Mid Peninsula Housing Trends–2009

What happened in 2009 and what might be in store for 2010?

THE PAST2010 Key

The median price in San Mateo County ended the year at $678,750 which is a dramatic drop from 2008’s year-end median price of $795,000. It continued to drop precipitously throughout the beginning of 2009, though it appears that January of 2009 was its lowest level when the median price reached $553,750—the median price has not been that low since 2000.

It wasn’t until April of 2009 that the median price reached the $600,000’s and the last four month have seen small but steady increases culminating in December’s median price of $750,000. But don’t read too much into these increases. Much of the median price increase is a result of larger homes selling do to the low interest rates and higher conforming limits.

Belmont and much of the mid-peninsula were less affected by the declines. The median price in Belmont dropped from $920,000 in 2008 to $833,725 in 2009 (9.4%). There are several factors which contributed to mid-peninsula cities faring better in declining markets.

THE BACK STORY

Beginning around 2001, many first time buyers entered the market with very little cash and qualified for adjustable teaser rate loans at an artificially low interest rate. Zero down financing meant that that if prices were to drop, they’d be in a negative equity position, making it impossible to refinance out of their adjustable loan. When the banks allowed people to qualify for a loan based at the artificially low teaser rate, when rates adjusted many could no longer make the minimum payment. Without the ability to refinance into a new loan, they were forced into foreclosure.

There are far fewer entry level homes in many of the mid-peninsula communities (Redwood City excepted). Therefore, these cities were spared the bulk of the foreclosures and resulting price declines. Furthermore, many people in these communities have ample equity from previous home sales and were able to refinance, or sit on the sidelines and avoid a distress sale.

THE FUTURE

We won’t pretend to have a crystal ball, so we’re not going out on a limb to try and predict the future. The real estate landscape has changed dramatically in the last several years and how it will shake out is anyone’s guess. But what we imagine could be a probability is that in 2010 will see much more of the same. We expect the record number of foreclosures which have been temporarily withheld from the market to be released and continue to put downward pressure on prices—especially in areas which have yet to be affected. Interest rates are sure to climb above their historical low levels making the cost of home ownership rise. This could easily offset any momentum which could otherwise spur normal home sales. Investors will continue to snap up good deals on distressed properties causing the number of sales to increase, but the median price to decrease, or stay flat. In fact, we wouldn’t be surprised to see a period of flat home prices for many years before any appreciable increase. People will first have to return to the job market before they will consider buying a home. Frustratingly, home sales have a huge effect on creating jobs so it’s easy to see why the government wants so desperately to have people buy a home (and extended the $8,000 tax credit). Once more people are being hired than fired consumer confidence will begin to slowly return. Folks will invariably reenter the housing market but at a less frenetic pace. Lasting memories of the “Great Recession” will haunt many homebuyers; and with higher interest rates and the days of easy money gone, it will be harder for prices to climb at rates seen in the first decade of the new millennium.

Don’t forget you can always check out the stats for a city near you on our web page.

Belmont Housing Market Report for November 2009

Well it’s another one of those tricky months where the numbers tell an inaccurate story when it comes to the value of Belmont homes.

Nov Stats for Bel

(Click on the graphic for a full size view)

MEDIAN HOME PRICE

Looking at the raw numbers, the median home value in Belmont dropped from $912,500 last November to $784,000 this year. That’s a whopping 14% decrease but wait—let’s look at what really happened.

This November Belmont had three short sales which greatly impacted the results. More importantly was that the majority of the homes sold were much smaller than they were last year. Larger homes sell for less per square foot (since land is a constant). Therefore if many smaller homes sell in a given period the price per square foot statistic will rise while the median home price will fall. Watch for this inversely proportional relationship to guess when there might be more to the story than meets the eye.

The median size Belmont home which sold in 2008 was 2095 Sq. Ft. and only 1568 in 2009. The difference of 342 square feet multiplied by the smaller price per square foot median of $488 last year means the adjusted median home value in Belmont this November would be $950,000, or an increase of 4%.

NUMBER OF SALES

The most impressive statistic is the number of sales which at 22 almost tripled from 2008. That speaks volumes as to consumer confidence in the local market. If sales were up because values were dramatically depressed, that would not be nearly as impressive. Of course the artificial interest rates people are enjoying right now are no doubt a contributing factor in the number of buyers who see an opportunity to lock in a home with a 30 year mortgage for under 5%–better move soon if that’s an important factor in your home buying decision.

