Saturday, April 18, 2015

Bay Area Real Estate Prices Spike Early in 2015

The Bay Area's hot economy and the limited number of properties for sale have pushed the median price for Santa Clara County homes to a record high, $879,000, and the rest of the region is not far behind.

Prices Climb

Median sale prices in Alameda County climbed to $665,000 in March, a hair below the 2007 peak of $669,500, according to data released Friday by real estate information service CoreLogic. After hitting a new peak of $1,060,000 in February, prices in San Mateo County dipped slightly to $995,000 but that mile-high figure still represented nearly a 5 percent increase over the year before. Contra Costa County prices climbed as well, to $470,000, a 10.6 percent increase.

It's a sellers' market everywhere, but Silicon Valley is leading the pack.

"It feels like a standard Silicon Valley spring: challenging," said James Yang, a Palo Alto-based agent with the Sereno Group. "It's been consistently crazy for the last four or five years -- multiple offers, bidding over the list price, a consistent pattern. If there are 10 offers on one home, those nine others are going to continue to shop. And if you got beat out at $2.5 million, there's kind of an understanding of where you need to be the next time."

March sales increased by 19.5 percent from a year ago in Santa Clara County and by 24 percent in Contra Costa County. But the sales volume dipped by 3 percent in Alameda and 2.1 percent in San Mateo Counties. Taken as a whole, the nine-county Bay Area saw a 10.3 percent increase in sales.

"For those looking for a higher sales volume, this is an encouraging sign," said CoreLogic analyst Andrew LePage. "So far, we're doing better than last year. But inventory is still tight" as the market moves into the spring season.

Last month's sales volume for all kinds of homes was still 19.6 percent below the March average going back to 1988, when the service began compiling data. "To support a more normal level of sales, we're going to need more inventory."

That limited supply is making it tough on buyers.

A year ago, Paul and Irene Goh of San Jose sold their townhouse, moved into an apartment with their three children and began the hunt for a house.

"In this one year, we went to open houses every weekend and probably looked at over 100, maybe 200 houses," said Paul Goh, a software engineer. "After losing three or four times, it gets more and more depressing. Sometimes you don't lose by a small margin -- you lose by $300,000 or $400,000, so you get some sense of your competition."

They bid on nine houses and lost every time.
On March 23, a 1,600-square-foot, four-bedroom house with a detached office came on the market for $959,000 in San Jose, near Campbell. They saw it March 26, bid $1,120,000 that night and the next day went to the Santa Cruz Mountains to pray. Hours later, their agent called: offer accepted.
"We're finally done with open houses, and so are our kids," Irene Goh said.

Stories like that of the Gohs abound throughout the Bay Area as buyers compete.
"You have some areas where you've had higher sales and some areas with fewer sales, although the pricing is almost 100 percent all increasing," said Jennifer Branchini, past president of the Bay East Association of Realtors. "Very interesting market. Every one says, 'What's the best time to buy? What's typical of this market?' There's nothing typical anymore. We're in completely different waters."

Buyers have to be willing to act quickly and overbid.
East Bay natives Chris Olesiewicz and June "JD" Dulfer, who met while attending UC Santa Barbara, and work in the tech industry on the Peninsula, have been renting a one-bedroom apartment in Foster City for $2,500 a month. "After we got engaged," Olesiewicz said, "we began watching the markets and every year it was just going up and up and up."

Their challenge: finding something that fit their budget, for $800,000 or less.
They got married March 14, took off for a honeymoon in Paris, and returned March 26. The next day, their agent, Alex Wang of the Sereno Group in Palo Alto, showed them an 870-square-foot, two-bedroom house in Menlo Park's hot Belle Haven neighborhood, near Facebook's headquarters. The cost: $450,000. Even with a 1940s kitchen and 1980s-era popcorn ceiling, the couple bid $600,000, and their offer -- one of five for the off-market sale -- was accepted in a day.
"We didn't even know how to comprehend it when Alex told us," Olesiewicz said. "We're still not sure it's real."

