The New New Normal

carrott

A couple of years ago I wrote a post about the market’s “new normal”. That normal is old now. We have a new new normal now. This could be as strange a new normal as I’ve ever seen. Maybe even as strange as that carrot up there. For 25 years I’ve had a common routine when it comes to showing houses to buyers. We go out, usually on the weekend, I enter the house via my lock box key and we proceed to examine the place and the lot. Simple right? That process repeats itself at the next house and the next…and with other clients later on that day…etc. What’s changed you ask? The feeding frenzy in all it’s radiant glory and beauty! Now when I show a property I need to enter the house…and close and lock the door behind us! I need to do that because well over half of my showings lately other people follow us in! On multiple occasions  while I’m out in the back yard with my clients 3 or 4 other groups come on in when they see an open door. It becomes an impromptu open house! I have to run around and throw everybody out so we can leave!

“Oh, aren’t you holding it open?” they say. Right! The amazing thing is how they all seem to be RIGHT THERE right after we go in. Prospective buyers just hanging around, lurking in front of houses for sale…looking for somebody to let them in. It’s freaking WEIRD! I kid you not folks…this happens to me every weekend now! Sorry, I just am not going to hold an open house on somebody else’s listing. Lately, before we go in I look around the street and see if anybody is sitting in a car. If they get out…I tell them to forget it. Lay down the boundary right away. “Sorry…call your agent, or Redfin or something!”

It doesn’t stop there though. The astonishing conversations I hear at ACTUAL open houses boggles my mind. Like the guy who asks the listing agent (in a room full of potential buyers) “How much over the asking price should our offer be?” Nice poker face, huh? Make sure you tell other interested parties how much you’re going to offer! What’s worse though is the expectation that the listing agent KNOWS what it’s going to sell for! He or she has NO CLUE folks. I swear, I could write a book on stuff I’ve heard people say at open houses…out loud.

“Will the seller fix all these things in the report?”

“If we work with you will that guarantee we will get this place” That to the agent holding it open, again, in a room full of other prospective buyers.

” Will the seller take less?” I always love that one…it’s a personal favorite. I usually reply “If the house is on the market in 3 months then maybe, but based upon the fact that there’s been 150 people in here so far today I’m willing to bet that more that a few people will express enough interest to buy it sooner rather than later…and I’m thinking that somebody in that bunch will most likely write an offer OVER ASKING.

It’s the New, New Normal. Playing now at a listing near you.

 

 

What Goes Up….

 

 

up-flying-balloon-house

So a few weeks ago I noticed a Realtor friend of mine on Facebook was touting the wild, overbidding experience she had just had selling a house she had listed. One of her friends commented “I can’t stand it…I’ll NEVER be able to buy a place around here”. My friend replied, “Don’t worry, what goes up must come down.” That sounded encouraging and sweet to me, but I think it’s simply not true at all. If there’s one thing I’ve learned repeatedly in the last 25 or so years doing this it’s that the Real Estate market isn’t a Yo-Yo. It absolutely does NOT rise and fall, and rise and fall. I’m sure most of you have seen the graphics on the market’s history around here. It looks a lot like the face of Mt. Everest. It’s about 95% uphill grade, moderated by some slight dips and a few plateaus. That’s over the last 30 or 40 years too. A Yo-Yo it aint.

On September 6 2006 I got this email from a sweet young woman who I’ll call Joanie. She wrote this

“I am beginning to explore the idea of buying my first home and am very new to the process. I browsed your website and found plenty of useful information.

Would you have time to meet with me and discuss further?”

I discovered that she was qualified to $700,000 and we began looking at places. Houses I might add. Houses in nice neighborhoods. The 2006 market was pretty crazy and overbids were common…she was uncomfortable in that environment. She decided to wait…hopefully it would cool off. Guess what…it did. In late 2008. When everybody started to come out of hiding in 2009 so did Joanie. The problem then was…would the market ever REALLY come back? Those 2006 prices were just an illusion anyway and certainly if she continued to wait they would come down even more.

Then in 2011 she came back again but discovered that the nice neighborhood’s she saw in 2006 were not available in her price range anymore. The market was back to competition again and overbids were common. Of course, she was picky too. If the paint color wasn’t right or, God forbid, there was some dry rot disclosed on the pest report…then forget it! She simply wasn’t going to assume somebody else’s problem!

2014 came and she could afford some more…up to $850,000 now. The problem was…she had to look at townhouses since she was WAY priced out of the neighborhood’s she liked before. She was priced out of the mid range neighborhood’s she didn’t like in 2006 but compromised over in 2011. An amazing thing happened though last June…she actually wrote an offer! Her first. We finished 4th out of 5…but it was a start. Right? We continued to look…right up to January of this year. She probably needs to be looking in San Jose or Fremont now…unless she wants a condo around here. The problem is…she’ll need to compete to get that as well. In either place. I personally don’t think she’ll ever buy anything. In my opinion she’s lost at least $300,000 as a result of her timidity. Probably more. Not to mention the tax benefits she DIDN’T get by remaining a renter these last 8 years.

