Twilight Tour with wine and cheese on Friday 9/7!

With the kids back in school and the last wisps of summer fading away, you might be busier than ever. You might just need your own little Open House night to wind down and get away from it all for a few hours! If that’s the case, stop by 1947 Eagle Peak Ave. in Clayton for a wine and cheese Open House event!

This condo is so beautiful, it could star in the next Better Homes and Gardens Magazine. It’s a quiet respite with breathtaking views, top-of-the-line finishes and a serene appeal. It boasts 3 bedrooms, 2.5 baths, a deck overlooking the cozy backyard, and modern updates.

As usual, we will have our normal Open Houses this Saturday and Sunday from 1-4 p.m. each day, but you don’t want to miss the chance to see the house on Friday night from 5:30-7 with wine in hand. Join the neighbors for this exclusive event and take a look at this stunning space!  I would love to see you! If you like what you see, contact me at www.kristinlanham.com , 925.899.7123 or kristin@lanham.com. I’m happy to help with sell or buy the perfect home for you!

Today’s housing market vs. 2008’s market

Consultant Bob Schwab has a few interesting thoughts on the difference between the housing market in 2008 and the housing market today. He essentially points out that the landscape of today’s market is radically different than 10 years ago, so comparing the two era’s – even if numbers look similar – is tricky. Here are his thoughts below:

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Some are attempting to compare the current housing market to the market leading up to the “boom and bust” that we experienced a decade ago. They look at price appreciation and conclude that we are on a similar trajectory, speeding toward another housing crisis.

However, there is a major difference between the two markets. Last decade, while demand was being artificially created by extremely loose lending standards, a tremendous amount of inventory was coming to the market to satisfy that demand. Below is a graph of the inventory of homes available for sale leading up to the 2008 crash.

A normal market should have approximately 6 months supply of housing inventory. As we can see, that number jumped to over 11 months supply leading up to the housing crisis. When questionable mortgage practices ceased, and demand dried up, there was a glut of inventory on the market which caused prices to drop as there was too much supply and not enough demand.

Today is radically different!

There are those who believe that low mortgage rates have created an artificial demand in the current market. They fear that if mortgage rates continue to rise, some of the current demand will dry up (which is a possibility).

However, if we look at supply again, we can see that the current supply of homes is well below the norm of 6 months.

Bottom Line

We will not have a glut of inventory like we did back in 2008 and home values won’t come tumbling down. Instead, if demand weakens, we will return to a normal market (approximately a 6-month supply) with historic levels of appreciation (3.6% annually).

Separate from the Schwab blog, NAR Chief Economist Lawrence Yun says, “It’s important to note that despite the modest year-over-year rise in inventory, the current level is far from what’s needed to satisfy demand levels. Furthermore, it remains to be seen if this modest increase will stick, given the fact that the robust economy is bringing more interested buyers into the market, and new home construction is failing to keep up.”

And First American Chief Economist Mark Fleming says, “Millennials’ lifestyle and economic decisions are some of the main reasons we currently have a lower homeownership rate than expected, based on our Homeownership Progress Index. Yet, it is reasonable to expect homeownership rates to grow as millennials continue to make important decisions, including attaining an education and, later in life, getting married and buying a home.”

Glen Bell, a very analytical realtor in Berkeley, shared some charts with us, which also give additional insights into the disparities in the market:

Zillow_June_Numbers

Bell says he predicts a recession in 2019 or 2020, and that the real estate market will be a minor factor in it. Rising interest rates may offset some buying opportunities. It’s also hard to predict how much tax reform will play into this. Prices continue to rise and might be causing more people in the middle class to flee the Bay Area.

Months_Supply

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Glen's Numbers pg 1

Glen's Numbers pg 2

What happens in a slowing market?

Consultant Kitty Cole has some interesting thoughts on the slowing market that got me thinking: what exactly happens in a slowing market? I’ve re-purposed parts of her blog below and added my own thoughts on the market at this pace, as well as interest rates in terms of what somebody can buy.