Nothing seems easy in this market.
Peter and Meredith Estremo of Livermore sold their house last month to one of 13 bidders and then had to find a new home within 60 days. An over-the-ask bid, an information sheet about their family dreams, a bottle of wine and a dog toy did the trick and their offer was just accepted.
"I'm kind of waiting for the other shoe to drop," Meredith said. "We're ready to close next week."

Wednesday, March 11, 2015

Baby Boomers Driving Real Estate Prices Higher in California

A recent survey of California baby boomers, those born between 1946 and 1964, shows that they will continue to be a strong force supporting our real estate market.

As the wealthiest generation, these baby boomers “will continue to wield great influence on the housing market,” says the President of the California Association of Realtors. “Even those who went through financial difficulties during the economic crisis recognize the benefits of home ownership and would rather buy another home than rent.”

The survey found that 22 percent stated they expect to buy a home in the next five years. Of those baby boomers surveyed, 78 percent indicated they will not sell because they like their current home. Nearly all baby boomer home owners (92 percent) surveyed have equity in their homes.
Despite the recent economic recession, only one in four baby boomers are postponing retirement. On average they plan to retire in nine years.

Three in 10 baby boomers live with their children. The majority of these baby boomers live with adult children mainly due to their children’s financial troubles. Baby boomers pay for a majority of living expenses with their children only contributing a median of $32 per month for living expenses.
Approximately 8.6 million baby boomers currently reside in California, according to the U.S. Census Bureau.

The median sales price for the six county region comprising Southern California showed annual gains of 5.1 percent at the 2014 year end according to Corelogic, a leading real estate information service. The median price paid for all new and resale houses and condos was $415,000.

The Southern California median sale price at the end of last year was lower, by about 18 percent, than the peak median price of $505,000 reached in the spring/summer of 2007. Recently, foreclosure resales have hit their lowest numbers since early 2007.

For the current real estate cycle, the foreclosure resales reached a peak of almost 57 percent in February 2009 when the recession hit the Southern California real estate market hard. At the end of last year, foreclosure resales represented only 5 percent of the resale market.

The median sales price reported for Century City, comprised primarily of condos and townhomes, is about $862,000 for the most recent quarter. Trulia reports that for the most recent quarter, the average listing price per square foot for homes in Century City was $527.

Sales prices have appreciated about 38 percent in Century City over the last 5 years.
Zillow is predicting price gains for Los Angeles will continue but at a much slower pace with an expectation of a rise of 1.8 percent for 2015.

Central bank policy makers have not ruled out a rate hike this year. For guidance regarding sources for mortgage rates and mortgage professionals, please feel free to contact me.

Monday, February 2, 2015

Lower Oil Prices: Boost or Bust for Home Buyers?

Most Americans are thrilled by the 50 percent reduction in prices at the gas pump. The strong U.S. dollar also helps our purchasing power for products manufactured outside the U.S. The real question is to what extent these shifts will positively or negatively affect the real estate industry.
No matter how the real estate or the overall financial market changes, there are always winners and losers. In terms of the current downturn in oil prices and the surge in the U.S. dollar, the short-term impact for most agents will probably be positive.

1. The historical upside
According to a recent Bloomberg Business article, “U.S. food retailers, pharmaceutical companies, makers of construction materials, banks and insurance companies have typically performed best in times of dollar strength.” Consequently, these sectors should be prime growth areas in 2015. This growth should increase sales wherever these companies have a strong presence.

2. A boon for Gen Y buyers
For Gen Yers, lower gas prices means they have extra cash to pay down their student loans. With their student loans paid off, they can begin saving for their down payment on their first home. Repaying their student loans also means that it will be easier for them to qualify for a mortgage.
As Gen Yers enter their prime child bearing years, family is a prime focus. As Chief Economist Jonathan Smoke put it, “Baby needs her own room.” 2015 will be a great time to prospect for first-time buyers in high-end rentals as well as Gen Y couples living in condos who may be starting a family soon.

