East Bay Blog

Thank for stopping by the East Bay Real Estate Blog. Before I begin today, let me remind you that what you read on our blog are just my OPINIONS on the outlook and direction of the market. Ok, with that out of the way, let’s begin.

If you’ve read my blogs before, you know that I try to keep my topics local. Many of you that read my blog are trying to get an insight into the status and direction of the Real Estate Market in the East Bay. Today however, I am going to write about the larger real estate market as a whole and the macroeconomic conditions which are guiding the real estate market. After all, we all see what is being shown on the news in regards to Real Estate. Like it or not, the macroeconomic conditions will affect our property values and how much we pay for property. No matter how desirable the Bay Area is, we are not immune to what is happening nationwide.

Last week was pretty bleak in terms of economic news. The stock market had one of its worst weeks in recent memory, and the housing data that came out (new home sales, existing home sales, & foreclosure/default notice stat’s for Bay Area) were not very good. What prompted the fall in the stock market last week is the concern that there is a “credit crunch” out there, meaning that it is becoming harder and more expensive for people and companies to borrow money. For the last several years now, interest rates have been low and lenders have been more than willing to lend money. This all began to change earlier this year with the sudden collapse of the sub-prime mortgage market back in February. Then early last week Countrywide came out and said they saw some problems starting to crop up in their second loan holdings. This means that people are starting to default on equity lines and 2^nd mortgages they have on their homes. This bit of news made the market extremely nervous because it is the first sign that trouble may be spreading from the sub-prime market into the “A” paper market. This is making it even more difficult from some borrowers to get loans, and of course is making the bad news we hear about Real Estate seem even worse. So with all this news, it is no wonder that there are a lot of buyers waiting on the sidelines and there are many nervous people out there not knowing in what direction to go with their real estate plans.

Now let’s bring it back to the East Bay. With all of the bleak news of last week, and all of the fear in the market, what is happening here? You may think that Real Estate in the East Bay is dead, but you’d be wrong. What I am seeing is the gradual return of the long term investor. The long term investor is not like the investor that we’ve seen in the last couple of years. The last couple of years we saw a lot of “flippers” looking for a quick buck. Come in, fix a property, and sell for a profit. Toward the end of the boom we saw the extreme of flipping. Where investors would not come in to fix a property, they would just buy and hold for a couple of months. Then, with the market moving up so quickly they would sell at a profit without doing anything to the property. These are really speculators, not investors. When speculators come in, it’s time to get out. So the long term investor that is gradually returning is the investor that plans to purchase and rent out a property for at least 7 to 8 years. This is a good strategy because that gives you enough time to not worry about the short term problems driving the current market. In addition we are starting to see rents rise nicely. This is another byproduct of the current market. As more buyers decide to wait before purchasing, and more former homeowners have to leave their homes due to finances, these people all rent. With more demand for rental property, rents are rising. This is good for the long term investor because in addition to buying a long term asset, the rising rents will help keep cash flow manageable in the event they rent the property out. In addition homeowners receive tax benefits for owning property.

It’s times like these when the smart investors come in to pick up what’s available. FEAR is driving the majority of the real estate market at this point. The best opportunities can be found where most others are scared to go. I truly believe this to be true. I am currently in escrow to buy another property myself. I really think this is a great time to go in where others fear to go and pick up cheap real estate.

As for you sellers, don’t worry. Property that is priced, marketed, and “dressed up” correctly will sell. If you have a proactive agent that is tuned in to what buyers are looking for, you will sell. If you want more info, drop me a line, until next time…

Hello East Bay Real Estate Blog readers. Unless you live in a bubble, you’ve probably heard something about the real estate market in the media today. We got the existing home sales numbers for June today and Bay Area Foreclosure numbers were also out for last quarter. Here is my take on what was reported today:

Existing Home Sale for June down 11.4% to 2002 levels

So this sounds pretty horrible and if you read any of the major news sites they tend to make it sound like there is even worse news yet to come. Well first of all, with all of the bad news I’ve been hearing about real estate over the last several months I would have thought we were in the worst market since 1989. 2002 was not that long ago, I don’t remember hearing anywhere near as much bad news about the real estate market in 2002 as I am hearing now. If homes are selling at the same pace as 2002, that’s not bad. What makes the media say it’s so bad is that compared to the last 4 years we are down quite a bit. Let me tell you, the last 4 years were not a normal market, and we are not going to see a market like that again for a long, long time. Perhaps not even again in our lifetime. Homes don’t normally double in value in 5 years like many homes did recently. We are probably going to see a flat market for quite a while. So if you are a buyer, what are you waiting for? If you think prices are going to drop even more from here, it will probably depend on where you are looking to buy, read on…

Median Sales Price of existing homes in June up 0.3% from a year ago.

