote this the stock market was singing “Stormy Weather” as news of an impending slow down in bond purchases sent the stock market into a bit of a humble tumble.

Looking at Belmont home sales for May 2013, we see that there’s no more debate about how the market is doing. The only question is, how long will this corybantic pace continue?

Belmont Home Values
Click on the picture for a larger size.

SALES

Home sales, after being down past month, rebounded with a 23% increase over May of 2013 were 32 homes traded hands as compared to 26 last May. The last time Belmont had that many homes sell in one month was in August of 2005 when 35 homes sold—well before the market correction which began in April of 2006 [it took well into another year for the national housing dilemma to begin to affect Belmont’s more insulated economy].

MEDIAN PRICE

Belmont home values reflected the median price topping out at $1,100,000 this May which has only been eclipsed twice in the history of Belmont home values—once in 2007, and most recently in January this year. One cannot not escape noticing that the median home price in Belmont has been over a million dollars four out of the last five months—a pinnacle in Belmont’s housing values trends as never before have we seen a sustained median home price over the million dollar mark.

So did larger homes sell this year? Each month we’re sure to look and see if that’s the cause and each month the answer has been yes, but only nominally. Certainly not enough to account for the year over year gains.

The median size home which sold in May of 2012 was 1,790 square feet. This May that increased 6.4% to 1,905 while the median home price increased 33%–from $825,000 last May to $1,100,000 in 2013.

What does this all mean? It means that a home 6.4% larger cost you 33% more this year. It means that Belmont home values are rising faster than most buyers can save money.

DOM [Days on the Market]

Statistically speaking, if you are going to get more for your home than you are asking, in Belmont that means you’ll be on the market less than 14 days. Between 14 and 21 you are considered lucky to get your asking price and rarely does a seller get their asking price after 21 days on the market.

This month’s numbers bear that out in spades as all of the homes which received more than their asking price did so in only 13 days. No home sold right at the seller’s asking price but of the few homes which were overpriced, they languished on the market for on average 22 days and received 98% of their initial asking price as compared to everyone else who netted on average 110%. Can you imagine being one of the few sellers who received 12% less for their home than everyone else? Clearly not all agents are created equal.

Of course getting too much for a home is usually the result of the same root cause—an agent who has no idea how to price a home—just that in the latter case the seller is much happier and probably never the wiser.

We’ll leave you with this one watercooler statistic. Did you know that in May the average Belmont home sold for $100,000 more than the asking price!

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA with more than 20 years of experience. They may be reached at (650) 508.1441 or info@morganhomes.com

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.

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

Belmont School Enrollment May Force Buyers to Pay More For a Home

Does the Belmont school enrollment window force buyers to pay more for a home in the spring?

We see it every year in a growth market. Belmont home values skyrocket in the spring with multiple offer bidding battles, then the market calms down during the summer and trails off into the winter before starting the whole cycle over again.

Why the spring?

It has been postulated that since much of the driving force for competitive neighborhoods is the school A.P.I. scores, it only seems natural that folks would want to be settled into a new home and secure their home school attendance before the open school enrollment period ends.

In order to test this theory, we had to gather information on Belmont’s system for school enrollment.

The first (and most coveted) open enrollment period—the one which will give your child the best chance of getting into their home school—begins in mid February and ends at the end of that month. That’s a pretty short window to time a home purchase. But assuming one did, then the optimal time to purchase a home would be in December and January so that a close of escrow would occur prior to the end of the first open enrollment period. Since the district will accept a purchase contact as well (as proof of residency), one really needs to only be “in escrow” to get their child enrolled so a February home “sale” may also qualify for the first enrollment period.

If school enrollment periods have an impact on home prices through competing offers, one would expect the percentage that a seller receives of their asking price to be higher in December through the end of February to coincide with the initial open enrollment session.

The next enrollment period begins immediately following the first one at the end of February—the start of March—and goes all of the way until the middle of June. This second enrollment period is less desirable than the first one yet a much larger window of time—it also happens to coincide with the highest percent of asking prices received by sellers.

The final enrollment period begins the Monday after the last one ends and continues until school starts—which this year will be delayed until September 11th.