3. More opportunity for mom-and-pop investors
As the institutional investors started to move out of the market in 2014, more mom-and-pop investors have begun to buy investment properties. Many baby boomers are choosing to buy a condo for their college-age child rather than paying dorm costs. Others see investment property as a way to create a consistent cash flow for their retirement.
The challenge over the last few years has been that foreign investors were snapping up many of these properties. The rise of the dollar has just made it much more expensive for these investors to purchase here. This should open the door for more American mom-and-pop investors to purchase.

4. Time for a European vacation or that Beemer you’ve always wanted?
The dollar’s rise against other currencies makes both travel and products manufactured outside the U.S. less expensive. To illustrate this point, the euro recently hit an 11-year low against the dollar. The drop in the euro means not only are European vacations going to be cheaper in 2015, so will buying that European luxury car. If you’re thinking about purchasing any type of product manufactured in Europe, the strong dollar means you have more buying power than you have had for many years.

5. A more generous mileage deduction
Have you been taking the actual costs of operating your vehicle or have you been taking the standard IRS mileage deduction? In 2015, it may be smarter to take the 2015 mileage deduction as opposed to the actual costs of operation. The IRS set the mileage deduction this year at 57.5 cents per mile. This was based upon $4 per gallon gas prices. At tax time, check with your tax professional about which option is best for your bottom line.

6. The downside: foreign investment
Cash-laden foreign buyers from China, Russia and the Middle East have repeatedly shut out many Americans buyers who needed a mortgage to purchase. There has also been a substantial influx of South American cash into areas such as Miami. These purchasers have been a driving force in the luxury market boom. Their influence, however, touches every price point and most locations across the U.S.

The collapse of oil prices has already begun to hit the luxury market, as a recent Bloomberg headline summed up: “Manhattan condos sit on market while foreign buyers wait.” The collapse of oil has also hit the trophy property market where Russian and Middle Eastern buyers have been major players.
The opportunity for agents here is to prospect your past foreign clients. For example, the collapse of oil prices and the skyrocketing inflation in Brazil and Venezuela have resulted in nationals from these countries canceling their contracts to buy new construction in Florida. If you have represented people from these countries in the past, they may need to liquidate their current holdings to keep their business or families afloat back home.

7. The double whammy for luxury
Because of the high demand, many high-end markets have experienced a building boom. This translates into too much supply resulting in declining demand. It appears that 2015 could mark the beginning of the next glut of luxury construction, even in high-demand areas such as Manhattan and Beverly Hills.

It looks as if a strong dollar and low prices will be with us awhile. Enjoy the lower energy prices and capitalize on the shifts to grow your business this year.

Wednesday, December 17, 2014

2015 Real Estate Market Predictions: Normal

As housing recovers, prices in many markets across the U.S. have shot up. In fact, RealtyTrac reported that the median sale price of U.S. single-family homes and condos in October had reached its highest level since September 2008. Price appreciation and the lure of foreclosures created a feeding frenzy for real estate investors willing to pay cash and made it harder for traditional buyers to compete.

But experts say that 2015 will be marked by a return to normalcy and balance for real estate markets across the country. Stan Humphries, chief economist for, predicts that home value growth will slow to around 3 percent per year instead of the 6 percent seen recently, and that will make real estate less attractive to many investors. “It's been a tough market for buyers," he says. "I think it's going to get easier in 2015. Negotiating power will move back to buyers and away from sellers. It will be a much more balanced market." (Too many buyers and too little inventory, or the opposite, contribute to an unbalanced market.)'s chief economist Nela Richardson agrees. "It's been a clear pattern that the investor activity has been shrinking over time," she says. "Investors like to go in where they can buy low and sell high. Price growth is starting to slow dramatically, so they can't sell much higher than what they buy. Investment property is less compelling in 2014 going into 2015."