I really think this is a train that you either get on…or remain standing at the station while others get on. The equity that people have earned simply by getting on is impossible to duplicate in any other way. The market will moderate for sure…but it’s not coming back to 2009 levels ever again.

Real Estate Diaspora

diaspora

Sort of coming on the heals of that last post I wrote about changing criteria is the also new phenomenon of buyer flight to the East Bay and South San Jose. It’s a veritable Real Estate Diaspora. Folks that would just as soon live in Foster City are taking flight and buying in Fremont or Blossom Valley.

Yesterday I looked at offers on a condo on Lido that I had listed. We got 13 offers and it went WAY over the $829,000 asking price. The question for buyers now is, what can we do if you can’t afford at least $1,000,000 on a home? Incredibly, you’re not going to be able to buy in Foster City now unless you buy a condo. Townhouses and Single Family are out. Last week an agent friend of mine won a bidding war on a 3 bedroom townhouse in Mountain View that was also listed for $829,000. It sold for $1,051,000. You can still get a townhouse for less in San Bruno, Pacifica, South San Francisco or Daly City but like I said before you might not be too happy with the schools there.

This diaspora I’m talking about is coming as a shock to the agents in Fremont and South San Jose. As recently as November, single family houses were getting multiple offers and selling for $20,000 over asking. Now they’re getting a gazillion offers and going for $150,000 over asking. In just a few months this has happened. Last week I wrote an offer on a fixer upper 3 bedroom house in the Cambrian section of South San Jose. It was listed for $725,000. They got 27 offers. Many from the Peninsula the listing agent told me. It sold for $860,000. Today, I wrote an offer in Fremont on a house listed for $789,000. The agent told me she had 26 offers!! The majority from Peninsula and San Jose agents! I think this house is going for $900,000.

What a freaking world! Meanwhile, my seller on Lido is moving to Oregon where he’s found a 3400 sq ft house with a master suite that’s about as big as his Lido condo…for $510,000. No competition either!

As an agent, this sure is a strange phenomenon. I had a fellow agent tell me he wouldn’t work with a buyer unless they were qualified to $1,300,000. Sheesh! Buy a condo for $800,000 or compete in Fremont and then have a 2 hour commute. If you’re lucky enough to get the Fremont house in the first place!

Altered Criteria

Path across labyrinth

One thing that always happens in hot markets is a buyers criteria gets reduced. In a slow market a buyer can afford to be picky and bad locations, plenty of needed improvements or schools that don’t have API scores over 900 can eliminate a property from someone’s choices. Not now though! I mention the API score thing because, in my experience, the better the school the more desirable the home. In fact, I’d say that the quality of the schools has really become the Holy Grail when it comes to where people want to live. One of the things that is REALLY shocking me in this particular market is how the escalation of prices has significantly eroded even these dearly held notions.

The truth is that if you’re qualified up to $1,000,000 and you want to buy a house in an area with API scores over 850 you’re pretty much screwed in the area between Millbrae and Redwood City. As I’ve written about before…it won’t be long until that’s the case with townhouses in Foster City as well. This is actually amazing and what’s happening is that folks are deciding that buying in San Mateo (for example) is better for their situations than buying in Fremont or South San Jose where schools are better. In the last several months 7 houses have sold in San Mateo Village over $1,000,000. I clearly remember when a house on Pasadena Street there listed for $305,000 and I thought the sellers were crazy. A million dollars for The Village? Amazing! The API for the school there, George Hall, is 823. I also heard about another house in San Mateo on the west side with the school’s API of 831 just sold $500,000 over asking at $2,200,000.

Last year I had a listing in South San Francisco that got 2 offers and sold for $15,000 over asking. The market in Foster City was super hot then too. The reason for the slowness there? The school’s API is 800. Last week I listed a townhouse up there in an area where the school’s API is 818…I have 11 disclosure packets out on it today and I’m looking at offers on Monday. 9 of the 11 disclosures are from agents in San Mateo and Burlingame. Their buyers would prefer the Mid Peninsula but they have to compromise. My suspicion is that what they’re deciding is to buy in these areas but have their kids attend a private school. Either that or decide to move to Fremont or Blossom Valley and commute to San Francisco (or San Mateo or wherever).

What a choice these prices are putting on people! Buy here and get something much smaller than you need or want…if you can buy at all, or eliminate most of your criteria including good public schools to save yourself a 2 hour commute. The storm that I thought was coming is really a lot worse than I thought.

