Real Estate Ends Year with Mixed Bag

Home owners, sellers and buyers can choose the news they want to end 2009 on. Housing market and mortgage reports are all over the board for the end of the year.

The Standard & Poor’s/Case-Shiller home price index released Tuesday was off 7.3 percent from October last year.

“I’d be very surprised if we don’t go below the lows we hit this year,” Dean Baker, co-director of the Center for Economic and Policy Research, a left-leaning Washington think tank. “We still have a very glutted housing market.”

The index is now up 3.4 percent from its bottom in May, but still almost 30 percent below its peak in April 2006. Home prices in San Francisco have climbed for 6 straight months and posted the largest gain of the 20 cities followed in the index.

Fannie Mae’s & Freddie Mac’s future are on the line. Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac own or guarantee about $5.5 trillion of the $11.8 trillion in U.S. residential mortgage debt. They have financed as much as 75 percent of new U.S. mortgages in 2009.

The companies have lost a combined $188.4 billion in the past nine quarters. The federal government now holds almost 80 percent of the equity in each of the entities and key members of Congress feel that they need to address the Fannie/Freddie issue in 2010.

Any changes in Freddie & Fannie have a huge impact on home buyers and refinancing.

Home equity loans are getting harder to get

For the first nine months of 2009, only $40 billion in new home equity loans were made. The impact on the economy: close to zero.

“The home as ATM is yesterday,” says Keith Gumbinger, vice president of HSH Associates Financial Publishers, which publishes consumer loan information.  The days of tapping your house for easy money are gone.

Bank of America’s HELOC’s were down 70% in the first 3 quarters of 2009 and they’re still scaling back.

Loan Modifications are Going to Fail for Most

The federally funded Home Affordable Modification Program aimed at getting banks to rework mortgages for homeowners in order to slow the pace of foreclosures is failing. The government set a goal of modifying up to 4 million mortgages over the next three years. Since March, just 31,000 homeowners have won permanent relief.

About 2.2 million homes since July 2006 have gone through foreclosure.

• Read Part 1: The Home Pricing Issue

• Read: Part 2 – The Home Pricing Issue

• Read: East Bay Housing Forecast for 2010

Search the MLS for Homes for Sale

Search for Foreclosures in Contra Costa County East

Search for Foreclosures I-680 Corridor

Our FREE In-Depth Real Estate Market Reports updated weekly, break real estate data down by zip code and price point. These are the best “real time” sources of data you can get for your local market.

Email Craig if you would like to know more about buying or selling a home or condo in Danville, San Ramon or the 680 corridor.

Do You Want YOUR Home to be FOR Sale or ON Sale?

Too many Danville and San Ramon homeowners have their homes on sale and not for sale. If you are considering listing your home for sale, here is information you need to consider:

The 3 Price Points You Need to Know

• Overpriced – is NOT For Sale – They are not your competition. There is no way you can use these listings to set a price for the current market conditions. They may have a for sale sign in the yard, but they are not for sale. No one is going to buy them for the listed price. These sellers are hoping for a buyer that will pay them what they want, not what the house is worth
• Competitive Price Point – you’re set where the competition is. When we set a competitive price point, we have to consider more than just price.  When pricing yourself against the competition, we have to look at location, condition of the property, updates and upgrades
• Priced to Sale – Slightly under the competition, so you are the competition (maybe 2% to 4%)

So, where do you want to price your property?

• Do you want it for sale or NOT for sale?
• How competitive do you want your property to be?

We can appreciate Danville & San Ramon home sellers wanting to set a high price point, but if they price the home in the “not for sale” range, then they need to be committed to a price adjustment within two weeks of putting the home on the market. The highest amount of interest in a newly listed home occurs within the first 3 weeks. If there is no interest and no offers within the first two weeks, the the market is telling us that the home is overpriced.

Keeping an overpriced home on the market results in two things:

1. The house becomes ignored by real estate agents. Since real estate agents are instrumental in over 90% of sales, you can’t afford to have them dismissing your property as a possibility.
2. The longer you wait to price the property competitively, the harder it is to regenerate interest and excitement.

The Discount Business

Home sellers that fail to address the price adjustment issue head on wind up in the “on sale” business. Basically, they are in the discount business. Now their home and situation is perceived as overpriced regardless of the price point because they have reduced the price several times in small increments and buyers interpret this as a desperate or uninformed seller that doesn’t know what the house is worth.

