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East Bay Real Estate Focus

Providing Definitive Information for the East Bay Area

By Carl Medford | Agent in Fremont, CA
  • East Bay Inventory WAY Up: 4 Important Things Sellers Need To Understand

    Posted Under: Market Conditions in Alameda County, Home Buying in Alameda County, Home Selling in Alameda County  |  June 10, 2014 7:51 PM  |  2,130 views  |  1 comment

    Increasing InventoryJust a few short months ago, East Bay listings were as common as fictitious hen’s teeth and subsequently, multiple offers were the order of the day for just about everything in sight. However, it looks like things are about to change: recently released data for May, 2014 confirms a recent surge of listings in almost every city in Alameda County. 

    Since the current extremely hot seller’s market has been driven almost entirely by a shortage of inventory, these newly released listings are sure to be a game changer. 

    As the market dipped slightly at the end of 2013, buyers began anticipating a return to a normal housing market in 2014. It wasn’t just buyers “wishful thinking” – simply go back a few blog posts and you’ll see market analysts like myself predicting a return to a “normal” market.  Everyone was shocked when the anticipated flow of inventory failed to materialize. For reasons stated in this forum earlier this year, sellers chose to keep homes OFF the market in droves, causing a listings drought. This in turn fueled a feeding frenzy for buyers competing for the few properties that were actually available. Sellers reaped a windfall as the resultant multiple offers forced prices higher and higher. 

    And now, although it’s six months later than anticipated, the “normal” market may actually be about to appear. 

    Looking at Alameda County as a whole, overall inventory is up 38% from the same month, 2013. In contrast, Santa Clara County has only seen an increase of 9.6% countywide. Contra Costa County, however, is up a whopping 71%. Contrast this with the Upper Peninsula and further north: San Mateo County is still down -3% while San Francisco is in at a negative 22%, indicating a continued exceptionally strong seller’s market. Marin County is almost flat at -1%. 

    To break this down by city in Alameda County, some show moderate increases in inventory: San Lorenzo (6.7%), Berkeley (15%), Oakland (15%), Union City (15.8%), Newark (17.6%). Cities showing larger gains are Pleasanton (29.9%), Fremont (32.3%) and Hayward (37.7%). Even greater gains can be found in San Leandro (50%), Livermore (62.5%), and Castro Valley (96.9%). The leader by a long shot, however, is Dublin – up an astonishing 231.6%.* 

    How is this affecting the market? 

    Cities with lower percentages are still maintaining increasing average prices. The real story, however, is in the cities with the higher percentages: while Castro Valley prices have dipped slightly in the past few months (down 2% in the past 2 months), Dublin average prices have declined a substantive 7.7% in the past 30 days. 

    This seems to suggest that if inventory continues to increase, other cities may begin to see falling prices as well. 

    To quote that great philosopher, Frank Sinatra. “The summer wind, came blowin' in from across the sea …” While Frank’s summer winds brought change to a relationship, our summer winds appear to be breathing cooler air into an overheated market. In many ways it will be a welcome change, but the outcome is anything but certain. The crooner summed it up by singing, “My fickle friend, the summer wind.” 

    There are 4 important things sellers need to understand about the impending current market changes: 

    Don't Panic1.     The sky is NOT falling. 

    This is not a time for panic. I believe we will see a market correction, not a market crash. We’re not in a bubble – current market prices are being supported by vast amounts of cash and loans which buyers can actually afford. I predict we will see a leveling off, but not a severe deflection downward. While there may be minor price corrections (dips) in various locales, overall the market is still very strong. 

    Sellers: Expect to see more competition ahead as more homes come to the market. Anticipate minor price deflections from the peaks of a few months ago. 

    2.     Destination cities will remain strong. 

    In the San Francisco Bay Area, home prices track directly with school scores, meaning that the strongest cities and markets (“destination” cities or school districts) are those with the highest scores. When buyers cannot afford homes in areas with great schools, they migrate to other cities and regions with lower scores. As more homes come to the market, opportunities re-open in the areas with higher scores, moving buyers out of areas with lower scores and back into higher scoring school districts. Therefore, I believe we’ll see buyers migrating from cities such as Oakland, Hayward, San Leandro and San Lorenzo in the North and Central County and Dublin in the Tri-Valley in search of comparable homes in neighborhoods with better schools. In the Central County this is Castro Valley, it’s Fremont in Southern Alameda County and Pleasanton and San Ramon in the Tri-Valley area. Consequently, cities and neighborhoods with lower school scores will see larger market adjustments than areas with higher-ranked schools. 

    Sellers: If you own a prospective listing in an area with lower school scores, you will need to make sure your marketing and property condition is top-shelf if you hope to compete with better areas. 

    3.     Listings are flowing to the market months later than normal. 

    Normally, homes start coming on the market in early spring to prepare for the flood of buyers that start showing up about the same time. Ideally, parents seeking to relocate their families hope to be in their new homes early enough to get their kids signed up and ready for their new schools. Many want to be in their new digs before summer activities begin, such as sports activities and summer vacations. This year, however, an artificial cork has been holding spring listings in the bottle until now – approximately three months late. This means that some new listings have effectively missed the peak of the buying season. Instead of buying a home, many potential buyers have refocused on graduations, Father’s Day, 4th of July events and more. Time that may have been available to look at homes a month ago is now going into sports leagues, vacations and the like. The actual numbers of buyers out looking is visibly lower than just a few short weeks ago, and open house attendance numbers in many regions have dropped dramatically. 

    Sellers: ExamineSince buyers now have less time to actually visit homes, they will be choosier as to which ones they see. They will spend more time looking online and less time in their cars. Make sure your listing sizzles online, that your agent has provided property prep and staging, a full complement of 30 pictures, virtual tours and more. 

    4.     This is NOT the time to overprice your listing. 

    Up until now, sellers have been able to price ahead of the market. Since the market has been going up, they’ve been able to price above the last sales price and, in most cases, have been able to get their price and more. It’s time to change that strategy: as the market softens, instead of pricing above the last sale, you actually want to price lower. 

    Sellers: Resist the urge to price too high. If your home does not see a buyer response in a relatively short period of time, you are probably priced too high. Make price adjustments sooner than later – if you wait too long, you will ultimately get less than if you bite the bullet now and reduce your price to get ahead of the competition. 

    One thing is certain – in most parts of the East Bay, inventory is up. While not real good news for sellers, for buyers, it’s like handing a bottle of water to a desert traveler dying of thirst. Buyers are starting to see the difference and respond in kind. It’s also our hope that those buyers previously drummed out of the market by intense competition will be able to get back in – as long as they haven’t signed a long-term lease that effectively keeps them locked out of the market – right at the exact time it starts to respond in their favor.