At first glance this does not seem to make sense. How can prices be going up with all of the bad news we are hearing? The median price gains are a result of the sub-prime mess that some unscrupulous lenders caused over the last couple of years. Nice homes, in nice neighborhoods are still selling. They may not be appreciating in price for the time being, but mostly homes in more expensive neighborhoods are now seeing flat pricing. Buyers for these types of homes should make a move now. With all of the negative media, they are able to better negotiate terms. Homes in lower priced neighborhoods are a different story. These homes are not selling as quickly. These properties are still seeing price corrections down. The reason is many of the sub-prime borrowers who purchased homes in the last several years purchased in these areas. Now that their rates have fully adjusted they cannot afford their loans. Many of these homes are now on the market. More competition means lower prices. In addition, with tightening lending standards, people who would want to move into those homes now are not able to find a lender willing to lend. In these areas the market could still get worse. The Bay Area Foreclosure numbers that recently came out tend to confirm this fact, keep reading…

Bay Area Foreclosures for 2^nd quarter hit highest level in two decades.

Now this is bad news, but again it depends on where you live. Statewide homeowners received the most mortgage-default notices since the fourth quarter of 1996. What I think is the worse news is that the number of trustee deeds issued rose 800% from this time last year. From 1,936 a year ago to 17,408 this year, that is a huge increase. A trustee deed is issued when the bank actually takes back the deed to the house. In the past when default notices were issued, a seller would refinance or sell their home. Now with tightening lending standards and a soft resale market, those homes are going back to the banks. That is why we see the huge increase in trustee deeds. Again, these foreclosures can be traced to the lower priced neighborhoods. In the Bay Area foreclosure report, the three counties with the least likelihood of default notices were: Marin, San Francisco, and San Mateo. These are probably some of the most expensive areas in the Bay Area. The same can be seen in the East Bay, where the more expensive neighborhoods are holding up better then the less expensive ones.

The take away from today’s blog might be that depending on where you are looking, it is probably a good time to make a move. If you are looking at a more expensive neighborhood, prices are going to be pretty flat. You can leverage all of the bad news in the media to try to get the best deal possible. In the lower priced neighborhoods, now is the time to start bargain hunting. The bad news is out, and working with the right agent, you should be able to find those diamonds in the rough. Now more than ever, whether buying or selling it is important to have a qualified professional on your side to help guide you through this market. Realtors® must be aware of not only the local market conditions but also the macroeconomic conditions that are pushing the overall real estate market. Until next time…

Hello readers, welcome to the East Bay Real Estate Blog. It’s the final full week in July and the East Bay Real Estate Market shows continued signs of correction. It is especially true in the lower priced markets where I have seen an explosion in Short Sales (where the property is being sold for less than the amount owed to the lender). There are going to be some upset folks next year when they receive a 1099 in the mail for debt forgiveness. If you want to know more about this, read my previous post entitled “Foreclosure and Short Sale Tax”. The higher priced homes are holding up better. That is why you continue to see the median sale price in the Bay Area rise. The more expensive homes are selling, the lower priced ones are not. The secret is that the more expensive homes that are selling are being sold by Professionals instead of For Sale by Owners or inexperienced agents. Overall volume is definitely down. Homes not marketed correctly are just not selling.

One of the most common questions I am hearing is “is now a good time to buy/sell real estate”. It’s funny how everyone tries to time the market. A few years ago I remember hearing people ask how much longer they should wait before selling. Anyone that waited until after late summer of 2005 probably did not get as much as they could have. That is when the market first started to turn. My advice is that now is a good time for buy or sell, unless you are a flipper. Flipping property is hardest in the middle of a changing market. If you only have a 3 to 4 month time horizon, between your purchase and sale, I would suggest waiting a bit to make certain the correction has ended. I do believe we are a lot closer to the end of the correction then to the beginning. So here is my advice:

BUYERS- Now is a good time because-

• Mortgage rates are still near historical lows, and there is still access to easy money.
• Over time your Real Estate will appreciate in value. In the last 50 years, after adjusting for inflation your real estate has appreciated 9% per year in the SF Bay Area, 6.8% per year in New York and 5% per year in Boston. We are pretty much guaranteed long term appreciation.
• You get interest deductions from the IRS for the interest you pay for your home.
• You have control of your hard asset. Unlike stock or bonds, you control what happens to your home.
• The Federal Government allows you to sell your principal residence as long as you have lived there two out of the last five years, and walk away with $250,000 for singles, $500,000 for married couples TAX FREE
• It is impossible to time the market. By the time you see the market has changed it will be too late, the best deals will have past you by.