We plotted these two trends on a single graph to try and visualize a pattern. Clearly there’s a pattern of spring sellers enjoying the highest percentage of their asking price but the school enrollment window may have little effect on the amount a seller receives. If the enrollment window were the majority driving factor then the most competitive bidding should be in December and January as well as a bit into February. Yet in this graphic we find the highest percentage seller’s receive each year to be around May—well after the second enrollment period begins.

Of course May sales were likely consummated in April but still that’s well outside the early March 1 second enrollment opportunity.

There are a lot of other factors that come into play during the spring buying season and open enrollment periods, not the least of which is that the weather gets better.

Rather than there being one trigger that sends buyers into a purchasing panic, we’d venture an experienced guess that it’s a combination of factors that makes the spring home buying season so rewarding for sellers and attractive to buyers: The weather gets better, more homes become available so more buyers enter the market, football season has ended and Sundays are once again free to view open houses, tax season is around the corner and buyers are looking at huge tax bills while wondering how they could mitigate that with a mortgage, and the summer is approaching when many sellers want to get into a new home before the next school year begins.

Another interesting hypothesis that we have put forth involves simple frustration on the part of home buyers. It goes like this, buyers start looking for a home around early spring in earnest. They’re new to the game and thus miss out on multiple homes in multiple bidding situations. At some point they are so frustrated buyers go into winter hibernation only to thaw out the following spring more determined than ever not to end up empty handed again. It’s these buyers that step to the plate and pay whatever it takes to get the ideal home—often paying considerably more than past sales justify. And the cycle begins again.

Note: In order to plot the enrollment periods on this chart, we arbitrarily attributed a value of 100 to the first most coveted enrollment period, a value of 50 for through the next period, and finally 25 for the last open enrollment period. We assigned no value for walk-in periods of enrollment (e.g. Sept-Feb).

Belmont School Enrollment

 

As the graph illustrates, there’s only a quasi relationship of enrollment periods and the high percentage of selling prices, which once again, we feel has more to do with it being spring than the schools.

 

 

 

In this second graphic we used data for the same periods in 2004-2005 and again in 2012-1013 to see if last year was an anomaly. Note how similar the two period’s data points are even though they are separated by nearly a decade.

Belmont Recent Received of Asking
Belmont Percent Received of Asking

 

 

 

 

 

 

 

 

 

 

 

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.

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

 

Belmont Home Values Rise Again in April But Sales Cool Off – Housing Report for April 2013

We’ll do a quick re-cap of the Belmont housing market for April 2013, since by now unless you’ve been living under a rock you’ve heard that the Peninsula housing market is back in full swing; and some would argue the swing is becoming dangerous to ride.

We’re probably a few years away from that precipice and we seriously doubt that the current run up of home values will continue at the frenetic pace we’ve seen in the last year. If the rate of appreciation settles down to sub double digit increases year-over-year the market will be more sustainable.

If you are some place where you can hear our audio accompaniment, we’ve recorded a short piece which helps explain some of the perplexing numbers for Belmont home values in April of 2013.

That’s a long way of saying we’ll be brief in our analysis this month. We’ll start with the big news which is probably not what you’d expect to hear…

[click on the sales for a full size chart]

Belmont Home Sales April 2013

SALES

Sales year-over-year dropped 30% in the month of April. In April of 2012 24 homes traded hands while in 2013 only 17 homes closed escrow.

 

New Listings

New listings were up 40% in 2013 over 2012 for the month of April.

Current Inventory

The inventory of homes available for sale in April of 2013 dropped 27% over last year at the same time.

Months of Inventory

The time it would take to sell off the entire current inventory of homes at the current rate of sales was virtually unchanged from 1.78 months of inventory last April to 1.76 months this year.

Do some of these numbers seem paradoxical? More new listings and fewer sales—is the market cooling off? If you’d like a more detailed discussion you may visit our blog page for a short podcast where we explain the correlation these numbers have to each other.

MEDIAN PRICE

The median home price in Belmont increased around 12% to $955,000 over last April when the median price was $849,500.

