According to Forbes.com, San Francisco is one of the markets most likely to recover quickly from the current real estate recession. In a nutshell, commercial real estate experts think that San Francisco’s strategic access to Asian trade (via the ports of San Francisco, and more importantly Oakland), and relatively strong office and apartment rental markets make it a good bet to recover fast. The logic is that a strong job base and relative lack of overbuilding in the commercial market means the economy will be strong, which will filter to the residential housing market.

Okay, we’ll take it. Good news is not that easy to find right now, so beggars can’t be choosers!

Popularity: 1% [?]

It looks like a lot more than candy-seeking children were spooked in October. With the wild, turbulent ride on Wall St and the Fed buying bank stocks and short term paper to avert disaster, October saw a lot of home buyers get spooked as well. In the Pleasanton real estate market, activity was down across all sectors of the market, and things got down right scary for a while as many of us saw our investments and 401k accounts take a major haircut. And political uncertainty added to the mix, as fear pretty much trumped everything. The good news? Things started to stabilize towards the end of the month, and the stock market actually bounced back. Thank god, because I was beginning to think hard about selling everything and stuffing the money in my mattress, or buying one of those lots that Eric Estrada is always pitching on late night TV. But bounce back the market did, and with it there seemed to be at least some stabilization, along with millions of simultaneous sighs of relief. And now that the election is past, we can hopefully get back to the job of getting our economy and the real estate market back on track. After all, I seem to remember hearing Obama saying that he is going to end war, eliminate hunger, fix our economy, give everyone free health care, and provide a good retirement for everyone. Heck, I’d settle for fixing the economy.

In Pleasanton, there were 30 pending sales in October, down from a strong 55 pending sales in September. Actually, that is not bad considering the climate of fear that prevailed throughout much of the month. But there is also a growing sense among some of the smart money that we may be closer to the bottom of the real estate market then many people think. And there are some great buys out there. Inventory overall dropped slightly, with 231 single family homes on the market at the end of October, as compared with 236 homes on the market at the end of September. (Click on the graph to enlarge)

In the under $1 million market segment, activity was down strongly. There were 21 pending sales in October, as compared with 37 pending sales in September. Inventory remained roughly the same with 122 single family homes on the market. (click on graph to enlarge)

In the $1 million to $2 million market segment, sales dropped from 15 pending sales in September to 7 in October. No doubt the gyrations in the financial markets had an impact on some buyer’s down payment funds. Inventory remained steady at 78 homes on the market, or a 10 month supply. (Click on the graph to enlarge)

In the luxury home segment over $2 million, there were 2 pending sales in October, as compared to 3 in September. Inventory dropped in this price segment to 31 homes on the market at the end of October, as compared to 37 at the end of September. Certainly some of the sellers decided that this was not the market they wanted to play in, and opted to wait for a better market to sell. Still, there is a 10 month supply of homes in this price segment, and it continues to struggle along. (Click on graph to enlarge)

Hopefully with the election, we can turn the page and get on with the recovery. Opportunity is certainly out there, and smart buyers with stable jobs, good credit, and strong assets are finding the market to be ripe with good values.

Popularity: 14% [?]

Timing financial markets, including the real estate market, is always tricky business. There are dozens of variables that have direct influence over the real estate market, including interest rates, buyer demand, population growth, economic factors, inventory levels, new home construction, changes in personal income, and job growth to name a few. It is the interplay of these variables that determine the strength of “the market” and determine price trends. Right now, there has been a lot of turmoil and volatility in the financial markets, as well as negative news about the real estate market both nationally and regionally. This has contributed to the downward pressure on the local real estate market.

I hear a lot of buyers say “I’m going to wait for the market to bottom out before I buy”. As a result, there is tremendous pent up-demand for housing in our area. All we need is for some definitive news that we have hit “the bottom” and there will be strong activity in the market. But finding “the bottom” is often harder than it seems. Unfortunately, there is no magic formula to alert us when we have hit “the bottom”. At that point, we are wondering “Is this the true bottom, or is it just a pause in the downward trend?”. The only way to know will be to wait and see, and if the market did in fact hit the bottom, and starts to trend up you will have missed it. In fact, the only way to know that you have hit “the bottom” is when you are well into the recovery.