    *Data by TrendGraphix, May 30, 2014

  • Buying A Home In The San Francisco Bay Area? 8 Critical Things To Forget

    Posted Under: Market Conditions in Alameda County, Home Buying in Alameda County  |  April 14, 2014 1:35 PM  |  3,844 views  |  No comments

    Prices up
    With an extreme shortage of housing inventory plaguing most corners of the San Francisco Bay Area housing market, any hope that we’d return to a normal market at the beginning of 2014 has vaporized like dew in the noonday sun.
    For a number of reasons, homeowners are deciding en masse to keep their homes OFF the market, forcing an inventory crisis that is spiraling prices on available properties skyward in a violent vortex.

    If listings are a scarce commodity, it’s the opposite for buyers. Loan rates are still low, the Bay Area economy is improving and buyer wannabes are out in droves trying to get their slice of the American Dream of home ownership. In a classic supply and demand market scenario, multiple offers are pouring in on almost everything out there and the bidding wars are forcing prices higher and higher. And unlike the market advances of 2005-2006, fueled by buyers with junk loans who had no business being in the market, current buyers are using substantive amounts of cash or have been properly qualified and can actually afford the loans they are using to purchase their properties. 

    Consequently, even with the current market escalation, I don’t believe we are going to see another market crash like the one we’ve just been through. 

    It’s a catch 22 scenario for many hopefuls: they’d like to wait until things cool off a bit, but with prices shooting up so quickly, there is a very good chance that if they wait too long, they will be priced out of the market. I know a number of buyers who decided to sit and cool their heels last year … for whom the prospects of getting a home that fits their criteria is no longer a reality. 

    So how can buyers compete in the current frenzy? 

    First of all, I understand that many may not agree with what I’m about to say. The purpose of this post is not to suggest that buyers be foolhardy or reckless – far from it. However, if any given buyer really wants to compete in the current market maelstrom, I believe they need to be encouraged to FORGET 8 critical things: 

    1.     Forget Non-Professional Advice. 

    I’m constantly amazed at how many buyers try to outguess their agent based on “advice” from friends who may have purchased a home in the past few years. While a friend, colleague or relative may have purchased one home in recent history, a single purchase does not an expert make. Unlike normal homebuyers, seasoned real estate agents buy and sell homes every day.  Since real estate is a commission-based business, agents don’t make a dime unless they figure out how to compete in the current market. Consequently, they are highly motivated to get it right. My recommendation? Put your cubical buddy or cousin’s advice on the shelf, pick a realtor who understands the current market … and listen to them. 

    I frequently tune in to Gil Gross, host of the nationally syndicated Real Estate Today program. He’s not only a nationally recognized expert on all things real estate, he has personally purchased and sold many homes. Just today I heard him say, in reference to the current market, “I’d never consider doing this on my own – you need a licensed professional on your side.” 

    2.     Forget List Price. 

    I frequently encounter buyers concerned they may pay too much over “list price.” They say things like, “We don’t want to pay more than 10% over the asking price.” So what is “list price” anyway? To be brutally honest, “list price” is a totally subjective and meaningless number. There are many ways to set the price at which a home goes on the market: some agents price low, hoping to score tons of offers. Others set the price high at the seller’s request, anticipating that recent gains will substantiate their price. Others price at what they believe is the actual market level. Other agents that don’t understand the current market or neighborhood may list at a price that’s totally irrelevant to reality – I’ve personally seen this scenario a number of times this year already. Therefore, “list price” is NOT the number to focus on – the only value that matters is what you believe you’ll actually need to pay to have a real shot at getting any given property. 

    3.     Forget The Comps.Comps 

    “Comps” is short for Comparable Market Analysis (CMA) – a comprehensive look at the market that lists comparable homes that have recently sold, are still active or have gone pending. In a normal market, a carefully crafted CMA is critical in helping determine what you should offer for any given property. Unfortunately, in a volatile market such as the one in which we find ourselves, it’s not so much an indicator of what to pay as it’s a look in the rearview mirror to see where we’ve been. And in the same way you cannot effectively drive your car by only looking behind, what lies ahead is more important. Consequently, regardless of what the last few homes sold for, the only price that’s really important is what you’ll need to pay to get the home you currently want. Comps will provide a starting point only. It’s going to go up from there. In some cases, WAY up. 

    4.     Forget What You Believe The House Is Worth. 

    Think you know what any given home is worth? It’s irrelevant as well. At the end of the day, anything is worth what some is willing to pay for it. Therefore, the only number that matters is what you believe another, motivated buyer will pay. Seems insane? Get over it or get out of the market. That’s tough talk, but it’s real. I’ve encountered many buyers who won’t buy because they believe the house is not worth it. News flash: if someone else out there is willing to pay the price, it’s suddenly worth it regardless of what you think. If YOU want the home, you need to figure out the other buyer’s price … and beat it. If you miss or flinch, the next one will be higher. Until, of course, the market turns. And no one knows when that will be. In the meantime, prices keep going up. 

    5.     Forget The Appraiser. Appraisal

    Many properties are selling far above previous sales, making appraisals difficult. Determined buyers are removing appraisal contingencies and finding ways to fund the shortfall if it appraises low. Don’t have the ability to come up with extra cash? You may need to get creative. We purchased our first home with a loan from the Bank of Mom and Dad. If you qualify, you can also reduce the amount of principal you are putting down and go with a higher payment. The difference in available cash may offset a lower appraisal price.   

    6.     Forget Searching At Your Maximum Price. 

    If you really want to get a home, you need to be looking at homes 10-15% UNDER your limit so you have some room to maneuver. If you are pre-approved for $500,000, you should not be looking at homes priced any higher than $450,000. Even then, if any given home is particularly desirable, multiple offers could easily push the price higher than you can afford. 

    7.     Forget Searching For Your Dream Home 

    This is perhaps the hardest of all: many prospective buyers have spent hours building lists of things they want and things they simply won’t accept. Couple that with the fact that the current generation of buyers emerging in the Bay Area is far less acquainted with a hammer than previous groups … and you end up with very “picky” buyers. My recommendation? Toss the list. Homes can be improved over time. The goal currently is to get a house at all, let alone one that meets all your criteria. When I suggest this to some buyers, their blank looks suggests that they won’t possibly consider this last piece of advice. One person said, while looking at a property, “This is not as nice as our current rental.” To which I responded, “True. But your rental belongs to someone else … this could be yours. In reality, you may need to move down initially before you can afford to move up.”  

    8.     Forget Giving Up 

    It’s frustrating, agonizing and totally scary … but the buyers who are getting a home are the ones who don’t give up. It’s hard to keep going … disappointment, frustration and anger can easily set in, derailing a buyer from sticking to it. The good news is that the ones who understand the rules listed above, who are persistent and keep adapting to meet the current demand are the ones who eventually get a home of their own. 

