Belmont Home Sales Smash Records! December 2013 Market Report

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

PART I

Let’s start with December sales:

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

Belmont December 2013

SALES

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

MONTHS of INVENTORY

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

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

MEDIAN HOME PRICE

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

DOM (Days on the market)

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

Hot Pepper 25PERCENT OF ASKING

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

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

PRICE REDUCTIONS

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

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

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

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

Disclaimer:

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

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

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

Belmont Home Values Set a New Record – November 2013 Sales

We hope that your holiday is filled with great times and fun with family or friends!

This is our last market update for the year as December’s won’t roll out until mid-January. That’s where we re-cap the entire year and take our best guess as to what’s  in store for our market in 2014.

We hope you’ve enjoyed this year’s market updates. Belmont has seen some amazing appreciation this year and November was certainly not a spoiler.

Click on the image for a larger view.
Click on the image for a larger view.

SALES

The seasonal slowdown has thus far not materialized. Belmont had 40% more sales this November than in 2012—25 compared to only 14 last year. That might seem staggering but as it turns out last November of 2012 was a bit of an anomaly in that very few homes sold when historic sales trends are reviewed.

MEDIAN PRICE

The big deal once again is the median price. Since virtually the same size homes sold last November in Belmont as did this year, the median price increase this year more-or-less accurately reflects the increase in Belmont home values. Last November the median home price stood at $901,500 while this year we hit $1,089,000—a 21% increase. But most important is that this is not a blip on the radar screen. Belmont homes values set a new record as except for April, Belmont has posted million dollar plus median home prices the entire year—a first in the history of Belmont.

Have the values surpassed those at the peak of our market? Undeniably—for Belmont.

DOM (Days on Market)

The time it took to sell a home was essentially unchanged at 23 days as compare to 27 days last year.

NEW LISTINGS

Interestingly enough we had 15 new listings hit the market in November this year. The warmer than usual weather might have had something to do with it but that represents a 50% increase over last year.

MONTHS OF INVENTORY

The time it would take to sell the existing home inventory at the current monthly rate of sales hit another low at 0.5 months. To help put the low inventory into perspective, nationally, that number still stands at around five months.

Hot Pepper 25PERCENT RECEIVED—THE SIZZLE FACTOR

Still holding at over 100% of asking, November did not disappoint as Belmont sellers enjoyed on average 107% of their asking price.  Some of you may have noticed that this number does not jive with the chart above. That’s because we calculate the percent received in our chart as a percentage the seller received of their ORIGINAL asking price, not the reduced price. The Multiple Listing Service tracks it as a percent of the price when the home sold, and that methodology accounts for the difference between our number of 103% of asking and the 107% reported. Either way, it’s a big number.

PRICE REDUCTIONS

There were more price reductions than normal this November. 20% of the sellers lowered their asking price while 16% received under what they were asking for their home. Still, 68% received more. But those numbers are just a tad bit less impressive than last November which could be rationalized because sellers are getting more aggressive in their initial pricing and thus are having to lower their expectations down the road in terms of a price improvement.

As always if you have any questions about our report you are welcome to reply to this post or email us at info@morganhomes.com or call at 650-508-1441.

And if you are considering a move in 2014, please take a moment to reach out to us. Well show you why year in and year out we have the best record for selling homes in Belmont.

Have a great Holiday and Happy New Year!

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.

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

 

Belmont Home Sales – Are We Headed for a Cool Down or Not?

Like a marathon finish before the New Year, Belmont’s home sales hung in there for at least one more month as October’s home sale statistics showed little signs of distress.

It’s actually amazing for us to see just how strong the market is going into what is typically a seasonal slowdown period.

In order to make any sense of Belmont’s housing statistics, we look at year-over-year numbers rather than month-to-month changes which are often influenced by seasonal factors.

Belmont Home Sale Activity-October 2013

SALES

The sales for October were virtually unchanged from last year when 23 homes sold in 2012 and 24 in 2013.

How’s the Inventory?

That’s all the buzz with agents complaining daily about no housing inventory.

 

There are three factors to look at when thinking about the inventory level.

  • The number of new listings
  • The number of sales
  • And the overall inventory level

The number of new listings this October went from 14 in 2012 to 17, the number of sales were up this year by one, yet the overall inventory dropped from 32 to 24 this October.

In October of 2013 the number of available homes for sale was 32, while this year that number dropped to only 24. That brought down the “Months of Inventory” statistic which measure the time (in months) that it would take to sell all of the existing homes on the market at the current rate of sales. Nationwide, that number is still around five months of inventory.

Belmont dropped from 1.39 months last October to 1.04 this year.

With sales staying relatively static, and new listings increasing in 2013, why then does the months of inventory counterintuitively shrink rather than grow?

The answer lies in the number of leftover homes from the previous month which linger on the market. Last year the market was strong, but not as hot as this year, so some of the September homes for sale last year managed to spill over into October causing the overall inventory to increase.

MEDIAN PRICE

The median price this October recorded at $1,135,000 which may have been a seasonal drop from August 2013 when it stood at a record high of $1,239,000, but an increase year-over-year of 16.1% when last October the median price was only $977,500. In both periods the size homes which sold were relatively unchanged at 2,037 Sq. in 2012 to 2,060 Sq. in 2013.

PERCENT RECEIVED—THE SIZZLE FACTOR Hot Pepper 25

So how hot is the market? Just last month we were seeing some signs of a cool fall market but October’s number appear to have staved off the winter housing chill for at least one more month. Could it be the warmer than usual fall we are enjoying? Perhaps. In any case, this October 20 of the homes or 83% sold over the seller’s asking price, while one home sold at asking and only two sold for less.

Last October only 35% of the homes sold over the asking price, two sold at asking and 22% sold for less.

The percent sellers received of their asking price were 100.3 vs. 108.5 in 2013. Hotter than last year, and hotter than last month when the sellers received 106% of asking.

 

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.

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

What is a Relative Bid in Real Estate?

Relative Bid Offers–Safe or Insane?

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

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

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

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

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

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

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

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

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

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

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

 

Disclaimer:

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

 

 

 

 

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.