Finally I've found articles that actually take the opposite tack as most others... read this one from a Van Eck-Tillman Advisors who supposedly has predicted all major market moves for 32 years.
http://www.millionaireriches.com/wpblogger/?p=36#more-36
After reading the above, we may actually be in a lull, with a new housing boom coming as soon as Buyers realize the newspapers are wrong. So check out my internet links for home searches in San Francisco, and if you're interested in investment properties outside of city, I've found some pretty good investments, so drop me an email if you're interested.
8/28/06
Yes, another "Bubble" comment
Each time I read another article, I can't help but add my two cents. There are so many "Bubble Blogs" out there with 100% certainty that we're about to have a major crash just like the dot-com crash or the early 1990s when home prices took a dive. Unfortunatly for them (fortunately for us homeowners) the comparisons are way off. One big one is that job losses and unemployment caused so much of the duress in the 1990's when Seller's had to sell, and there were few buyers. Now, job reports are all positive, and Seller's are not under duress. Another is that there was an 18 month supply of homes in the early 90's, now it's about 6 months which is dividing line between a Buyer's market and a Seller's market. We've got a LONG way to go to 18 months supply.
The reason bubble pundits are so positive is that in 2007 about 12% of the nation's mortgage debt will switch to adjustable payments. But is this 12% of all homes? Not likely. About 8% of all homes change hands each year. With about 40% of loans being the risky ARMs the bubble pundits are so worried about in the last couple of years, that means about 3.2% of homes are at risk each year for the 2 or 3 year period that ARM's were so prominent. These ARM's also varied in length, generally from 3 to 10 years which spreads it out even further.
But let's say that 3.2% of homes are at risk each year. First off, 8% of homes change hands each year. That leaves nearly 5% not at risk, who don't need to sell. Plus, don't you think ARM holding homeowners know their rates are going to adjust? Don't you think they realized that they needed to Sell or refinance before their ARM's adjusted? If they got a 5 year ARM, maybe they realized that 3 to 5 years is the average length of time many homeowners stay in their homes? How many of these homeowners will really be at risk? My guess is a very few will not act proactively and end up in Foreclosure or in a rush sale. Definitely not enough to "crash" the market. Additionally, banks HATE foreclosure. And with money supply so massive, it's likely that Banks will do what they can to alleviate the situation, including offering great refinance programs. Banks are used to a very brisk mortgage business, and are doing what they can to keep that business high. So the so-called bad debt is likely to be sold, or rolled into a new mortgage. Yes, foreclosures will rise, and yes the media will jump all over thos new numbers. Personally, that just means it will be a GREAT time to invest in real estate to pick up cheap properties in an overall strong real estate market.
Finally, many of those whose ARM's are going to adjust are in the money - they're homes have appreciated quite nicely, so they can refinance and either keep their payments low, or cash out. Or they can sell comfortably without being upside down and having to do a Short Sale. The bottom line.... the bubble pundits need to look a little harder at the facts they use to justify their predictions. 3 trillion in adjustable debt coming due in 2007 sounds horrible at first glance, but upon closer inspection, it's likely to be a minor blip on the housing market radar.
sources:
http://www.nytimes.com/2005/06/16/realestate/16arm.html?ei=5088&en=d4ea9a4dd01af4d5&ex=1276574400&partner=rssnyt&emc=rss&pagewanted=print
http://www.financialservicesfacts.org/financial2/mortgage/homeown/
The reason bubble pundits are so positive is that in 2007 about 12% of the nation's mortgage debt will switch to adjustable payments. But is this 12% of all homes? Not likely. About 8% of all homes change hands each year. With about 40% of loans being the risky ARMs the bubble pundits are so worried about in the last couple of years, that means about 3.2% of homes are at risk each year for the 2 or 3 year period that ARM's were so prominent. These ARM's also varied in length, generally from 3 to 10 years which spreads it out even further.
But let's say that 3.2% of homes are at risk each year. First off, 8% of homes change hands each year. That leaves nearly 5% not at risk, who don't need to sell. Plus, don't you think ARM holding homeowners know their rates are going to adjust? Don't you think they realized that they needed to Sell or refinance before their ARM's adjusted? If they got a 5 year ARM, maybe they realized that 3 to 5 years is the average length of time many homeowners stay in their homes? How many of these homeowners will really be at risk? My guess is a very few will not act proactively and end up in Foreclosure or in a rush sale. Definitely not enough to "crash" the market. Additionally, banks HATE foreclosure. And with money supply so massive, it's likely that Banks will do what they can to alleviate the situation, including offering great refinance programs. Banks are used to a very brisk mortgage business, and are doing what they can to keep that business high. So the so-called bad debt is likely to be sold, or rolled into a new mortgage. Yes, foreclosures will rise, and yes the media will jump all over thos new numbers. Personally, that just means it will be a GREAT time to invest in real estate to pick up cheap properties in an overall strong real estate market.