    This is grim advice, to be sure. It even flies against the grain and defies common sense. And it's NOT a mandate to get crazy or foolish. It is advice however, that if you fail to heed, there will be one last thing you can forget as well… 

    Getting a home any time soon.



  • Shortage of Listings Extends Seller’s Market – 9 Key Factors

    Posted Under: Market Conditions in Alameda County, Home Buying in Alameda County, Home Selling in Alameda County  |  March 10, 2014 2:25 PM  |  4,662 views  |  2 comments

    Just a few short months ago we were predicting that the market would soften as it entered 2014 and then mellow out during the year. We offered hope to buyers, especially those in the hunt for their first home, that the overheated market of 2012-13 would cool down and they’d have a better shot at their first digs.

    I was wrong. 

    As my wife will be more than willing to point out, I’ve been wrong before, but, in my own defense, not usually when it comes to the housing market. In this case, however, my recent predictions have so far proved to be way off the mark. The market may have dipped a hair as it neared the 2013 Holiday Season, but come the New Year, it fired back up again with a vengeance. And it hasn’t slowed down one iota. Multiple offers are flying in on almost every listing and prices are still pounding upward. And there are a few indicators that this may continue for a while yet to come. 

    What is going on? Although (1) the economy is improving, (2) interest rates are low, (3) Silicon Valley money is flowing freely, (4) homes are still below 2007 levels in most areas, (5) there is a huge pent up supply of buyers looking for homes … the current upwards explosion in the housing market in the San Francisco Bay Area is being driven by one fundamental ingredient: 

    A shortage of homes to buy. 

    It’s simple supply and demand economics – there has never been a better time to buy in the Bay Area yet, with all the upside advantages of purchasing a home now, there are not enough listings available to meet the current demand. Consequently, prices are going up. And by all accounts, it's getting worse instead of better. With Spring close by, we'd normally expect to see an increased number of homes coming to the market. Instead, it actually appears to be tightening in many areas. 

    Here are 9 key Factors driving the current shortage of listings: 

    1.     Many sellers no longer need to sell. 

    Just a few short years ago, short sales were sprouting up like dandelions after a spring rain. Prices had dropped dramatically at the same time variable rate junk loans were adjusting upward. Numerous homeowners found themselves unable to pay their new loan amounts, yet couldn’t unload their properties because they were under water. 

    As the market turned around in 2012, prices started moving upwards and, as we entered 2013, many sellers found themselves above water again for the first time in years. Those that had managed to hang onto their homes finally had options, including the ability to refinance out of their garbage loans. The refinance market kicked into high gear and many sellers who were contemplating a short sale just a year previous were now comfortably back in the black and in no hurry to go anywhere. 

    2.     Many sellers no longer WANT to sell. 

    In fact, significant numbers of homeowners who were recently under water … are now improving their existing homes and settling down for the long haul. They’ve obtained a refi, their job prospects are better and they are not interested in going anywhere. Contractors who, as recently as a year ago, were struggling to feed their kids, are now scrambling to keep up with the sudden demand for their services. Many contractors I’ve talked to are now booked at least six months out. 

    3.     Distressed sales are down dramatically. 

    Back in 2009/2010, foreclosures counted for more than 40% of many local market sales. That’s a sizeable percentage no matter how you slice it: with REOs and short sales phasing out, a substantial piece of the supply chain is disappearing, yet current home owners, in better shape than a few years ago, are feeling no obligation to fill the void. 

    4.     Flippers are running out of raw material. 

    As distressed homes flooded the market, flippers began appearing en masse. In many ways, they were a bright spot in the market: many well-executed flipped homes looked shiny and new against the backdrop of shabby REOs. It was a great run while it lasted, however, as the flood waters of distressed homes are receding to a mere trickle, flippers are running out of properties to work with. 

    5.     Some sellers are trying to time the market. 

    As home values have begun to skyrocket, many sellers have concluded that they can cash in even more if they time the market and wait a while longer. In many ways they are right, but, as everyone knows, if they wait a day too long, they may regret their decision. In the meantime, they are sitting tight watching values increase around their ears. 

    6.     The luxury market is beginning to sizzle. 

    While this may not be true in many parts of the country, it certainly applies here in the San Francisco Bay Area. With bucket loads of cash flowing through Silicon Valley, newly minted millionaires (and billionaires) are looking around for upscale quarters. Consequently, for the first time in years, the luxury market is picking up and catching fire. 

    7.     Move-Ups have nowhere to go. 

    In a normal market, move-ups constitute a significant percentage of the market as they sell their existing properties, then turn and buy something bigger and better. This year, however, there are literally no homes for them to easily move up to. In a hot market like this, home sellers are not keen on accepting contingent offers, so those hoping to move up really need to sell their existing homes with no guarantee they will find a replacement anytime soon. 

    While some are biting the bullet (selling and then renting until they find their next property), many are staying put out of concern that current market increases might outpace their abilities to purchase a replacement home they can afford. Additionally, the lack of inventory has some doubting they’ll be able to find a new home they actually like. Another factor is the fact that the high end of the market, normally selling at a slower rate than the lower tiers, is currently hot as well, making upward moves even more difficult.

    There is a dark side to move-ups as well ... many current home owners bought a long time ago and consequently have existing property tax bills that are quite low. When the prices of replacement homes were also low, moving up seemed like a great idea - many could either transfer their tax base (Props 60 & 90) or pay new property taxes that were still manageable. Now, however, with the new higher prices, taxes have dramatically increased and for many, especially those looking to lower expenses, significantly higher tax bills are simply unpalatable.

    All of these issues have many potential move-ups sitting on their hands doing nothing.

    8.     Investors are holding homes longer than anticipated. 

    The Bay Area has historically had lower-than-normal rental rates. That has changed over the past couple of years. As many lost their homes due to the financial meltdown, they were forced to transition from ownership to renting. In an ironic twist, at a time when there was a glut of low-priced, foreclosed homes for sale, increased demand for rentals went through the roof. The sudden demand began pushing rents higher. Investors responded by snapping up homes at ridiculously low prices, then turning and renting them at the new higher rental prices. A second group also began renting homes: normal owners who’d either moved out-of-the area, were able to move up without selling their existing home or the like. Since many of their existing homes were under water, they chose to rent these properties out until things improved. 

    Take higher rental incomes and couple them with dramatically increasing values and suddenly, homes owned by investors are seeing better-than-expected returns. This has prompted many to sit tight and hold whereas they might have been expected to sell by now. 

    Unfortunately, even with the increase in available rental units, there is still a shortage. 

