My Thoughts for Real Estate in 2009 in San Francisco and the Peninsula

The year began with home prices free falling and no end was in sight. In April we, in the business began seeing the light at the end of the tunnel. Homes in the starting price points began selling and inventory started to stabilize. Banks were pricing their homes on the low range and were receiving multiple offers. I consider single family homes under $700,000 to be the starting price point on the peninsula. Homes over a million dollars were having trouble due to the higher interest rates for loans of that size and the lack of lenders willing to loan. Loans under $729,750 were backed by the government and hovered around all time lows all year. Loans were broken up into different categories. Rates for loans under $417,000 were below 5%; rates for loans between $417,000 and $729,750 were slightly higher. Above that they took a jump. Finally we are now seeing the rates for the larger loans fall into line. Today rates are below 4% fixed for five years for under $417,000. That could be the right loan for many people. Many people took advantage of these record lows to purchase, their first home, investment property and to refinance. During the summer, sales began to increase as compared to the month before and the year before and are still moving along quite well. Prices are showing increases over the previous month but not over the previous year. The appraisal policy changed and that added to a longer time in escrow plus many properties not appraising. Many appraisers were favoring the conservative approach and it has affected many sales. I can’t talk about 2009 without mentioning Short Sales. This occurs when the home is worth less than what is owed on it. The bank has to agree to accept less than they are owed. Not too easy but possible. Often it is 2 different banks. As the economy went bust; The Short Sales and Foreclosure were only in the starting price points. As the year comes to a close it has spread like the swine flu into the higher priced areas as well. Interesting how the table has turned. The Short Sale process seems to be going much smoother and a little quicker, from 6 months down to 3 months. I must give credit where credit is due. Wachovia Bank has come out with a 14 day short sale process. If you have a Wachovia loan and are having trouble making payments give me a call. Also when speaking of 2009 I must call it the “Year of FHA”. Federal Housing Administration guaranteed loans for buyers with low down payments. They guaranteed loans with only a 3.5% down payment allowing many first time home buyer the opportunity to take advantage of the market and achieve the American Dream of Home Ownership. These buyers do have to pay mortgage insurance but it is still a great opportunity. The new tax code allows Mortgage Insurance to be deducted. 2009 has put a strain on many Home Owners Associations. Many individual owners and sellers are not making the monthly HOA payments causing increases for the people making the payments. When a bank forecloses they will make the payments but nothing prior to taking title. I believe legislation should be passed giving HOA dues priority over other liens just like property tax is. I must also give credit to our government. The $8000 tax credit given to anyone whom has not owned a home in 3 years has been a huge boom. As of this writing they just extended it to April 2010 and are allowing the move up buyer, (anyone who has owned their home for 5 of the last 8 years) $6500. If you would like to take advantage of the credit or would like more information please give me a call at 877-Lee-Sells (877-533-7355) Inventory in some starting price point areas is less than a month’s supply, but in the higher price areas it is up to a year’s supply. Three months supply is considered normal. More makes it a buyer’s market and less is a seller’s market. Pricing the home right the first time has become the big key to a home selling in 2009. Overpriced homes even slightly overpriced homes are not getting seen, and by the time it is reduced the property has become stale and winds up selling below the market. Homes must be priced comparable to the bank owned and short sales because that is the market today. Overall many homes have sold in 2009 but at lower prices than the years prior. Please do not hesitate to contact me if you would like to know about a specific area.

My Thoughts for Real Estate in 2009 in San Francisco and the Peninsula

The Shoe is on the Other Foot Now

I am responsible for selling my mother’s home.  Great I got an easy listing.  Well not that quick.  She lives in New Jersey. And they do things differently than we here in northern California and I am not licensed in New Jersey. They use lawyers instead of Escrow and Title companies. I pondered how a deal is ever going to close with two lawyers involved. The people I spoke with assured me they do. It seems radon gas is an issue in this part of New Jersey and the seller is responsible for mediating it. My mother lived in an adult community where Open Houses and For Sale signs are not permitted. No wonder as I drove the community I did not see any other homes for sale. I thought there was no inventory and I would receive multiple offers just like here in the San Bruno and South San Francisco. After doing additional research I come to find they have a year’s worth of inventory in the area adult communities.