Reading between the lines—we see that the size home that sold in 2012 though was also 2,070 square feet as opposed to the homes which sold this April which were only 1,520 square feet. Effectively this means in 2013 you get a home in Belmont that is 26% smaller but cost you 12% more. That’s a serious increase in prices in just one year which we discuss more in the audio portion.

PRICE REDUCTIONS

Another indication of the hot Belmont housing market is reflected in the number of price reductions—or lack thereof. There were no price reductions in April for any Belmont home which sold.

In April of 2012, out of the 24 sales 10 homes sold above the asking price, 4 sold at the asking price and 10 sold below. In 2013 all but one home sold over the asking price.

PERCENT RECEIVED

Sellers in Belmont received on average 111% of their asking price in April of 2013 as compared to 99.6% last April.

If you are a seller who has been waiting for the market to rebound, it just did.

Data from the Multiple Listing Service for San Mateo County – MLS Listings, Inc.

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. Drew & Christine did not participate in all of these sales.

Where Did All the Inventory Go? Long Time Passing…

Where did all of the listing go? Where’s the inventory?

That’s a common question today as eager home buyers are wondering if they’ll ever get a house. As we said in an earlier post, it’s not that there aren’t enough homes coming on the market, it’s that they all sell, and so it appears there are no homes to buy.

We’re getting enough questions about the hot housing market that we thought it warranted an attempt to explain what the reasons are for what Mr. Shiller (of Case-Shiller) would likely refer to as “Irrational Exuberance” after a book he authored by the same name.

Before we show you the numbers, which in some cases are absolutely mind boggling, we’ll proffer our explanation.

Our economy and the housing sector are recovering from the longest and most devastating housing downturn since the great depression. Home values plummeted for five years in a row in the end making home ownership more affordable.

As seen in this graph, home affordability peaked in 2009, yet sales were still dismal. Even with reduced home prices and record low interest rates buyers were afraid to take the plunge into home ownership.

There were still several obstacles which buyers had to overcome. Confidence in the economy and confidence in job stability. Even though home affordability peaked in 2009 potential home buyers were worried about the economy and their jobs. To compound the reluctance to move forward there was the deep rooted psychological trauma in the wake of post bubble bursting which was enough to keep most skeptics on the sideline for a few more years.

We saw things begin to change in 2011 when we were being inundated with new hires in the tech sector moving from out of state and requesting our assistance in securing a one year rental. It was the first sign that 2012 housing might pick-up—and it did.

In 2012 the “Buy Now” light switch was flipped on and buyers came out in droves to bid on the few home available. Why did so many buyers elect to more forward all at once? Because they all enjoyed the same motivating elements—America was on sale, interest rates were at historic lows, and now with companies hiring again, buyers felt comfortable in their jobs.

So in the wake of the greatest housing downturn in U.S. history, it seems plausible that might be going through a rebound equally as dramatic.

How long can this last? More “Equity Sellers” are being created every day as home prices replenish the equity lost during the downturn. More homes for sale will help the current historically low inventory levels (San Mateo County has less than two months of inventory and Belmont less than one).  But don’t expect prices to drop anytime soon. Even higher interest rates have had little affect on the prices of Peninsula homes.

Now onto the numbers...This is our post about the first quarter Belmont home sales. Here you can see how low inventory levels have created overbids averaging 114% of the seller’s asking price.

The partial title is a tribute to the endless hours my father would play the Kingston Trio’s “Where Have All the Flowers Gone” which harkens to the days of the Vietnam War resistance. If you are old enough to remember that little ditty, I’m sure it’s stuck in your head by now too…

 

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.

Belmont Home Prices & Sales for March 2013 – Can it Get Any Hotter?

Once again Belmont home sales were strong. Now that we are comparing a bull year in 2013  to 2012, another bull year, the increases seem a bit watered down since in both years thus far home sales have been strong.

Belmont Home Prices March 2013

SALES

At 22 home sales in Belmont this March, we tied last year’s impressive increase of 29% over 2011 with 22 sales once again.

DAYS ON MARKET

The time it took to sell a home in Belmont went from 38 days last March to only 29 this year—just one more affirmation of the incredibly hot market.

