Tuesday, January 26, 2010

SF Bay Area among strongest gainers in S&P/Case-Shiller Index

An Associated Press article in the SJ Mercury News today talks about prices rising for the 6th straight month. The article is posted here:
http://www.mercurynews.com/breaking-news/ci_14270038

As a frequent news reader I'm sure you're wondering how we can get news like this after receiving comparable BAD news yesterday. What gives!? It's simple, bad news sells airtime and newspapers.

The media area still struggling with how to actually spin the recovery. Every major measure of a recovery has been good since summer 2009. We've seen consumer spending rise, unemployment drop (although it has wavered), construction spending rise, home sales prices and volume rise, etc. However, the media love disasters.

What I caution readers about is that the news is usually so general as to be irrelevant to the Bay Area or Los Altos in particular. Our area has seen median and average selling prices rise in recent months. We're seeing a balanced market without wild swings, inventory is relatively low and homes are selling relatively quickly.

2010 is going to be a good year for both buyers and sellers. Stay positive and take the news and stats with a grain of salt.

Sunday, January 24, 2010

Most expensive U.S. small town: Los Altos Hills at #4

Well it looks like we're not quite at the top of the list but we're very close and in good company with some well known towns for the well-to-do. I read an article in Yahoo Real Estate and Business Week Online about the most expensive small towns in the U.S. The article is here:
http://realestate.yahoo.com/promo/most-expensive-us-small-town-sagaponack-ny.html

Some positive news for us is that while the median price in the list of Top 50 towns dropped 5.4% in November, the prices in Los Altos Hills rose. That reflects what I've been seeing in Los Altos and Los Altos Hills, prices are moving up and the high-end probably saw the bottom the middle of last year.

A few other local towns making the list include Monte Sereno (18), Loyola (21) NOTE: this isn't a real town but area near Los Altos, West Menlo Park (50). What the last two towns show is that the data was compiled using sources that identify areas that aren't really "towns" in some cases. For example, Atherton isn't on the list and they have a population under 10,000 according to the last census. I'll reach out to Business Week about corrections.

Thursday, January 21, 2010

Silicon Valley house & condo markets show gains

The SJ Mercury News reported today that the median sales price rose 15% in December vs. the same period a year ago. Strength was primarily at the low-end of the market. The article is here:
http://www.mercurynews.com/top-stories/ci_14239079?nclick_check=1

What this means for Los Altos, Los Altos Hills, and other high-end markets is that increasing demand will support "move up" buyers coming from moderately priced markets.

As that starts to turn around this year, we'll see the average "days on market" drop and more multiple offer situations. While both of those would normally give rise to a big bump in prices (often 10% or more in Spring alone), I don't think we'll see the same situation this year.

The market in Los Altos and the Hills will certainly stay strong this year. However, even with strong demand I don't see huge gains in median and average selling prices. My reason is that the more prices go up, the few buyers available to buy. If we price too many buyers out of the market inventory will stagnate again. So, we need a balance between price increases and buyer demand.

Wednesday, January 20, 2010

UPDATE: China's real estate meltdown management

China announced today that they were tightening monetary policy and boosting reserve requirements for banks to prevent a possible meltdown from real estate speculation. The move, along with other news, sent the Dow Jones Industrials down over 1.5%. The original MSNBC article is here:
http://www.msnbc.msn.com/id/34952339/ns/business-stocks_and_economy/

As I said a few days ago, this is relevant because China is a huge buyer of our treasury bonds as well as goods and services from all over the world. The overall global economy and our recession recovery depend on China being strong financially. If they go down, we go down.

So, let's hope these new changes succeed in preventing a real estate bubble in China. If they do, our recovery should continue and recent improvements in home buying should continue as well - especially at the high end.

Tuesday, January 19, 2010

Use the lender you said you would in your offer

I had a situation where a buyer decided to try and get funding from a lender other than the one they got their pre-approval letter from. In my book this is a HUGE mistake on the buyer's part.

First, the pre-approving lender can keep the loan on track and not waste several days reviewing a loan application. Second, if you're going to change (for whatever reason) notify the listing agent immediately. If the buyer is rate shopping, fine but don't forget you have a financing contingency deadline to meet.

As it is, wasting time with no-name lenders and mortgage brokers often leads to conditions and issues that put the deal at risk. It may force the seller to grant an extension because the buyer and their agent didn't do what they said they would do. Shopping rates or lenders after going into contract puts the transaction at risk and shows poor communication between the buyer and agent as well as the buyer's agent and the seller's agent.

As a buyer, if you want or need to change from the lender you said you would use, be upfront about it. In this case, the buyer was trying to get a cheaper loan - that's understandable. However, because the buyer was denied, 9 days were wasted in the escrow process.

Buyers - do you think you should have to communicate about something like this?
Agents - what would you do in this situation?