Take a look at the above illustration. Everyone wants to buy at point “B”, which is the bottom. But actually buying there is more of a matter of luck than anything else, since at that point in time the market still seems to be going down. The reality is that most buyers who are waiting for “the bottom” end up buying at point “C”, which is well past the bottom. At this point, there are clear indications that the bottom has been hit. But due to pent-up demand from all the other buyers waiting for “the bottom”, the market has actually rebounded a little and is starting to trend up. In reality, you are better off buying at point “A” than point “C”, even though prices are still coming down. Why? Because if you buy at point “A”, you have several advantages:

* You have little or no competition for the house you want. Thus, you are in a better position to get a better price.

* You have the luxury of choice, and can find a home in a prime neighborhood that in normal market conditions would sell immediately, perhaps before you even had a chance to view it.

* Depending on the situation, you have less pressure to rush through inspections and gloss over potential issues with the property. You will have time to evaluate the condition and address any concerns you have. And the seller is much more likely to accommodate you if any property issues need correction.

If you buy at point “C”, you have missed the market. At that point, you are in a weaker position because:

* You have competition from other buyers who were waiting for “the bottom”. You will likely pay more for the house because of it.

* You have less choice in available homes as the market heats up. And prime properties in the best neighborhoods will sell quickly, sometimes with multiple offers

* You will be more inclined to make concessions on the condition of the home, as you will be under pressure from other potential buyers

* The seller also knows that we have hit “the bottom”, and is expecting prices to rise. This will raise their expectations, as well as the price they are willing to now accept

The fact is Real Estate is a long term proposition. If you are planning on staying in your house for 5 years or so, it is not crucial that you find the bottom of the market. I purchased my last 2 homes at the “top” of the market each time (in June of 1989, and July of 2000). And both houses have at least doubled in value, even if they declined in value after I purchased them. If you are a believer in market timing, I overpaid for both houses. And it is the best thing I ever did. In the long run, local real estate is very desirable, and given the long term growth in area population, job growth, and future restrictions on housing development, real estate will be in demand. So if you want to buy a home or move up into a larger home, now is a great time to do so, even if prices are still trending downward. Do it now before we hit “the bottom”, and you will be better off in the long run.

Popularity: 32% [?]

Despite the doom and gloom from Wall Street and the national real estate and mortgage markets that has permeated our collective psyche, the Pleasanton real estate market continues to be steady in the face of adversity. September saw pending sales increase to the second highest level of the year, with 55 pending sales, up from 50 in August. This is second only to April, which saw 67 pending sales. Inventory edged lower as well, with 236 single family homes on the market at the end of September, down from 264 at the end of August. (click on graph to enlarge)

So what accounts for this strong showing in the face of negative news? In my opinion, it is several factors

* Pleasanton remains a highly desirable community, with excellent schools, good commute access, strong job base, outstanding quality of life, clean, well manicured neighborhoods, and a charming downtown.

* We are still seeing a fairly consistent migration from the South Bay/Fremont to this area. Buyers are looking for good schools and safe neighborhoods

* The market here is more stable than many others in the outlying areas. Pleasanton has yet to be inundated with large increases in distressed properties for sale.

* Home values are attractive. While the market is certainly more stable than other areas of the East Bay, prices here have definitely dropped over the course of the last 2 years, and this creates opportunities for buyers to get homes in prime neighborhoods at great prices.

Inventory is down because some sellers have decided they don’t want to participate in the current market environment, where demanding buyers are extremely cautious and looking for prices that reflect the current reality. There is no getting around it… buyers demand value today, or they are just as happy to wait. But when a home is a great value, there is interest from buyers. And the more motivated sellers are willing to swallow hard and sell their homes at a price that is attractive to buyers.