More inventory and less competition from investors means even traditional buyers are becoming “more picky, and they're willing to let a home go if they don't think it's a good fit for them," Richardson adds. "Buyers are less worried that they'll miss out on something. Houses are more like buses now. If you miss one, another one will come along." Whereas buyers might waive contingencies in the recent past to make their offer more attractive to sellers, they're now more likely to insist on contingencies for financing and inspections.

That said, foreign investors may still find high-end American real estate appealing because of economic turbulence in their home countries. For instance, the U.K. is toying with a so-called "mansion tax" that would apply to those who own properties worth more than 2 million British pounds (or over $3 million), and China has placed restrictions on homebuying in large cities. Some foreign investors also worry about currency fluctuations devaluing money they hold in their home countries. "That section of the market is still all cash – people buying up these huge places because it's safer here than in their own countries," says Herman Chan, real estate broker with Bay Sotheby's International Realty in San Francisco.

Buyers from outside the U.S. may use their properties as a rental, a pied-à-terre (a secondary residence used for travel) or a residence for children studying at American colleges. But for buyers looking for more moderately priced homes, 2015 could offer a respite from bidding wars and all-cash offers. "People who've been on the fence about selling are finally going to pull the trigger, which is great for buyers [because it creates more inventory]," Chan says. "Now people with regular jobs and 20 percent down finally have a chance to get into the market."

For years, many millennials have postponed homeownership in favor of renting, but that may also change next year as a growing number of Gen Yers start families and seek more stability. "By the end of 2015, millennial buyers will represent the largest group of homebuyers, taking over from Generation X," Humphries says. "They prefer smaller units closer to the urban core, so it will be interesting to see whether they follow the time-honored path towards the periphery of the metro."
Baby boomers are also likely to make a move in 2015. Chan says he's "gotten so many calls from baby boomers recently saying, 'We’re downsizing, and we're moving to be closer to our grandkids or our son or daughter.'" With fewer homes underwater, they're finally in a position to sell.

While mortgage rates may not remain at the historic lows seen recently, more people may qualify for home loans as issues like foreclosures or short sales age out of their credit reports and Freddy Mac and Fannie Mae ease mortgage eligibility. Freddy and Fannie recently announced a new mortgage program for buyers with a down payment as low as 3 percent. "Freddy and Fannie have always been the industry leaders, and they're saying, 'It's OK to lend to people who don't have 5 percent down. It's OK to extend credit in a reasonable and safe manner," Richardson says.

Wednesday, December 3, 2014

9 Red Flags to Watch When Choosing a Real Estate Agent

The proliferation of online real estate information makes it easier than ever to be an informed consumer when buying or selling a home. Yet the digital revolution has done little to lessen the importance of choosing the right real estate agent to work with you.

The right agent can help you buy your dream house or sell your existing home quickly. The wrong agent can botch the transaction, leaving you with egg on your face and nowhere to call home.
Despite the high stakes, many buyers and sellers give little thought to choosing an agent, whether they’re buying or selling.

Get recommendations from friends and relatives, and see which agents are buying and selling the most homes in your neighborhood. Read online reviews, but realize they don’t tell the whole story, since most clients, satisfied or dissatisfied, don’t write reviews. Interview three or four agents to find the one who is the best fit for you.

Most real estate agents are independent contractors who are paid a commission based on the number of homes they sell. The commission, paid from the sales proceeds, is usually split equally between the listing agent and the selling agent. Once the deal is closed, each of those agents usually has to pay a share to the broker who owns the office where he or she is affiliated.

Here are nine red flags to watch for when choosing a real estate agent:

The agent suggests the highest price for your house. If you’re selling your house, get listing presentations from at least three agents, who will tell you what comparable homes have sold for and how long they take to sell. The agents are all looking at the same data, so the suggested listing price should be close. Pricing a home too high at the start often means it takes longer to sell and ultimately sells for less. “If you’re too high for the market, buyers will not even look at it because they know you’re not realistic,” says Lee, the author of eight books and a frequent speaker at real estate conferences. “The longer your property sits on the market, the more people are going to think there’s something wrong with it.”