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So, is this market change normal or is the slowing a correction? Here are a few thoughts from Kitty’s blog to help you figure it out:

The market has begun to change, albeit slowly. A small segment of the market has slowed down in several Bay Area counties, including San Francisco. The indicators of a slowing market are that the number of active listings rise, the “Days on Market” increases and price reductions occur. You may also see more contingent offers (but fewer with no contingencies at all).  My two cents: In Contra Costa County, we are in line with these indicators. The outer-lying areas such as Concord is where I am really seeing the price reductions and increased time on market. However, if the property is remodeled and priced right, there are still multiple offers, just not as many.

The buyer pool for your property has decreased in the last year because the interest rates have risen more than a full point. For every full percentage point they rise, the buyer’s purchasing power goes down by almost 10%. Buyers who could afford a home worth $1 million last year, can now afford $905,000. That alone will significantly impact the buyer pool.

As far as projections go, CAR and NAR both feel that there will be a slower 2019. They forecast a slow-down in the 2nd half of next year, but Kitty’s theory is that it will happen a bit sooner since some market segments are showing signs of correction. The economy is healthy and the unemployment rate is hovering consistently. The Fed has stated that there will likely be 2 interest rate hikes this year, which will price out some buyers. Given how long we’ve been in recovery mode in the real estate industry, it’s normal to expect a correction.
The economy: The economy is healthy (the GDP was 2.0% for the first 3 months and 4.2% for the 2nd quarter) and the unemployment rate is hovering around 4.2%. There have been 9 + years of recovery in the economy. There have been 5 and half years of recovery in the real estate market.
More of my two cents: Many analysts are predicting 2020 for a correction. Most are saying there will be a correction, the question is just “when?” We still have low inventory and our local economy is robust, so for me, the question is “will it pick back up in September and October after all the summer vacations are over and the kids are back in school?” Or, are these current changes going to continue? Nobody has a crystal ball, so we will see. Sellers who are on the fence will be considering “is this is about as high as the market is going to go for the near future?” If you believe that, then it is time to sell.

Bay Area rent prices are out of control

According to the San Jose Mercury News, the top three most expensive places for renters in the entire nation are in the Bay Area. We knew it was bad, but this is a whole new level of shocking. In that article, the author writes that with San Jose’s $13.50/hour minimum wage, a person would have to have more than 3 1/2 minimum wage jobs just to afford average rent. Crazy!

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To nobody’s surprise, the San Francisco, San Jose and Oakland areas were top three in the nation, but the East Bay isn’t much better off. You’d have to earn $93,000 per year to afford average rent in the East Bay. Given the costs of pretty much everything around here rising, it’s no surprise.

In the real estate market – whether buying, selling, or renting – you have to expect to pay a premium in the Bay Area these days. That’s where people like me come in handy! We can give you expert advice and help steer you in the right direction. Remember, the most expensive direction isn’t always the correct one.

Here are a few more interesting tidbits from the article:

  • 2-bedroom apartments in the South Bay will require you to make about a $50/hour
  • In San Francisco, Marin and San Mateo counties, it’s closer to $60/hour
  • This is a national issue: there is no state, metro area, or county in the U.S. where workers earning minimum wage can afford a two-bedroom rental home by working 40 hours per week
  • Five years ago, about 3,000 people came to the Community Services Agency for food – it’s now over 7,000.

Why bank statements are so important!

Our friend Jay Vorhees at JVM Lending has shared another important blog recently: why bank statements are so important for borrowing and financing for a home. You’ll want to read on to see what Jay says, especially if you’re in the market for a new home. You’ll find a copy of the (slightly re-formatted) blog copied below:

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STRONG BORROWER DENIED FINANCING – WHY?

We once had a borrower who qualified for financing in every way (income, assets, credit, etc.) but she was denied financing. The reason?  She had five unexplainable overdraft charges on her bank statements that indicated she could not manage cash.

Every borrower has to provide bank statements for every account used for “cash to close” (down payment and closing costs). There are no exceptions because lenders have to ensure that down payment funds were not recently borrowed or obtained through illicit means.

