JVM Lending: If appraisal comes in low…

…a buyer is not overpaying! Appraisals and market value can be a tricky math problem for buyers to figure out, but that’s why my friend Jay Vorhees from JVM Lending has put together this handy-dandy blog to explain. Take a look below:

When Appraised Value Does Not Equal Market Value

We have a buyer who was convinced she was “overpaying” for her property because her appraisal came in low. But, there were multiple offers for her property that were very close in price to hers, and there are nearby pending sales that are also similar in price. The entire issue has to do with appraisal guidelines. We repeat this often in this blog because the issue comes up so often: appraised value often does not equal market value.

Image result for house for sale

If there are multiple buyers willing to pay $850,000 for a property in an open market, then that property’s market value is $850,000. But, appraisers cannot appraise properties (in most cases) above the highest closed comparable sale in the neighborhood. So, if there are no closed sales above $800,000, that property will usually not appraise for over $800,000.

But, again, that does not mean the above property is not “worth” $850,000. Once this was explained to our buyer, she was no longer concerned about her low appraisal. This is something every buyer needs to understand in a fast-appreciating market where contract prices are tough to support in an appraisal.

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This is something I deal with constantly with my own clients. Jay hits the nail on the head here: appraisals may come in lower than expected, but it is not equal to a diminishing value on the property. For more helpful information like this, give me a call! I can talk about real estate all day 😉

You pa-gotta try Parada

Nestled in a quaint corner of the new-ish Pleasant Hill BART area – but technically still in Walnut Creek – lies a hidden gem of foreign cuisine. Parada, the latest brainchild of the Michelin rated Chef Carlos Altamirano, is a delicious, colorful display of Peruvian food that will definitely bring you back for seconds.

Chef Altamirano’s name may ring a bell; he has Mochica and Piqueos in San Francisco, Barranco in Lafayette, a fleet of Sanguchon food trucks, as well as La Costanera in Half Moon Bay, where he earned Michelin stars in 2011, 2012 and 2013. He trained under some of the Bay Area’s most renowned chefs, combined that background with an upbringing infused with Latin American culture and cuisine in Southern Peru, and created a food empire.

Now I know from personal experience that Peruvian cuisine, especially when cultivated by Chef Altamirano, is a can’t-miss eating opportunity.

The restaurant itself is quite small, but you wouldn’t know it when you’re in there enjoying your meal. Parada is open for lunch and dinner every day of the week, though hours vary. It’s a little bit pricey, but that’s what quality fine dining in Walnut Creek will get you these days!

If you haven’t been to Parada yet, I insist you do so. When you go, let me know how you liked it!

Art Town: Cost Plus globe!

We have a pretty unique art piece for this week’s Art Town. Normally, we discuss paintings on electrical boxes, or statues that everyone has seen. But this time, we’re making you crane your necks to look up!

You’ve all been to Cost Plus World Market, which shares a block with the movie theater.  I’d always noticed the big, metal globe on top of the building, but I had never taken a really close look.  It may be a tie to their logo, not unlike the circles at the back of the Target building on the corner of Ygnacio and California.  For new business construction, the city requires some sort of art work to accompany our streets and I believe this is exactly that, yet ties nicely with the business.  I may be wrong and if anybody has some insights, please share as I did not find any notations about this piece.

When you get up on the parking deck on the roof, you can actually see it up close behind the gate they have there. It’s much more intricate and detailed than you realize from the ground, and it really is a beautiful, random piece of art. Take a look at this up-close picture here to see the detail:

It almost looks like a nest, or a cage, or what the Earth might look like if only rivers and faults were mapped on a globe. It is all wound together so randomly, but there’s an order to it, as well. Truly a fascinating piece of artwork that many people might not even notice when they’re walking around downtown or parking on the top lot!

What can bring down house prices and rates?

What could bring house prices and rates down? According to my friend Jay Vorhees at JVM Lending, it could be something called “monetary tightening,” or an experiment conducted by The Fed to infuse the economy with cash. Basically, what Jay is getting at, is that you’ll never know exactly when to buy or sell (or when a market dictates that decision), and that assuming you know the market intimately trying to time the market may be a mistake. Read on for more from our slightly-edited version of Jay’s blog:

Dude Sells Too Soon!

I was at a graduation party yesterday and the host told me how his law partner sold his Silicon Valley home two years ago because he was convinced the market had peaked.

It hadn’t. The poor guy’s former home has gone up another 20% since he sold, and so has his rent. The host made the further point that people should never try to time a market they are not intimately familiar with.

I like to remind everyone that nobody should ever try to time a market, no matter how much they know, because there are so many variables they have no control over – especially when those variables involve the Fed.

Elephant in Room: Monetary Tightening

There is a huge elephant in the room that nobody is talking about: Massive Monetary Tightening via Higher Rates and Quantitative Tightening.

