What’s Really Going On?

I think it’s time we had a chat.  A serious chat.  This market is messed up, yo.

So…. what are we seeing out there today?  Good homes that should have sold that didn’t?  Yes.  What?  But aren’t more people moving here?  Aren’t rates still good?  Aren’t buyers still out there?  Yes, to all of those questions but the market got strange.  It’s like we went to sleep on Christmas Eve and woke to a different real estate world here.  Explain that?  Oh, I will.

Let’s start with the article from the SF Gate from Friday, March 25 that stated the Bay Area has grown by 90,000 people from 2014 – 2015.  It’s not as great as the 106,000 that moved here in 2013 but that’s still a lot of people.  I’m sure you’ve noticed it on the road, in Whole Foods, trying to get a table at State Bird Provisions.  It’s crazy how we’re growing so much that when you see the mega structures popping up along 101, it makes sense.  We’re going to have housing for these people but our infrastructure isn’t making accommodations when you look at our roads which is pretty frustrating.  Our schools are also way impacted but that’s another tangent.  However, they’re only building luxury apartments assuming that the influx continues and they can afford it.  Can they?  That’s a scary proposition if you consider what would happen if there were mass layoffs – all these projects will stop or sit empty.  Yahoo has already started tightening their pants, will other companies follow in the next few years?  How will that affect these Chinese giants that will own these mega-structures?

So is it a bubble?

According to the CEO of KB Homes (a local builder), we ARE NOT in a bubble.  Oh, that magic word that’s so cute when you’re 4 and terrifying when you’re 40.  Jeff Mezger doesn’t want you to worry your pretty little head about it because, “$1.5 million is affordable in the Bay Area right now.”  It’s great for his business to tell us we’re not in a bubble, everything is fine.  I’m kind of curious why the SF Gate would go to a home builder to ask this question.  It seems like a publicity stunt.  Here’s what I see – $1.5 million as a median home price is unreasonable.  It’s superb to have dual tech or bio-med incomes but that’s the only sector that can afford that right now.  How will our nurses, firemen, teachers, paramedics afford to live here?  It’s unfair to degrade their quality of life with two hour (each way) commutes to the valley.  I think this will be our first mass exodus if you don’t count the natives moving to Portland in droves because they’re already priced out.  With minimum wage not set to reach $15 until 2022, I think businesses will struggle to find the employees who are needed for services here (so expect service quality to go down because only teenagers living with their parents can afford to work for $9 an hour); unless we build affordable apartments, it’s not sustainable.  We can’t have a society of only rich people because we like luxuries like grocery shopping and someone to bandage your kid up when he falls at school.

That brings me to another really interesting article I read on Thursday, also on SF Gate – Palo Alto considers subsidized housing for families making under $250k (per year).  Let that sink in for a bit.  A quarter million in earnings per year is now the middle-class poverty line in Palo Alto.  That’s considered very well off anywhere else in this country.  Palo Alto is doing this specifically to keep their teachers, firefighters, police officers, and government workers where they work.  If they see it and we’re seeing it…. why are other cities not following suit?  Affordable housing isn’t a negative word and it’s going to be necessary.

Here’s another reality check – it’s getting harder to get a loan.  What?  But Sterling Bank is now doing undocumented loans!  (If you sign up for one of these or you sell your home to a buyer with one of these loans…. well, I’m going to guess you weren’t paying attention a few years ago).  Lending has gotten harder to obtain in the last 4 months since TRID started and lenders will tell you it hasn’t changed anything but waiting times but I don’t believe them.  My clients have good jobs.  They’ve worked hard, achieved stellar credit, and now have a down payment saved up.  We send them to a bank that has always performed and…. we’re closing late.  Things are and aren’t happening.  Underwriters are tightening their belts and not making exceptions.  Relatively low risk loan applicants are being put through the ringer.  Not only did I have a client with solid employment (10 years at one company!), astounding credit, and large reserves – he also answered the lenders emails and got him what he needed within very short time frames and he still had problems.  I’m thinking this speaks way louder than the CEO of a building company saying everything is great!  This scares me.  This is why homes are sitting on the market and falling out of escrow.  This is why having an agent who vets the buyers is super important but it doesn’t always mean you won’t be effected.

I think we’ll see an interesting Spring but by the end of the year and going into 2017, it’s going to level out.  Buyers are either waiting to see what happens or they’ll jump in and it will be like years before this where prices will climb until Summer hits.  It’s really hard to predict right now but I think the lower price ranges will be fine.  It’s that $1 million + that will be affected by buyers cold feet.  And let’s not forget it’s an election year.  Those always throw the market off!  Add to this the fact that we’re even mentioning the word “Bubble” and many buyers will cool their heels hoping to wait it out and get a deal in the future.  But that’s a big gamble because if we fall in 2017 or 2018, will it be to 2012 prices or Spring 2016 prices?  You just don’t know….

