Saturday, November 18, 2017

Bay Area Ranks as Nation's Most Competitive Real Estate Market

 
 
The San Jose metropolitan area posted the nation’s steepest year-over-year plunge in the number of homes for sale in October — falling by a precipitous 51.6 percent.
With buyers competing for so few listings, San Jose also posted the nation’s sharpest year-over-year rise in the median cost of a home: up 19.2 percent to $1,049,000. That’s according to a new analysis by Redfin, which analyzed 74 U.S. housing markets with populations of 750,000 or more. Nationally, the home supply shrank for the 25th consecutive month, down 12.2 percent from a year earlier.
“Buyers are just flocking from one property to the next,” said Kevin Swartz, a Saratoga-based agent for the Sereno Group. “We’re at this point where they’re just making offers on whatever is available, because it’s so limited.”
The Redfin report also ranks the Bay Area’s three main metro areas as the most competitive markets in the U.S. Combining data for single-family homes, condominiums and townhouses, it ranks San Francisco as the nation’s most competitive market, with 78.6 percent of homes selling for above the list price in October. San Jose ranked second, with 76.3 percent of homes going for above list, and Oakland ranked third, with 63.7 percent of homes selling for more than the asking price.
 
Bay Area markets also figured among the five “fastest” metro areas in the U.S.
The speediest market was Seattle, where homes typically sold in 10 days, according to Redfin. Second speediest was San Jose (12 median days on market) and third was Boston (14 days). Oakland and San Francisco tied for fourth place; homes spent 15 median days on the market in both metros. Nationally, the typical home spent 44 days on the market, down from 49 in October 2016.
Underlying all these trends are the chronically low levels of homes for sale. Thursday in all of Santa Clara County, Swartz pointed out, only 620 single-family homes were on the market. Adding condominiums and townhouses to the mix, the total still only grew to 745 listings.
San Jose’s 51.6 percent year-over-year tumble in the number of homes for sale was unmatched, though San Francisco had the second steepest decline in the U.S., 28.5 percent. Oakland was close behind, with a 25.5 percent year-over-year drop. As the supply of available homes contracts, buyers keep putting pressure on prices. The median price of a home in the San Francisco metro area hit $1,282,200 in October, up 4.7 percent year-over-year. In the Oakland metro area, it climbed 13.1 percent year-over-year to $690,000, according to Redfin.
Only eight of the 74 metros showed year-over-year increases in inventory. Those were mostly in the South and Midwest. Raleigh, N.C., had the largest jump in the number of available homes, up 16.1 percent, followed by Baton Rouge, LA (12.9 percent), Austin, Texas (8.8 percent), New Orleans (7.5 percent) and St. Louis (4.8 percent).
With home supplies chronically low in most U.S. metros, sales “are sputtering,” said Nela Richardson, Redfin’s chief economist. “The last time we saw a substantial increase in the number of homes for sale, Donald Trump was a candidate in a Republican field of 11.”
Also on Thursday, the California Association of Realtors (C.A.R.) issued its October report on the statewide housing market.
Looking at existing, single-family homes, C.A.R. reports that the median price in the nine-county Bay Area is $892,720, up 11.1 percent year-over-year.
County by county, again for single-family homes, here are a few more numbers.
The Contra Costa County median was $615,000, up 6.1 percent, while the Alameda County median was $862,450, up 11.3 percent. In Santa Clara County, the median was $1,242,500, up 18.6 percent. In San Mateo County, the median climbed 12.8 percent to $1,522,500, and in San Francisco County it rose 13.3 percent to $1,594,000.

Friday, November 3, 2017

Proposed Mortgage Cap Tax Cuts Could Hit Bay Area Homeowners Hard

 
WASHINGTON - House Republican leaders on Thursday proposed legislation that would overhaul the U.S. tax code and jettison numerous tax breaks that Americans and businesses have used for years to limit their taxable income.
The release of the proposals launched into motion a frantic political effort that could impact almost every American. In a number of cases, the tax plan cuts back on tax benefits for families and individuals while expanding tax benefits for companies.
The Tax Cuts and Jobs Act would lower the corporate tax rate from 35 percent to 20 percent and collapse the seven tax brackets paid by families and individuals down to four. It could create giant new benefits for the wealthy, cutting business taxes, eliminating the estate tax, and ending the alternative minimum tax.
 