Finally, many of those whose ARM's are going to adjust are in the money - they're homes have appreciated quite nicely, so they can refinance and either keep their payments low, or cash out. Or they can sell comfortably without being upside down and having to do a Short Sale. The bottom line.... the bubble pundits need to look a little harder at the facts they use to justify their predictions. 3 trillion in adjustable debt coming due in 2007 sounds horrible at first glance, but upon closer inspection, it's likely to be a minor blip on the housing market radar.
sources:
http://www.nytimes.com/2005/06/16/realestate/16arm.html?ei=5088&en=d4ea9a4dd01af4d5&ex=1276574400&partner=rssnyt&emc=rss&pagewanted=print
http://www.financialservicesfacts.org/financial2/mortgage/homeown/
Home Size - the meaning of Square Feet
A common question among home buyers is what is included in "Square Feet" measurements. I'll explain what a home appraiser explained to me, and add my own thoughts that you ought to be aware of when comparing homes.
First, no outdoor space of any kind is included in Square Feet (SqFT) measurements. That includes decks, yards, roof decks, etc. Of course each of these add greatly to value. Imagine a deck right off your kitchen allowing you to BBQ or just relax right outside. Two condos with 1,200 SqFt would justifiably feel much different in size, so when comparing Price Per SqFt be careful to take this into consideration.
Second, I was told appraisers measure from the outside of the walls in, and include ALL interior space. This means closets are included, and it of course means an extra wide hallway that can only be used as a hallway, and foyer's or other types of "wasted" space are included. This is VERY important too. The same 1,200 SqFt Condos would have dramatically different living spaces. In many older Victorian or Edwardian Condos you'll find very wide hallways. Whereas in new Condos, or even in other Victorians, you'll find minimal hallway space. I've seen 1,600 SqFt Condos that felt smaller than well laid out 1,200 SqFt Condos.
Lastly, it is not unusual to see significant differences in SqFt measurements. One appraiser might measure from the outside of the wall inward. This adds about 1 foot of space if the walls are 6 inches thick. And then there are just plain old mistakes made in measurements. So as a Real Estate Agent who does VERY thorough "CMA's" (Comparative Market Analysis) to help my Buyers and Sellers understand the value of homes, I DO use price per SqFt to make comparisons. But it is only one of the many things I compare and analyze. I'll try to visit the comparable homes, but when I can't I thoroughly review the photos from the Listing, I read the marketing and "agent-only" remarks, I check the tax records for SqFt size, and I'll call both the Seller's agent and the Buyer's agent in the transaction for the comparable home that sold. After gathering and analyzing all of this information, only then will I be able to include or eliminate some of the ones that seemed comparable based on SqFt size.
The bottom line for you.... as long as the space is livable, and what you want, that should be much more important than a home that claims to be larger, yet doesn't feel it.
First, no outdoor space of any kind is included in Square Feet (SqFT) measurements. That includes decks, yards, roof decks, etc. Of course each of these add greatly to value. Imagine a deck right off your kitchen allowing you to BBQ or just relax right outside. Two condos with 1,200 SqFt would justifiably feel much different in size, so when comparing Price Per SqFt be careful to take this into consideration.
Second, I was told appraisers measure from the outside of the walls in, and include ALL interior space. This means closets are included, and it of course means an extra wide hallway that can only be used as a hallway, and foyer's or other types of "wasted" space are included. This is VERY important too. The same 1,200 SqFt Condos would have dramatically different living spaces. In many older Victorian or Edwardian Condos you'll find very wide hallways. Whereas in new Condos, or even in other Victorians, you'll find minimal hallway space. I've seen 1,600 SqFt Condos that felt smaller than well laid out 1,200 SqFt Condos.
