School Growth

The new and improved Foster City school looks fantastic, huh? Yet, the discussion/debate about more schools continues. It continues for good reason too. Oddly, or not oddly, the subject of new schools is a hot one in communities all over the Peninsula. Seems like everywhere I go I hear constant debate about this topic. I’ve got some clients looking in Los Altos and it came to light on a house we were looking at that the gorgeous park that was just at the end of the street from a home we were looking at was being considered for redevelopment into an elementary school. As you can imagine, plenty of folks in this part of Los Altos are not looking too kindly to the idea.

Same story here of course…as it is in San Carlos and San Mateo and on and on and on. How do we resolve it? Overcrowding in schools is a real concern. 250 kids a year are joining just the San Mateo-Foster City school district. That’s a need for 75 new classrooms. Bowditch has a plan to ad onto the school and accept 5th graders to take the edge off of the elementary schools. There’s lots of kids out there and this issue is simply not going away. Available vacant land isn’t being created…there’s going to have to be a solution for all these new kids and demand for schools. There solution is going to have to come from us paying for it in some way…and it’s going to come from in an area of land that will need to be redeveloped for that purpose.

Ringing The Bell

Last year, a large 4 bedroom, 3200 sq ft house on Gloucester in Whalers sold for $610,000 over asking. Remarkable for sure, but it’s a big house, it was priced low to begin with…and it’s on the water in Whalers. It closed at $2,010,000. A couple of days ago a 3 bedroom, 2 bath house in Plum Isle at 934 Aruba, in all of 1810 sq ft closed at $1,750,000. $462,000 over asking. That’s simply astonishing. To add some perspective…the most money ever spent on this floorplan in Plum isle was $1,160,000. That place closed on July 22 of this year! 10 days ago! OK, the Aruba place is nicer than the other one on Grenada…but WOW!

Real Estate is a lot like baseball. You never really know what you’re going to see every day you go out. Amazing!

 

Long Term Appreciation

I saw this chart on Paragon’s website and thought it was terrific. Of course it’s about San Francisco’s market, but it’s pretty much the same numbers here as well. I actually have seen this same chart before that encompassed all the way back to the end of World War 2. Same story, pretty much. Interestingly, this period sort of is the time I personally have been in this business. I started in 1990 right after the earthquake and right before the first Gulf War. It was a recession, but I didn’t realize that…I didn’t have any clients anyway. I was new!

I clearly remember the market heating up in 1995. I had this goofy client who predicted the market’s acceleration because of technology that year. I thought he must have been crazy…but he was right of course. What I really see when I look at this chart is that we had 21 or 22 years of escalating prices out of the last 30. I think it’s very hard to deny that. The little blip this chart calls the dotcom bubble in 2001 didn’t exist at all to me….with the exception of the stalled market following the events of 9/11/01. That lasted for 3 months until January of 2002 when it went off again.

That means that the market slowed a bit in 2007 and early 2008 and then plummeted in September of 2008. It sucked in 2009, rebounded somewhat in 2010, dipped in 2011 and then took off again in 2012. 2009 was really the only market I remember where multiple offers were rare and buyers had nice leverage. The rest of the time it’s been highly competitive for buyers.

I know there’s been tons of ridicule about realtors touting their particular market as being “different” from everybody else and how our values don’t plummet like everybody else’s…but look at this history! Our’s don’t. This brings me back to renting again. Why? The MLS history goes back to 1998…a 4 bedroom 2 bath rancher sold then on Shad for $473,000 (It got multiple offers…it was listed for $450,000!). That same floor plan sold on Marlin this year for $1,300,000. Did anybody who chose to rent over those 16 years earn that kind of appreciation. While doing nothing other than living in a place?

How much do you want to bet that the people who bought Shad in 1998 for $473,000 felt they overpaid…and that the market would fall apart since they just bought. Sort of just like buyers feel right now.

Staying or Going?

About 10 days ago now I had a condo listed at 143 Albacore in Marina Green. It’s a very cute 2 bedroom place and was listed for $599,000. I had the usual amount of interest…in other words lots of people went through there and I eventually handed out 8 disclosures to interested parties. A gentleman came in the first hour of the first open house and expressed interest. Actually…a lot of interest. He was there for at least an hour. He told me he and his family have been renting in Foster City for years and he never could get around to making the plunge into a purchase. This was going to be the time, he said. This was the right property! He came back later and spent another 15 minutes or so there…then the next day he came back with his daughter. She liked it too. He asked a lot of detailed questions about offers and disclosures. he told me his agent would contact me and get the disclosures. During the week we marketed this place he called me 3 times to ask questions…his agent called a couple of times too. I’ll bet he told me 5 times he was going to write an offer. During the second weekend he came back with his wife and together they spent about a half hour in the condo. Offers were due on Monday by 1:00PM  and he called me himself at about 10AM to see how much competition he had. Keep in mind, his agent was doing the same thing.

I really liked this guy and was rooting for him! We ended up with 3 offers and his turned out to be lower than the other two. We countered him to help him out and he agreed. We ratified that evening! Yay!!