“Borrowed” down payment funds are not considered “seasoned” and they create debt ratio issues b/c they need to be paid back. In any case, lenders are required to go through every bank statement with a fine-toothed comb to look for every irregularity. Irregularities include overdraft charges, unusually large deposits, and unexplained regular monthly deposits or withdrawals, among other things.

Unusually large deposits have to be paper-trailed and explained or they are assumed to be borrowed funds (and they can’t be used for a down payment/closing costs funds). And unexplained regular monthly deposits and withdrawals often indicate the existence of undisclosed side businesses, support payments or other liabilities.

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In any case, borrowers often get frustrated when we ask them to explain so many things that are buried in their bank statements. But, we have to ask because bank statements tell lenders so much more than meets the eye.

This is, in fact, often one of the most time-consuming aspects of the loan approval process.

**

On a related note, Jay discusses something at the footnote of this blog: rates have climbed recently after a stretch of stability. President Trump’s comments about the Fed raising rates too quickly were the primary cause, but, according to the Wall Street Journal, the Fed may now be more likely to raise rates than it was prior to the President’s comments. This is because it will want to prove its independence from political pressure. How ironic!

7 repair requests to re-consider

Missy Yost of Inman News wrote an interesting article a while back about buyers being educated regarding which home repairs are actually necessary before finalizing a deal. I’ve re-formatted the original article below, with some of my insight added:

Most buyers and sellers understand that buying and selling a home requires negotiation. You give a little here, and they concede a bit there. But what do you do when you have a buyer who demands unnecessary repairs after a home inspection?

Educating buyers so that they better understand which repairs are necessary and which may annoy the seller enough for the deal to shatter is part of the job of a real estate agent. Here is a list of seven repair requests that buyers should think twice about before making.

1. Easily repaired items under $10

Whole-house inspectors often come back with a list of items that cost under $10 to repair or replace. Save yourself the hassle, and omit these things from the list of requested repairs. If repairs are not related to a safety issue or the breakdown of an expensive system, it’s better to refrain from listing them, if you are asking for a credit, than take them into account by rounding up.

2. Replacement of smoke and carbon monoxide detectors

Sometimes buyers are adamant they want missing smoke detectors or carbon monoxide detectors replaced. Although these are safety items, unless local codes say differently, it is better if the buyer installs the smoke and carbon monoxide indicators after closing. That way, they can make an informed decision on the type of alarms they feel most comfortable using in their new home. Fortunately, in our area, they are required by law to be installed and should be done prior to an appraiser coming out as they have to take pictures of them. If they are not there, the lender will not fund the loan until they have been installed and the appraiser has a picture to confirm.

3. Cosmetic issues in a resale home

Unless the home is brand-new construction, advising your clients against noting uneven paint or stained baseboards on a repair request is a good idea. Normal wear and tear should be expected in any resale home and should be a factor in the original price negotiations.  Homes are usually priced for condition and similar homes that have recently sold. Most buyers want a home that is move-in ready, thus why remodeled homes tend to sell at a premium.

4. Repairs related to minor plumbing and electrical issues

Often, a whole-home inspector will list in the report issues with simple electrical and plumbing items such as an upside down outlet, or corrosion on a fitting. Unless the problems cited are a safety concern, a buyer should not list them as a requested repair. Simple issues such as an upside down outlet or a corroded water line to a sink are simple DIY repairs or matters easily handled by a handyman.  Outlets that are not GFI’s tend to be common issue in our area. An outlet by water should be GFI – that is a health and safety issue, but for the rest of the outlets – especially if the house is 40 years or older – will not have GFIs, and the cost is about $350.

5. Repair of hairline cracks in the basement or driveway

Concrete expands and contracts naturally, and over time, cracks will occur. As long as the cracks are minor, don’t list them in a request for repairs. However, if the breaks are over a quarter inch, it’s an excellent idea to have a structural inspection. Structural cracks are a whole new ballgame.

6. Outdoor landscaping, porch and fence repairs

These items were visible at the initial showing and will be a factor in the initial offer and negotiations. It’s not a good idea to ask for things that were obvious at the beginning such as sod replacement, fence restoration, loose railings or loose hinges. The exception is if the repair is necessary as part of the loan process such as in an FHA, VA or USDA loan.