Lastly, it is not unusual to see significant differences in SqFt measurements. One appraiser might measure from the outside of the wall inward. This adds about 1 foot of space if the walls are 6 inches thick. And then there are just plain old mistakes made in measurements. So as a Real Estate Agent who does VERY thorough "CMA's" (Comparative Market Analysis) to help my Buyers and Sellers understand the value of homes, I DO use price per SqFt to make comparisons. But it is only one of the many things I compare and analyze. I'll try to visit the comparable homes, but when I can't I thoroughly review the photos from the Listing, I read the marketing and "agent-only" remarks, I check the tax records for SqFt size, and I'll call both the Seller's agent and the Buyer's agent in the transaction for the comparable home that sold. After gathering and analyzing all of this information, only then will I be able to include or eliminate some of the ones that seemed comparable based on SqFt size.
The bottom line for you.... as long as the space is livable, and what you want, that should be much more important than a home that claims to be larger, yet doesn't feel it.
Supply-Demand & the "Bubble"
U.S. Population growth is roughly 3 million people per year, yet in one of the most expansive housing booms in history the U.S. added "only" 1.8 million new housing units. With all the bubble fears, builders may slow in new construction, but population growth seems to be rising.
The current average household size is about 2.37 people per household, yet new home growth vs. population growth is equivalent to building one new home for every 1.53 people. While this might seem that we're overbuilding, in fact household size seems to be shrinking rapidly with more single people buying homes, delaying marriage, and limiting their households when they finally do marry and have children. Plus, the retiring Baby Boomers are buying second and even third homes, which is 1 person per household if you consider a retired couple with 2 homes.
Whats more, certain states are growing even faster than the U.S. in population vs. housing unit growth. Arizona's new construction must squeeze in 2.29 persons per household, yet this is a retirement and second home mecca (and you thought Arizona was a bad investment now - NOT!!!). Texas is at 2.17 persons, and Utah at 2 persons per household. California is "only" 1.59 person per new household being built, but that is higher than the national average, and here in San Francisco, the persons per household is likely much lower than the rest of the country, AND we're not building many new units.
As of today, Monday August 28th 2006, interest rates have slipped for 5 consecutive weeks. Rising rates is the #1 culprit cited by Bubble maniacs as the cause of the so called Bubble. But with rates staying steady, and population on a never ending upward spiral with land not increasing, demand should continue to outweigh supply and continue to increase property values for eternity. Personally, I think the bubble has already burst earlier this year. Now home prices are steady, and are likely to start an average increase each year around 3% or so. However, when you read news reports in the coming months that show a turn down in prices, longer time on the market, and fewer homes being sold, keep in mind that what you're reading is older news. The news about the decline I saw from September 2005 through March of 2006 has yet to come out. When it does come out it will scare the heck out of everyone. To me that means that between right now and when that news comes out will be the ideal time to pick up homes for bargain prices just before everyone realizes prices are already on the rise once again.
Sources for this article included:
http://www.census.gov/Press-Release/www/2006/cb06-127table3_rev.xls
http://www.census.gov/Press-Release/www/releases/archives/statepop05table.xls
http://www.bayareacensus.ca.gov/counties/SanFranciscoCounty.htm
wikipedia.org/
The current average household size is about 2.37 people per household, yet new home growth vs. population growth is equivalent to building one new home for every 1.53 people. While this might seem that we're overbuilding, in fact household size seems to be shrinking rapidly with more single people buying homes, delaying marriage, and limiting their households when they finally do marry and have children. Plus, the retiring Baby Boomers are buying second and even third homes, which is 1 person per household if you consider a retired couple with 2 homes.
Whats more, certain states are growing even faster than the U.S. in population vs. housing unit growth. Arizona's new construction must squeeze in 2.29 persons per household, yet this is a retirement and second home mecca (and you thought Arizona was a bad investment now - NOT!!!). Texas is at 2.17 persons, and Utah at 2 persons per household. California is "only" 1.59 person per new household being built, but that is higher than the national average, and here in San Francisco, the persons per household is likely much lower than the rest of the country, AND we're not building many new units.
As of today, Monday August 28th 2006, interest rates have slipped for 5 consecutive weeks. Rising rates is the #1 culprit cited by Bubble maniacs as the cause of the so called Bubble. But with rates staying steady, and population on a never ending upward spiral with land not increasing, demand should continue to outweigh supply and continue to increase property values for eternity. Personally, I think the bubble has already burst earlier this year. Now home prices are steady, and are likely to start an average increase each year around 3% or so. However, when you read news reports in the coming months that show a turn down in prices, longer time on the market, and fewer homes being sold, keep in mind that what you're reading is older news. The news about the decline I saw from September 2005 through March of 2006 has yet to come out. When it does come out it will scare the heck out of everyone. To me that means that between right now and when that news comes out will be the ideal time to pick up homes for bargain prices just before everyone realizes prices are already on the rise once again.
