East Bay housing market is shifting

Lately, we’ve started to see a “shift” in the Walnut Creek-area housing market. Price appreciation growth has slowed and we are now seeing more price reductions. Home price appreciation has generally declined to single-digit annual appreciation with estimates in the next year of 3-5 percent.

In the 24/680 corridor, homes are sitting on the market longer than they did in the Spring (20-26 days, as compared to 15-20 days). I am receiving 1-3 offers with a final sales price of 4 percent over the asking price on most of my listings.

The Federal Reserve Bank will not increase interest rates this month. Currently, the best mortgage interest rate for a 30-year fixed rate is approximately 3.5 percent. In the big picture, global growth concerns remain the driving force behind the long-term trend toward lower rates.

Kitty Cole, who coaches many Bay Area agents, has noticed two distinct Bay Area markets. Many of them are side by side. Check out her insights:

Some of the market (still a seller’s market) is hot, with low DOM’s, high Sales Price to List Price ratios, low inventory, no contingencies, multiple offers and buyers aplenty. This market is going on in Oakland, Berkeley and surrounding cities.

It looks similar to the last 4 1/2 years. The only thing that is quite different is the number of offers that was 10-25 a few months ago, and is now 2-6 (and occasionally higher). This market requires savvy pricing and negotiating to get your seller the highest price.

The other part of the market (a buyer’s market) has slowed with these factors in place: price reductions (up to 10 percent, and sometimes two before it brings an offer), contingent offers (contingent upon the sale of another property), high DOM’s, few offers (sometimes only one!), expired listings, cranky sellers and demanding buyers (because they can be!).

In the city, one client whose specialty is high-rise condos, literally slowed overnight and now the DOM’s for her listings are more than 30 days. Another San Francisco agent has had three listings expire in the past three months. One agent in the East Bay (Pleasant Hill) is stymied by her listings that sold within seven days and are now sitting for weeks. Many newer agents are not prepared to have the “I need a price adjustment to sell your property” conversation. In three months, it will be different … how, I don’t know, wished I had that elusive crystal ball.

How to Ensure a Smooth Home Purchase

If you’re planning on purchasing a home this year, you’ll will want a transaction as smooth as possible. That’s what us agents are for! We want to help you find the perfect home and then ensure the process becomes as pain-free as possible. You don’t realize how important this is until you have the transaction from Hell!

Taken from a Better Homes and Garden’s article and repurposed with some of my insights, here are five tips for a smooth home purchase:

Tip 1: Communicate with Your Agent

You spend a lot of time with your agent in a finite window, so, you should work with a real estate agent you are comfortable with. They should be straight up and express everything you want and need in your new home. By communicating your desires from the beginning, your agent won’t waste time showing you homes that don’t fit your criteria. If you know you want an updated kitchen or two baths, make that clear. It is also a process; sometimes what you want and what your budget can afford creates a discovery process, but when it comes to finding that perfect home, clear communication is key. And if you run into any problems along the way, be sure to speak with your agent to iron out any issues.

Tip 2: Be Reasonable with Expectations

If you’re searching for a three-bedroom home located in a certain neighborhood that has the right schools, and your agent shows you a property with a color you don’t like that only has 1.5 baths, don’t simply write off the home. When searching for the home of your dreams, you may have to give something up or make some changes once you move in. No home will be perfect and, again, it is a process to find that out.

Tip 3: Don’t be Discouraged

Don’t expect to find your dream home overnight. Buyers often get frustrated because nothing pops up in their price range for two weeks or they have written five offers and none of them were accepted, but remember, it is a process. And, this is the Bay Area! Buyers usually course correct, change their expectations, get a quick education on the market and – voila! – the universe unfolds, the right house pops up and your offer is accepted! Woo-hoo! Now the rubber hits the road and you are in contract!

Tip 4: Play the Money Game

If you offer $375,000 on a home that’s listed at $400,000 and the seller refuses to budge, be prepared to negotiate. Wait!!! This is the Bay Area! When you offer $650,000 on a home listed for $620,000 and you are one of nine offers, you need to have some wiggle room for a counter offer. Before making an offer, discuss your strategy with your agent as he or she will be able to tell you whether your offer is fair or not. It’s also important to check out comps in the neighborhood so that you can make a reasonable offer from the get-go. Don’t forget how important a good lender is and the reputation they have with other agents. This may make the difference in your offer getting accepted over the other eight.

Tip 5: Get Your Mortgage Pre-Approved

This could be the smartest thing you do all year. By having a mortgage approved before you even begin looking at houses, you’ll be ready to make an offer as soon as you find the home of your dreams. Not all lenders are equal, and a good lender may give you the upper hand over other buyers who may be interested in the same house. Can they closer faster than 30 days? Do they get all the paperwork upfront and desktop underwrite you so there are no surprises? Are they responsive to your calls?

If you have any interest in purchasing a home this summer, and are looking for an agent who can guide you through the process smoothly, I am at your service and I have a great lender or two to refer!

Why Are the Interest Rates So Low?

There have been a lot of articles about interest rates and the stock market recently. First, the German 10-Year Government Bond Yield has hit negative territory. In layman’s terms, this means that Germany gets paid interest to borrow investors’ money, the same thing is happening in Japan. Thus, Germany and Japan are getting paid to borrow money.

