Hot Housing Market This Summer

It is unlikely the Federal Reserve will be increasing interest rates this month after a weak May job report (only 38,000 jobs created, 117,000 less than expected and the worst month for job creation in nearly six years). According to experts, the likelihood of a rate hike is down to a measly 4 percent, and that trend may carry over into July.

Thus, this summer could prove to be the hot time to buy or sell a home. In California – specifically the East Bay – selling season tends to be in the spring. Once we move into the middle of May, buyers and sellers become distracted with graduations, weddings, etc.

And once school is out everyone moves into vacation mode through mid-August, before families start getting ready for going back to school. Usually, we see an uptick in the number of homes that are on the market in the summer compared to the  the spring. With continued low rates, this summer might buck that trend with buyers out to purchase.Beautiful white, blue and beige living room.

To prepare, buyers should be pre-qualified for a mortgage before they start shopping and, ideally, desktop underwritten. It is best if buyers don’t make an offer contingent on the sale of their own home. For sellers, they should be ready to make themselves and their homes available for show. At minimum, have a staging consult done. Try to have your home staged before a showing.

 

Statistics show clean and pristine homes that are staged properly sell faster and for more money than ones that are not. Necessary improvements, such as new painting, replaced fixtures and refreshed house plants are huge for staging.

It is about getting it show and picture-worthy and keeping it neutral, not spending a lot of money on upgrades. As is the case with personal preferences, “What you think is a nice improvement is another man’s gold shag carpeting.”

The State of Convenience

The California Association of Realtors (C.A.R.) report that 69 percent of Americans are looking for ways to simplify their lives. Furthermore, they say, 74 percent of Americans will walk out of a store – even if they have exactly what that person is looking for – if the service is poor. And 45 percent of U.S. consumers say they are likely to pay for a service that provides extra convenience in their lives. See their graphic below:

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So, what’s the conclusion here? Consumers value time, and therefore convenience. This also translates to buying a home. Home buyers these days, especially millennials, want updated and move-in ready homes. They want properties conveniently located nearby public transportation or in an area with a high walking score.

As a seller, taking care of deferred maintenance, updates or remodeling will appeal to these convenience consumers.  Though you can’t change the location, you can highlight positive conveniences. As a buyer, know that living without some of these things may either get you a home or a better deal.

Market Commentary – Carol Rodini (Part 2)

As promised, I said I would write a couple of blogs from a Carol Rodini speaking event I attended. The first blog gives her thoughts on how China and Saudi Arabia may affect the real estate market in the coming months. Today, we’re discussing a general Bay Area real estate overview.

Carol said thatSF houses we (in the East Bay) are usually 6-8 months behind the other side of the Bay – meaning San Francisco and the Peninsula. What is currently happening there (and we may see this in the later part of the year) is that the media is reporting a growth of inventory. This type of news has adverse effects on real estate. In reality, there are two types of real estate: desirable and non-desirable. The media bundles them together, but Carol pointed out how they are different.

Prices have gone down on high-end properties, and buyers are getting hesitant and willing to stand by and watch what happens. For example, a house in San Francisco that was listed for $1.5 million sent out 30 disclosure packages. One buyer submitted a pre-emptive offer of $1.75 million all cash and the seller didn’t take it because they thought they could get more and wanted to market it a bit longer. On the offer due date, none came in. So they went back to the cash buyer and that person said no.

A few takeaways:

1. You can’t be over-priced in this market.

2. Buyers in the city are no longer playing the competition game.

3. Sellers need to be aggressive with their pricing, by pricing it slightly under market. The reason? Millennials buy with their stock options. And with the market volatility and changes, this is making them a bit more hesitant.

The East Bay will have a great spring. We traditionally see a bit of a slow-down in the summer, and depending on what the stock market does, we may follow in the steps of the city. Our average price point is much lower and we are seeing a bunch of first-time home buyers that can’t afford San Francisco or the Peninsula who are looking at the East Bay – at least until the prices drop on the other side of the Bay.

Can China & Saudi Arabia Affect the Real Estate Market?

On January 11, I attended a speech by Carol Rodoni about the Bay Area real estate market with an emphasis on the East Bay. My blogs are going to spread out over a handful of posts to give bite-size tidbits of her speech, which I always find very entertaining:

3dp_china3dp_map_flagCarol started off by saying that 2015 was an extraordinary year in real estate and outlining a few global situations to keep in mind that may have an impact on our 2016 real estate market.