    This has kept rents high and has added yet another factor to an already tight market. Some investors/landlords that currently want to sell are faced with the fact that their current tenants have nowhere to go due to the current dearth of reasonably priced rentals. In a classic Domino Effect, the current lack of rentals is making it difficult for renters to vacate and delaying sellers in getting their properties on the market. Many sellers, aware of the difficulties, are allowing renters to stay until they find replacement homes.  This is effectively keeping much needed homes off the resale market and continuing to force property values up, making it even harder for renters to vacate. As an example, our team currently has 5 listings waiting in the wings for renters to vacate. 

    9.     New construction starts are lagging. 

    While new homes are re-appearing, it’s not at the rate needed to fill the shortfall. Additionally, some builders, responding to the dramatic upturn in sales, hiked their prices too far above market norms and actually turned potential buyers away. It’s hoped that builders will be bringing more homes to the market in the near future with prices that a bit more amenable to buyers. There is another issue here as well: when the market is slow, builders provide tremendous incentives for Realtors to bring their clients by. As the market heats up, builders often remove those incentives and some go so far as refusing to cooperate with Realtors in any way. This produces a level of animosity between agents and builders, causing some agents to downplay new homes with their buyers. 

    Where do we go from here? 

    Personal opinion, we’re going to be here a while longer than anticipated. If there were only a couple of factors involved, it could probably work itself out in a relatively short period of time. However, with nine arms, this is a mutant octopus of a dilemma with no immediate or short-term solutions. In the meantime, record numbers of buyers are out in droves looking for illusive listings, writing multiple offers on the ones that do emerge, forcing prices higher and further contributing to the overall problem in the process. 

    And in the meantime, frustrated buyers are wondering why so MANY homes are ... NOT FOR SALE.


  • Top 8 Market Trends for 2014

    Posted Under: Market Conditions in Alameda County, Home Buying in Alameda County, Home Selling in Alameda County  |  January 16, 2014 4:54 PM  |  5,265 views  |  5 comments


    Full Speed AheadHow would you describe the housing market of 2013, especially in the San Francisco Bay Area? It was like strapping yourself into a rocket-assisted vehicle, firing up the afterburners and having the extreme acceleration try to push you through the rear of the seat all the while stretching your face around to the back of your head. An extreme shortage of inventory coupled with record low interest rates and a pent up pool of ready-and-eager buyers launched the market out of the gate and into the stratosphere, resulting in higher than anticipated market gains. Although the frenetic pace began to slow late in the year, there was still significant activity in many of the most desirable neighborhoods. 

    Understandably, 2014 has been approached with a great deal of nervous anticipation. 

    After extensive market research, one key word seems to be emerging over and over again. BORING. And that's a good thing, actually. In fact, Svenja Gudell, Zillow's Economic Research Director states, "You want boring in the housing market." 

    After a 20-month-long rebound, our local bay area housing market is predicted to mellow in 2014, mirroring trends predicted across the country. 

    To understand why 2014 will be different than the previous year, you need to understand what ignited the market in 2013. "Overall," Jed Kolko, Trulia's Chief Economist, "regression analysis shows that recent price gains are most strongly associated with the severity of the local housing bust." He goes on to elaborate that, "All of the 10 metros with the largest year-over-year price increases in December were hard-hit during the housing bust. Asking prices fell by at least a third from peak to trough in these 10 metros." His contention is that bargain-basement prices caused an influx of investors and other buyers, eager to snatch up properties at rock bottom prices. I concur, but would add that record low interest rates and a large pool of ready and eager buyers all combined to create a tipping point. 

    The result of 2013's record-breaking market is that in many areas, prices are well on their way back to pre-bust levels. In other words, we're returning to where we might have been had we not seen the exorbitant increases from 2005-2007 and the ensuing crash. The analogy is a bit like a well that ran dry during a severe drought and then was significantly refilled after long-sought rains: now that it's nearly full again, its dramatic refilling will not be repeated because it has almost reached capacity. 

    Bottom line: I believe that 2013's mind boggling gains have been consigned to the pages of history and consequently will not be seen again anytime soon. 

    As we venture into 2014, in sharp contrast to 2013's significant market gains, I believe 7 Key Factors will combine and work in a concerted manner to keep overall market gains under double digits for the year. 

    Pendulum1.     FHA has dropped loan limits. 

    Signally a tightening of lending requirements, the FHA has dropped their loan limits in higher-priced regions from $729,500 to $625,000. As a result, FHA buyers are going to find their market choices severely constrained for 2014, especially when you consider that all bay area counties have prices averaging above the limit. As an example, the average price for a single family home in Alameda County, CA for 12/13 was $648,899. 

    2.     New Qualified Residential Mortgage guidelines are now in effect. 

    While underplayed in some quarters, I believe this will have a larger than anticipated effect due to a convergence of several key features. In reality, it may be the straw that breaks the camel's back. Debt limits will be limited to 43%, especially affecting lower-income buyers who are already reeling from price increases. Current estimates for mortgage approvals that have debt ratios above 43% are between 18% to 22% - not an insignificant range. While the 43% limit might be overridden - it has to be with Fannie or Freddie's approval, which requires a second signature and is running an additional 24-48 hours for approval. In a market that is already extremely frenetic, there may not be enough time for this extra step. 

    Banks will be forced to limit loan origination fees to 3%, which could lower their interest in providing loans for lower-priced homes. Additionally, self-employed individuals will have a much harder time getting past the income verification guidelines, reducing the number of self-employed persons who will be able to obtain mortgages. 

    Add it all up and the guidelines, which went into effect on 01/14/14, are truly going to reduce the number of qualified buyers that will be able to enter the market. 

    3.     Interest rates are guaranteed to rise. 

    With the economy well on its way to recovery, the Fed has stated it will wean itself away from the massive long-term debt purchases of the past. This will ensure rate increases. Pundits believe we'll see rates over 5% by the end of Q2. As rates rise, some buyers who are currently at their extreme margins will effectively be priced out of their preferred markets. This will effectively put the brakes on the housing market to at least a minor degree. 

    4.     The "lower-to-middle-price" buyer pool will diminish. 

    With vast segments of America on sale at bargain basement prices, investors hit the market like a pack of piranhas, devouring the hopes of many first-time buyer wannabes by snapping up everything in sight. With rabid investors throwing cash at everything that hit the market, inventory was drained to the dregs and subsequent pricing gains pushed many buyer hopefuls to the gutter. As prices skyrocketed, investor profit margins were dramatically decreased, forcing investors to begin looking elsewhere for profit centers. In the meantime, many buyers, blown out of the market, ended up renting the very homes they'd been trying to buy. As we enter 2014, investors are moving en-masse from areas such as the San Francisco bay area. Rising prices, decreases in FHA limits and the new Qualified Residential Mortgage Guidelines have also reduced the numbers of qualified buyers. With the resultant decrease in buyers of all kinds, fewer multiple offer scenarios are expected in this segment of the market. 