After the meltdown, the Fed engaged in a massive experiment known as Quantitative Easing, where the Fed bought trillions of dollars of government bonds and mortgage-backed securities. These bond purchases increased the money supply by flooding financial institutions with cash in an effort to increase lending and liquidity. The Fed also lowered the rates to unprecedently low levels.

The low rates and huge capital infusion pushed up asset prices, particularly with respect to stocks, bonds and real estate. This is what usually happens when the Fed increases the money supply, and this is partially why we see such high asset prices now. Many people believe high prices are just a function of too much demand chasing too little supply, but that is not always the case.

Excess demand is often driven by excess capital in an economy; people want to park their capital somewhere, as opposed to letting it sit in bank accounts, so they buy assets. In any case, the Fed created about $4 trillion of new money up through 2016, and in 2017 they reversed the policy! They are now not only pushing up rates but also selling bonds with the intention of vacuuming about $2 trillion out of the economy.

This will likely have an adverse effect on asset and housing prices at some point. Do I think real estate prices will tank? No. I still like real estate because the fundamentals are so strong in many areas. But, I don’t think we’ll continue to see such strong appreciation, and now might be a good time for Silicon Valley lawyers to sell their homes.

Fed Could Reverse Again

Nobody is more aware of this than the Fed, and they are watching closely. If Fed policymakers see the economy showing excessive signs of softening, they could very likely change course again – and lower rates. Again, nobody knows what will happen because we have never seen anything like this before! We are in the midst of one giant experiment, and we all get to be the lab rats.

“Sure Enough” – new art installation in Civic Park!

You may remember when I posted my most recent Event Round-Up. It featured an artist named Patrick Dougherty who was putting up a massive art installation in Civic Park, culminating in a final reveal/celebration on May 26th.

Well, the installation is done and up in downtown Walnut Creek, and I’d highly recommend you go check it out! It’s extremely unique and interactive, and it draws your eyes right to it. I recently stopped by Civic Park to take pictures and experience “Sure Enough!” It is fun to meander through and get lost in the moment and just watch other people do the same. I got there after the celebration and people were still coming into the park with curiosity and then continuing through to see the Hand of Peace.

As mentioned in my previous blog, the installation is made possible because The Bedford Galley and City of Walnut Creek Public Art Department have a National Endowment for the Arts grant.  This project is inspired by the idea that art is for everyone.   I am continually impressed with Walnut Creeks urban art and how they expose and engage the community to public art.

Dougherty is a world-famous sculptor, known for his larger-than-life woven willow sapling installations. He says that ¨Sure Enough” (which is a Southernism evoking a state of complete satisfaction) is aimed at the open skies to take in “that special California light.”

Dougherty, who has won many awards for his work, started out with single pieces on pedestals and moved into these monumental, scaled works which require truckloads of saplings. He has built more than 250 of them now, and has become internationally acclaimed for sculptures worldwide, including Scotland, Japan, France, and more. The “Sure Enough” installation will be there for a couple years, so no need to hurry, but next time you’re in or around Civic Park, make sure to check it out!

Road Trips: Summer Festivals

One of the best parts about summer in Northern California is that it’s pretty much perfect weather all the time. Even the notoriously-chilly San Francisco has a legitimate summer for a couple months at the tail-end. If you’re a fan of music like me, this is a perfect season for festival-hopping!

Last weekend, BottleRock in Napa took place and they had another fantastic lineup. I went on Friday which was a birthday gift from my friend Veronica. It is one of my favorite festivals – more to come on a future blog. Between the music itself and the amazing Napa-esque food and drink scene, you can’t go wrong at BottleRock. There are a few other great festivals in the Bay Area you should definitely check out, too. Here are 5:

Outside Lands (Aug. 10-12 in San Francisco): Another wildly popular festival that attracts top names in the music circuit to its stages in Golden Gate Park. This year, you can see Florence and the Machine, The Weeknd and Janet Jackson atop the list.

Stern Grove (June 17-Aug. 19 in San Francisco): Stern Grove is a free (!!!) annual festival that has hosted names as big as Stevie Wonder in the past. This year, two of the biggest names will be M. Ward and Ziggy Marley, also playing in Golden Gate Park.

Hardly Strictly Bluegrass (Oct. 5-7 in San Francisco): I’m pretty sure Hardly Strictly used to be literally strictly bluegrass. But nowadays, the free show in – you guessed it – Golden Gate Park welcomes all genres. This year’s lineup includes Brandi Carlile and The Wood Brothers!

Country Summer (June 15-17 in Santa Rosa): Let’s mix it up a bit. Florida Georgia Line, Little Big Town, Toby Keith and Maren Morris are the highlights of this country festival in Santa Rosa. I’ve never been, but if you like country, this line-up kicks it!