It would also jettison numerous tax breaks that Americans and businesses have used for years to limit their taxable income. in half the popular mortgage interest deduction used by millions of American homeowners, capping this tax deduction at new mortgages of $500,000 or less. Presently, Americans can deduct interest on mortgages of up to $1 million from their income.
This change could have a particularly big impact on high cost areas, such as San Francisco, New York, Boston, and the Washington D.C. area, and housing groups and lawmakers will likely try to defeat it. The bill would allow people to deduct their local property taxes from their taxable income, though this benefit would be capped at $10,000.
The bill's true impact on the middle class will be difficult to immediately measure. The bill would create a new "Family Credit" and expand the child tax credit used by working families. The child tax credit would grow from $1,000 per child to $1,600 for each child.
The bill would nearly double the standard deduction that many Americans claim on their taxes, raising it from $12,700 to $24,000 per family. But this benefit would be partially offset by the personal exemption many Americans can claim, which can be large for families with multiple children.
Families would also no longer be able to deduct their state income taxes from their federal taxable income, another change that would have a particular impact on places like New Jersey and New York, where state taxes are higher than in other areas.
And Americans would no longer be able to deduct their medical expenses or property and casualty losses, according to a document outlining the plan.
The legislative fight over the tax bill has become the Trump administration's biggest political goal, after failed attempts to repeal the Affordable Care Act. President Donald Trump wants the legislation to pass the House and the Senate by the end of the year, though they must resolve numerous differences.
The bill would add $1.5 trillion to the debt over 10 years, but Republicans believe the changes would trigger a surge in economic growth, higher wages, and job creation.
Other changes in the bill would be far reaching. It would, for example, make changes to college savings programs and have new requirements for tax-exempt organizations like churches and charities.

Monday, October 30, 2017

North Bay Area Home Prices Surge After Sonoma Fires


A shortage of homes for sale combined with strong demand continued to push up Bay Area home prices last month, and the situation is only going to get worse in the North Bay when those displaced by the wildfires seek new housing.

The inventory shortage is statewide but “particularly acute in the Bay Area,” the California Association of Realtors said in news release.

On Friday, CoreLogic reported that the median price of new and existing single-family homes and condos in Bay Area hit $739,000 in September. That was up 13.7 percent from September 2016, the largest yearly gain for any month since January 2014. It was down 0.1 percent from August, reflecting a normal seasonal slowdown.



The number of homes sold fell to 7,338 last month, down 13.6 percent from August and down 7.5 percent from September 2016.

It’s too early to know what impact the Wine Country fires, which started Oct. 8 and destroyed an estimated 8,800 structures, are having on home prices and sales in the North Bay. The CoreLogic report reflects transactions that were recorded in September.
Anecdotally, real estate agents say that sales in Sonoma County have picked up as buyers who were taking their time before the fires rushed to nab a house before demand from fire victims grows.

At the same time, “We’ve had a rash of fire victims buying for cash,” said Diana Gorsiski, president of the North Bay Association of Realtors. “Even if they are rebuilding, they know it’s going to be two to three years minimum.” Given the tight rental market, some would rather buy than rent in the meantime.

Some fire victims are looking into a loan for disaster victims backed by the Federal Housing Administration. Called a Section 203(h) loan, it’s made by qualified lenders to people who lost a primary residence they owned or rented in a major disaster and are rebuilding or buying another single-family home or condo.

Buyers can borrow up to 100 percent of the purchase price of the replacement home. When lenders are calculating the debt-to-income ratio on the disaster loan, they don’t have to count the mortgage on the destroyed home if they had adequate insurance and are working with their original lender to apply insurance proceeds to that loan, said Michael Regan, sales manager with Stearns Lending in Petaluma.

The maximum loan amount is the same for all FHA loans and varies by county: It’s $595,700 in Sonoma and $636,150 in Napa. Borrowers pay the usual FHA mortgage insurance premiums.

Regan has firsthand knowledge of the housing market. He recently purchased a home and was going to put his existing Petaluma house on the market just before the fires broke out. He waited a few weeks and listed it a week ago Saturday. By Saturday afternoon, he had two cash offers, both for more than the asking price. He said the last two homes in his neighborhood, Adobe Creek, sat on the market for 40 to 50 days before the fire.

