Is the housing market shifting, an opportunity for some?

Is the housing market going to start shifting in the direction of price reductions at the higher end of the spectrum? According to Zillow Senior Economist Aaron Terrazas, it could happen. Approximately 14 percent of homes for sale underwent price reductions back in June, and most of them happened at the more expensive levels.

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Over the last two years, the housing market has tilted sharply in favor of sellers. But this might be an early warning sign that the tide is turning a little bit. Although it’s too soon to officially call this a buyer’s market, this data does indicate that the trends in the housing industry may be normalizing. In speaking to my title rep, Jason Webb at Fidelity, I asked what he is seeing in the industry. His response was that there are currently more contingent offers, homes taking longer to close, and more demands to close escrow. I am personally experiencing all that in one escrow and it is not fun!

In my situation, the sellers have already moved and the buyer (who did not have a contingency on selling their condo) is delayed on it closing by three weeks. It was originally supposed to close by tomorrow. The agent representing the seller of the condo and the buyer on my listing is a rookie agent who has not been great at communicating the status. My sellers are frustrated and gave a demand to close escrow, but it was really to get them to push on the buyers of the condo, as I had no control and no authorization to speak to them.

We will now most likely close in another week on my my clients’ home because the buyer decided to go out and buy a new car. That caused his debt-to-income percentage to be too high, and now the car has to be paid off with proceeds from the sale of his condo. That causes further delays in our closing because the lender needs to see it get paid off. Another interesting component to this was that my clients Google’d the buyer and the results were…surprising. We knew it could be a challenging process, but we didn’t think it would be this much of a wild ride!

I believe we will see more of these types of issues as the market softens and reverts to a better balance. We can’t keep increasing, and it is time for the market to come down off this upward trajectory. There are some positive outcomes to a correction, but it is change and change is hard for most people; especially sellers when they still expect a higher price than their neighbor.

Are home values really inflated?

For the 71st month in a row, the housing market experienced year-over-year gains. As of January, the median existing-home price for all housing types was $240,500, which was a 5.8 percent increase from January 2017 ($227,300). According to Bob Schwab from Finance of America, this may lead many to believe that home values are overinflated.

Schwab, and Zillow, disagree with that common opinion. Zillow says: “If the housing bubble and bust had not happened, and home values had instead appreciated at a steady pace, the median home value would be higher than its current value.”

I’ve pulled some information and graphs from Schwab’s article to help demonstrate why home prices are exactly where they should be. First, a graph showing actual median home sales prices from 2000 through 2017:

By itself, this graph shows home values rising early in the century, then tumbling down, and now climbing back up. This may give off the impression that a pattern is emerging, and another tumble is coming. But, if you look at this second chart, indicating where prices would naturally go with the market had there not been a boom and bust, you see something different:

The blue bars represent where prices would have been if they increased normally, at an annual appreciation rate of 3.6 percent. By adding that percentage to the actual 2000 price and repeating for each year, we can see that prices were overvalued during the boom, undervalued during the bust, and a little bit lower than where they should be right now!

All in all, thanks to Bob Schwab for pointing out that we should be comfortable with current home values, and understand that the market actually isn’t overinflated, based on historic appreciation levels.

What is the most expensive zip code in CA?

If you had to guess which California city has the most expensive real estate, what would you say? San Francisco, maybe? Certain parts of Los Angeles – remember the show 90210?
Watkins-Cartan House, 98 Alejandra Ave., Atherton, CA
Nope, the honor goes to the 94027 zip code – Atherton, CA. For those not familiar, Atherton is right above Palo Alto and the average cost of a home there is…wait for it…$6.17 million. According to Zillow, home values in Atherton reached a low point in summer 2009, dipping below $3 million.
I asked my friend Jay Vorhees of JVM Lending what kind of average income would be necessary to afford a home in Atherton at 25 percent and 50 percent down.
Given that the average income in Atherton is about $250,000, I was wondering how exactly a median home price of $6.17 million was affordable there! Here’s his assessment:
Assuming no consumer debt, a 4.0% rate and a 42% debt ratio, with 25% down, PITI would be about $29,000 per month (rounded). This would require $69,000 of monthly income or $828,000 annually.
With 50% down, PITI would be about $22,000 per month (rounded). This would require about $52,500 of monthly income or $630,000 annually.
So how does the average income earner in that area afford Atherton? Most likely people have had these homes for years, thus the lower income. For new purchases, stock options from IPOs are not usually included in your annual income, thus allowing the the nouveau riche of Silicon Valley to buy with cash or put 50% or more down.