However, if your investment is for 10 years or more, real estate is still safer than stocks!

We’re those DIY people you’ve been warned about

Over this past year of home ownership, I (Sara) have discovered I have a special talent – I can find anything at Home Depot.  Anything.  That little dohickey that Dave can picture in his head but has trouble translating into words?  Found it.  Found it in an aisle three aisles away from where he was looking.  Who knew I’d be so handy?  It’s like I hold a PHD in shopping, luckily Dave is super talented at putting the parts together.  We make a good team.

On our latest project, we decided to tackle the tiny bathroom attached to our master bedroom.  We started talking about this bathroom years ago while staying in a suite at the Cosmopolitan in Las Vegas where I was enamored with the tub and the stunning aqua tiles.  I stayed up late using the little notepad drawing up ideas to layout the room and bathroom.  It morphed as we dreamed of a door leading out to a deck with a hot tub, possibly a wet bar so we could have coffee in bed, big picture windows looking out into the woods surrounding the tub, handmade blue lantern and penny tiles from Morocco – we dream big.

But here’s the reality.  I called it the creepy bathroom because there was almost always some creepy crawly thing hiding in there waiting to kill me.  I could tell you a comical story about the time there was a spider on my leg and I couldn’t get away from it because I was putting Vick’s vapor rub on my feet for a cough but we don’t have time for that.  I wouldn’t use the medicine cabinet because I didn’t know what was hiding in it and there was evidence something was hiding in it.  So one night, Dave cleaned the medicine cabinet – a really good deep clean and he decided he would caulk the separated seams to keep the crawlies out.  But he couldn’t live with the faucet because he likes a single handle, not two.  So we shopped for a faucet and stocked up on caulk.  But do you put a fancy faucet in a bathroom you don’t love?  Or buy cheap?  Do the cheap ones hold up?  None of these cheap faucets have the drain stopper we need.  Oy vey!

While standing in the bathroom discussing faucet heights, I noticed something on top of the window molding.  And there he was.  The offensive creepy crawly leaving gifts in the medicine cabinet.  A gigantic millipede.  Ewwwww!  Obviously I stepped out of the very small bathroom now inhabited by my husband and this giant bug he’s trying wrangle and scream again because there’s something living on the molding above the bathroom door!  Relax, it’s just the key.  We’re replacing the medicine cabinet now!

So we’re going to have an expensive faucet and a nice medicine cabinet over this vanity we don’t really love that has super limited counter space?  Let’s replace that, too!  And this is the story of how we went from “Let’s move this wall and expand under the house and put in french doors!”  To the reality of this:

I think only 24 hours had passed between “Maybe a new vanity….?” and Dave tearing the old one out.

It’s not my dream bathroom but it’s functional and less creepy and I love that.  That wall to the right?  It was supposed to go but we opted to make the bathroom usable now and not wait 10 years while we “figure it out.”

We found a cheaper version of the Kohler vanity we used upstairs, it’s all aluminum and since it’s recessed into an exterior wall, Dave caulked the outside to keep moisture and bugs out.  We found the cabinet at our place in the city where we also purchased all of our kitchen and upstairs bathroom cabinets.  We opted for white to give the room a light, clean, modern feel.  We went with a banjo counter so we’d have extra space to charge our toothbrushes and try to keep the area around the sink less cluttered.  I spent an extra $50 to have tile back splash instead of the short quartz pieces that come with the counter top.  I think this gave it a nice feel, will be easy to keep clean, and gives our tiny room a touch of character.  In reality it also meant we didn’t have to re-texture and paint where the old vanity which was 2 inches taller and its back splash were attached.  It was pure kismet that we found tile the exact height we needed between the mirror and counter.  We added those sockets to the left because the socket on the right is so close to the cabinet you have to choose between plugging something in and using the cabinet.  This is where having a brother in law who’s an electrician comes in handy!  The socket heights don’t match because we were working with an exterior wall with lots of studs and window framing but that’s ok because function is key.  We went with the same Hansgrohe faucet we have upstairs in a different finish because we really love it.

Obviously, it’s not done but after a week  of my husband disappearing at every opportunity (read: times when I did need him) to get this thing done, I’m pretty darn proud.  It wasn’t easy, he worked his butt off and there was that call while I was getting my haircut about how the counter top might need to go back because it wasn’t sitting right and losing two hours driving to SF to talk to the quartz guys… but there is no reward without a bit of stress, right?

Next, we’ll straighten the drawers, get some receptacle covers, add our sleek black handles (that I’ve been carrying around in my purse), paint the doors to the built in storage (white to match or pale gray), and try our hand at some linoleum tiles.