7. Replacement of failed seals in windows

Unless the window is under warranty, most sellers will refuse to fix a failed seal. Window seals fail over time with use, and depending on the age of the window seal, failure can be expected. It’s another simple fix, and sometimes you need to choose your battles.

For all items on this list that your buyer would like to have fixed and are not safety or related to the failure of an expensive system can be included in a request for credit at closing. Sellers are more likely to agree to a $300 credit for the buyer to replace 30 $10 items than they will to repair or replace the 30 issues themselves.

Is there a recession coming in 2020?

Is there a recession coming in 2020 or sooner? And if so, what does that mean for the real estate industry? Additionally, how do Chinese buyers affect California real estate? Jay Vorhees of JVM Lending (with a little help from The National Real Estate Post) has you covered:

The National Real Estate Post had a great video today with information I thought was well worth sharing. Marketing commentator Barry Habib discusses margin compression, the coming 2020 recession, why he is bullish on real estate even if a recession hits, and why Chinese buyers influence California real estate so much.

RECESSION IN 2020 – WHY?

Mr. Habib agrees with other prognosticators I have cited in previous blogs and illuminates two reasons why a recession is likely in 2020:

  1. Short-term rates are almost the same as long-term rates. I won’t explain the economics, but I will say we are at this stage in the interest rate cycle now; and
  2. Unemployment has likely bottomed out and will only increase at this point.

BULLISH ON REAL ESTATE EVEN IN RECESSION

Mr. Habib remains very bullish on real estate – even if a recession hits. He thinks a 10% correction is very unlikely for several reasons:

    1. It is different this time for reasons we have explained in previous blogs – tighter lending guidelines, more structural housing demand, etc.
    2. Rates come down during recessions and that props up real estate prices; and
    3. According to Mr. Habib, if you look at data from the last six recessions (other than the 2008 meltdown) you will see that real estate prices usually do not decrease significantly.

CA PRICES HURT BY CHINESE BUYERS PULLING OUT

15% of the money spent on real estate transactions in California is from China. But b/c China’s currency is now so much weaker than it was relative to the U.S. dollar, Chinese buyers are now sitting on the sidelines. This drop off in demand is already affecting prices, particularly on the high end. But, according to Mr. Habib, this too will end and Chinese demand will return.

I hope this helped you learn a little something about the impending recession, how it affects real estate, and why Chinese buyers may affect the market long-term!

Now, with a little input from us:

Comments from Bob Schwab – Inverted Yield Curve

Our in-house lender has remarked that one of the indicators a recession may be on the horizon is an inverted yield curve. I asked what that means, and here was his response (note any errors are mine via translation):

“The U.S. runs a deficit, and in order to pay on the deficit, they sell treasury notes and pay interest to the purchaser. Normally, the longer the you take the note, the higher the rate or return; [in the] shorter term, the lower the rate the government will pay you. When the short-term notes have a higher rate than the long-term is when we have an inverted yield curve. That margin has been steadily decreasing, and we have been about 30 points away from an inverted yield curve, and thus why the buzz of a correction is coursing through the media. I am seeing a different effect; in June we had a wave of listings come on the market, when it usually quiets a bit due to summer vacations. I believe sellers are thinking prices might have reached a peak and now is the time to get their home on the market, which means we now have more inventory and more for buyers to choose from. The outcome is price reductions, things sitting longer, etc., because buyers now are thinking they will have a wait-and-see strategy!”

CoreLogic’s State of the Nation’s Housing 2018

Bob Schwab shared CoreLogic’s State of the Nation’s Housing 2018 report recently, and I wanted to pass that information along to you. This is the 30th anniversary of the report, which features CoreLogic’s home price and rent growth information. This year’s report article was authored by Molly Boesel, and you can see it in its entirety below:

From the State of the Nation’s Housing 2018 Report

The State of the Nation’s Housing 2018

On June 19, the Joint Center for Housing Studies of Harvard University released their 30th anniversary edition of the State of the Nation’s Housing report. The 2018 report highlighted some major themes including lack of housing supply, rising home prices and rents, and housing affordability.