The under $1 million market saw a sharp decrease in inventory, with 121 single family homes on the market at the end of September, down from 148 at the end of August. Pending sales were about the same, with 37 pending sales in September, down from 38 in August. (click on graph to enlarge)

The $1 million to $2 million market saw an increase in pending sales, with 15 pending sales in September, up from 9 pending sales in August. Inventory edged down to 78 single family homes on the market at the end of September, as compared with 83 in at the end of August. (click on graph to enlarge)

In the luxury home segment, inventory edged up, with 37 homes on the market at the end of September, as opposed to 33 at the end of August. Pending sales were basically flat, with 3 pending sales in September. (click on graph to enlarge)

Here’s hoping we can see some stabilization in the financial sector soon so we can see better days ahead.

Popularity: 41% [?]

I hear a lot of Pleasanton, Dublin, and San Ramon buyers say they want to wait for “the bottom”. They just are not comfortable buying in the current market with all of the negativity and the fear of more price erosion. Perhaps it’s time to take a walk down memory lane and revisit the market of 2005. Because once we are past “the bottom”, and all signals are pointing up, we could be right back into that kind of market. You do remember the market in 2005, don’t you? (cue up background music with heavy strings)

Ah yes, the good old days. No worries about how much prices are going to drop. Everyone is buying real estate (even, as it turns out, some people who shouldn’t be). The news media is full of stories about how much homes are appreciating. You are my client, and you would like to buy a 4 bedroom, 2000 sq ft house in Pleasanton. You would like to spend between $800,000 and $900,000. Great! Let’s get started.

Thursday, 2:00 PM. There are 4 listings on the market that you can choose from. One of them backs up to the freeway, and it is overpriced by at least $50,000. Another one is completely original, and has dark brown chocolate carpeting, harvest gold appliances, and foil wallpaper everywhere. It kind of looks like Janis Joplin’s house would look in 1967. In fact, by the looks of the seller, they have been smoking a lot of what Janis smoked in the day (allegedly). The third house is moderately updated, but on a semi-busy street. You could live with it, but it is not perfect. It would be a good “backup” house. And the fourth house is remodeled throughout, great lot, and a definite showcase. After seeing the 4 houses, you decide to focus in on the 3rd and 4th choices. Smart move.

Thursday 4:30 PM. I call the agent on the “showcase” house. They are asking $869,000. However, they are not looking at offers until next Weds, which means we have to wait through the weekend. There will be competition. No matter, you want to go for it. It is a great house, and you can move right in. The 3rd house might be a good back up house if we are not able to get one we really want. I talk to the agent on the “backup” house, no offers yet, but several interested prospects. Good… no offers yet.

Friday, noon. No new listings on the market. Bummer

Saturday, 2:00 PM. Get a phone call from you. You drove by the “showcase” house, and there is an open house. You go in, and there is a constant stream of people filtering through the house. Everyone loves it, lots of questions directed at the agent, including “when are you looking at offers?” We will have company. No new listings on the market.

Sunday, 2:00 PM. Get another phone call from you. You drove by the “showcase” house, and it is of course open again. Almost a traffic jam on the street. People are going into the house in droves… like they are holding auditions for American Idol inside. Agent says “several people”" are interested. Nothing new on the market. You are anxious. I am thinking about taking up yoga.

Monday, 11:00 AM. I call the listing agent on the “showcase” house. Expects 6 to 10 offers based on what other agents have told him. Called the agent on the “backup house”. Two offers have been written, and the seller is reviewing them Monday night at 8:00.

Monday 4:00 PM. Decision point. Do you want to make an offer on the “backup ” house, or wait for the “showcase” house that will likely be a bidding war? You have to decide.

Monday 4:30 PM. 2 new listings hit the market. One is on a busy street. Forget it. The other one has some remodeling, looks promising. You drop everything and meet me at the house. Yes, there is some remodeling, but it backs up to apartments, and the pool is a disaster (looks like something the Creature of the Black Lagoon crawled out of in the 60’s). Oh yeah, it is $839,000. You decide to wait for the “showcase” house. You are going to pass on the “backup” house too. After all, there will be other listings, right?

Tuesday 10:30 AM. Find out the “backup” house had 2 offers on it, and sold for $20,000 over asking price. That’s okay, it is not the one you wanted. I take a couple of Rolaids. No new listings.