    5.     Distressed home sales have virtually disappeared. 

    While it's true that some severely depressed areas of the country still have large numbers of foreclosures and short sales, in most parts of the county the record numbers of distressed properties have gone the way of the Stegosaurus. Their demise signals a welcome end to bargain-basement pricing and blue-light specials. It also signifies that the number of flips currently hitting the market will be significantly reduced going forward into 2014. Normal sellers are going to have to step up to fill the void and will more than likely be willing to do so as their distressed competition disappears and overall prices solidify on the higher end of the scale. 

    6.     More sellers will put their homes on the market. 

    New Listing2013's market was noted for a dearth of inventory as many sellers were either still under water or were waiting to see where the market surge would carry values. Additionally, many who wanted to move up were scared that they would not be able to find a replacement home - a valid fear, in fact, in many arenas. As the overall market decelerates in 2014, many sellers, realizing the top of the market could be in sight, are projected to cash in on recent equity bonanzas. Additionally, large numbers of homeowners previously under water are finally in a positive equity position and can now sell without resorting to a credit-damaging short sale. Lastly, as DOM (Days On The Market) numbers increase, more move-up sellers will feel more comfortable with their chances of securing a replacement home and will therefore be willing to put their current digs up for sale. 

    7.     New home builders are still struggling. 

    Although builders are back out in force and once again building new homes, they are not seeing the rebound the rest of the market is experiencing. One of the reasons is pricing - any buyers have been able to get major discounts on existing homes and so have turned a blind eye towards builders who have priced their products at the high end of the market. Builders, at least in areas like Dublin, CA, saw a surge in sales in early 2013 and reacted by boosting their prices with each new offering. 

    The higher prices, in many cases, turned out to be way above the levels buyers were willing to pay. This resulted in price decreases as some builders were dealt a reality check and had to lower prices towards the end of the year. Local Realtors can always judge the new home market by whether or not local builders are willing to cooperate with commissions. When the market is down, builders offer high commissions and incentives to induce local agents to bring their buyers by. As the market strengthens, commission offerings are lowered, incentives removed and, in some cases, builders refuse to cooperate with Realtors in any way. These practices have not endeared builders to real estate agents, many of whom are frustrated by builder tactics. 

    All this to say, at the end of 2013, Bay Area Realtor inboxes were filled with emails detailing builder incentives. New home sales, while up, are clearly still being outpaced by the existing home resale market and are projected to remain this way into 2014. Higher interest rates are not going to help. 

    There is also a final factor that will run contrary to the rest of the market: 

    8.     Luxury home sales will increase. 

    In contrast to the remainder of the housing market, recent stock market gains and subsequent flood of new IPOs are significantly boosting luxury home sales. This trend will continue into 2014, especially in the San Francisco bay area whose economic engine fueled by Silicon Valley is off and running on all cylinders. Local tech giants are discovering that the best way to improve their strategic edge is to buy up local startups. And buying they are. As many Silicon Valley entrepreneurs are coming into massive amounts of cash, the average age of luxury home buyers is plummeting dramatically as luxury home prices are spiking upwards. Construction companies are also starting to score windfalls as many high-end buyers are snapping up less-than-stellar properties in high-rent neighborhoods and then spending massive amounts to get them renovated up to current specs. 

    Overall, we anticipate an increasing market in 2014, but not at the rates seen in the past 2 years. 

    Look for gains in the region of 6-8% averaged over the year. Many buyers still haven't received the memo as the first couple of weeks of 2014 have seen a wave of buyers out in full force and the few available homes being snatched up in short order with multiple offers. Many realtors I've talked to, however, have a number of listings in the queue that are waiting to come to market as soon as they are ready. 

    As this increased inventory hits the market, I believe we may see a return to the first "normal" market in over 10 years. We can only hope.

    Top 8 market trends for 2014, market trends, top 8 trends, housing, luxury prices increasing, New home builders struggling, Qualified Residential Mortgage guidelines, QRM, QM, distressed home sale down, fremont ca, alameda county, ca

  • Selling A Home Is Like Online Dating: 5 Critical Facts You Need To Know

    Posted Under: Home Selling in Alameda County, Design & Decor in Alameda County  |  November 25, 2013 6:45 PM  |  5,759 views  |  2 comments

    Selling a home? Although it sounds strange, the more you understand the principles of effective online dating, the higher your chances of successfully selling your home. 

    Even though the internet has not been with us very long, it has totally changed everything. This is especially true with dating. Before the World Wide Web was created, people met in traditional ways: in church, at clubs or work, perhaps the girl next door, a high school sweetheart or even a personal column. Online DatingProblem is, society has changed. As mobility has increased, the speed of life has quickened. Many are placing education ahead of relationships and giving careers a chance to be established before hopping on the matrimonial wagon or hooking up with a significant other. The last census confirms that the average age of those getting married is on the rise. Additionally, many traditional dating venues and methods are being outmoded making it increasingly difficult to find a partner. 

    Enter online dating. 

    Once the object of ridicule, online match-making sites have become the preferred methodology for many hopefuls. Busy singles, their hectic careers minimalizing any significant socialization, have consequently endorsed online dating en masse. And it's not rocket science to figure out that successful matches come from online profiles with extensive information, well-written bios, detailed lists of hobbies, preferences and realistic, high quality pictures. Of course there are scammers - those whose pictures are from another era or who blatantly lie about their 'attributes.'  But overall, it's working in record-increasing numbers. 

    And once online individuals connect with a partner, they go back to the internet and leverage the same online expertise and technology ... to find a house. 

    Cue online house hunting. 

    In the same way that online dating sites have flourished and transformed dating, online home sites have revolutionized the way homes are bought and sold. In fact, it's safe to say that real estate processes have been completely transfigured. No longer relying on open houses, Realtor lists, magazine ads or lawn signs, over 90% of those looking to buy a home use the internet as their primary source for information and to search for prospective properties. Used to be real estate agents would look at listings, preview the ones they thought might be a fit for a client and then, if the home was nice, bring their buyers through. No longer. Buyers are skipping this step altogether and previewing homes themselves - online - and in many cases, doing so LONG before they identify a Realtor to work with. 

    Those sellers that are still relying on Realtors to preview properties and then bring their buyers to have a look are already way behind the curve. 

    Since buyers have moved onto the internet to find homes, carefully crafted online property profiles are critical. Savvy sellers understand that the better their home is presented online, the better their chances of a successful sale with top dollar and the best possible terms. Therefore, homes with extensive online info and numerous, good quality pictures are the ones that get the most attention and have the best chance of getting ... 'a date." Once an appointment is set up, buyers go to check out the house to decide whether or not it's a match. 

    Sellers that do not understand this are at a serious disadvantage. 