Sources for this article included:
http://www.census.gov/Press-Release/www/2006/cb06-127table3_rev.xls
http://www.census.gov/Press-Release/www/releases/archives/statepop05table.xls
http://www.bayareacensus.ca.gov/counties/SanFranciscoCounty.htm
wikipedia.org/
8/21/06
8/18/06
Hiring a Listing Agent
First - why hire a listing agent to sell your home? Mainly because you are more than likely to get more money, and have to do much less work. "More for less" vs. trying to sell on your own, and having to work very hard without knowing the tricks of the trade that only experience can bring. What those tricks of the trade are is an entire article, or book, unto itself, but rest assured, any mistake can cost you lots of money in selling too low, or taking too long to sell, or setting yourself up for potential law suits by missing important disclosures.
I'll touch on a few of the key tricks of the trade that you ought to ask about when you are comparing and interviewing Listing Agents. Just about every expert says "interview at least three listing agents". I couldn't agree more, even though that means I'll have at least two competitors each time I meet with a potential Seller client.
So what questions should you ask each Listing Agent? Here are some key ones:
1. How will you attract the most amout of buyers to my home?
2. How will you generate and/or negotiate the highest possible price for my home?
3. What do you do differently than other Listing Agents?
4. Do you offer any guarantees?
5. What is my home worth - show me how you got to that number?
6. What commission do you charge - how does that effect my bottom line?
From the above answers you will discover how confident the Agent is, how knowledgable, and you will have much to compare between the three or more agents you interview. One of the "new" tricks of the trade is use of the internet to attract buyers. The internet has taken over for print (magazines and newspapers) in a big way, and effective use of the internet is only practiced by a small percentage of Listing Agents even though research shows this is what Buyers use to find homes. If Buyers use the internet, why isn't your Listing Agent? If you're selling on your own, are you an internet expert? Do you know how buyers find homes and what they're looking for?
What about commission. The biggest mistake Sellers make is in trying to save commission rather than thinking about how a low commission is more than likely to lead to a much lower sales price. So ask what you're likely to Net in a sale, and how the Listing Agent thinks he/she can get more for your home. But commission is negotiable, and you ought to have a thorough discussion about it. Those that say "take it or leave it" ought to be left in the dust. Keep interviewing until you find a great agent who can illustrate how the commission can actually help you sell your home.
Finally, a true testament to whether or not an agent is experienced is in their "CMA" or Comparable Market Analysis which estimates your home's value in the current market. This requires market expertise, and is one of the most critical elements in any sale since the CMA is what you'll base your "Asking Price" on. Price it too high and you may lose money in the end. In San Francisco, pricing it too low is rarely a mistake, but pricing it just right, is a must to guarantee the most buyers coming through, and the most and best offers.
If you'd like to interview me to get all of the above answers, then just drop me an email to robr@kw.com
I'll touch on a few of the key tricks of the trade that you ought to ask about when you are comparing and interviewing Listing Agents. Just about every expert says "interview at least three listing agents". I couldn't agree more, even though that means I'll have at least two competitors each time I meet with a potential Seller client.
So what questions should you ask each Listing Agent? Here are some key ones:
1. How will you attract the most amout of buyers to my home?
2. How will you generate and/or negotiate the highest possible price for my home?
3. What do you do differently than other Listing Agents?
4. Do you offer any guarantees?
5. What is my home worth - show me how you got to that number?
6. What commission do you charge - how does that effect my bottom line?
From the above answers you will discover how confident the Agent is, how knowledgable, and you will have much to compare between the three or more agents you interview. One of the "new" tricks of the trade is use of the internet to attract buyers. The internet has taken over for print (magazines and newspapers) in a big way, and effective use of the internet is only practiced by a small percentage of Listing Agents even though research shows this is what Buyers use to find homes. If Buyers use the internet, why isn't your Listing Agent? If you're selling on your own, are you an internet expert? Do you know how buyers find homes and what they're looking for?
What about commission. The biggest mistake Sellers make is in trying to save commission rather than thinking about how a low commission is more than likely to lead to a much lower sales price. So ask what you're likely to Net in a sale, and how the Listing Agent thinks he/she can get more for your home. But commission is negotiable, and you ought to have a thorough discussion about it. Those that say "take it or leave it" ought to be left in the dust. Keep interviewing until you find a great agent who can illustrate how the commission can actually help you sell your home.