Discounting can mean losing 10% of the home’s value before it sells. Discounting means that your home is going to be used by the competition to sell their home. Discounting means you have taken your beautiful home and put it into the “used sale” business because we have admitted that, after all the work that has been done, it isn’t worth what it was priced at. This puts in the mind of the buyer that the home is not going to be worth what they are paying for it, so they want to pay even less for it.

Home sellers can usually get away with a one time “market adjustment,” which needs to happen within the first three weeks. We can’t sell discounting to a “low-balling” buyer or investor – how can they be sure they are making a smart decision when the price has been lowered 4 or 5 times. Their belief system tells them that the seller will come down even more.

Making a “one time” market adjustment is using the feedback from the market to get the home competitively priced “in front of the market.”

What is the value of hiring a Danville or San Ramon real estate agent that will overprice a house to get the listing?

Is helping to put a home in the discount business a service to a client that wants top dollar for their home in a correcting market. Top dollar does not mean getting the client what they think the house is worth. Top dollar is selling the home in the upper third of the price range for competitively priced homes.

Is a REALTOR’s job simply to list homes for sale? Any San Ramon or Danville real estate agent can list homes for prices that won’t sell. A professional REALTOR’s job is to get you the best price possible in the current market – to make sure the home is actually for sale and to prevent the homeseller from getting into the discount business.

How Buyers are Perceiving the Market

• Foreclosures are cheap
• Middle tier so, so
• High end under stress.

Investors, with cash, in the foreclosure market understand the numbers. They either want it to cash flow from the get-go or they want it as cheap as possible to get as much appreciation over time as possible.

Buyers with low down and FHA financing) going into a hot foreclosure market cannot win against cash buyers. First time buyers need to understand this. Every real estate agent in the area can give you multiple examples of buyers that have spent many months hoping to beat the system to no avail. In fact, the situation is worsening as more investors are entering the market and inventories are dropping.

What does foreclosure mean in this market? It means the bank owns the house. It does not mean you can get the house for less than it is listed for. In most cases it means are going to pay more than listing price for a foreclosure in Danville or San Ramon.

The banks are becoming tough sellers, they can afford to wait. Every agent in the area has stories of how banks are delaying the process or forcing buyers into re-starting the process – it’s amazing how much paperwork has mysteriously disappeared in the last year to the bank’s advantage. The Federal government is allowing banks to write off current losses against past profits. Banks are in a strong position to dominate negotiations.

• Read Part 1: The Home Pricing Issue
• Read: East Bay Housing Forecast for 2010

Search the MLS for Homes for Sale

Search for Foreclosures in Contra Costa County East

Search for Foreclosures I-680 Corridor

Our FREE In-Depth Real Estate Market Reports updated weekly, break real estate data down by zip code and price point. These are the best “real time” sources of data you can get for your local market.

Email John if you would like to know more about buying or selling a home or condo in Dublin California or call (925) 895-2694

Setting the Home Price – Value versus Valuation

Buyers & Sellers have different points of view when it comes to the price of a home. In today’s real estate environment, the questions of price and value are more challenging than ever.

The world that buyers and sellers have lived in =

• zero down
• low interest rates
• house as ATM
• flip and earn

The home-buying world that existed prior to our suspension of common sense =

• significant downpayment
• 3% to 6% annual appreciation
• use appreciation to improve property
• take appreciation out on sale of home

The New World Order in Real Estate

The average home value doubled between 1/2000 and 4/2006. From 1998 to 2008 home values increased 155%.

• Home values across the nation are down 26% to 30% from their highs
• U.S home sales up 7.4% from a month ago (NAR)
• U.S home sales down 11.3% (HUD) (do you know why these two figures are different?)
• Inventory is down to 6.7 months of inventory from a high of 12-13 months of inventory
• Case Schiller reports San Francisco home prices up 1.2% over September and down 37.9% from their peak.
• Since the peak of 2006, 1/4 of homes are now underwater

The peak of 2006 was not the value of real estate or your home. That is a  bogus number to use, because it did not reflect the true value of the property.

If we go back and look at the 30-year trend of real estate – appreciation averages about 6% nationally when adjusted for inflation – maybe 7% in the Bay Area. Between 2000 and 2006 we saw real estate double in value in the Bay Area – this could not be a true number. Price appreciation during this period reflected a frentic market being fueled by low interest rates and zero down loans. Market values were being built up without any true value underneath.

When people say, look how far the market has fallen – they are talking in figures that do not reflect a fall in REAL value.

Where are home values going to wind up? That depends on the market. If half of the value of the home represents fluff, then prices are probably going to wind up back at 2002 values. When it’s all said and done, homeowners are going to wind up with tradtional appreciation of home values.