The U.S. housing market continues to be plagued by a lack of supply of homes for sale. Months of supply available for sale is a key measure of housing supply, and is at levels that are below where they would be for the housing market to be balanced. The Harvard report points out that negative equity as reported by CoreLogic no longer appears to be a drag on sales. Negative equity shrank from 12.1 million mortgages in 2011 to 2.5 million in 2017. Rather, a factor in the low housing supply is slow growth in single-family construction that has not kept up with demand.

Low housing supply has contributed to increases in home prices. Home prices, according to the CoreLogic HPI were up by 5.9 percent for all of 2017. Prices for the lowest-cost homes (those homes priced at 75 percent or less than median) were up by 8.5 percent, compared with 4.7 percent for the highest-cost homes (those homes priced at 125 percent or more than median). Along with home price increases, there have also been increases in rents. The report highlights the CoreLogic Single-Family Rental Index (SFRI). While the SFRI is still showing increases in rent through the beginning of 2018, there has been a deceleration in the rate of increase.

Living in the Bay Area, we know the increases in home prices and rents have outpaced increase in incomes and have contributed to affordability problems. High prices and low supply constrain access to homeownership, but affordability issues are more immediate for some households. The CoreLogic SFRI shows that the lowest-cost rentals are showing the fastest rent growth, adding to affordability challenges to low-and-moderate income households. The Joint Center reports that in 2016, 38.1 million households were cost-burdened, meaning they spent more than 30 percent of their incomes on housing. While this number was down by 800,000 from 2015, it is still 6.5 million higher than it was in 2001.

I also believe the low supply in California has multiple factors.  People are not moving up, but remodeling because they don’t know where they would move. Seniors also have the same problem and if they stay in California, some counties will not accept their current tax base and they often have to sell in order to buy.  It is a domino effect.

I’ve included the graph above for context, and have the entire PDF report available if you’d like to see it. For any housing-specific questions, shoot me a note!

10 items every home should have

Thanks to John Solaegui, who sourced this article from Architectural Digest, about 10 items every home should have. It basically is a list of must-have home items that you never knew you needed; the little things you forget about when moving into a new home. I think this is a spot-on look at what every home should have, with a little bit of added input from yours truly! Let me know if there’s anything we missed.

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1. Art that you love

Bare walls are boring. I’m not saying you need to go all JoAnna Gaines on your interior decorating, but finding some art that you love, that has meaning to you, is a huge plus in a new home. Personal photographs, postcards, custom-framed prints, etc. make for great decoration and tell the story of you!

2. Guest linens

This one might make you laugh, but it’s easy to overlook! If you’re planning on having guests over, you shouldn’t have to pull out a sleeping bag or ratty blankets. These people aren’t at summer camp! Stash a few extra sets of sheets and extra towels in a linen closet so you’re ready to host.

3. Entry table

It never hurts to have an aesthetically-pleasing piece of furniture right inside your front door. But it’s also multi-functional: mail, keys, sunglasses, and other necessities you are always misplacing would go neatly into a bowl, tray or box on an entry table.

4. Table linens

There’s nothing like freshly-pressed linens, but you don’t have to overdo it. A bare, white table set with white linen placemats can create a fresh, airy vibe. If you want an eco-friendly bonus, you can get linen sets that are better than paper, too.

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5. Plants

Bring a touch of nature indoors! Houseplants add color and texture to a home. If you are a chef (or pretending to be one), you can also plant some basil, thyme, or other spices inside to create a decorate herb garden. Another pro tip: apparently having a mint plant inside keeps insects on the right side of the walls (outside!).

6. Multiple lighting sources

We do a lot of things in our homes throughout the day. It’s only fitting that we have different lighting options available for sleeping, entertaining, and just relaxing. A single overhead system doesn’t really cut it anymore. Add at least one table, floor, or desk lamp to every room in your home to elevate the mood!