The agent does real estate on the side, part time: Whether you’re a buyer or seller, you want to choose an agent who is actively following the market every day. If you’re buying, you want an agent who can jump on new listings and show them to you immediately. If you’re the seller, you want an agent who is always available to show your home to prospective buyers.

The agent is a relative: Unless your relative is a crackerjack full-time agent who specializes in your neighborhood, he or she is unlikely to do as good of a job as another agent. That can breed resentment, as well as derail your transaction.

The agent doesn’t know know the real estate market in your area:  Finding a neighborhood expert is especially important in areas where moving a block can raise or lower the value of a home by $100,000. An agent who specializes in a neighborhood may also be in touch with buyers who are looking for a home just like yours or sellers who haven’t put their home on the market yet. “It’s really a very local business,” Lee says.

The agent charges a lower commission: In most areas, commissions are traditionally 5 to 7 percent, split between the buying and selling agent. If the commission on your house is lower, fewer agents will show it. This doesn’t mean you can’t negotiate a slightly lower commission if one agent ends up both listing and selling the house. Some newer companies rebate part of the commission to the buyer or seller, but don’t use that as the sole reason to choose an agent. That’s only a bargain if the agent is otherwise a good fit.

The agent’s face shows up with online listings: The agents’ faces are there because they paid to be there. They may or may not be the best choice for you. Don’t accept the online portal’s assertion that the agent is a neighborhood expert. Interview him or her yourself and find out.

The agent doesn’t usually deal with your type of property: If you’re buying or selling a condominium, don’t pick an agent who rarely sells condos. If you’re looking for investment property, find an agent who traditionally works with investors. Many agents have multiple specialties, but you want to make sure the agent is well-versed in the type of transaction you’re doing.

The agent doesn’t usually work with buyers in your price range: Some agents specialize in homes of all types in a specific area. But if you’re a first-time buyer looking for a $200,000 entry-level home, you are unlikely to get much attention from an agent who mostly handles $10 million luxury listings.

The agent is a poor negotiator or fails to keep up with details of the transaction: In many cases, the most important work of an agent is not to find the home but to make sure the sale closes. That includes making sure the buyer is preapproved for a mortgage, the home is free of liens before it goes on the market, the appraisal is accurate and issues raised by the home inspection are resolved.

Saturday, November 22, 2014

15 Questions You Should Ask Your Real Estate Agent Before Working With Them

Not all real estate agents can help you get the home you want. When it comes to finding a good agent, you need to ask the right questions upfront to save yourself the trouble later. Real estate brokerage Redfin recommends that you ask every potential agent the 15 questions below before committing yourself to an agent.

1. Is real estate your full-time job? How many clients have you had in the past year?

Okay, that's two questions, but they're actually the same. An active, full-time agent is much more likely to be up to date on the market and the local real estate laws than a part-time agent.

2. How many homes have you sold in my target neighborhoods? 

Don't expect every agent to have an in-depth knowledge of the places you want to live. You want someone who knows those precise markets, with a few recent deals in your target neighborhoods to ensure their expertise.

3. When clients are dissatisfied with your service, what went wrong?

There's not a single agent out there that hasn't dealt with an unhappy customer, but knowing why others were dissatisfied can help you anticipate and prepare for the bumps ahead, or whether or not they'll be a good fit for you.

4. Has a client ever filed a complaint against you?

If you're not comfortable asking this, you can always check with your state's licensing board. Some state boards will even list disciplinary actions and education credits associated with the agent.

5. What's your fee?

While you pay no fee at all as the buyer, the fee is built into the price of the home. When the house is sold, the seller pays the agent their fee using the money you paid for the house, typically 2 to 3 percent of the sales price. Since the commission amount is set by the seller and can vary from home to home, you should inquire what their share would be. After all, you don't want an agent who may pressure you into a home just because they'll land a bigger commission.

6. What are all the services you're willing to provide me?

Negotiations, escrow, paperwork and contingencies are the minimum additional services an agent can provide, though some are willing to go the extra mile. Make a list of what you'll be paying for so there are no surprises later.