DOM

The time it took to sell a home is virtually unchanged but it’s interesting to note, after much analysis, that the actual DOM this November was 121, not 39. This is because several of the short sales which took FOREVER to sell (usually because the banks are really bad at getting around to looking at offers) skewed the numbers (see the lower row of adjusted sales).

% Received

The percent a seller received of asking remains as a statistic, virtually unchanged; however this number varies dramatically from home to home.

What’s our take on this?

The Belmont market appears to be stabilizing in a comfort zone where buyers can still get reasonable deals and most sellers still have ample equity.

Call today if you are thinking of a move in 2010!

Time to Brine?

Thanksgiving!

What a great time to be appreciative of all that you have; your health, happiness, friends and family. Our Thanksgivings are typically not typical at all. The family descends upon our home with the enthusiasm eclipsed only by a FREE four star resort vacation, which is close to what they have come to expect. Somehow, we wouldn’t have it any other way.Turkey

We both love to cook so cook we do. Drew owned his own food service company and is an accomplished cook in his own right, and in another lifetime I worked for Bill Graham Presents and helped run the catering operations to feed the bands. Needless to say our experience cooking for the masses comes in handy when the troops are home for the holidays.

What’s on our menu?

What’s not? We tend to view Thanksgiving as traditionalists and stick to dishes that conjure up fond memories of comfort foods prepared by our mothers with all of the love (if not creativity) imparted to the meal. But we also add one or two extra dishes that help keep the whole preparation less perfunctory and more fun.

This year we’re doing Oysters Rockefeller but reverting to the original recipe from Antoine’s in New Orleans, rather than the typical oysters with spinach and hollandaise so prevalent at today’s seafood houses. We’ve actually made these once before—just not at Thanksgiving—and they are amazing! Here’s the recipe we used and the key ingredient is fresh Chervil & Taragon so forget going to Safeway. BTW—The Blue Point Oysters at the Crystal Springs Fish and Poultry at the Crystal Springs Shopping center looked awesome when I was there yesterday (11/25/2009).

Now well pass along a few tips for this year’s Thanksgiving for those of you who cook a traditional Turkey.

To brine or not to brine?

Brining a Turkey helps it retain moisture. We’re not here to discuss whether or how to brine; some good recipes and the basics behind brining can be read here.  But here are several brining tricks:

· Put your turkey in the vessel you will use for brining and cover it with enough water to submerge the bird completely. Now take the Turkey out of the brine and measure how much water was needed. That will determine how much water you need for your brine recipe.

· Only use half of the water required for the brine recipe to dissolve the sugar and salt. Once your brine has been cooked—bringing out all of the bouquet and dissolving all of the salt and sugar—remove the pot from the stove and add the remaining amount of water in the form of ice cubes. That will enable you to quickly submerge your bird without first having to chill the brine. How many ice cubes do you need? Remember if you need a half gallon more of water that’s 64 ounces. Simply keep filling a plastic bag with ice cubes until you reach 64 ounces in weight.

· If possible, store your brined bird in the refrigerator being sure it remains completely submerged. If you’re like most and don’t have the room, you can line an ice chest with a clean plastic bag (be sure it’s not made from recycled materials), and place the bird in the bag and cover with brine, then pack around it with bags of ice.

Give your bird plenty of rest.

By the time it comes down to cooking everything you and your bird probably need some rest. This is just the time to get out your iced-down bird and let it begin to come up in temperature. If you are deep frying your bird, this is a critical step. Once submerged in hot oil a cold bird can drop the temperature of your oil by over 100 degrees.  Equally important though is allowing your bird to air dry. You can even point a fan at your bird to expedite the process of removing water from the bird’s skin which will ultimately produce a crisp outer skin.