Over Reaching

reaching

Last week, a 2 bedroom townhouse at CityHomes listed for $758,000 got 21 offers and launched all the way up to $925,000. It was a cash offer, good since the last comparable for this floorplan was 3 weeks old and came in at $875,000. Nothing like escalating $50,000 over a very recent comp, huh? When I hear stories like that (I had clients in that frenzy too) it sort of gives me the shivers. I figure it’s bound to mean that pretty much ALL townhouses now will be selling for $1,000,000 this year. I mean, if a 1410 sq ft place like this gets 21 offers…what’s a 3 bedroom place going to go for?

This problem is particularly troublesome now because of this horrible inventory! It’s actually beyond belief. Today, there are 6 whole listings in Foster City. 4 houses, 1 townhouse and 1 condo. It’s a 1 bedroom condo too. In January there were a mere 517 homes for sale in all of San Mateo county…condos/townhouses and single family combined. In January 2013 there were 1028…a reduction of 49%. Consequently, the temptation is sure there to try out new and higher prices on what comes up. Some folks have tested the market just to see what it’ll bare. Interestingly, it would appear that in spite of it all, the sky is actually NOT the limit.

In Foster City of the 6 listings currently on 4 of them have over reached…at least in my humble opinion. Of course, they could always sell and who knows what could happen, but they’re chance of a market driven frenzy are probably slim at this point. The gorgeous house on Beach Park seemed high to me at $1,748,000 and it’s been on now for almost a month. The house at 1101 Catamaran didn’t get what they were hoping for at $1,605,000 and they dropped the price today to $1,529,000. The townhouse at 678 Libra didn’t come together in spite of receiving multiple offers. It’s been on for 21 days at $749,000. The last unit like this one sold last fall for $710,000.

Certainly, there’s nothing wrong with taking a shot. I do think it’s sort of encouraging that people aren’t willing to pay any price just to get in. Apparently not every property gets 21 offers and sells $175,000 over asking.

Amateur Hour

amateur

OK, I know I probably sound like an egotistical jerk here…but here comes a rant. I’m not sure why this is, but so far in 2015 I seem to be running into more ridiculously amateurish real estate agents than I think I’ve ever seen. Unfortunately they seem to have listings that I have clients interested in! Damn! Here’s a few examples:

I go show a listing in Redwood City on the first day it hits the MLS. While we’re there a couple of property inspectors are also present doing their thing under the house. I hear one tell the other “Hey, there’s no foundation at all on this front perimeter wall”. Hmm…a tad disconcerting. My clients have interest so I call the listing agent who tells me that she has 2 offers in front of her right then so I better hurry. “What about the disclosures?” I ask. “They’re not ready yet”. she says, and obviously the inspections aren’t either. “Go ahead and write your offer without them…it’s OK” She says.

Really? Write an offer in competition without seeing the inspections or disclosures? I know, I’d have to include a contingency but how do you compete that way?

Or how about this one. I’m showing a house a few days ago in San Jose and the open house we’re at is mobbed. People are asking for the disclosures. The agent says (with a straight face) “We’re looking at offers on Wednesday and expecting multiples. If you’re the winning bid we’ll give you the disclosures at that time”. What? Did I hear that right? So you’re supposed to compete for the place without knowing ANYTHING about the home? Obviously you would include a contingency but how are you going to feel about writing an offer $100,000 over asking and then discovering the house has significant issues. Of course you’ll back out. Why would either the seller or any buyer want to do it that way? Why not just let everybody examine the disclosures and then everybody goes into the offer with their eyes open. This other way is absurd.

And yet another, a house I’m showing has open house signs everywhere and the door is wide open…but no agent is there. Anybody can just walk in…and potentially walk out with the stagers stuff. Several interested parties are there but not the listing agent. People are asking me questions about it…I guess I look sort of official. Unfortunately it’s not my responsibility ( If my client would have liked it I should have told them that the place was in the middle of active toxic waste…it might have discouraged competition? Just kidding!) Once again, I send an email requesting disclosures and I’m told they would be ready by Thursday but 2 offers are coming in on Monday so go ahead and write your offer. It’s kind of zany to me, sorry.

OK, I’ll get off of my soapbox.

Exponential

Double_Exponential_Function

A couple of posts ago I marveled at the listed price of the house on Beach Park that’s up for $1,748,000 and a couple of posts prior to that I marveled at the price for the house at 908 Constitution that was listed $100,000 over the sales price of a similar comp that was a few months old. Constitution sold of course and I can’t wait to find out what for. The fact of the matter is that so far in 2015 the prices seem exponentially higher than they were in 2014.