I was recently in New Jersey and spoke with three realtors.  Prudential is not strong in the area so I went into a GMAC Realty office at the local shopping center and I made an appointment with the floor agent. Immediately she told me she will come with her partner. Good! Two for the price of one. She and her partner came very well prepared. They presented information on themselves and their office. After speaking with them for a while I could tell they were not very experienced. It comes out they were in the business for five years. They were very friendly, easy to speak with, extremely motivated and aggressive but not pushy, understood marketing but not to knowledgeable on the contract, (do they need be since an attorney will review it?), they were the only ones that came with complete information on solds, actives and under attorney review. They had scheduled to show my wife and me three active listings. There was one under attorney review listed in their office that I mentioned interest in seeing. I was impressed that one of them immediately called their office to verify that a lock box was still on. We were discussing painting the home and once again immediately called a painter they work with and got a ball park price over the telephone.

The second agent I spoke with was recommended by a friend. My friend did not have a business relationship only a personal relationship. I called him on a Sunday about 3 PM and returned my call at 9PM and we set an appointment for 9AM the next morning to meet my schedule. I already liked his response time. I will justify him being the least prepared with the fact he had the shortest time to prepare. He did have information on the market but no marketing information. He did discuss marketing briefly. His mother in-law lives in the same complex and he lives in the complex next door, so I felt comfortable that he was familiar with the area. He offered to paint a stained area himself to save money. I appreciate saving money.
We had a very good rapport I thought. We discussed our mutual friends, the Real Estate industry and Back home.

The third and final agent I found on the internet as a “Top Producer” for a local old time one office company.  She definitely knew the complex.  She said I should hire her because she is the best and her office is the dominating listing office. She showed me all sorts of stats. Not much at all with buyers. She told me the various websites she will list the property on.  She spent most of forty five minutes we spoke, discussing pricing.  She suggested that I offer 4% to the listing agent because there was over a year of inventory available. It is a thought that was shared by another realtor as well but I’m not a big believer in that. She was not warm and friendly but she was not cold either.  She was opinionated.

Real estate is very localized so before interviewing the agents I prepared a list of questions to learn about the area: market procedures, lock boxes, inspections, time frames, the attorney situation, inventory, Open Houses, marketing, availability, full time or part- time, experience, DOM, list to sale price, their mix of buyers to sellers, office activity and more.   Could I hire all of them? Sales people are easy to sell. we trust everyone.  We don’t want to say no to anyone.  Each had pluses and minus. They were all pleasant.  Now I understand what our clients go thru. Let me tell you by the third agent in two days I was burnt out. Do I go with experience, relationship, motivation? I thought I would hold off my decision until I see how their follow up is.  I ask for your help; whom do you think I should hire? 

The Shoe is on the Other Foot Now

Is a Condo the Right Choice?

I recently showed a condominium in Redwood Shores to a young couple that was considering single family homes under $490,000. They grew up in a middle-upper class neighborhood and wanted to own in the same type. Most homes under $490,000 in San Bruno, San Mateo, Redwood City, South San Francisco were run down and needed some work. My clients made several offers on short sales and were overbid on at least 5 REO offers. I was concerned with the necessary work since they did not have much money in reserve. I did not want them to start something and not be able to finish it like many of the homes we were looking at.

They were not looking forward to doing yard work so I convinced them to look at condominiums. They were hesitant because of HOA fees but I explained the costs of ownership over a period of time were basically the same as of single family homes or.
http://www.pruvoices.com/2008/10/hoa-dues-junk-fees-or-good-budgeting/

I showed them a 3 Bedroom 1300 sq. ft. condo and the young bride’s face just lit up when we walked in. It was modern, spacious, laundry inside, views and more. They were sold but they had to convince their parents who were putting up a good share of the down payment. The parents were difficult to convince. They were concerned with appreciation. I ran some numbers for the State of California from 1990 thru 2008 single family homes appreciated 79% and condos appreciated 116%. In San Bruno from 2000 –2008 single families increased 20% and condos 28%. Still did not convince the folks. San Mateo it was 7% for single family homes and 5% for condos.

When purchasing a home. appreciation should be taken into consideration but that should not be the only consideration. Life Style should also be given major thought.

I believe Condominiums offer a life style that fits many needs: No exterior maintenance, security with a security force or proximity to neighbors, often many have recreational facilities, and large complexes offer social activities, more updates than similar priced single family homes. Buildings that were built as condominiums and not converted offer excellent sound proofing and insulation. They also have laundry in the units. I suggest if buying a condo today to review the HOA financials closely. Many are having severe problems and assessments could be inevitable.

Oh, the young couple are hoping to close on a short sale soon.

www.leesellsmore.com

Is a Condo the Right Choice?