Berkeley World Music Festival (June 1-3 in Berkeley): We can’t have an arts/culture/music blog without including the funkiest Bay Area town around. This is going on RIGHT NOW, but it’s free and you can bring the kids to experience music from all over the world!

The Cost of Waiting

I generally encourage all my clients to be patient in the home-buying process. You’re looking for your dream home, and a house to call your home where memories are created. You want to exercise patience and really find the right place. However, at some point, waiting too long or sitting on the fence can have consequences.

As you’ll see in the blog from my friend Jay Vorhees at JVM Lending below, waiting too long on a home purchase can be costly. He highlights one particluar (anonymous) client who kept quibbling over small price differences and that stubbornness led to her not only missing out on her dream home, but settling for an entirely different town. To add insult to injury, the home she wanted has doubled in value since!

Read on to learn more:

COST OF WAITING IN 2012

In 2012 and 2013, we had a borrower looking to buy in Oakland and she was obsessed with getting the absolute lowest possible price.

As a result, she kept walking away from transactions, b/c of $5,000 to $10,000 price discrepancies, even though she was shopping in the $650,000 range in what was becoming the hottest market in the country.

The $10,000 differences she quibbled over worked out to be less than $50 per month in payment. What is most interesting is that she waited so long that she was ultimately unable to buy in her desired Rockridge neighborhood altogether, and she ended up buying in a suburb east of Oakland.

The houses she was bidding on are now worth twice what she was offering too. Her “cost of waiting,” or cost of not executing, was extremely high, to say the least. Unfortunately, her story is not unique.

RATES HIT 7 YEAR HIGH

According to this CNBC Report, “interest rates are surging to their highest level in seven years.”

And, it looks like they are going to continue to climb, based on continued strong economic reports and announcements by the Fed.

Despite the rate increases, the demand for housing remains very strong. In addition, property values continue to appreciate at a surprisingly fast pace.

COST OF WAITING IN 2018

These factors (increasing rates and appreciation) combined make the “cost of waiting” as high as ever.

In a recent National Real Estate Post Video, at about the 9-minute mark, Barry Habib uses a $500,000 Orange County purchase as an example.

At current appreciation rates, waiting even six months can cost a buyer an additional $200 per month, according to Mr. Habib.

Waiting a year can cost over $400 per month.

Real Estate is a GREAT investment!

Buying a house can be terrifying. Selling a house can be equally as difficult. The entire process is stressful, but the end result is often worth every second of the struggle. Bob Schwab, a mortgage lender in our office, often shares great information, and points out this is because investing in real estate is a solid decision!

For the fifth year in a row, a Gallup poll showed that real estate is the best long-term investment out there. This year, 34 percent of Americans chose real estate as the best long-term investment, followed by stocks (26 percent). You can see the chart, stolen from Bob’s blog, below:

Just five years ago, gold was the most sought-after long-term investment with 34 percent of votes. Even back then, real estate was in second place, though the economy was recovering from the economic crash that preceded it. Overall, the real estate market is in good shape and people seem to agree that it’s a stable, long-term investing option.  Rates are rising, so now may be a good time to buy check out this graph that shows how much buying power you lose as rates go up.
You can always give me a call to help you make that investment – it is, after all, my job!

Walnut Creek Yacht Club strikes again

I’ve written about how much I like the Walnut Creek Yacht Club before. You’ll remember my blog about last year’s Lobsterfest at the Yacht Club, but I’ve never actually written just about sitting at the bar, eating dinner, and enjoying my meal in a normal setting before. It has great bar seating, with a view looking outside and is one of my favorite bars to just eat dinner either alone or with a friend. The bar is also a great place to hang out to drink and socialize.

I recently went to meet my friend Victoria before going to a movie. Of course, we sat at the bar, I was running late and when I got there, she was socializing with a neighboring patron soaking up all the good WCYC vibes. I ordered Zarzuela de Mariscos – Spanish Seafood Stew with prawns, octopus, mussels, clams & rock cod tomato-shellfish broth, serrano ham, garlic, almonds saffron rice pilaf, grilled Acme levain bread, and lemon aioli for $29.00; the special for the month of May. It was like a tomatoey seafood risotto. Victoria had WCYC Fish‘n’Chips, with California ling cod beer battered in Anchor Steam, with WCYC tartar sauce, regatta fries and WYCY coleslaw for $18.00.

In the past, the service has always been top notch, this time, the bar service was a bit lackluster or aloof, usually they chat you up and are refilling your water and asking what else you might need, but this night was not to their standard tip-top shape. If you are local, you will usually run into someone you know and this evening was no different! Jodi was there socializing with friends and her new baby!

I love the food and the drinks and their special dinners and tasting – it is great to be a member. Of course, if you go often, you get some sort of gift at the end of the year and an envelope not to be opened until a specific date. After you open the envelope, you have to go back in and eat! Check them out!