Dave showing it off to me now that we can really see the finish line!  And as Dave says, “You can finally wash your face in here now!”

Let’s talk about… Protection

I’ve got my mind on my money and my money on my mind…

Protection is something that’s rarely discussed in our industry but it’s so important.  Many agents love to blog about the market, how many lovely homes they’ve sold, how to look past a dated kitchen or a lack of curb appeal.  Don’t get me wrong, I love all that fluffy stuff, too.  What’s not openly talked about is one of the key factors you should be hiring an agent for.  With the birth of the internet and sites like Redfin, Trulia, and Zillow, you as a buyer or seller have access to the listings and the ability to do market research yourself.  You can identify your perfect home on your own, so why even hire an agent?  You hire an agent because whether you realize it or not, this is going to be one of the biggest investments in your life and you want to make sure your hard earned money is protected.

You may also want to protect your heart.  Sound silly? Maybe it’s not.  You’ve walked into this home and you’re already picturing your son’s first steps in the living room, your daughter walking down that staircase in her prom dress, or late nights snuggled on the porch with a glass of wine.  This home is going to become an extended member of your family, you’re emotionally invested.  Then you’ve spent the time trying to decipher the reports which are written in another language (“serviceable” means what?)  and you’ve decided that you can live with or fix the flaws because every home has flaws but not every home has what makes this one feel right.  You’ve also sacrificed, choosing to forgo fancy meals or vacations to build up that down payment.  But now comes the stressful part.  Will the sellers like my offer?  Will they like me?  Did I choose the right amount to offer?  Should I have gone a thousand dollars higher?  What if the others offers are all cash?  What if the other buyers have more money in the bank?  What if we don’t get it?  Will I ever find another home I love this much?

Let’s face it, you sign on the dotted line and you’re all in.  It’s a legally binding document.

Now let’s take a step back… You just signed a legally binding document with someone licensed by the state to write legally binding documents.  In California, agents are the only other entity beyond lawyers who can write such binding contracts and your savings (and heart) are on the line.  Did your agent explain this contract to you?  Are you aware of all the terms you’ve just agreed to?

How did you choose your agent?  Was it because they were nice and made you feel comfortable?  Are they a family member who maybe took a few online classes and thought, “Hey, I can sell houses now?”  Or did you pick the professional who successfully does this for a living, who studies the market and the paperwork as though it were a craft that can be honed but due to consistent changes in the law can never be mastered?

A few days ago, we were invited to be part of a small, exclusive forum made up of the top agents from our brokerage to discuss the two contracts commonly used in our area.  We challenged each other and used our real world experiences to pick apart each contract to point out the positives and negatives of each one because neither one is perfect for all situations.  Most buyers have no idea that there are two standard contracts in our area and even worse, most agents are only comfortable working with one.  However, it’s important to know that each purchase contract protects the buyer and seller in different ways.  While the contracts can be modified a bit through the buyer’s choice of terms and terms can be negotiated later, the main fact is the contracts are very very different and the contract your agent chooses for your offer may be the difference between opening the door to negotiations and a hard no.  For example, one contract obligates the seller to make repairs while the other one doesn’t… which contract do you think the seller is more likely to accept if he/she’s got one of each sitting in front of him/her?

This all comes back to working with a real professional.  You can find the house but we are the ones who help you leap off that cliff and (hopefully) dive into homeownership.  The quality of the contract your agent writes, the importance of knowing which contract the seller or their agent would prefer, the knowledge base your agent brings to the table in knowing how to give the seller what they want while still protecting your rights as a buyer – these are all the factors that can stand between you and the realization of a dream.  Your agent can make or break it; they truly can be the difference between you writing an offer and buying a home.  As a seller, an agent who understands all the purchase contracts coming in will protect your rights, too.

(Sara’s Notes:  This advice may not apply to you as many states in the US require a lawyer to write up the contracts.  If you do live in a state where the contract is not written by the agent, I’d still advise you to pick an agent who fully understands the process and can ensure the entity writing the contract executes it with your terms and conditions in tact.  Contract writing is often the first step in the negotiation process so it is key to make sure that you have a strong negotiator with your best interests at heart.  Once it’s in writing, it’s very hard to redefine your needs.)

Victory in DC

As Realtors sometimes we get political.  We don’t always want to but most often the powers that be don’t understand what we do and why it is done the way it is done.  Sometimes they make decisions that don’t benefit the general public – that’s you, the people we represent and care about.  Parties don’t matter to us, it’s the decisions that affect you directly that matter to us.

So it is with great pride that I get to announce that the National Association of Realtors finally won a 10-year battle with the U.S. Department of Housing and Urban Development that eliminates prepayment penalties on loans insured by the Federal Housing Administration (FHA) which makes up a good percentage of loans nationwide.  This policy change will prohibit the FHA from charging borrowers interest on their home mortgages after the mortgage is paid off on FHA-insured single family mortgages.