Are They Comparing Apples to Apples??

When you and I purchase a new computer we compare the memory, the speed, the screen size: does it come with a camera, DVD player/recorder and more. A home the largest purchase most of us will ever make often is not reviewed with such detail by the people doing the lending and sometimes by the people doing the spending. Yes, they look at the square footage, the general condition, and the location. Appraisers often do not have any idea of the cost of section one termite repairs. The differential in repair costs could be 3%, 5% even 10% of the purchase price. Roofs costs could range between $5000 to $25,000. A home with a two year old roof should be valued higher than one with a 25 year old roof. Appraisers know roughly how old the roof is on the subject property but they don’t know the age of the comparables. Same with double paned windows and furnaces. A home with copper piping through out or or with upgraded electric needs to have additional value added to it. All this information does not show up in the MLS. The MLS shows if the kitchen or baths have been cosmetically remodeled but does not go into detail if the cabinets, floors, lighting was all upgraded and how much they were upgraded. Is the home landscaped and does it have automatic sprinklers? This could add $5000, $10,000 up to $50,000 or $60,000. So.. What am I saying. The government has put in all of these new laws to make appraisals non biased but we as an industry have to work together and help them compare apples to apples.

We need to add more info to our MLS data reports. Even comparing selling prices is not a fair comparison if you don’t have all of the information. So many purchases have a credit for closing costs and or repair costs. Whole neighborhoods will be overpriced real quick when just a few homes were compared to homes with 3% credit backs. I realize some MLS’s are more progressive than others and include some of this information now. Some appraisers call and get this information. We as agents, could make this a very simple process. I suggest we add the following categories to the MLS data: age of roof, furnace, type of plumbing and electric, Cost of section one termite repairs if not completed, Amount of credit back, type of financing. If we put this in an area only available to agents we will be more valuable to our clients and help the appraisers compare apples to apples.
http://www.leesellsmore.com/

Are They Comparing Apples to Apples??

Buyer’s Market?

Buyer’s Market?  You bet it is.  I will be speaking about the low end of each market area. On the Peninsula and San Francisco we talk about Single Family homes priced under $700,000.  In the East Bay it is below $400,000.  Buyer’s Market yes but not in the traditional way.  Today’s buyer cannot expect to purchase a home for 20% off the list price, but they can expect to purchase a home 30-60% off of 2004 prices.  Today’s buyer cannot expect the seller to take care of all necessary repairs, but the buyer can expect to receive an $8000 Federal Tax Credit and an extra $10,000 State Tax Credit if they are purchasing a brand new home.  Today’s first time buyer cannot expect to be the only offer, but they can expect to receive the lowest interest rates in 40 years.  I think it is just in a different way.  

The Real Estate Market in San Bruno, South San Francisco, Daly City, San Mateo is hot just like the weather. Prices are based on supply and demand.  Demand is strong as all smart people want to take advantage of the buyers market.  By the way the $8000 Federal Tax Credit terminates Nov. 30 of this year.  many people do not understand this credit.  It is a true gift.  When this concept was originally introduced the credit was really a loan and needed to be paid back.  In 2009 it became a true credit.  You could just amend your 2008 taxes and receive your check in less than 2 months is what many buyers have seen.  Other are choosing to claim it when they file 2009 taxes.    Inventory is drying up.  Please look at the chart.  We are seeing less homes for sale today than we had last month or last year.  If you remove the short sales that have received offers (maybe 25% of the homes available we are probably close to the inventory of the hot market in 2005.  Please not the difference in the higher end and lower end of the markets.

 

	Belmont	Bur.	D.C.	F.C.	Mill.	S.Bruno	S.Carlos	S.F.	S.Mateo	S.S.F.	S.M. Cty.
Jun. 09 Inv.	62	70	92	34	31	57	73	140	175	89	1554
May 09 Inv.	62	65	100	42	27	65	73	179	178	95	1619
Jan. 09 Inv	41	39	170	26	43	65	64	210	134	109	1452
Jun. 08 Inv	61	63	213	32	52	122	71	184	193	170	1957
Jun. 05 Inv.	36	41	84	15	26	46	42	372	96	61	1013
Jun. 09 Sales	20	18	37	13	12	18	25	178	50	36	420
May 09 Sales	14	14	31	9	8	14	16	139	41	24	321
Jan. 09 Sales	3	6	31	6	2	13	5	81	24	12	163
Jun. 08 Sales	20	21	31	11	18	21	29	275	40	18	376
Jun. 05 Sales	36	32	43	26	19	37	32	211	87	37
Jun. 09 Av. Pr	888,175	1416438	506,145	955,541	910,308	530,588	963,773	995,024	950,807	559,887	945,717
May 09 Av. Pr.	831,250	1164000	493,419	1,004,555	944,875	525,142	963,509	973,483	877,318	933,698	933,698
Jan. 09 Av. Pr	813,333	1,330,208	510459	1,008,000	925,000	580,134	1,122,200	747000	778,124	526,416	683,900
Jun. 08 Av. Pr.	854,318	1,386,086	580,088	1,149,626	1,114,216	637,140	1,123,682	1,248,334	933,032	628,833	1,157,966
Jun. 05 Av. Pr.	987,373	1362750	751,485	1,104,995	981,107	749,864	1,059,218	1,210,739	985,005	756,017