On the surface, this seems silly. Why would investors take a negative yield or pay somebody to borrow their money? Because it’s safe. Investors will put money wherever they can in order to ensure they can safely recoup it in the future.

How does this help the real estate market? First, the demand for bonds keeps rates very low, making real estate leverage much cheaper (The Brexit will also have an impact, which will be a different post). When investors have a lot of cash and are looking to put it somewhere, real estate investing becomes a good place to do so.

According to the National Association of REALTORS^®, the number of homes that went under contract to be sold in April was the highest in more than a decade. It was also the strongest month in more than eight years for new home sales – with a 16.6% jump from the previous month. We do tend to see a bit of a lull in the summer as families head off for vacation.

If you are a buyer, it might be a great time to jump into the real estate market! Give me a call if you would like some help.

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.

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.”

Top 5 Must-Do’s for First-Time Home Buyers

So you’ve finally made the big decision. You’re going to buy a house!

You are aware of the long road ahead, but excited to take on the challenge and have a home you can call your own.

It’s a stressful process, however there are a few things you can do to help prepare for your first time through the home-buying process:

Determine your budget.

There are many online calculators available that can help you to get an idea of what your monthly mortgage payments should be, based on how much money you are looking to borrow. Don’t forget to include property taxes, though – estimate 1.25 percent of the purchase price for a yearly property tax estimate. If you are looking at a condo or a townhouse, then you most likely will have to consider a monthly HOA fee. Also, look at what your income, debts and assets are; this is where I strongly recommend you speak with a lender. The good ones break that all out for you and can help you work up a budget.

Examine your credit and credit score.

You want to get yourself in the best position to qualify for the lowest interest rates and best mortgage terms and one way to do that is to beef up your credit score. If your score is less than perfect, look for ways to increase your score. If you have limited credit history, look for ways to build positive credit before you apply for a mortgage loan. This is another area that a good mortgage broker can give some suggestions to improve your credit. No matter what your score is, review your credit report to ensure that there are no errors on your report which ay impact your ability to qualify for the mortgage you want.

Where will your down payment come from? And how much will you need?

Buying a home is a big financial commitment, which can often require a big cash down payment. Where will you be getting your down payment from – savings, a 401(k) or IRA withdrawal? As a gift from family? Although FHA loans are often an attractive option for first-time homebuyers because they only require you put 3.5 percent down, you’ll still need to roughly determine how much 3.5 percent will be and where you’ll be getting those funds from, while still saving enough for closing costs. All the while, you must keep your debt-to-income ratios in line with guidelines.

Begin to gather up all the documents you’ll need to qualify for a mortgage.

When you apply for a mortgage you’re likely going to need to show your lender proof of your identity (passport, driver’s license or similar) as well as recent pay stubs from your employer and copies of your past year (or two years) of tax returns. Each lender will have their own requirements, but gathering together these basic pieces of information can help make the mortgage application process go smoothly. Again, a good lender will send out an introduction email with a list of the things that are required.

Get preapproved for a mortgage before you begin house hunting!

This is a MUST! Home sellers want to know that you’re serious about buying, and one of the best ways to show them that is by submitting an offer that comes with mortgage pre-qualification. In some hot housing markets, sellers won’t even accept offers without a pre-qualification or DU Approval. A good real estate agent will also help guide you through this process, which can include an informative face-to-face about the whole process or a good lender recommendation.

Excerpts of this blog generously borrowed from The Orland Group Realtor Coaching.

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 that 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.

Home Buying 101: Having a Good Lender in Your Pocket

When you’re in the market for a new home, having a good lender is essential. In a seller’s market or at entry-level price points, where many first-time home buyers are also submitting offers, the information in this blog becomes even more critical.

I like to have a buyer’s lender call and speak to the listing agent when I submit an offer. I want to know what their qualifications are, and more importantly, the lender’s ability to close in the time stated on the residential purchase agreement. This is where a local lender becomes very important; it is unlikely if you go with an out-of-state lender or one where you have to speak to somebody different each time, that they’d be willing or able to make that call to the listing agent.

However, if the listing agent has worked with the lender before (odds increase if they are local) and had a good experience, the buyer is one step closer to getting their offer accepted over others. Simply put, people like to work with people they know they can trust.

Another question to ask your lender is if you’ll be completely underwritten with a complete file in hand. This prevents surprises. If you walk into a bank and give them the basics, oftentimes they will give you a pre-approval for a certain amount, or for the amount you stated you would like to have (provided you qualify).

This is fraught with land mines – once you are in contract, that lender is now asking for additional paperwork and, surprise! Something comes up under Freddie and Fannie guidelines that won’t allow you to get the loan for that amount, or at all. This is not a happy situation for anyone involved, so it is also helpful if the underwriter is somewhat local and they work closely with the lender on a daily basis. Communication is key!

One of the many benefits of working with a mortgage broker is the appraisal managment company most likely has better quality appraisers, who know the neighborhood they appraise in. They can’t select who will appraise the property, but they can choose who is or isn’t in the group.

Finally, if you are shopping a loan, make sure you are comparing apples to apples. If you get a quote for a condo, make sure the other company is also quoting a condo and not a townhome. I know some great lenders – contact me if you would like their names and numbers.

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:

Carol 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 Arabia 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%.