    One thing is clear: many sellers ARE cognizant of the new realities. They've jumped on board with homes that have been upgraded, staged, have 30 or more magazine-quality pictures, gorgeous virtual tours and carefully crafted comments. A second thing is also obvious: a quick search of any real estate website will reveal plenty of homes with sellers who, for whatever reason, didn't get the memo. Looking Online

    Although methodologies have changed, human nature has not. Therefore, properties that present themselves well online will get moved to the top of the prospect list, while those that don't ... won't. A friend of mine decided to test this theory. He was looking for a spouse but refused, in his own words, 'to play the online beauty contest game.' The profile picture he posted was in no way flattering. Number of responses? None. After a miserable silence, he updated his profile and immediately got a number of replies, including the special girl who is now his bride. 

    It's hard for some sellers to understand that in this new internet marketplace, their online property profile is actually more important than their actual home. 

    If you are going to go on a first date, you only get one shot at a first impression - and that impression starts long before they even meet you - it starts with your online profile. If they don't like what they see online, they'll skip right over to the next one. 

    With this in mind, here are the Five Critical Facts you need to know to maximize your online presence (whether dating OR selling your home): 

    1.     Properly Prepare. 

    No one wants to inherit someone else's issues - whether it's from a previous relationship or a worn-out house. Prepare for the next chapter in your life. We are seeing a radical shift in the numbers of buyers who want properties that are move-in ready. Not only do many buyers not know how to improve a home, more and more they simply do not have the time or desire to do so. We recommend you made upgrades as necessary, apply fresh coats of paint and do whatever you can to make it as move-in ready as possible. And keep in mind that younger buyers often have dramatically different tastes than you do - work to their tastes, not yours. Don't have a decent budget? A competent Realtor can help you put limited resources where they will really matter. 

    2.     Hire Professional Help. 

    If you are getting ready to go on a first date and you want to make a good impression, there is no way you'd cut your own hair. You'd get professional help to look your best, from hair to fingernails to a fashion consultant. In the same way, a professional stager can prepare your home in ways you cannot. It's no secret that builders design their model homes to influence buyers and manipulate their emotions. Why should the sale of your home be any different? 

    3.     Get Professional Pictures. 

    While that cutesy picture of you and your ten best gals may be OK on Facebook, it's not exactly putting your best face forward. Your goal should be magazine-quality shots - keep in mind that people will be seeing you or your home first online. Professional PhotographerAnd your picture(s) will be competing with many others. If buyers like what they see on sites like Realtor.com, Trulia, Zillow and others, they will want to see your home in person. Many Realtors like to take their own pictures and some even fancy their shots as "professional' quality, but I've not found many agents who have the ability or equipment to take pictures that truly sizzle. Additionally, ensure that they produce a virtual tour - one that has actual panoramas, not just moving stills. A custom website can also be very helpful for its ability to house associated documents such as inspection reports, seller disclosures and provide links to walk scores, local schools and more. 

    4.     Write a Compelling Story. 

    Winning online profiles are full of life and passion, not just facts. While factoids such as '3-bedroom, 2-bath home with granite counters'  will appeal to a buyer's mind, to communicate effectively, you need to engage their emotions. Dialogue that is descriptive of behaviors and activities will speak to buyers more than simple facts. Instead of saying, 'remodeled kitchen," try, "Picture yourself creating memories in this revitalized, gourmet kitchen! It's perfect for whipping up culinary treats for treasured friends or teaching children the fine art of making Jell-O critters." 

    5.     Pay Extra to Showcase. 

    When they finally arrive at your profile, make sure it sizzles. In the same way it takes extra time and effort to go back and clean up Facebook and pay profile enhancement fees so your best foot is forward, ask that your Realtor pay extra to Showcase your listings on all major real estate websites. It will cost more, but it's worth the time and effort. Showcased listings are allowed more pictures, links to virtual tours, custom dialogue and predominant placing on websites. All of these allow your listing to shine in relationship to the others. 

    The sad thing is this - not all sellers are interested in the new online reality. The same applies to real estate agents - there are many out there who don't believe in going the extra mile to set your home apart from the rest. Truth is, however, how you look online really matters ... and can mean the difference of whether or not you hook up with just any buyer... 

    Or the buyer of your dreams.


  • Pocket Listings Growing in Popularity: Top 5 Positives and Negatives

    Posted Under: Market Conditions in Alameda County, Home Buying in Alameda County, Home Selling in Alameda County  |  October 8, 2013 9:05 PM  |  5,986 views  |  No comments

    It looked like a good idea at the time: sellers needed to sell their property and one of the Realtors they contacted to do a listing presentation actually had a buyer for that exact type of home. The agent presented the positives: the seller wouldn’t have to endure the streams of looky-loos interrupting their lives at all hours, poking through closets and disrupting their lives. There would be no requests for repairs, no out-of-pocket upgrades, no need to even keep the house clean. As for the buyers, they had written tons of offers and been kicked to the curb repeatedly in multiple offer situations. For them, it was a chance to get to the table without having to compete with others. It meant a clean shot at a home they loved in the area they had been looking and an end to weeks of frustration and rejection.
    Pocket Listing
    It seemed a win-win.

    The contract was signed, escrow was opened and things began percolating along. Until seller’s remorse kicked in. They began questioning the wisdom of the sale. “Could they have gotten a higher price on the open market?” “Might there have been a cash buyer out there who would have mitigated the need for an appraisal?” Questions lead to reservations which migrated to full-grown doubt.

    Had they done the right thing? The buyers had similar queries: “Had they paid too much?” There were issues with the house, but they were buying “AS-IS” and felt that, because it was a private sale, they couldn’t ask for repairs of any kind.

    Welcome to the world of Pocket Listings.

    Pocket Listings are defined as, “Any listing that is retained by a listing broker or salesperson who does not make the listing available to other brokers or to any multiple listing system (MLS) members. Also referred to as an ‘exclusive listing’.”*

    Although these type of listings are always happening in any market to some degree, hot markets produce pocket listings like a dark, damp manure-laden room incubates mushrooms. Although there are ‘benefits’ to selling privately (pocket listings), they can also be fraught with potential issues and landmines.

    When markets heat up, multiple offers become the norm, pushing prices higher. A hallmark of hot markets is an increase in ready-and-able buyers who, with their purchases, lower the number of homes actually available to others. Even though it’s a pain getting a property ready and even more of a hassle allowing strangers to invade at a moment’s notice, it’s normally in a seller’s best interest to allow their home to go on the market to get exposed to the highest possible number of potential buyers. In seller’s markets, the 3Ps (Preparation, Pricing and Promotion) reap significant dividends. In fact, the better you prepare, the higher the caliber of marketing and the more access you allow, the higher the number of visitors and the better your chances of getting multiple offers and a rewarding contract.

    So why would a seller consider a private, pocket listing?