“It’s definitely not the same market it was before the fire,” said Rick Laws, senior vice president with Pacific Union International in Sonoma County. People who “had the ability” began looking to secure housing even before the fires were out.

“We have some highly qualified and motivated renters and buyers who are offering significantly over-market prices,” for homes and long-term leases, he said. He suspects this flurry of activity will subside soon and things will become less volatile. But he also knows that “we are going to run out of housing before we run out of need.”

 
 
Before the fire, Sonoma County had only three months of unsold inventory, meaning it would take three months to sell all homes on the market at the current pace of sales. Inventory averaged 2.2 months in the Bay Area (compared with a long-term average of 4.4 months) and 3.2 months statewide.

 
There are many reasons for the inventory shortage. One is that new construction “remains well below anything close to a normal level historically,” said CoreLogic analyst Andrew LePage. New-home sales this year are 5.1 percent below last year’s level.

The Realtors association contends that many long-term homeowners won’t sell because their property taxes would go up if they bought a new home, even a less expensive one. In California, homes generally are reassessed for property taxes only when they are sold. Many long-term owners are paying much less than they would if they bought the same house today, which has a lock-in effect.

California homeowners who are 55 or older get a once-in-a-lifetime chance to sell their primary residence and buy another of equal or lesser value and transfer their property tax base from the old house to the replacement house. However, the new home must be in the same county or in one of 11 counties that accept transfers of property tax values.

Thursday, October 12, 2017

Northern California Fires Put Communities in Shock

 
Late Sunday evening, Russel Lee was relaxing on his deck in Santa Ana, CA, drinking a glass of wine. Then he smelled the smoke. He checked the local police scanner app on his phone and learned that wildfires blazing out of control were moving in on his four-bedroom townhouse in Southern California's Orange County.
The 63-year-old real estate agent and his wife, an artist, dug out their three cat carriers and frantically began packing some clothes, valuables, and important paperwork. At around 1 a.m., the police came banging on the door, yelling: "Get out now!" The Lees made it to a makeshift emergency shelter at the local veterans center, along with some folks who hadn't had time to change out of their bathrobes and slippers before fleeing.
 
Their home was burned to rubble, and they lost nearly everything—including one of their beloved cats, Alya, who refused to get into her carrier in time. His wife's artwork, much of which she had already sold online, was all destroyed along with the antique furniture that had been in his family for generations. The couple are now living in their motor home parked on their friend's driveway.
But despite their devastating losses, Lee and his wife know they were lucky. Twenty-one people have died in the 22 large wildfires burning through seven counties, including the famed wine-producing areas of Napa and Sonoma, as of Wednesday, according to the California Department of Forestry and Fire Protection. About 3,500 homes and buildings have been incinerated by the blazes, which have ravaged about 170,000 acres, mostly in Northern California. (That's larger than the island of Manhattan.) The causes of the fires have not yet been established.
As firefighters struggle to contain the conflagrations, in the wine country north of San Francisco, it is clear that the region, an economic powerhouse for California, will continue to suffer long after the flames are extinguished and the human toll has been counted.
The disaster is expected to ravage the housing markets of this highly prosperous region, with slashed prices, scarce availability, and wrecked infrastructure—all factors that will need to be taken into account as displaced homeowners decide whether to return and rebuild, or leave the area for good. The multibillion-dollar tourist industry, and the jobs it provides, is also at risk. It's likely to take up to a decade to rebuild the homes, businesses, and essential services such as schools residents will need should they choose to return.
Wildfires are common in California, as well as the Western states of Washington, Oregon, and Colorado, in late summer and fall. But those burning in Northern California are unusual, says Tom Jeffery, a senior hazard scientist at CoreLogic, a real estate information company.
 