Wednesday 3:00 PM. Decision time. You and your wife are going by Macy’s home store to look at all the cool furniture you can put in your new home. Call the agent on the “showcase” house. She expects between 8 and 10 offers. More Rolaids. Undeterred, we make plans to meet a 5:00 to write an offer.

Wednesday 4:15 PM. New listing hits the market. It looks pretty good from the MLS information, not as good as the “showcase” house, but a possibility. No showings until Friday, so no chance of getting into it. Oh well.

Wednesday 4:50 PM. Call the agent again. 4 offers in hand, several more on the way. I ask her if she can give me a hint as to how high they are, and of course my question is met with laughter on the other end of the line. Oh well, worth a try. A couple more Rolaids.

Wednesday 5:00 PM. We meet to draft the offer. You are a strong buyer. 30% down, pre-approved, cash in the bank, etc. But there is competition. You talk about how the house would be perfect for you. I try my best to temper your enthusiasm, and remind you that there is a good chance you might not get the house. You are not phased by that thought.

Okay, run the comps. The last couple of closed sales say it should be priced at around $850,000. There are 2 pending sales that are kind of similar, and they were asking $855,000 and $870,000. It seems to be priced pretty well given the market conditions.

What do you want to offer? You respond with $860,000. Reality check time. There are already 4 offers, and probably 8 to 10 offers by the time they are presented. I calmly explain that you have a better chance of finding D B Cooper than getting the house for $860,000. Okay, but we are getting up there in terms of what you are able to afford. No argument from me. After much discussion, we decide to go in at $890,000. We will give it our best shot. Of course, this offering price has no relationship to comparable sales, or market data. At this point is is purely us against the other buyers, and who wants it the most. We have to strengthen the offer too. 7 day contingency period for the loan, appraisal (oh yeah, remember the appraisal?), and the inspection contingency. Stress level goes up. I try to remember what I did with my box of Zantac.

I have you write a cute letter to the seller telling them how much you love the house, how it will be perfect for you and your family, how you can see your kids playing in their yard, and how much you hope they choose your offer. You include a picture of your family and your dog. You include a copy of your Eagle Scout certificate.

We finish signing the offer, write the substantial deposit check, and I tell you to keep your fingers crossed as you leave the office. I also tell you not to get too attached to the house, because you might not get it. I call the agent, now 7 offers in hand, and 2 or 3 more expected. I have to get the agent the offer by 7:00 PM.

Wednesday 6:50 PM. I deliver the offer. Now I get to wait. And wait.

Wednesday 7:00 PM. Nothing

Wednesday 7:30 PM. Nothing

Wednesday 8:00 PM. Nothing. I start getting nervous.

Wednesday 8:30 PM. Call from the listing agent. They ended up with 12 offers. They are going to counter 6 of them, including ours. Multiple counter offer. Great. Expires at 10:00 AM the next morning. We have to jump through hoops, and we still may not get the house. I call you, and you sound drained but still hopeful. I am thinking about how cool it would be to have a normal job.

Wednesday 8:55 PM. I get the multiple counter offer faxed to me. $925,000. Yikes! I call you, and you are not enthused. You really wanted to stay under $900,000. But you can stretch and make it work. Let’s sleep on it.

Thursday 9:15 AM. We decide to up the ante. We counter back at $930,000. I’m feeling good about this. I deliver the counter to the agent.

Thursday 10:00 AM. No word from the agent

Thursday 10:30 AM. No word from the agent

Thursday 11:00 AM. Voicemail from the listing agent. “Thank you so much for the response (I already know we are screwed by that opening sentence) but the seller has chosen one of the other offers. It was a little higher than yours, with no loan or appraisal contingency. We’ll let you know if anything happens to the escrow”.

Thursday 11:01 AM. Bolt to Starbucks. Need a Carmel Frap. Now! 2 more Rolaids en route. I wonder what it would be like to sell for a software company. Surely it would be easier.

Thursday 11:08 AM. I call you. You are bummed. I can hear the combination of disappointment and exasperation in your voice. We did everything we could, but it was not enough. That’s okay, I reassure you. There will be other houses. It wasn’t meant to be. (funny how Realtors become such great philosophers at times like this). I’m anxious. I know we have to go through this circus again.