Wednesday, January 13, 2010

China's real estate bubble...could it derail us?

As you're probably aware, China has a major role in the financial stability of the United States. They're the #1 buyer of our bonds which is critical to our government's ability to finance anything, including the economic recovery. The original story on MSNBC is here:
http://www.msnbc.msn.com/id/34800156/ns/world_news-washington_post/

Now, China is facing its own potential real estate meltdown. Prices have risen substantially in recent years making real estate speculation more lucrative than actual work. Sound familiar? It should. That's what started the mortgage meltdown here.

How does this affect us here and our local real estate market? On several fronts, including buyers of luxury homes, the general health of the economy, and interest rates. Many buyers of luxury homes (and property in general) have come from overseas as the value of the dollar dropped in recent years. With the recent drop in real estate prices that buying has continued. However, if the economy in China takes a hit we could see many of those buyers disappear. I see a significant number of overseas buyers of luxury homes in Los Altos Hills. The high-end market is rough enough but that would hurt even more.

China put curbs on bank lending yesterday which caused a slight dip in our stock markets. From a psychology perspective, having the market drop again as it did when our mortgage meltdown started would damage what little confidence we have in the current recovery. So from a selfish perspective, we want China to stay strong so our recovery can continue.

As for interest rates, the impact from a meltdown in China is difficult to predict. However, it could mean more limits on our banks to lend with higher costs as a hedge against defaults or to cover losses. We're not done with our own foreclosure storm yet. With rates rising in recent weeks, the up-trend will take a little wind out of our recovery's sails.

I'll keep an eye on this issue and post again when and if we see a real impact.

Sunday, January 10, 2010

Sawbuck comes to town

Sawbuck is a new search tool for finding properties available in the area. They also have a mobile capability. It was just launched in the Bay Area after performing in other large metro areas. Here's an article on the launch:
http://www.sfgate.com/cgi-bin/blogs/ontheblock/detail?&entry_id=54884

While I'm always interested in the latest tools for finding new homes, I don't see the advantage of this one nor do I think their mobile tools have much value. Certainly there are numerous iPhone, Blackberry, and Treo owners out there who will argue the convenience associated with home shopping from their phones. The people I see using mobile tools usually want two things: a map or open house information.

In my opinion, either of those needs are served by established companies. Trulia mobile already offers information on homes including open houses. If I want mapping, I'll go with Google Maps. So, I'm not seeing the value of Sawbuck. Does anyone else care to weigh in?

As for searches in general, either Realtor.com or Trulia are far superior in my opinion. In addition to searches they offer expertise and informative articles not offered by Sawbuck. We'll see how they do but I expect they'll go the way of so many other tools in the last few years - obscurity or offline.

Wednesday, January 6, 2010

Housing headed for a double-dip...I don't think so

An article on MSNBC and other media outlets reported that according to the National Association of Realtors, the number of people preparing to buy a home in November dropped -- the first decline in 9 months. Here's the article:
http://www.msnbc.msn.com/id/34704789/ns/business-real_estate/

The concern is that the only reason sales have held up is government tax credits and lower interest rates. Sure, those have helped but they're not the only reason. In a lot of markets around the country investors have been buying homes because they can rent them out for more than the mortgage payments. They've depleted low-cost inventory locally in most markets. Even city governments are getting into the act such as when Menlo Park bought properties within city limits as affordable housing. Investors are not being driven by the tax credits.

Even without investors, inventory levels are low locally and sales strong. Look at my post on Monday about closed and pending sales in Los Altos. If we see a dip in demand, it will likely remain at the top end of the market (which is still weak). There are sufficient buyers to keep local sales strong.

As for the rest of the economy, manufacturing is up, job losses are dropping, and consumer spending is improving. All these signs in the last few weeks point to a stronger economy. As those bolster consumer confidence and the media speak positively about real estate, we'll see the housing market continue to improve.

Monday, January 4, 2010

Starting off 2010 with low inventory and strong demand

Let me start by saying "Happy New Year" to all the buyers, sellers, and agents reading my posts. This year will be a great year on a lot of fronts, not just real estate.

We're starting off the year with inventory of available homes at exceptionally low levels, considering the market in 2009. Here's where things stand now:

Los Altos: 47 (37 single-family, 10 condo/townhouse)
Los Altos Hills: 34 (all single-family)
Mountain View: 59 (29 single-family, 30 condo/townhouse)

Just to put some perspective on how strong demand is, 7 homes in Los Altos closed in the last week of December and 4 homes went pending. That's pretty good in any week let alone a time when most people are away on vacation.

In Los Altos Hills, I had a call each day the week of Christmas (except Christmas day) for my listing. Three properties closed in the last week of December and 1 went pending. Not bad considering how few homes are on the market and the prices.

We'll see how many homes that expired or were pulled off the market last year come back on. If the economy continues to recover we should see local sales stay strong.