Foster City is a great place to look at comps since it has so many similar floorplans. Comparing like kind homes is simpler than doing the same thing in San Mateo.   For example, the 3 bedroom house at 249 Shearwater sold after being listed for $1,748,000. The all time high for this floorplan was actually this house and it sold last year for $1,525,000.

The house currently listed at 1130 Schooner is listed for $1,629,888. I sold this floorplan last year around the corner for $1,350,000. A similar floorplan also sold on Mira for $1,650,000 though. Schooner is looking at offers next Wednesday…that’ll be interesting.

There’s also the house at 1101 Catamaran that’s listed for $1,608,000. Again, I sold the last house with this floorplan in Foster City last year, it went for $1,280,000 with 7 offers. Slightly different floorplans with this square footage sold last year for $1,400,000 and $1,358,000.

I have a condo at Lido Isle coming up in a few weeks, it has the best waterfront exposure I’ve seen on either a house or a condo. Wide water on 2 sides. I’m listing it well over the all time high for this floorplan. Why not?

 

Foster City 2014 Condo/Townhouse Statistics

OrderStatistics

As I’ve mentioned before on this blog, condo/townhouses are a lot more difficult to draw conclusions about because there are problem projects and great projects and some are way up and others not so much. Thus that should be considered when thinking about the overall statistics about FC. Let’s get started…how about the total number of units sold. Here’s the history:

2006…240

2007…165

2008…112

2009…140

2010…143

2011…144

2012…156

2013…169

In 2014 the number was 176. Pretty interesting since there has indeed been low inventory. It’s nowhere near the high of 2006 but I suspect that unlike many years, everything that came up sold. Now how about the average prices:

2006…$661,993

2007…$694,026

2008…$635,839

2009…$577,267

2010…$577,150

2011…$512,192

2012…$551,000

2013…$657,000

In 2014 we hit an all time high….$744,522! Most projects in Foster City did indeed have all time highs as well. What’s 2015 going to bring? More all time highs if you ask me. We’ll see…

Foster City 2014 Statistics

stats

So every year I write this post and the story has been pretty much the same…less sales as the result of bad inventory. Last year I marveled at the fact that only 106 single family houses sold in 2013 and how that was the lowest number since the lean year of mortgage meltdown in 2008…when there was only 99 closed sales. Well, in 2014 there were 99 closed sales. Again, this wasn’t because of low demand. It wasn’t because there was an international crisis that stopped the market. It was simply because there was no inventory.  I also marveled at the fact that the average days on the market in 2013 was only 20 days. That was miniscule compared to 37 in 2006 (the market’s previous high point) and then 65 in 2009. Guess what? In 2014 the DOM was 15!!!

Now for the really scary numbers. Here’s a breakdown of the average sales prices since 2006:

2006…$1,078,000

2007…$1,113,000

2008…$1,118,000

2009…$1,010,000

2010…$1,004,000

2011…$976,000

2012…$1,021,000

2013…$1,236,000.

Hold onto your hats…the average sales price for 2014 was $1,359,000! I mentioned this before, but there was only ONE home that sold under $1,000,000 in 2014. In 2013 there were 22 sold under $1,000,000. Today there’s a new listing on Beach Park that came up for $1,748,000. The most money EVER spent for a house on that stretch of Beach Park? $1,400,000. The most in ANY stretch of Beach Park…$1,540,000. We’re on a wild ride, huh?

Highs & Lows 2014-Condo/Townhouses

OK, so how about these guys:

 

MOST EXPENSIVE CONDO/TOWNHOUSE:

promo

740 Promontory Point #3404 This large 2697 sq ft unit sold for $1,290,000. The high in 2013 at Promontory Point was $1,012.500. Same size place.

HIGHEST PRICE PER SQUARE FOOT:

ERICK

834 Erickson at Winston Square, in only 1380 sq ft, sold for $1,050,000…a whopping $760.00 per square foot.

LOWEST PRICED CONDO:

ADMIR1

2110 Admiralty Lane This little 1 bedroom unit closed for $337,500. The 2013 low…$280,000.

LOWEST PRICE PER SQUARE FOOT:

ADMI1

1214 Admiralty Lane The Admiralty is always going to come in last it seems. This 3 bedroom unit sold for $510,000…or $338.00 per square feet.

LONGEST ON THE MARKET:

till

1082 Tiller This unit was on the market for 105 days, but was originally listed as a short sale and was rescued by the market and sold as a regular sale for $848,000.

GREATEST OVERBID:

PORTO

664 Portofino So much for Island J’s problems. This unit was listed for $825,000 and sold for $995,240. An overbid of $170,240!

GREATEST AMOUNT UNDER THE ORIGINAL LIST PRICE:

TOWNG

219 Town Green Lane It’s actually very remarkable that so few places sold under asking…I only found about 5 out of 176. The place closed $45,000 under asking. Very unusual last year.