Cooking Tips:

If you are deep frying your Turkey be sure and start the oil at a higher temperature than the recipe calls for. Most recipes call for cooking a bird at around 350 degrees so starting your oil at around 400 will help the oil recover faster from your cold bird taking the plunge. Alton Brown, who I respect immensely, has a recipe that calls for starting the bird at 250 and slowly bringing it up to 350. Personally, we believe cooking it faster allows for less absorption of the oil and produces a crisp skin. Our 15 pound bird last year needed only 45 minutes and it was cooked perfectly. Be careful though, plopping a cold bird in hot oil can cause oil to spill over the top and risk a fire. One way to avoid this is to dip your bird in the oil for about 3 minutes when the oil is only around 290. Then pull it back out and allow the oil to reach temperature. Now you’ve successfully removed some of the surface water from the bird that could overreact with hotter oil. If you want to remove the risk of a flash fire always turn off the fire when lifting your bird in and out of the oil.

And for anyone who thinks deep frying a Turkey is sacrilege, we thought so too until we tried it. It actually produced a bird with less fat than the traditional roasting method. That was quickly demonstrated when we went to skim off the Turkey fat from the pot of Turkey stock the next day and there was none! Think about it…the leanest piece of bacon you will ever eat is one that has been deep fried—the process renders all of the fat form the meat. That said, we’re opting for a rotisserie version this year; brined and with a hint of Lavender smoke.

Enjoy your holiday and stop in again soon!

 

Cheers,

Drew & Christine

Belmont-July 2009 Home Sales (by request)

We’re posting the sales for Belmont from back in July at the insistence of one of our readers (thanks for being so patient). We skipped that month since we were so busy ourselves. Quite a few buyers came out of the woodwork in July and we noticed it on one of our listings in San Carlos that had multiple offers. In our estimation, the Peninsula real estate market has not recovered significantly enough to warrant such activity but the low interest rates probably spurred people into action—all at once.

July Belm 2009

At 24, July had the most sales and of any month this year.  The median price was also the highest it has been all year at $926,500. But just look at how many homes sold over a million dollars! There were some very large homes selling which definitely propped up the median price temporarily.  We’ll go out on a limb and say that will probably hold for the remainder of the year—and well into the next; mostly because of the seasonal nature of real estate.

The prices that the sellers accepted were far under what their homes were listed for, indicating some tough negotiations by buyers and capitulating by sellers. Fifteen of the 24 homes sold under asking for on average of $ 43,000 less.

Sales in July were still less than half of what they were just a few years ago when homes were flying off the shelves. Still, it’s nice to see a momentary blip—unless you are a buyer. Speaking of that, if you are a buyer, the best time to buy a home is coming up soon. Don’t start your winter hibernation too soon and miss out on what we expect will be some great deals in December and January.

Peninsula home values continue to slide, but slower.

We thought we'd update this graph depicting the median price in several peninsula cities. Note that while in Q4 of 2007 the median price in Menlo Park was still rising, it had started to fall off dramatically in Daly City. Prices appear to have hit bottom–for now. The real estate landscape has changed so dramatically in the last few years that everything we knew about home values (and recoveries) needs to be reexamined. Could we be in for another double dip? Knowbody knows for for sure–one way of the other. It's safe to say that at some point a recovery will happen and next time it might pay to watch what is going on in other cities. Daly City seems to ge a good barometer as to where the market may he headed…

 

Belmont Market Report–October 2009

Changes to the Belmont home market seemed to have slowed recently.

Belmont October 2009 

(click the graph for a full sized image) Data retreived from the MLS.


 MEDIAN PRICE

In 2008 the median home price stood at $960,000 in the month of October. This year, it has dropped to $865,000.

Once again the numbers are a bit misleading. The size home which sold last year in October was 150 square feet larger. The adjusted median home price for Belmont this year should be $938,000 which would put the median drop at a paltry 2.2% year over year.

DOM

The sellers in Belmont are still receiving around 99% of their asking price, just that they have to ask a little less this year.

SALES

Sales dropped from September but were almost double what they were last year at this time–reflecting more confidence in the market. Of course this number may be influenced by a mad dash of buyers availing themselves of the $8,000 tax credit.

So far 1.2 million buyers have qualified for the $8,000 tax credit. 40% of those said they would not have considered buying a home without it. 70% said it weighed heavily on their decision to purchase e home. Really? All it takes is an $8,000 credit and people are willing to buy a home?