Information deemed reliable but not guaranteed.

Buyer’s Market?

What shall it be; Loan Modification? Short Sale? Foreclosure?

You are among the millions underwater and over stressed. What shall you do.

Your credit will be most negatively affected with a Foreclosure, then a short sale. As long as you stay current on your loan, loan modification should not affect your credit. Your credit score weather it is right or wrong is used by potential employers before hiring, landlords before renting, insurance companies before granting insurance and etc. Depending on your individual situation maybe credit is not important.

My client’s father nearing retirement age could live in his son’s rental unit and will not be looking for another job said he might pass away before his home in Las Vegas is worth as much as as his loan. He opted for foreclosure.

I had another client, a family with parents and adult children living at home in South San Francisco. They came to me for a discussion on their options. They are still working and acquiring things so their credit score is important to them. Being an immigrant family losing their home, the “American Dream”, would be extremely emotional and their image amongst friends and family here and back home would be devastated. They struggled making payments, but after family members lost two part time jobs they couldn’t do it any more and came to me for help. They pondered the situation. Should they continue making payments on a home that they owe $250,000 more than it is worth. They purchased this home with no money down and realized they would probably never be able to save the 10-20% now required down payment to purchase another home. They opted for a loan modification. They were hoping for some debt forgiveness.

Their bank would not hear from that. But with persistence similar to a short sale approval I was able to get the bank to modify their 6.5% fixed interest only loan to a Principal and Interest loan starting at 3% for five years, 4% for 1 year and 5% for the next 34 years. Before that, the second lender agreed easily to modify their 8.5% loan to .31% yes .31% not 3.15 but only for 1 year. We will follow up with them in a few months. With home ownership tax benefits their new payments are now about the same as rent would be. They are thrilled, knowing they will now be able to afford the “American Dream”. During these negotiations I had them apply and they were approved for a property tax reduction with annual savings of almost $3,000.

I was told during this process that each loan holder not necessarily the servicing bank has their own set of ratios and criteria for loan modification. This worked out to be win-win situation. Their lender will receive their full payment over a longer period of time rather than losing several hundred thousand dollars during a short sale or incur thousands of dollars for foreclosure expenses.

We have all read that more than 50% of loan modifications are defaulting. Maybe it depends on the modification. I recently reviewed a loan modification for a client from San Bruno, Ca.. She was was in default. In November her loan was modified from 8.4% to 7.9%. Maybe $100 reduction and then they had the nerve to add on another $550.00 per month to bring her current. Her payments were $400.00 more than before the modification. If I did not see it myself I would not believe it. What were they thinking? It is no surprise she is in default again only 4 months later.

What shall it be; Loan Modification? Short Sale? Foreclosure?

Memorial Day 2009

For 6 years I have been putting out over 500 American flags in the front yards of homes in the Crestmoor Park area of San Bruno on the Memorial Day Weekend. Memorial Day, originally called Decoration Day, is a day of remembrance for those who have died in our nation's service. Memorial Day was officially proclaimed in May 1868 by General John Logan, national commander of the Grand Army of the Republic. I think it is important to remember those that gave their lives for us; for our freedom. The Crestmoor Park residents appreciate the beauty the flags add to the neighborhood. After walking up one side and down the other side of the street putting flags in the front yards of all the homes I turn around and see the flags waving in the wind. “What a great sight”. Even with all of the problems we are having, I am very proud to be living in this great country. The wonderful fulfilling feeling surely outweighs the sore back from bending down and the sore legs from walking up and down the hills. Several agents from my Prudential Ca. Realty office have begun the same tradition in other parts of San Bruno and South San Francisco.

Memorial Day 2009