    As with any practice, there are always perceived benefits - the Top 5 Seller Benefits include:

    1.   It protects the seller’s privacy.


    While certainly true for normal sellers, it is especially the case for high-net-worth individuals who don’t want the details of their sale plastered all over the MLS and internet. In addition, there are no pictures to remove from the internet after the sale – a task that’s become almost impossible to accomplish due to the way listings are now syndicated literally around the world. 


    2.   It enables the seller to sell to a specific individual.


    This can be good AND bad – it could enable the seller to sell to a buyer who’s been blown out in numerous multiple offers. Or a friend. Or someone they’ve met who has expressed a particular interest in the home. It can also keep the seller from selling to a specific someone or some category of buyer to whom they don’t want to sell – which could easily be a violation of federal Fair Housing Laws.


    3.   It reduces/eliminates the need for intrusive traffic through the home.


    Some sellers are actually more concerned about convenience than they are about getting the absolute highest price. No MLS listing means no open houses, no requests from Realtors to show at inconvenient times, no nosy neighbors, no need to be concerned about security and more. It can be a private, simple sale in which the seller sets the terms they want and the buyer, if they want the house, simply agree and proceed with the purchase. Neat. Clean. Done.


    4.   It removes/reduces the need to prepare the home for the market.


    Many pocket listings are “AS-IS”, so the seller is off the hook for doing any upgrades and/or repairs. Coupled with #3 above, this can be VERY attractive to certain sellers.


    5.   It can potentially lower the commission.


    Many listing agents are willing to cut a deal on the commission since they will be getting both sides.


    There are benefits to buyers as well – here are the Top 5 Buyer Benefits:


    1.   It allows a buyer to buy with no competition.

    No competition 

    Many buyers I’ve worked with who’ve been blown out of contention by higher multiple offers are more than willing to do a private sale if it means getting a home they like. Even if they buy at above market prices and “AS-IS”, at least they have a home and, as market values increase over time, they usually break even fairly quickly. And keep in mind, there are some controls in place: for any deal to work, the home either has to appraise or the buyer needs to be willing to bring more money to the table to make up the difference.


    2.   It provides an opportunity for a buyer to buy a specific house.


    How many times have you driven through a neighborhood, spotted a specific home and made the comment, “I’d LOVE to get THAT house.” Pocket listings provide that opportunity. Your Realtor contacts the owner and, if they are willing to sell and you can both agree on price and terms, you have a sale. And the house of your dreams.


    3.   It keeps the sale private and out of the public eye.


    We’re back to the privacy issue – some buyers do not want the public to know they are buying a specific home. In addition to privacy issues, many state that security is also a critical consideration, especially with higher net-worth individuals.


    4.   It allows for flexibility in terms.


    When there is no competition with other buyers, terms are easier to negotiate so that both parties have a win-win. This can include longer contingency or escrow time periods, rent-backs and other benefits.


    5.   It allows opportunities to buyers in less-than-stellar situations.


    Buyers with marginal loans can be given more time to get their loan and funding sorted out. This can provide huge benefits for those with FHA or VA loans. If a buyer wants to buy a condo in a development that is not FHA or VA certified, time can be provided to allow for a spot approval. The seller can also benefit by negotiating a long rentback, “AS-IS” and so on.


    Unfortunately, there is a dark side as well. The Top 5 Potential Issues are:


    1.   It doesn’t give the Seller the opportunity to utilize the power of the open market.


    Who do you want competing for your home – one agent or thousands? It’s a simple mathematical fact that, in a hot market, the combined resources of thousands of realtors working on your behalf through the local MLS have a higher chance of bringing you an offer for the highest possible price and terms. It’s the free market doing what it does best: force competition, driving prices up.


    2.   It has the potential to destabilize local property values.


    Even though all sales eventually make it to the tax records, most agents and appraisers do not look there for comparable sales: they mostly rely on the MLS for up-to-date market data. If a property never makes it to the MLS, it will never show up on a Realtor’s CMA for the area. This can skew neighborhood values and give a false impression of actual market activity. This is a huge issue – especially since the current percentage of pocket sales versus market sales is so high. 2013 estimates for San Francisco Bay Area MLSs range between 26-30% - in other words, every third or fourth sale is not making it to the public market.


    3.   It is undermining the validity and integrity of the MLS.


    It’s actually worse than stated in #2 above. In addition to pocket listings representing such a large percentage of overall sales, many listings on the MLS show 0 days on the market – meaning that a deal was cooked up and the property sold privately before it was reported to the MLS. The huge market for pocket listings has spawned informal networks where agents post available properties before they hit the MLS. These are actually off-MLS marketing networks where agents can share information informally or, in the case of Top Agent Network (TAN), an organized pocket listing network aimed at the top producing 10% of local agents.

    Here is a video explaining how TAN works:


    In a post by NOTORIOUS R.O.B., the potential impact of pocket sales and official/unofficial off-MLS networks on local MLS systems can be seen. It’s an alarming assessment where he states, “Well, if all of the producing agents in a given market area are using off-MLS systems… and the producers know that only 64% of the available properties on the market are actually in the MLS… the compelling value proposition of the MLS itself starts to fade.”


    4.   It can violate a number of laws.


    Pocket listings are legal. However, according to the California Association of Realtors (C.A.R.), “The practice raises a number of legal, ethical and practical red flags that must be considered and addressed.” There is the potential of breaking local MLS laws, the Realtor’s Code of Ethics and state and federal laws. It can also produce a breach of the agent’s fiduciary duties to either the seller, buyer or both. To highlight its concerns, C.A.R. has produced a “Pocket Listings” presentation outlining potential issues. They have also changed both the listing agreement and disclosures to alert sellers to the pros and cons of pocket listings. Additionally, local MLS associations have instituted heavy fines that can be levied against offenders.


    5.   It can play to the dark side of human greed.


    It’s no secret that where there is the potential of making extra money, greed can play its hand as sensibilities and ethics go out the window. It goes without saying that some agents have suggested an “off-market” sale for the sole purpose of securing a higher commission for themselves. When this happens, no one wins, even the Realtor who ‘cooked up’ the deal. While they may have more money in the short term, they’ve opened the door to potential litigation from the buyer or seller, extensive fines from the MLS, suspension or loss of their real estate license by the state licensing board, a possible civil suit, potential liability for monetary and punitive damages and more.


    For a pocket listing to be fully legal, it must be fully disclosed to all parties. C.A.R. stipulates:


    ·     Make sure that a seller understands in a meaningful way the pros and cons of doing a pocket listing, including any options available within the MLS to address their concerns (such as declining Internet display if apprehensive about privacy or non-placement of a lockbox if concerned about security).

    ·     After full disclosure, make sure seller voluntarily decides to keep the listing off the MLS.

    ·     Agents who are members of any given local MLS must have the seller sign an MLS waiver stating that they are willfully and with full knowledge keeping their property off the local MLS.