Finally, a true testament to whether or not an agent is experienced is in their "CMA" or Comparable Market Analysis which estimates your home's value in the current market. This requires market expertise, and is one of the most critical elements in any sale since the CMA is what you'll base your "Asking Price" on. Price it too high and you may lose money in the end. In San Francisco, pricing it too low is rarely a mistake, but pricing it just right, is a must to guarantee the most buyers coming through, and the most and best offers.
If you'd like to interview me to get all of the above answers, then just drop me an email to robr@kw.com
8/15/06
State of the market - August 2006 update
Someone living out of state just asked, so I'll recap my basic findings given my recent Listings, and my recent Buyers who have bought properties.
1. Desireable properties, in desirable neighborhoods are flat at worst, with some areas up from last year, and some properties still getting multiple offers. Although it's usually 3 to 5 offers, not 10 to 30 offers.
2. Undesirable properties, in undesirable neighborhoods have taken a beating.
3. Areas like South Beach and SOMA where new construction continues to go up, thereby continually increasing supply is a unique area all to itself. It still looks like a stand off to me. Enough buyers are buying to keep prices from falling, but the inventory is growing every month with Seller's choosing to just wait for the right offer without dropping the price. I estimate a 3 to 4 month supply of homes for sale right now, which is very high for San Francisco. Then again, 6 months is what the experts say is the dividing line between a Seller's market and a Buyer's market. But my feeling is we may jump up to a 6 month supply in September since many Seller's wait out the Summer before listing their homes. If that happens, Seller's may blink first, and prices would start coming down.
4. Even if South Beach and SOMA come down in prices, I still don't see that effecting the very pricy north eastern part of the city, or neighborhoods like Noe Valley where there is next to no new supply. Demand is still higher than supply, and well priced homes are selling quickly. Plus there are still a ton of buyers on the sidelines just waiting for these areas to drop so they can get in. So if it were to drop, these buyers would prop it right back up.
Finally, interest rates have remained steady right around the 7% market, and as long as they don't go up further, there is no new pressure on prices.
So is it a good time to buy? Well, that depends. Not if think you'll get the same kind of crazy price appreciation of prior years. But it is if you want to buy and hold for at least a few years. Buy in a less desireable area, and you've got your bargain at 10% to 20% below last year - you can wait for the next crazy market to prop up prices. Buy in a more sought after higher priced area you will still pay a premium, but at least you don't have to fight to buy it against 10 to 30 other offers. Don't expect these areas to drop, so if you want to own a home, now is a good time to buy.
Stay on top of the market at www.SF-MLS-Search.com and email or call me if you're looking for more help.
1. Desireable properties, in desirable neighborhoods are flat at worst, with some areas up from last year, and some properties still getting multiple offers. Although it's usually 3 to 5 offers, not 10 to 30 offers.
2. Undesirable properties, in undesirable neighborhoods have taken a beating.
3. Areas like South Beach and SOMA where new construction continues to go up, thereby continually increasing supply is a unique area all to itself. It still looks like a stand off to me. Enough buyers are buying to keep prices from falling, but the inventory is growing every month with Seller's choosing to just wait for the right offer without dropping the price. I estimate a 3 to 4 month supply of homes for sale right now, which is very high for San Francisco. Then again, 6 months is what the experts say is the dividing line between a Seller's market and a Buyer's market. But my feeling is we may jump up to a 6 month supply in September since many Seller's wait out the Summer before listing their homes. If that happens, Seller's may blink first, and prices would start coming down.
4. Even if South Beach and SOMA come down in prices, I still don't see that effecting the very pricy north eastern part of the city, or neighborhoods like Noe Valley where there is next to no new supply. Demand is still higher than supply, and well priced homes are selling quickly. Plus there are still a ton of buyers on the sidelines just waiting for these areas to drop so they can get in. So if it were to drop, these buyers would prop it right back up.
Finally, interest rates have remained steady right around the 7% market, and as long as they don't go up further, there is no new pressure on prices.
So is it a good time to buy? Well, that depends. Not if think you'll get the same kind of crazy price appreciation of prior years. But it is if you want to buy and hold for at least a few years. Buy in a less desireable area, and you've got your bargain at 10% to 20% below last year - you can wait for the next crazy market to prop up prices. Buy in a more sought after higher priced area you will still pay a premium, but at least you don't have to fight to buy it against 10 to 30 other offers. Don't expect these areas to drop, so if you want to own a home, now is a good time to buy.
Stay on top of the market at www.SF-MLS-Search.com and email or call me if you're looking for more help.
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