China devaluing their currency:

Carol sees this move as a growing pain and a way to try to support their economy. Every Nov. 11, China celebrates “Singles Day,” the biggest on-line shopping day of the year. Nov. 11, written out as “11/11,” represents four singles, which is also referred to as “Double Eleven.” This past November, Alibaba broke its own record and increased sales by 60 percent, or $14.3 billion. By comparison, American sales on Cyber Monday were $1.35 billion. I don’t think we need to worry about China.

Middle East and the price of oil:

Oil now costs less than $27 per barrel and is still dropping, when only a few years ago it was $109 per barrel. Saudia 4695206-Oil-prices-dropping-vector-illustration-of-fuel-barrels-with-currency-icons-and-a-down-arrow-signify-Stock-VectorArabia has refused to cut down production, perhaps in the hopes of pushing out a few competitors. Saudi Arabia has a tremendous advantage, as their technology to extract oil is inexpensive compared to other countries; this includes the U.S., where fracking has become a provider of jobs in the Midwest. Saudi Arabia may be okay with lowering prices to eliminate smaller competition, like Iran, now that oil sanctions have been lifted.

As a result of how chaotic the world is, Carol doesn’t believe the Fed will raise rates more than twice in the next year. She said she believes the next rate hike won’t happen until June, and felt the hike in December was at the wrong time.  All this still makes for a great time to purchase or refinance as rates are still hovering below 4%.

 

Can a Seller Reject a Full-Price Offer?

Concerned guyI was recently asked this question as sellers often have concerns if they list their home slightly lower then recent sales, what would happen if they got a list price offer?  I saw a recent article on this subject and thought I’d address this concern in my blog.

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In short, the answer is yes, a seller can reject an at or above listing price offer.  A listing is a solicitation of offers, not an offer to sell.  This means that an offer at or above asking price does not necessarily mean the offer will be accepted.

In order for there to be a contract between buyer and seller, there has to be a “meeting of the minds” on all the elements of the contract.  The seller must agree to all elements of the offer including price, financing, contingencies, and time for performance.  If the seller has a problem with any of these elements, they have the right to reject the offer
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In a sellers market, listings often receive multiple offers, sometimes much higher than asking price.  This means that a buyers offer can be rejected because another buyer had a more appealing offer in terms of price, financing or terms like no appraisal contingency.

The bottom line … until the buyer and seller agree to all the terms of the purchase, there is no contract.

Mortgage Rates

decision_imageInterest rates have been hovering in the mid to high 3s and Janet Yellen (Fed Chairman) stated that the Fed will not raise rates in the near-term.  It should be noted the Fed is not the only influence on rates, there are many factors in our global economy such as the prices of gas, problems in Greece and overseas investors hanging out in our bond market which affect the rates.
With rates so low, I have many clients looking into “80/10/10” financing, which stands for an 80% loan-to-value (LTV) first mortgage, a 10% LTV 2nd mortgage, and a 10% down payment.  The purpose of getting house_balancetwo mortgages with 80/10/10 financing as opposed to one mortgage to 90% LTV is twofold: (1) borrowers avoid private mortgage insurance (PMI) by keeping their primary mortgage under 80% LTV; (2) borrowers get a much lower payment overall.   Overall payments are lower b/c borrowers have no PMI and because the 2nd mortgages are Home Equity Lines of Credit (HELOCs) with “Interest Only” payment options.   Almost all major banks offer HELOCs, but only a select few offer HELOCs that fund “concurrently” with a first mortgage.  If you are interested in knowing more, give me call (925) 899-7123 or send me a message.

 

The 15 Best County in the State for Livability – by Movoto Real Estate.

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The company used U.S. Census Bureau statistics covering a wide range of information to arrive at the rankings. The information was gathered in the following categories:

  • Unemployment rate (the lower the better)
  • Median household income (the higher the better)
  • Median rent (the higher the better, to indicate area’s desirability)
  • Median home price (the higher the better, to indicate desirability)
  • Percent of families below the poverty line (the lower the better)
  • High school graduation rate (the higher the better)
  • Average Commute Time (the lower the better)

Considering that high rents and home prices are included in the rankings, it’s not so bad to finish out of the Top 10.