The graph below shows the sales in Belmont for the month of October 2009. Since homes are sometimes relisted, the total days on market and original list price totals can be skewed. We searched the records and reported the actual data—noted by the green dots in the columns. This helps portray a more accurate picture of the time it takes to sell a home and the price a seller receives. Of the 14 sales in October one sold for asking in ten days. Seven sold for less than asking and were on the market an average of 113 days when they received, on average, ~$14,000 less than their LOWERED asking price. The sellers that appropriately priced their home fared much better, receiving on average $2,000 more than their asking price (we defined pricing a home right when it sells within the first month) and sold on average in only 33.5 says. More money, faster sale, one wold think every seller would try to price their home right.

 

Belmont Homes Sales – May 2009

What’s happening in our local market is the number one question we receive so here’s the good the bad and the ugly for May 2009 in Belmont.

Bel May 2009

The Good

The number of homes sold in creased in May to 15 from April’s paltry 12. Still, compared to 2004 when 32 homes sold there’s not a lot of activity.

The number of days it took to sell a home in Belmont went from 48 in April down to only 37 in May.

Of the 15 sales in May, 5 sold over the asking price, none sold at asking, and 10 sold under the seller’s asking price.

The Bad

Homes which were originally overpriced took a beating.

Overprice Homes

10

Homes Priced Well

5

DOM

 

76.8

DOM

 

18.8

Percent Received of Original List Price

89%

Percent Received of Original List Price

101.4%

Real Dollar change

$67,000 less

Real Dollar Change

$5,000 more

 

The number of overpriced homes reaching a factor of 2-1 over well priced homes is indicative of the disconnect between what sellers feel their home is worth as compared to what a buyer will actually pay. It’s clear by looking at the numbers though that the number one mistake a seller can make continues to be overpricing their home.

The Ugly.

The median price in Belmont continued its correction in May.

 

May 2009

April 2009

May 2008

May 2007

Median Price

$820000

$775,000

$1,098,750

$1,036,733

* Corrected for size of home

$820,000

$855,000

$952,300

$1,106,533

May Δ in percent

 

-4.09%

-13.94%

– 25.89%

 

*We endeavor to report the true median price as accurately as possible. In doing so, we must take into consideration if larger or smaller homes are selling in a given period.

 

*Date retrieved form the Multiple Listing Service of San Mateo County.

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.

HOUSING REFORM-2009 Panacea or Panic?

The news is full of housing reform stores but the shelf life for reform legislation seems shorter than that of freshly baked bread—what made the news just yesterday is often obsolete by today.Congress

We expect 2009 to be a turbulent time in real estate. Knowing how to weather the storm is paramount to the survival of homeownership.

Key Elements

President Obama signed a $787 billion stimulus bill which includes many features to protect homeownership.

These are a few of the incentives targeted to help 4-5 million responsible homeowners stay in their homes:

\\· Provide access to low cost refinancing where borrowers who have less than the required 80% loan-to-value could refinance to lower their monthly payment.

· Seventy-five billion will be spent on homeowner stability initiatives to help struggling homeowners who, because of the recession, are hard pressed to make their mortgage payments and cannot afford to sell or refinance their home due to a drop in value.

· No aide to speculators. The initiative has no provision for assisting investors or speculators.

· Provide support for homeowners who are at imminent risk of default before they miss a payment.

· Provide loan modifications to bring monthly payments to sustainable levels.

· â€Pay For Success”—Initiative for loan servicers to receive $1,000 per month each month a borrow stays current on their loan.

· â€œHelp Borrowers Stay Current”—Provides a $1,000 per month reduction in a home owners’ principle loan balance for five years if the borrower keeps their payments current.

· â€œReaching Borrowers Early”—An incentive of $500 to loan servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrow falls behind.

· â€œHome Price Decline Reserve Payments”—Holders of mortgages modified under the program would be eligible for an additional insurance payment (from a newly formed entity under the Treasury Department) on each modified loan to offset declines in the home price index.

There are quite a few more initiatives to help homeowners. Though many do not apply to the majority of the loans on the Peninsula since they are not held by Fannie Mae or Freddie Mac.

Lenders Are Worried.

Recently, many lenders have been modifying loans without incentives just to keep their head above water. However in contrast to the President's incentive plans, many banks require the homeowner to be months behind in payments before any relief is possible.

â–ºIf your mortgage is scheduled for an interest rate increase which you feel you may not be able to afford, we encourage you to contact your mortgage holder immediately and see if they will modify your  existing loan. It’s in everybody's best interest if homeowners can continue to make their monthly payments, even if it takes a loan modification to make it happen.