7. When am I committed to working with you?

Buyer beware: If you start touring homes the agent sends you, this may obligate you to work with them despite not having signed a contract.

8. How many foreclosure or short-sale transactions have you handled in the past?

While you can buy distressed properties at a great price, the paperwork is complicated, and your liability is greater. If you choose to go down this road, you'll want an agent with experience closing deals with banks.

9. Who else will be working with me?

A real estate agent agent is often supported by a team, but the person you hire should being doing most of the work.

10. Am I obligated to work with the lender, inspector or other service providers you recommend?

If they answer "yes" here, it's a big red flag. Good agents may have solid recommendations for lenders or inspectors and other service providers, but you should never feel pressured to use their recommendations. In fact, it's illegal for an agent to force you to use their recommended providers.

11. How quickly can you get me into a home?

 Hot homes move fast, so how does your agent compete? Ask the agent how they handle tours on short notice.

12. Do you represent buyers and sellers on the same house?

This is not a good thing for a buyer. When one agent represents both the buyer and seller, this is known as dual agency. If the agent is trying to get the most money for the seller's home, how can he also be trying to get the best deal for the buyer? Redfin recommends to just avoid dual agency altogether.

13. What sets you apart from other agents?

Listen to how they answer this question. You're looking for expertise, not just enthusiasm. You want an agent who's experienced in your favorite neighborhoods, with a proven track record, and in-depth knowledge of any special requirements that you want in your next home.

14. What if I'm unhappy with your service?

If you have any complaints after you've purchased your new home, it may be too late to do anything about it. Most agents don't get paid until you buy a house, so there's incentive for them to close the deal even if you still have doubts. You want an agent that will guarantee your satisfaction, so ask about what recourse you'll have if you have a bad experience.

15. Can I see reviews of your past deals?

A good real estate agent should have nothing to hide; that's why Redfin posts reviews for all agents after every deal. While an agent may provide you their hand-picked endorsements of those clients they kept happy, you want to get the full list of reviews, especially those from the dissatisfied customers. A few success stories does not necessarily define a good agent, but only those who consistently deliver excellent service. Not every real estate agency will provide this list, but you can use sites like to see what feedback others had to give.

Monday, October 20, 2014

Bay Area Home Sales See More Upside in 2015

California overall

  • Year-over-year sales of new and existing houses and condos increased year-over-year for the FIRST time in a year.
  • This year delivered the strongest September in 5 years.
  • September delivered the 31st straight month of a year-over-year increase in the median sales price. This is still 19.6% below the all-time peak in 2007.
  • Indicators of distress continue to decline: "Foreclosure activity remains well below year-ago and peak levels reached in the last five years." A report released three days later declared: "Lending institutions initiated formal foreclosure proceedings last quarter on the lowest number of California homes in more than eight years."

SF Bay Area

  • This year also delivered the highest sales of new and existing houses and condos for a September since 2009.
  • The median price was up 14% year-over-year, 9.2% below the all-time peak in 2007.
  • Absentee buyers and all-cash buyers - most likely investors - had a smaller share of sales from last September, 2013 levels. From 20.9% and 23.% respectively in September, 2013 to 19.1% and 20.9% this past September.
Even the amount spent on housing in California terms remains favorable compared to historic norms. In California: "Adjusted for inflation, last month's [average mortgage] payment was 36.0 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 48.1 percent below the current cycle's peak in June 2006. It was 60.5 percent above the January 2012 bottom of the current cycle."

Ditto for the SF Bay Area: "Adjusted for inflation, last month's payment was 19.4 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 39.1 percent below the current cycle's peak in July 2007. It was 82.4 percent above the February 2012 bottom of the current cycle."

Even with the encouraging numbers, California has a ways to go before reaching anything close to normal levels of sales. For example, September's "sales were 15.5 percent below the average of 42,996 sales for all the months of September since 1988…California sales haven't been above average for any particular month in more than eight years." So, there remains plenty of upside potential as the market continues to normalize.