SELLERS- Now is a good time because-

• It’s not over till it’s over. If you need to sell in the next couple of years, it could get worse by the time you have to sell. As I told the buyers, it’s impossible to time the market, just like things could get better, they could also get worse.
• Inventory is still rising. It’s up to 6.8 months to 9 months from 5.7 months to 8 months in December 2005. More inventory means more competition for you.
• Delinquency rates are increasing. Sub-prime loans show a 10.5% delinquency rate. If you start seeing foreclosures in your neighborhood, it will affect your home’s value.
• Tax laws still favor you walking away from your sale with tax free money. With the government bail-outs that are likely to save the mortgage market, new tax dollars will have to be found to fund these bail outs. This may end up in a change to real estate tax laws.
• Your home can still shine. There are still sellers who are trying to do it themselves or hire “discounters” to help sell their homes. They are doing this because they think they need to squeeze every dime out of their home because of the market. What they don’t realize is the days of “discounters” have passed. It is tough to sell a house now. If you don’t hire dedicated professionals who will invest time and money to sell your home then you will either have to resort to bottom barrel pricing, or not sell at all. Better to lose a little now, then a lot later.

I think you can sum up my advice to both buyers and sellers as follows: It is impossible for anyone to time the real estate market. Try not to look at your real estate as a short term investment, because it shouldn’t be. It’s a long term investment. In the long term it will appreciate, it will house you, or provide cash flow if it’s a rental. It will provide tax benefits. It will give your security and a hedge against inflation.

If you have more questions, or if you want to discuss this issue further, don’t hesitate to contact me. I love real estate, and it’s what I do well. I am always willing to discuss it. Until next time….

Welcome to my East Bay Real Estate Blog. It’s the middle of summer, prime moving time. The market seems to have a healthy clip going. Although nothing like the last couple of years, deals are still closing. Top notch marketing and correct pricing strategy are helping to stabilize the market. More and more I am seeing the experienced agents walking away from problem listings and saving time and resources. There are many reasons why an agent would not take a listing. If they can’t list it correctly it will become a burden because it only drains time and money for the agent and the seller. For a listing to sell, the seller must be willing to take the advice of the professional and be willing to let agents help with staging, scheduling, pricing, and reporting.

I for one am now “re-listing” property for sellers who did not want to take our advice several months ago. They listed with someone else, and the homes did not sell.

Another trend I continue to see on the increase is the “part-time” agent. Without the right expertise and resource, many agents are dropping to “part-time” status, so they can pick up another job. In my opinion we will continue to see this trend until Spring of 2008. Be on guard for these types of agents. Selling your home should be your agent’s full time job. Would you hire a part time tax preparer to be your accountant?

It has been a little over a month since I updated my readers with East Bay sales numbers comparing month over month from last year, so it’s about time I give you this info again. The following numbers compare May of 2007 with May of 2006. This shows you where we were one year ago in regards to sales of single family homes. These numbers do not include condo/townhome information. If you need that, give me a call and I’ll get it for you.

Castro Valley

Median Sales Price- May 07-$741,000 / May 06-$742,000

Units Sold- May 07-29 / May 06-33

Average Days on Market- May 07-27 / May 06- 28

Dublin

Median Sales Price- May 07- $829,000 / May 06- $796,250

Units Sold- May 07-31 / May 06-20

Average Days on Market- May 07-38 / May 06-16

Hayward

Median Sales Price- May 07-$571,250 / May 06-$588,000

Units Sold- April 07-40 / May 06-74

Average Days on Market- May 07-30 / May 06-29

Livermore

Median Sales Price- May 07-$667,500 / May 06-$660,000

Units Sold- May 07-67 / May 06-93

Average Days on Market- May 07-26 / May 06-27

Pleasanton

Median Sales Price- May 07-$830,000 / May 06-$892,500

Units Sold- May 07-65 / May 06-50

Average Days on Market- May 07-20 / May 06-20

San Leandro

Median Sales Price- May 07-$525,000 / May 06-$580,000

Units Sold- May 07- 43 / May 06- 75

Average Days on Market- May 07-33 / May 06- 21

San Lorenzo

Median Sales Price- May 07-$550,000 / May 06- $565,000

Units Sold- May 07-13 / May 06- 22

Average Days on Market- May 07-25 / May 06-22

I hope you find the above information helpful, and of course this is just a tiny sample. If you need information about townhomes/condo’s let me know. Also, this is only comparing May 2007 to May 2006. If you would like information for other months, or full year, please let me know. As always your comments are welcome, until next time…