"When you have a wildfire occur in an area that's uninhabited, it can be a good thing for the environment. You have to have fires to have certain plants to reproduce" like certain pine species, he says. "[But] whenever you have homes exposed to it, then you have a potential disaster."
The median home price in Napa County was a whopping $876,200 on Sept. 1, according to realtor.com® data. In neighboring Sonoma County, home to hard-hit Santa Rosa, the median home price was $750,000. But that was before the fires.
More than 172,000 homes are now at risk of going up in flames in the Napa and Santa Rosa metropolitan areas, which are usually not prone to wildfires, according to an analysis from CoreLogic. (Napa is the name of a town as well as of the surrounding county.) It will cost an estimated $65 billion or more to rebuild them.
Californians are just beginning to come to grips with the scope of the disaster.
"Multiple neighborhoods are burnt out," says Randall Bell, CEO of the national real estate appraisal firm Landmark Research Group, based in Laguna Beach, CA, which has assessed areas damaged by wildfires. "It's street upon street of just charred-to-the-ground moonscape. All you see are chimneys and foundations. It's a sad sight—and you see hundreds of them."
 

WHAT WILL HAPPEN TO THE HOUSING MARKETS ONCE THE WILDFIRES ARE EXTINGUISHED?

Only about a quarter to half of the original residents whose homes were reduced to ash are likely to return and rebuild, Bell predicts.
"Emotionally they’re overwhelmed. Financially, they’re overwhelmed," he says. "When these fires come through, they don’t just burn houses. They burn stores, restaurants, the churches, the schools. They burn everything. You may rebuild a house, but where’s your infrastructure?"
Lee, the real estate agent whose Orange County home burned down, doesn't plan to rebuild. He and his wife plan to move to Kentucky, TN, or North Carolina, where they have friends who might be able to find him work.
"I’ve started an insurance claim and hopefully I’ll do well. ... [But] I'm a real estate agent and there's nothing to sell anymore," he says. "I'm starting over from scratch at 63 with achy joints and an achy back."
Even homeowners with insurance premiums may not get enough money to rebuild their entire homes to what they were before, Bell says. That's because the price of construction is likely to skyrocket with the extra demand for construction workers, for which there is currently a national shortage compounded by Hurricanes Harvey and Irma, and building materials. Some will get loans, others will tap into their savings.
Those who do rebuild are in for the long haul. The area is expected to recover only about 10% to 15% each year, according to Bell. That means it's likely to take five to 10 years before homes, businesses (including employment and tourism), and the local infrastructure is back to normal.
Plus, they'll have to find a place to live while they rebuild—which won't be an easy feat.
"We had a housing crisis before the fire," says Santa Rosa–based Realtor® Daphne Peterson, of Keller Williams Realty. "We're in a very high-cost area. Our vacancy rate was about 1%. Now we've lost about 1,500 to 2,000 homes. We have no place for people to stay."
Homeowners who decide to sell won't have it easy, either. Those whose homes survived should expect the properties to sell at a 10% to 35% discount. That's because it's not as desirable to live near burnt-out houses or with fewer services and businesses nearby.
"People don't buy a house," Bell says. "They buy a neighborhood."
Meanwhile, properties whose homes were charred or destroyed altogether could see discounts as high as 60%, he says. Sellers should expect an army of investors, a combination of home flippers and landlords, to swoop in.
But the price breaks won't last forever. These will likely dissipate after about five years, he says.
"I know that it will all come back," says Sonoma-area Realtor David Kerr, of Terra Firma Global Partners. "People in the North Bay are resilient. They will get through this." But he worries about the farmhands at the vineyards and the other residents or workers who aren't quite so well off. "It's not going to be easy for [everybody]."
 

HOW CALIFORNIA'S WORST WILDFIRE TRANSFORMED ONE NEIGHBORHOOD

The Oakland Hills fire in 1991 was California's deadliest and most destructive, according to CoreLogic. Twenty-five people were killed and about 2,900 structures on 1,600 acres were destroyed in the blaze.
One of the neighborhoods that sustained serious damage was the Upper Rockridge area of Oakland. It had been a middle-class community of Tudors, Craftsmen homes, and California bungalows built in the early part of the 20th century on narrow streets before the disaster.
But after the wildfire, it became an opportunity for many of the residents who stayed, as well new buyers purchasing empty lots, to start over. Most of the rebuilt homes were much larger than their predecessors.
Today, "it's a highly sought-after neighborhood" of homes in the $1 million to $3 million range, says real estate broker Daniel Stea, of the Stea Realty Group in Berkeley, CA. The homes have been built to new fire codes, the streets have been widened, and there's now a fire station up in the hills nearby. "It transformed the area," Stea says.