We end up writing offers on 4 more houses. We finally get one. Evey new listing seems to be priced $10,000 or $20,000 higher. With every house we loose, we get more aggressive on the next one. We waive loan contingencies. We shorten inspection contingencies. We throw in 30 days free rent, and dinner at Ruth’s Criss. The house is not perfect, not even close. But after the ups and downs of 5 offer presentations, you are relieved to finally have one in contract. Of course, there were several issues that came out in the inspections, and of course the seller is unwilling to fix any of them. But hey, at least we got the house. For $45,00 over the asking price, and probably $55,000 over the comps. I worry about how long this crazy market can keep up. At some point, this market is going to run out of steam I think to myself. I’ve seen it before.

So, the question is, do you really want to wait for the market to be “better”? Really?

Popularity: 11% [?]

Interesting case in San Diego, where an unhappy home buyer is suing their Realtor, alleging that they overpaid for their home because the Realtor withheld sales information that indicated a lower value for the property they purchased. Here is a short segment from The Today show explaining the background.

Certainly, no one likes to purchase a house and find out that the value has declined. However, Realtors don’t control the direction of the market. And there is no state law that homes in California can only go up in value (as if we all needed to be reminded of that right now).

If, as alleged, their Realtor purposely withheld relevant information (for example, pending or closed sales on the MLS) with the intent to deceive the buyer, then they have every right to be upset and to seek recourse. The Realtor has a fiduciary responsibility to represent his/her client’s best interest, and if the agent did in fact withhold vital information then they should bear the consequences.

On the other hand, the buyer should take some responsibility for their transaction. The internet is a very powerful tool, and there are multiple channels available for consumers to do their own research on real estate. Sites such as CyberHomes.com, Zillow.com, and others exist where consumers can get neighborhood sales, estimates of value, and other relevant information about any property.

Lastly, real estate is not something that is easy to quantify. There is always a range of value, even within a neighborhood. Factors like upgrades, market conditions, appeal, lot size, location, and even the direction the home faces can have an impact on the sales price of the property. Just because a home sold for less than the subject property does not mean that the subject property is worth less money…. any of these factors can effect the final selling price of the subject property (up or down, for that matter). In this case, just because there were a couple of sales at a lower sales price than the property in question does not in and of itself mean that the buyers were deceived or misled. From a real estate perspective, a property is worth what a willing buyer is willing to pay, and what a willing seller is willing to sell for. And that figure can range depending on the buyer, as most buyers have different factors they value.

I am not an attorney, nor is my intent to comment on the specific allegations of this suit. But it is an interesting case, and one that is fairly topical at the moment given the sluggishness of the market. In a fast moving market like we are in now, it begs the ultimate question…. How do you really tell the value of a property?

Popularity: 10% [?]

This is primarily a blog devoted to real estate and lifestyle issues in Pleasanton and the Tri-Valley, and in general I avoid discussing politics. But one observation I have made over time is that voters often are attracted to the personality and the idea of what a certain candidate represents, while having little or no knowledge about what their favorite candidate actually stands for. My mom, for example, is an Irish Catholic who was raised in the great depression. She is a card carrying Democrat come hell or high water, mostly because that’s the way most Irish voted at that time, and because of her fondness for Roosevelt and the New Deal. However, much has changed since the 1930’s, and yet she clings to the label “democrat” like Brittany Spears clings to celebrity. But if I ask her about specific issues, her responses are typically more conservative than liberal…. but she remains a tried and true “democrat”.

Here is a link to a short questionnaire about several important political issues. When you answer the questions about your feelings on these various issues, the survey tallies your answers and shows how your answers compare to all of the candidates’ actual stance on the same issues. This is the greatest thing since Al Gore invented the internet, because it removes the “rock star” persona and slick political messages that most people are attracted to, and instead focuses on what the candidate actually stands for, and how that compares to your personal beliefs. The results are very interesting to say the least. It shows you which issues you have in common with each candidate, and on which issues you differ. It is a fun exercise. Give it a try (courtesy WQAD in Iowa)

Select a Candidate Quiz

Popularity: 8% [?]