Housing Market Shows Signs of A Cool Fall

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

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

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

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

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

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

Belmont Home Sales October 2013

SALES

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

NEW LISTINGS

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

INVENTORY

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

MEDIAN HOME PRICE

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

Days on Market [DOM]

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

PERCENT RECEIVED

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

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

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

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

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.

Are Belmont Home Values Near The TOP–August 2013

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

When will it begin to cool? Has it already?

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

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

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

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

Belmont Home Values Aug 2013

[click on the graphic for a larger picture]

MEDIAN HOME PRICE

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

Summary—Belmont homes values have hit a new high.

SALES

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

MONTHS OF INVENTORY†

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

DOM [Days on Market]

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

PERCENT RECEIVED OF ASKING

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

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

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

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

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

Disclaimer:

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Disclaimer:

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

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

Bay Area Home Prices Rise But Interest Rates May Dampen Values

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

Perfect Storm

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

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

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

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

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

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

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

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

Disclaimer:

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

 

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

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

 

Is Silicon Valley Returning To A Normal We Once Knew?

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

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

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

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

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

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

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

Disclaimer:

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

Belmont Home Values Rise Again in June But Fall Short of Surrounding Cities

One would have to be living under a rock to be oblivious to the reports of the hot Bay Area housing market. The San Jose Mercury released the headline yesterday that in the nine Bay Area counties the median home price rose 33% year over year this June.

June of 2012 was about the time we were seeing strong signs of a housing rebound but it was still too early to declare with certainty that the rebound would last—that didn’t occur until November of 2012.

One might wonder if Belmont is under performing since home prices only rose 6% this June over last. There’s actually good news for Belmont homeowners in these statistics, here’s why:

One of the main reason that home values have skyrocketed year-over-year in the nine Bay Area counties is that many of the cities in these counties had home prices which felt to levels far below where any market correction should have predicted they would land. In other words, the hardest hit areas with the most drastic price reductions are seeing the largest percentage rebound. Since Belmont’s home values fared rather well during the downturn, our rebound is more sensible.

Don’t tell that to buyers who are trying to get their first home. They’re seeing bidding wars going on which in June of 2013 made the average home in Belmont sell for 112% of the initial asking price.

Belmont Home Values Rise
Click on the graphic for a full-size screen shot

SALES

Home sales in Belmont—contrary to the nine Bay Area County trend—picked up (albeit an insignificant amount).  June of 2012 saw one more home sale than last June with 27 homes closing escrow.

The only event that helped sales in June of 2013 was that in May we had a plethora of new listings—35. Year over year that was a strong seasonal influx of new listings.

INVENTORY

This new category we are adding to the monthly report is all about inventory—the number of homes available for purchase. We measure the inventory level and compare that to the number of monthly sales to arrive at a “Months of Inventory” statistic. The so-called months-supply is the number of months required to sell the current inventory of homes at the current rate of home sales. Our nation’s housing inventory is seeing levels in the 4-5 month range while Belmont’s inventory is less than one month’s worth—that’s a very tight housing inventory.

The housing inventory in June of 2012 stood at 39 homes for sale with 25 new listings hitting the market; contrasted to June of 2013 when there were only 19 homes to sell and 15 new listings. The good news that might save July’s statistics is the rally of new listings after the Fourth of July week that saw a listing hiatus.

MEDIAN HOME PRICE

The median home price in Belmont, as mentioned above, was a more sustainable 6% increase over last June at $1,113,500, the second highest median home price ever recorded for Belmont (October of 2007 it stood at $1,135,000).

SQUARE FOOT

We always look at the size of homes selling in the two periods to see if there is an inequity but with the difference between June of 2012 and June 2013 being a meager 55 square feet smaller in 2013, it’s statistically insignificant. Why? Because appraiser don’t even account for square foot difference of less than 100 square feet.

DOM (Days on the Market)

The time it took to sell the average home in Belmont dropped dramatically from 50 days last year to only 14 this June—a 72% decrease in the time it took to sell a home.

PRICE REDUCTIONS

Price reductions are another way to catch the pulse of the market. The more sellers who have to lower their asking price expectations in order to attract a buyer says more about buyer trepidation  than seller’s lofty and overzealous price expectations. In June of 2012 four of the 26 sellers lowered their asking price while this June only one seller suffered from that fate.

PRICE RECEIVED OF ASKING

The price a seller receives also tends to be a good indication of the strength of the market. In June of 2012 57% of the homes sold for more than the asking price with a list-sale price ratio of 103%. This June 88% of the homes sold for over the asking price for on average 112% of the initial asking price.

Interest rates are rising and how that will impact our local market is yet to be seen. Clearly it has knocked a few buyers and sellers off of the fence.  It’s anyone’s guess how our local market will react but intuitively we believe that the days of multiple offers in the double digit range may be waning.

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.

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

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 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.