Friday, November 20, 2015

Bay Area Real Estate Showing Similarity to 2000 Dot-Com Bust

Surging rents, skyrocketing real-estate prices and booming tech companies. Sounds like San Francisco in 2015, right? It also describes the city just before the tech bust of 2000, according to a recent report.

John Burns Real Estate Consulting of Irvine, Calif., and Pacific Union, a San Francisco real-estate brokerage, say that based on the appreciation (and apparent correlation) of venture capital deals and rent prices, the rise in the Bay Area’s rapid real estate and rent price appreciation today is looking more like a repeat of the dot-com bust of 2000.

“The San Francisco Bay Area is on our watch list for a correction,” said John Burns, his company’s chief executive, in an interview. He said that while San Francisco has become a permanently more expensive place to live and should be one of the most expensive places to live in the world because of its status as the center of the high-tech and Internet economy, the recent increases in home prices and rents have been fueled mainly by speculation.

“Affluent older buyers, often for investment reasons, have identified San Francisco as a place they want to own or live and have driven up prices dramatically,” he said. About a third of all-cash buyers in the Bay Area are purchasing property only as an investment, he said. 

In the City of San Francisco, the median value of homes has skyrocketed, from $670,000 in the beginning of 2012 to $1.1 million this month, a gain of more than 67%, and a gain of 15% in the past year alone, according to

But to gauge when such a correction might occur, you need to look to venture capital deals — and rent prices, he said.

Burns and Pacific Union noted that the size of the average venture capital (VC) deal rose from $4.9 million in 1997 to $17 million in 2000, a 243% increase. At the same time, apartment rents in San Francisco and San Jose increased by 52% and 60%, respectively.

Burns also noted that in the three years that followed — as VC funding collapsed during the 2001 recession and the turmoil that followed the September 11 attacks — rents fell in with the decline in VC funding, which plunged from an average of $16 million per VC deal in 2001 to just over $7 million by 2004, a decline of over 50%.

During the same time frame, average rents in San Francisco plunged from about $2,300 a month in mid-2001 to about $1,600 by 2004, a decline of about 30%, according to data compiled by Burns’ group from PricewaterhouseCoopers, Axiometrics Inc. and Thomson/Reuters.
Rents in San Jose fell even further, from a similar average of $2,300 a month to $1,400 a month, or a decline of about 39%, Burns’ research showed. 

The current tech sector upswing in the Bay Area is presenting a similar relationship between VC funding and apartment rents, said Burns.

In 2010, the average VC deal in the Bay Area was $6.9 million, but had risen to $23.5 million in 2015, a 240% increase, Burns says.

At the same time, just like in the 1997 to 2000 period, average monthly rent for apartments in San Francisco and San Jose have shot up. In San Francisco, average rents have soared from about $1,900 a month back in 2010 to more than $3,200 today, a gain of 68%. In San Jose, the average rent in 2010 was about $1,600 a month. Now it’s $2,800, a gain of 75%.
“Rents in San Francisco and San Jose have respectively eclipsed prior dot-com bubble peaks,” Burns said. “We think another decline this time around is inevitable.” 

Monday, November 16, 2015

3 New Design Trends for Real Estate in 2016!

If you’re a real estate junkie like I am, then you love to watch real estate shows. Love It or List ItHouse HuntersMillion Dollar Listing New York. These are some of my favorites.
Because of my fondness for these shows—and because I recently bought and sold two houses—I can rattle off popular real estate terms. I’m thinking specifically of en suite, chef’s kitchen and open concept, which has people knocking down walls left and right.

While many of these terms continue to be used in real estate lingo, a recent survey unveiled some new terms we should probably get used to hearing. They are the top 3 hot real estate trends, based on real people’s preferences and what they want in a house they’re buying. These trends are described as “Inviting,” “Rustic” and “Beachside Charm.” Here’s how they come to life:

The Inviting living space is described as a welcoming atmosphere that includes fun barware, plenty of seating and a gather-worthy kitchen (can you say open concept?) that can serve as the life of the party.

Those who prefer a Rustic look want natural elements in their homes. These include wood, stone, water and light. Designers say that this style takes traditionally organic materials from the outside and brings them inside to achieve perfect balance.

You don’t have to live anywhere near the water to capture Beachside Charm. It is described as relaxed, casual, airy and breezy. This design incorporates terracotta tile, patio umbrellas, sundecks and scattered shells to make homeowners and others feel like they are miles away from the hustle and bustle of life’s daily pressures.
I’m not sure which of these trends I like the best. What I do know, though, is this: when people come to visit, I want my home to make them feel comfortable and relaxed.

Tuesday, November 3, 2015

California Home Price to Increase 4.7% in 2016

CoreLogic® a leading global property information, analytics and data-enabled services provider, today released its CoreLogic Home Price Index (HPI™) and HPI Forecast™ data for September 2015 which shows home prices are up both year over year and month over month.

According to the CoreLogic HPI, home prices nationwide, including distressed* sales, increased by 6.4 percent in September 2015 compared with September 2014 and increased by 0.6 percent in September 2015 compared with August 2015.**

The CoreLogic HPI Forecast indicates that home prices are projected to increase by 4.7*** percent on a year-over-year basis from September 2015 to September 2016, but could potentially dip slightly month over month from September 2015 to October 2015. The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

“After nearly 10 years of very high home price volatility, home price increases have been remarkably stable for the last 15 months, ranging between a 4.8 percent and 6.5 percent year-over-year increase,” said Sam Khater, deputy chief economist for CoreLogic. “Home price volatility is now back to the long-term trend prior to the boom and bust which is a good barometer of the market’s stability and health.”

“The continued growth in home prices is welcome news for many homeowners but more markets are becoming overvalued. In the near term, this trend is likely to continue and pose evaluated risks to the housing economy,” said Anand Nallathambi, president and CEO of CoreLogic. “More has to be done to expand inventories if we are going to address the emerging affordability crisis, especially in hot markets like California and Colorado.”