    As for the deal we began with? Although the negotiated contract price was above market value, the seller began thinking they could’ve received more had they gone on the open market. The buyer also had misgivings as friends suggested they’d overpaid and given away too much of their negotiating power. In the end, even though the deal closed, the seller began examining venues for potential recourse for the money they thought they might have received had they sold their home under more conventional circumstances on the MLS.

    Good? Bad? You decide.

    One thing for sure, pocket listings/sales are creating substantial controversy and will be the focus of intense scrutiny by all parties going forward. Truthfully, we are only at the beginning of a new trend that has the potential to completely reshape the way we do business in the years that lie ahead.


    * http://www.investopedia.com/terms/p/pocket-listing.asp


    Additional Reading:


    SFGate: Pocket listings grow as more sellers keep homes off MLS

    LATimes: Private sales of homes, known as 'pocket listings,' are surging

    RealtyTimes: Pocket Listings Could Sell For Less

    Carl Medford, pocket sales, pocket listings, market conditions, Alameda County, Fremont CA, buyers, sellers, listings

  • East Bay Housing Market Cooling Off: Top 5 Reasons

    Posted Under: Market Conditions, Home Buying, Home Selling  |  August 7, 2013 9:51 AM  |  7,301 views  |  3 comments

    Cooling Off
    We’ve just gone through our first heat wave of 2013. While the blazing temperatures serve as a welcome sign that summer has commenced, there’s some irony here. As Mother Nature’s weather department has everyone groaning as the mercury pushes higher and higher, a climate change of a different type has been easing into the Bay Area almost unnoticed.


    The superheated housing market in the San Francisco East Bay area has begun to cool off.


    Beginning in February, 2012, the last 17 months have provided us with an unprecedented ride. From a housing market that lost up to 50% of its value in the epic slide of 2006-2010, we’ve regained a significant portion of those values since the market turned immediately following Super Bowl, 2012. Fueled by a scarcity of inventory and a rebounding Bay Area economy, multiple offers have been the standard on almost every listing, enabling sellers to cash in on soaring prices that have exceeded everyone’s expectations.


    And now, finally, I believe, the market is starting to slow.


    Even though there’s still plenty of activity, and it’s too soon to tell from the actual market data, my gut is tingling with a premonition, a sense, an inkling … a bit like that first drop of water hitting your cheek when the skies are still largely free of any clouds. I’m not the only one to feel this way. It’s become the topic of discussion in local real estate offices as agents are seeing lower numbers through open houses, declining numbers of offers and fewer buyers calling about listings.


    Is it a market breather, seasonal adjustment or actual turn? It’s too soon to tell.


    It’s fascinating that this seems to be coinciding with higher interest rates. I don’t believe rates were the trigger: in reality, the market was giving off indications of slowing before recent rate hikes. In most cases, rising rates galvanize buyers into action so they can get in before they’re priced out. This usually results in a short-term market rally. Since we haven’t really seen a rally, any surge may have been hidden by an overall slowing market. In other words, a rally may have occurred, masking the fact that the market has slowed even more than perceived.


    Here are the top 5 reasons I believe the market is finally slowing:


    1.   Many buyers have left the market.


    It’s been a very rough ride for buyer wannabes. There are two categories here: first are those who’ve simply been priced out of the market by skyrocketing prices. Mostly holding FHA loans, this group was unable to compete with better-healed buyers and simply lost out as prices soared over their heads. Secondly, an even larger number of buyers, frustrated after being repeatedly blown out in multiple offer scenarios, have pulled out of the market and signed long-term leases. I’ve personally talked to many of these: in spite of the fact that prices and rates are going up, they’re taking a wait-and-see attitude. Some believe that we’ve entered a “bubble” which will eventually burst, sending values down again. I personally disagree: I believe the current market is built on strong fundamentals and, although it may dip in a minor market correction, is too strong to collapse or burst as it did previously.


    2.   More inventory is coming to market.


    July, 2013, was the first month in a long time where available inventory was higher than closed transactions. With fewer buyers and more homes available, you do the math: numbers of visitors to any given home will be lower than just a few short months ago. Further, as increasing quantities of homes become available, the hopefuls still out there looking are doing so with less urgency. The panic of the past many months is beginning to fade to some semblance of normality.


    3.   A portion of the market is overpriced.


    Some sellers, anticipating escalating prices, have priced their homes beyond market reality and are being snubbed by buyers. I call it “misplaced optimism.” It’s easy to see how this has happened: when values climb sharply, sellers can price ahead of the market and reasonably anticipate that offers will rise to their level. If the market slows or dips, then they are suddenly left hanging too far above the rest. Since buyers, given a choice, prefer to go after lower hanging fruit, the higher-priced homes get ignored. Cash is decliningThese homes then stay on the market longer than anticipated which in turn pushes their prices down.


    4.   Numbers of cash offers numbers are down significantly.


    Hovering slightly above 30% at the end of 2012, cash transactions signaled a dramatic change in the way properties were being purchased. As the market motored into 2013, the percentage of transactions purchased with cash increased to a whopping 41% in the San Francisco East Bay. Recently numbers, however, tell a different story: cash now accounts for less than 20% of closed deals – a dramatic drop. Why? First, prices have risen above the levels at which investors can make an easy profit. Second, many buyers who could have paid cash a few months ago are now requiring loans to complete their purchases.


    5.   Failed transaction numbers are up.


    As fewer transactions are being funded with cash, growing numbers of purchase are being funded with loans. Since sellers still expect offers above asking price, “AS-IS” and with most contingencies removed, the margins are growing extremely tight. Lenders are becoming increasingly vigilant and, consequently, with low appraisals and intense underwriter scrutiny, more and more offers are failing to make the cut. In the past, sellers would have simply moved to the next person in line. However, as inventory increases and the numbers of multiple offers decline, the chances of a buyer sitting in a backup position are being lowered dramatically. As more transactions fail, the net result is downward pressure on prices.


    If interest rates continue to rise, they will definitely become a factor in their own right.


    Some insist they are already a serious contender or even the prime motivator. I’m not there yet – I’ve seen robust markets with much higher interest rates. I agree with FORTUNE writer Nin-Hai Tseng, who states, “Some might worry higher mortgage rates could derail recovery of the housing market, but that will depend how quickly rates rise. And if history tells us anything, paying more is unlikely to hurt homeowners and buyers.”


    Looking at the bigger picture, while many buyers have been shocked to discover they can no longer afford the price-point they wanted, they can still get in and, if trends hold, will actually have a better shot at getting a home if the market stabilizes than they may have over the past crazy 17 months.


    Whatever the reasons, the housing market winds appear to be shifting and, at least for now, a cooler breeze seems headed our way. Who knows? We may actually be approaching the first “stable” market in over ten years.


    I, for one, welcome the change.


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