The new valuation of the market is a normal market correcting itself from the craziness of a lending market operating with no rational constraints. Depending on the market, we will see home prices settling at 1998 to 2002 price points.

Is the housing market getting better?

• What is the housing market?
• How do we define it?

There is no national housing market. There isn’t a state market or even a county market. Real estate is always local. The housing market is what is happening in your neighborhood or the neighborhood you are looking at buying in – and whether you are buying single family home or condo. In the Danville – San Ramon area, there are probably at least 20 markets.

To know what is happening in the real estate market, we first have to define the market – location, property type, price point, distressed properties. These are the things buyers and sellers need to look at to understand what is happening with the local market:

• Are listings increasing or decreasing?
• What’s happening with days on market – In a market with little inventory but increasing DOM, this indicates a market with overpriced homes. In markets where inventory is increasing byt DOM is decreasing houses are priced right for buyers
• How have prices done? Listing Price versus Sold Price
• How much did they have to come down
• Who’s buying properties? Homeowners or Investors – First time buyers?
• Who’s the Seller – homeowners or banks
• What’s the economic profile of the area – job market, economy, commercial property
• What percentage of REOs or short sales
• Does the LENDER like the market – if you can’t get to the appraisal, you can’t borrow

How do I know what the right price is in my market?

To answer this question, we need to talk about the difference between value and valuation. Buyers look at value one way and sellers look at it from another perspective.

Today, we have a third party involved in the value proposition and that is the banks – and behind the banks is the Federal government because the majority of loans these days involve Fannie Mae, Freedie Mac and FHA.

Sellers, typically, have an unrealistic view of value. Their opinion counts the least because:

• They pick the market cycle they like
• They’re emotionally invovled in the price
• They have either an “I Want” figure or an “I Need” figure

These three items have nothing to do with the value of property. The seller’s desired price usually has little to do with the value of the property.

Buyers used to have total control of the market. They would look at properties, compare values and offer what they were willing to pay. Today, the buyer’s perception of value is – there is no value because of all the foreclosures, short sales and media coverage. So, buyers are low-balling everthing because they have a misperception that everthing is over-valued and that all sellers and banks are desperate to move properties.

Many buyers still can’t understand why a foreclosure that was listed by the bank for $250,000 sold for $300,000 – after all, it’s a foreclosure market. True, but the foreclosure market is one of the hottest markets the East Bay has seen. It’s not uncommon to hear of 10, 15 or 20 offers coming in on some listings. Some properties have had 60 or more offers within a few days of listing.

Buyers are dealing with investors willing to pay cash. An FHA loan with 3.5% down is not going to carry any weight with the bank with an all cash offer in the mix – much less 10 all cash offers bidding up the price.

In the high end of the market, buyers are turning deaf ears to sellers that think their multi-million dollar properties are immune to current market forces. Special and unique don’t carry much weight in a market where a buyer can go down the street and lease a multi-million dollar home at a value-rate and wait out an obstinate seller.

When a buyer offers a seller $2.8 million for a home listed at $3 million and the offer is rejected, you can bet that in 6 to 12 months, if that house is still on the market, that buyer will be offering $2.65 million, not $2.8. The buyer’s value still has significance, but it is not the key to property values in today’s market.

The key to property values in today’s market is valuation.

Valuation is a very strict, realistic, financial analysis of what a property should be worth – and that is what the banks are doing.

Buyers that are willing to pay all cash, can pay whatever they want for a property. Investors that pay cash are looking for the valuation of property to meet their investment criteria – which is usually low value so the property will cash flow positive. The seller’s wants and needs have no impact at all on valuation.

What does the bank look at when determining home value?

• Inventory
• Days on Market
• What properties have sold for
• Number of foreclosures and short sales in the area – that area is very narrowly defined

Banks aren’t looking at comps 10 miles away, 5 miles away or even 1 mile away these days. They’re looking at your specific neighborhood and they are applying a specific formula that they have come up with to determine value. The banks and appraisers these days care very little about a home’s updating. They want conservative, strict numbers for what is the valuation of each specific property.

The “Right Price” is going to be different for every local market. The right price in the foreclosure and short sale market depends on – who is the seller? Is the seller the bank? The bank can can set the price where they want, often times it is below current appraised value because they are looking at multiple offers as a way to bid up the price.

All of the the things sellers have been conditioned to understand as important to value – location, updates, schools, etc. – are not key to property values in most current markets. In most markets, it’s the numbers that count.

Sellers can be shocked to learn that the appraiser settting the valuation on their house is from 30 or 60 miles away. This is happening everyday in Danville and San Ramon – appraisers are coming over from Daly City or Fairfield and have no clue about the “neighborhood values” in Danville and San Ramon.