The Top 10 of California’s 58 counties:

1. Marin County
2. San Mateo County
3. Santa Clara County
4. San Luis Obispo County
5. Ventura County
6. Placer County
7. Napa County (tie)
7. Orange County (tie)
9. Santa Barbara County
10. San Francisco County

~Kristin

“Sometimes I’m terrified of my heart; of its constant hunger for whatever it is it wants. The way it stops and starts.” Edgar Allan Poe

Tax Code for the Sale of your Home – Just a Reminder

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The tax code allows individuals to exclude up to $250,000 in profit from the sale of their primary residence; $500,000 for married couples filing jointly. This means that homeowners do not have to pay tax on up to $250,000/$500,000 of the profit from the sale of their home, thus avoiding the capital gains tax.

To use the home sale exclusion, you have to meet certain ownership, use and timing qualifications. You must have owned the home for at least 2 of the last 5 years before the sale. You have to have lived in it as a primary residence for at least 2 out of the last 5 years, and you can’t use this exclusion if you’ve already taken it within 2 years.

Generally, if you sell your home due to circumstances involving divorce, change in employment, change in health or other unforeseen circumstances but don’t meet the ownership, use and timing qualifications, you may qualify for a reduced exclusion.

~Kristin

“The best people possess a feeling for beauty, the courage to take risks, the discipline to tell the truth, the capacity for sacrifice. Ironically, their virtues make them vulnerable; they are often wounded, sometimes destroyed.” Ernest Hemingway

Home Equity Line of Credit (H.E.L.O.C.)

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Home Equity Line of Credit (H.E.L.O.C.) are popular once again, because borrowers have now more equity in their homes. They also come into play for buyers with 80/10/10 financing, which allows borrowers to put 10% down and avoid paying PMI. That happens because they have an 80% loan-to-value (LTV) first mortgage and a 10% combined LTV HELOC or 2nd mortgage.

How dos it Work? Here it is:
– Rate: Prime +1.99%
– Payment: Interest only for 10 years – but you can pay it off sooner
– Draw Period: 10 years
– Repay Period: 20 years

Here is why I like them – if it is a small amount, (i.e. similar to a car purchase), it can be paid off in a relatively short time – especially if someone gets bonuses, their income is steadily increasing or they are stock rich & cash poor (IPO). It avoids paying mortgage insurance, and if you pay it off, you can use it down the road for remodeling.

The only concern is they are not a fixed rate and are tied to the prime can climb significantly and we all expect rates to rise, however we as an industry thought that would have already happened. It might just be a great option one buyer, but it isn’t for everybody.

I like to have these discussions with my buyers so that they are informed and can make the best decision for their needs & situation. Options are a beautiful thing….

~Kristin

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Tips of the Trade – Common Mistakes To Avoid When Buying A Home

I am not a big fan of things stated in the negative, so I will translate each point to a positive Do.

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1. Do understand the local real estate market to determine pricing and location options – go to open houses, look at Zillow & Trulia for ideas on prices and what you get;

2. Narrow your search to what is available in your price range – having said that, it is best to get a pre-approval upfront so you know what you qualify to purchase and what your monthly payment will be. Give me a call if you would like a reference for some great lenders;

3. Do obtain a proper home inspection to identify problem areas that could prove expensive – everything is negotiable until you remove contingencies, know what you are buying;

4. Do identify all available financing options based on your monetary situation – the lending environment has loosened up ever so slightly and you can now get a conventional loan for as little as 3% down. Know your options;

5. Look for the best home for your family’s needs – The “perfect” home does not really exist. If your agent has not sat down with you to discuss what you are looking for in lifestyle, commute, future and top 3 most important features, then it may take you longer to sort that stuff out. A good agent helps navigate that process;

6. Familiarizing yourself with local schools, shops and other neighborhood amenities – school borders can be tricky, consult your agent and ask where you can verify the information. I have seen out of area agents note a home is in the Walnut Creek School District when it isn’t, but they make the assumption because the house is in Walnut Creek;

7. Consult your lender before making a major purchase or changing jobs – moving money around or purchasing a new car could affect your credit rating or ability to purchase the home; &

8. Do buy with resale in mind.

Call or email me to learn more about how I can help you with a home purchase.

~Kristin