The smallest decisions can make your house more valuable

When selling a home, oftentimes the goal is to maximize financial return on the deal. Everybody wants to make as much as they can off their home sale, and even the slightest changes can increase what a home sells for.

Take this article on Inman.com for example. It’s about how homes with blue bathrooms sell for $5,400 more on average than others, according to a Zillow study. Crazy, right? Literally just changing the color you’ve painted a wal or two can add thousands of dollars to your wallet!

The article goes on to list a couple other color choices that can add or subtract from the sale price; for example, grey (and other neutral) exteriors sel die about $3,500 more than homes with other colors.

It really goes to show that small aesthetic decisions can play a huge role in netting you some extra zeroes on your home sale. It’s always wise to cater to the current trends when painting, decorating and remodeling your home to go on market – even if it means just a couple grand more in your pocket.

I try to stay tuned in to what’s popular so I can help you make those decisions. I am committed to maximizing your value as a seller, and on the flip side, getting you the best deal possible as a buyer. Give me a call if you’re interested in a real estate transaction!

New review from a happy customer!

One of the greatest joys of working in real estate is sharing in the excitement (and relief!) of buying or selling a home with a client.

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Oftentimes, I become close with my clients just by virtue of developing a personal connection while I vet houses for them. Throughout the process, we usually text, call, email and meet in person dozens of times. So, when we succeed together and find the perfect buyer or the perfect property, it’s extra special for me to get a great review!

For example, I recently helped my client and friend Mckenzie with a transaction, and here’s what she wrote for me:

Kristin is amazing-she went above and beyond as my real estate agent; as a first-time homebuyer, I am SO lucky that I found her!! I found Kristin on Zillow, I was interested in a specific property and sent an email. She followed up and was immediately so helpful over the phone. As I said, I am a first time home buyer, and she gave me lots of advice. She met with me in person to go through the home buying process (like a crash course) which was VERY helpful, and something she didn’t have to do, as I wasn’t even looking at properties yet. She went out of her way, she knows her stuff, she is quick, gives good advice that isn’t biased, and made sure through the whole process I was finding what I wanted. She has a great reputation with other agents in the area and has lots of people she works with that she recommends in terms of home repairs etc. Even after escrow closed, she is still talking with me making sure I have what I need, helping me find handymen and other things I hadn’t even thought of. On top of how capable she is-she is also so fun and has personality plus! It was actually an enjoyable process for me (who would have thought!?!?) I have already been recommending Kristin to friends looking to buy in the area, and if I ever buy/sell again, will definitely be contacting Kristin to be my agent!

What a sweet note from Mckenzie! I loved working with her. If you want to be like Mckenzie, and be my next satisfied client, please give me a call or shoot me an email!

Photo infringement case against Zillow

I saw an article a while back about Zillow being sued for more than $8 million for infringing on photo copyrights. Here is the full story, for those interested.

 

Zillow is appealing the decision, which was originally brought to court in July 2015 by VHT. They are a photography company that alleged Zillow had been stealing thousands of VHT photos and using them illegally on their new “Zillow Digs,” which shows what is currently trending in residential interior design.

I haven’t heard anything about the outcome of the appeal, but thought it was interesting, as I’ve had my own share of run-ins with claims of copyright infringement for pictures used on my blog. We use Google Images, but only the ones tagged for reuse. Most images for sale have a water mark to indicate it is copyrighted and if you click on it, it takes you to the site where you can pay for the use. Apparently, the legal representative told me the owner has no obligation to indicate you have to pay for it and then if you use the photo thinking it is a free image, you are liable for payment.

One company wanted $7,000 from me for seven views on my blog before I took it down. They are really after deep pockets such as a Zillow, who should have staff that is aware of that process. I think Zillow will end up paying, but who knows how much. I am now much more cautious about the pictures we use.