NAR made it clear that the prepayment penalty placed an unreasonable burden on consumers who are already facing high housing costs.  Programs like the FHA and Ginnie Mae are there to help our citizens realize the dream of home ownership.  Currently conventional loans, Veteran’s loans, and the USDA’s Rural Housing Service do not have post-payment interest charges.

This rule will go into effect January 21, 2015.

RE/MAX National Housing Report – July 2014

Curious how this recovery is effecting our country as a whole?  Overall Days on Market are down (excellent!), prices in metropolitan areas of the Mid-West are up, and an increase in inventory is having a positive impact on the nation’s real estate outlook.  Our market here in the SF Bay Area recovered faster than any other market and has settled into something that resembles a stable market (as depressing as that may seem to some who thought the Spring frenzy would last); now it’s the rest of the country’s turn to start seeing some positive numbers so those who wish to make a move can.

If you’re thinking about a change in the SF Bay Area, we’d love to help you!  If you are thinking about a change anywhere else in the world, don’t hesitate to contact us.  Through our vast network, we can help you find the right professional in your area to get you the best results!

REMAX_National_Housing_Report_July_2014

Are you thinking global?

If you’ve been thinking about selling your home, you may not have put a ton of thought into where your buyers are coming from. Or hopefully you have. Most sellers know they want to sell, hoping to get as much money as they can and move on with their lives and they trust their agent will expose them to the buyers. Or they blindly trust the internet will propagate their home’s listing to the sites the buyers are looking at. Every seller has one top priority whether they know it or not – to have their property exposed to the most qualified buyers. See that word I snuck in there? Qualified.  Sure the tire kickers will show up but you want solid offers.

A good listing agent knows where the qualified buyers are coming from and how they’re searching for their next purchase. If they’re looking locally, the listing agent will know the importance of being represented on a certain site, not just represented but they’ll make sure the listing is at the top because very few buyers will stick around to see what’s on page 5. In our area, the key is being on the front page of Realtor.com, Zillow, and Trulia (and yes, being a showcase listing is something we pay for out of our commission because we know how important it is to our clients, don’t assume every Realtor does this).

What if a large percentage of your buyers aren’t local? What if they’re looking at homes in your area from the comfort of their couch in China or Canada? They’re qualified, competitive, and making up a significant percentage of the buyers. Are they seeing your home?

We’ve heard sellers express that they don’t see the importance of working with a global agent, they don’t care if the company representing them has a global presence. I’m encouraging you to think globally because your buyers are.

RE/MAX has a presence in over 85 countries (I believe the total is 91 as I’m writing this) and is one of the most trusted real estate brands in the world. Our clients get the benefit of having their homes showcased on one of the most searched sites in the world for real estate and those buyers are put in touch with me directly because no one knows your home better than me, your listing agent. We have the benefit of having it all in one place so buyers in China can see my listing in Belmont and my Belmont retirees who dream of paradise can use the same site to look for homes in Playa Coco, Costa Rica.

Let’s look at the numbers from the National Association of Realtors (see slides below):

• 17% of the international buyers shopping for a home or investment in the US are shopping in California; second to Florida which has 23%
• Over 50% of the international buyers who bought a home in California last year were from Asia
• In the US, most of the International buyers made a majority of their purchases between May and August
• 39% of International buyers viewed the US as a desirable location
• 22% viewed US property ownership as a secure investment; this is even more important when considering the number of buyers in the Bay Area markets that didn’t see a huge price loss during the crash
• 31% not only said was a secure investment but a profitable one; we remain one of the very few markets that has not only recovered from the crash but a majority of our homes are worth well over their value at the height of 2008
• 42% of the International buyers searching for homes for sale on RE/MAX’s global site were looking in the US – far more than any other country in the world
• 4,542 is the number of unique page views global.remax.com saw in January 2014

And lastly…. 1

There is one office that has exclusive partnerships with remax.cn. We have a wonderful arrangement that allows us to showcase select listings on China’s national RE/MAX site giving our sellers exposure above and beyond the global site. Wouldn’t you like your home to have double the exposure to the fastest growing real estate buying sector in the world? The Hurun Global Rich List 2014 shows that China is home to 358 billionaires, second only to the US. Many studies have shown that no matter what your net worth, you want what most of us want – to have our hard earned money in a safe investment, to house our family in a safe neighborhood, good schools, steady employment, and a great location. All of which can be achieved by investing in the SF Bay Area.

Don’t take your chances and simply hope your home will be found by the right buyer. Make sure you list with the agents who will put your home in front of the best buyers to get you moving in the right direction.

We’re happy to help you with an evaluation, the advice is always free.  

Sara & Dave 650.200.7420