It’s hard numbers the bank wants and who controls the appraisal process these days? The banks (Federal governent) – surprise!

Valuation is what is determining home prices these days. Sellers can either be “In the Market” or “Out of the Market.” We will discuss what sellers need to know about setting home prices in a post later this week.

• Read: Part 2 – The Home Pricing Issue
• Read: 2010 East Bay Real Estate Forecast

Search the MLS for Homes for Sale

Search for Foreclosures in Contra Costa County East

Search for Foreclosures I-680 Corridor

Our FREE In-Depth Real Estate Market Reports updated weekly, break real estate data down by zip code and price point. These are the best “real time” sources of data you can get for your local market.

Email John if you would like to know more about buying or selling a home or condo in Dublin California or call (925) 895-2694

Market update for California Chateau and Danville Ranch in Danville CA

Homes in California Chateau and Danville Ranch on the west side of Danville continue to be in demand; last month there were a total of 9 homes on the market. Let’s look at the details of the homes that sold, went sale pending or homes that are still for sale:

• 1399 Fountain Springs Circle; 2295 square feet with 4 bedrooms and 3 baths sold for $835,000 which was close to the asking price.
• 1318 Strawberry Court: 1649 square feet with 3 bedrooms and 2 baths sold just under asking price at $575,000.

The following homes went ‘sale pending’:

• 1712 S Clear Creek place: 1447 square feet with 3 bedrooms and 2 baths is listed at 545,000.
• 1829 Mockingbird Place: 1916 square feet with 3 bedrooms and 2,5 baths is listed at $565,000.
• 1644 Fountain Spring Circle: 1447 square feet with 3 bedrooms and 2 baths is listed at $499,950. This is a short sale.
• 1706 S Clear Creek Place: 1632 square feet with 3 bedrooms and 2 baths is listed at $545,000. This is a short sale.

There are currently 3 homes for sale;

• 1304 Fountain Springs Circle: 2295 square feet with 4 bedrooms and 3 baths is listed at $650,000. This home has a 3 car garage. A great deal for the square footage!
• 1324 Fountain Springs: a short sale, 2400 square feet, 4 bedrooms, 2,5 baths and a 3 car  garage is listed at $675,000.
• 1314 Strawberry Court: a short sale, 1520 square feet with 3 bedrooms, 2 baths is listed at $449,000.

We’ll keep you posted on any new listings since Real Estate in this neighborhood is doing so well.

Both neighborhoods are very popular because of its price point, amenities, location and the fact that it is part of the San Ramon Valley Unified School District. The Home Owners Association fees are about $125 a month; there is a pool, clubhouse, greenbelt, play ground and tennis courts

Danville Ranch was built by Braddock and Logan in the years 1983 – 1986 and is located off San Ramon Valley Blvd near Fountaihttp://greenbrookneighborhood.com/manage-my-own-blogn Springs Circle. The homes range in size from 1200 sq ft – 2100 sq ft.

California Chateau in the same neighborhood was built by K and B Homes in the years 1988 – 1989.  The homes range in size from 1400 sq ft – 2300 sq ft. The local schools for Danville Ranch and California Chateau are Greenbrook Elementary, Charlotte Wood Middle School and San Ramon Valley High School.

Search the MLS for Homes for Sale in California Chateau & Danville Ranch

Search for Foreclosures I-680 Corridor

Our FREE In-Depth Real Estate Market Reports updated weekly, break Danville California real estate data down by zip code and price point. These are the best “real time” sources of data you can get for your local market.

Email John if you would like to know more about buying or selling a home or condo in Dublin California or call (925) 895-2694

Short Sales & Foreclosures Are Increasing in Blackhawk, Alamo & Other High End Communities

Most, if not all, real estate experts, professionals and pundits monitoring the local housing markets in the East Bay are predicting a price correction in the high end of the East Bay housing market. Looking at recent data from the Contra Costa MLS – it appears that the correction is starting to impact high end markets like Blackhawk, Diablo, Alamo and others.

Distress sales are accounting for about 70% of recent transactions in San Ramon.

Search the MLS for Homes for Sale

Search for Foreclosures in Contra Costa County East

Search for Foreclosures I-680 Corridor

Our FREE In-Depth East Bay Real Estate Market Reports updated weekly, break real estate data down by zip code and price point. These are the best “real time” sources of data you can get for your local market.

Email John if you would like to know more about buying or selling a home or condo in Dublin California or call (925) 895-2694