PERCENT RECEIVED

Sellers enjoyed another boost in the percent of their asking price they received. In March of 2011 sellers received 99.5% of asking which jumped to 101.6% in 2012 before being eclipsed by this year’s impressive 108.3%. Sellers that are worried about what they pay their agent should think less about negotiating a ½ % discount in commission and more about hiring the best agent with the best results. My parents called that “Penny wise and pound foolish”.

PRICE REDUCTIONS

Two sellers had to lower their initial asking price to entice a buyer as compared to last year when three sellers lowered their asking price. Once again, compared to 2011 when almost 1/3rd of seller reduced their asking price, this is another high water mark.

MEDIAN PRICE

The median home price in Belmont last March was $899,000 and for the second month in a row it has eclipsed the $1 million dollar mark coming in at $1,044,000 for March—though the median size home also went up from 1,763 square feet in 2012 to 1,830 in 2013. So while the size of homes selling this year are 3.8% larger, they are selling for 16% more—suggesting an overall increase of around 12% year over year. Sounds about right for what we are seeing.

MONTHS OF INVENTORY

This statistic is used represent the “Month’s of Inventory” in a given period. Essentially the time it would take to sell the entire existing inventory of homes at the current rate of monthly sales. In Belmont, that number has been dwindling each month until it reached .6 (less 18 days of inventory). That number alone might not have much meaning unless you understand that the housing inventory as whole in the US stands at 18 months—not 18 days.

Is it because there are more sales, or a declining inventory due to fewer new listings—or both?

With buyers and agents complaining about the lack of inventory, and with the lack of inventory playing a large role in the multiple offers we’re seeing, we decided we’d add a new graph to our statistics page that tracks the number of new listings and sales each month in select cities.

 

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.

DRE License Numbers 01124318 & 01174047

Drew & Christine Morgan, REALTORS | Notary Public

 

Belmont and the Bay Area Peninsula Housing Downturn

If you’re wondering where the housing downturn is headed in Belmont you can get a good indication by these two snap shots taken for the month of March 2007 and 2009.

We use 2007 as a benchmark since it was the last year where the impact of the housing crises had not yet been realized in our market.

Here are some startling yet revealing statistics:

The far right column of this chart says it all. Every indicator in red illustrates a deterioration of the seller’s market which has prevailed for so long.

You may notice that even though larger homes sold in 2009 the median price still dropped $161,500 in 2009. Adjusting for this, the real median price drop is actually $252,850 or 26%.

Today, on average it will take almost three times as long to sell a home in Belmont; when you do sell you are likely to receive under you asking price. In fact statistically you no longer have any chance of getting over your asking price and the odds of getting less than your asking price has increased by 50%. Sellers now receive on average only 96% of what they ask for their home compared to over 103% in 2007. In real dollars that translates into a swing of $52,000.

In the end, this much anticipated market correction will produce a more stable real estate market. Affordability is increasing and eventually sales will increase as buyers feel more optimistic about the future, including job security and housing stability.

Considering the drop in value we are experiencing, for sellers who are debating a moving out of the area, sooner rather than later will probably produce a better result. In all likelihood it will be many years before inflation drives price points back to levels seen in 2007.

A down market is typically an attractive time for sellers who are thinking of a move up. The logic behind this is a more expensive home is less in real dollars–and also saves you thousands of dollars in property taxes over the life of your ownership. Our current market also includes attractive Interest rates that are at historic lows, though Jumbo loans are not enjoying the full benefit of the government’s intervention.

Buyers who have stable jobs and are planning to live in their first home for five years or more are benefitting the most from the current conditions. Prices are at a low not seen in years, interest rates are at historic lows, the government is paying them $8,000 to buy a home this year, multiple offers are for the most part non-existent and the high inventory levels means there are a lot of homes to choose from.

In every market, there are opportunities. If you would like advice on how to make the most of our current economic climate give us a call at (650) 508-1441.

*Data retreived from the MLS

The information contained in this post is educational and intended for informational purposes only. It does not constitute legal or tax advice, nor does it substitute for legal or tax advice.