7. A coat rack

You don’t live in the dorms anymore, so tossing your coat on the nearest surface when you walk in is no longer acceptable. If you have a full mudroom, you’re set. If not, a back-of-door coat rack, or even just a section of the nearest closet, can function as a de-cluttering coat rack.

8. A bookshelf

If you can get a vintage cabinet, or utilize built-in shelves for this, you are a true professional. But every home should have some sort of chic shelving set-up to store your favorite books, framed photos, and other meaningful trinkets. You can organize the things on the shelves however you want, and change it often!

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9. A sumptuous throw

Toss a nice-looking throw over the end of a bed or across the back of a sofa. Not only will it make the room prettier, but it will imply that your room is cozy and welcoming. You can go as colorful as you want, or match the throw to the mood of the room.

10. Matching wine glasses

Don’t be that person. The one who scrambles through three different cabinets just to come up with a bunch of different wine glasses to serve the bottle your guests brought over. Invest in a quality, matching set of wine glasses, and upgrade your happy hour game. Brownie points for having a dedicated wine rack piece in your home.

What does a real estate agent do all day?

Being a real estate agent is a tough job. We work constantly, even on weekends, holidays and evenings, and have to balance about one million different tasks for a given sale. On top of that, we’re monitoring leads, following up with clients, and having to market ourselves regularly. But most of that is below the surface, so it leaves some wondering what the heck we actually do all day!

Luckily, Cara Ameer, a realtor in Florida, explained it in detail for Inman.com. I’ve given you the main takeaways from that article below, to shed a little light on what exactly I’m doing for you and my other clients all day:

The realtor is an incubator, initiator, action-taker, coordinator, scheduler, personal concierge, resource, problem-solver, mediator, miracle worker, red-tape cutter, transaction manager, and chief make-it-happen officer for any client that wants to make a real estate move. Some of these roles get delegated elsewhere, but the realtor oversees everything and gives valuable input on the process every step of the way.  I could work every day, and often feel guilty if I am going to be out of town or take a day off (even on my scheduled days off). I usually will check email a couple of times and answer my phone which is also the beauty of it all – I can be on a beach in Hawaii and still answer questions and get things done.

A typical day in the life:

  • Responding: there are always inquiries, emails, texts, etc. to respond to. We are always “open,” if you will, and waiting until the next day can result in a missed sale or lost client. And it’s not just clients asking about properties – it’s other agents, stagers, brokers, and more.
  • Reviewing MLS activity: we review MLS activity for relevant listings and updates on properties of interest and notify our clients right away if anything needs to be shared.
  • Keeping a Database: we must always be updating our contact databases with new customer info, updates, birthdays, home-buying anniversaries, etc.
  • Scheduling Showings: agents put together property itineraries for clients who are planning to house-hunt and see multiple showings. The schedule is constantly changing, and getting it right is a priority for everyone.
  • Making Contact: we are your liaison for establishing a dialogue with sellers or buyers, and conduct all the research for market comparables.
  • Setting/Attending Appointments: meetings never end in real estate. We meet buyers and sellers for initial discussions and tours, we meet inspectors, appraisers and other specialists, and oftentimes you’ll get other calls about other meetings while you’re already in the first one!
  • Negotiating Offers/Managing Sales: this process can take a very long time. Once an offer is accepted, though, and a property goes under contract, the agent has to be on everyone involved to finish their part of the job. That means lenders, title companies, attorneys, other agents, and all clients, to name a few.
  • Problem-Solving: educating clients about the market, the offers, etc., gathering info about a community or property, troubleshooting unseen issues. There are a million little issues that go into a real estate transaction, and the agent will be expected to be the one solving them.
  • Marketing: don’t forget how much we have to market ourselves at all times to gain new clients and keep existing ones. Everything from a website, to a blog, to a newsletter, to a postcard, to a flyer will have to be created, approved, proofread and spread digitally and physically.
Courtesy: Inman.com

Long story short, real estate is a 24/7 profession that involves severe multi-tasking, prioritizing, evaluating, advising, hand-holding and problem-solving. The lifestyle isn’t as glamorous as it seems on TV, but it’s a rewarding job that I love to do! Now you know exactly what kind of work I’m putting in for you!