At 10AM the next morning his agent called and told me that he was backing out. I couldn’t believe it. After all that time and effort…he got cold feet. He didn’t want to use his savings on the down payment, the commitment was just too big, said his agent. He’s going to continue renting. OK, no problem…except I think that’s a mistake of course. We didn’t have any problem finding a buyer…we had two great backups. An hour later we ratified again. In 5 years this condo will be worth $750,000. In five years this gentleman will be paying $4000 a month to rent a similar size apartment. At least. OK, OK…I’m WAY invested in this real estate thing, but I think it’s crazy to rent instead of buying. Especially to choose to rent vs buy in a case like this. I see all those online comparisons too “RENT vs BUY” on Facebook or wherever. I’m never going to believe renting is better than buying. I don’t have to look any further than my own family. If it wasn’t for the fact that my parents and my Aunts and Uncles bought property way back when we would just flat out be screwed in our generation. That’s a fact. Real Estate investment was the best thing that ever happened to us..and will be the best thing that happens to my kids too for that matter. I’m going to expand on this in more posts going forward. I just feel bad for that nice guy who could have had Albacore.

What’s Changed?

So every time I hold a place open in Foster City I hear somebody comment that the inventory is way up. Yay! Just look at it all…they exclaim. I used to do charts here identifying inventory in both single family houses and condo/townhouses in Foster City. I stopped doing it because there wasn’t any inventory to report on! Last time I did one was September of 2011. At that time there were 30 single family homes listed for sale and 18 pending sales. In condo/townhouses there were 38 active and 14 pending.  Today in this land of bounty and opportunity there’s 11 single family for sale and 9 pending. There’s also 18 condo/townhouse active and 16 pending. These are indeed higher numbers than a few months ago and maybe that is encouraging but the question is out there. What’s changed?

In the first few months of this year it seemed like every single property that came on the market got multiple offers and sold way over asking. Didn’t matter what it’s condition was. Now, buyers are not as willing to go for it on properties that seem risky in some way. I’d call that sanity. Consequently, when I look at active Foster City homes I see this…overpriced Eichlers, a house with a very high HOA, a small house in an iffy location with a high price and maybe 4 houses that I think will sell quickly. There aren’t any traditional rancher 3 or 4 bedroom places in Foster City on the market right now. When one comes up it’s going to get a lot of attention. Same sort of dynamic with condos/townhouses. There’s some very nice places out there…but more with an issue or two. This kind of market is really kind of challenging. It’s easy to get encouraged by the new inventory…but it sure seems like the choice houses still get multiple offers

How NOT to Do It

So I sold my listing on Burbank in San Mateo yesterday and in the process had quite an amazing experience. I had given out 17 disclosures to interested parties and, as you might be able to guess, we got multiple offers. The experience I’m referring to came after I met a nice couple at the last open house on Sunday. They requested the disclosures on Sunday night and I get a call from the guy at about 1:10 on Monday informing me that he would like to put in an offer. Offers were due at 1:00. He proceeds to tell me that he hasn’t quite squared away their financing and asked if he could get his offer to me by 7:00 or 8:00 that evening. Offers were due at 1:00. Naturally…some questions came to my mind.

1) Do you have an agent?

He answered that he didn’t but would be writing the offer himself.

2) Are you a lawyer? A licensed Real Estate agent?

He said no…but he bought another house once this way. Back east someplace.

3) How are you going to find the necessary forms to accomplish this offer?

He said he would be able to download some online someplace.

4) Have you read the disclosures?

He said that he hadn’t but he would have 2 weeks to do that inside his contingency and after he did his own inspections.

5) Are you completely out of your tiny little pea sized mind?

He said that he wasn’t. He also told me he wanted to write a full price offer and leverage the commission (he thought it was $50,000) toward making his offer more attractive.

Seriously…let’s summarize. Here’s a buyer with absolutely no experience at all in real estate in this area wanting to write his own offer in an environment that he knows nothing about. He wants to write a full price offer and leverage the commission which he thinks is 6%. It’s actually a total of 5% and 2.5% is mine…so he apparently wants me to sell the house for free so he can get the house. His offer would be written with long contingencies and a desire to do his own inspections (even though he doesn’t know any local inspectors…I guess he’ll find them online too). Since he doesn’t have access to the approved local contracts he’s going to write his offer on some generic document that may or may not apply to this area’s laws and customs.

I ended up with 7 offers on that house and all 7 were over asking. 6 were As Is with no contingencies of any kind. The house sold $135,000 over asking.

OK, this is rare…thankfully!! Real Estate needs one of those dangerous activity disclaimers posted at open houses. Such as:

Real Estate is an inherently dangerous activity and should be performed only with the proper instruction and supervision of an experienced person. The agent and seller of this home assume no responsibility for any stupid mistakes incurred by the reader!

 

 

All a Matter of Perspective

So I’m pretty much used to the mid Peninsula area and, obviously, Foster City so the escalation in prices this year (last year wasn’t anything to sneeze at either) is pretty amazing to me. By most standards anywhere this area is shockingly wild when it comes to values. My brother in law from Peoria, Illinois was out visiting last week and you can only imagine his expression when I took him to see a few houses. His 3 bedroom, 2 bath house there is worth about $85,000. Just for fun I took him to the listings at 676 Matsonia, 921 Haddock and 843 Grenada (Matsonia and Grenada have sold since) and of course he was appalled. I really think the new median price for a 3 or 4 bedroom rancher is $1,300,000 right now in Foster City.

Well, I have some clients who are looking in Los Altos and we’ve written a couple of offers down there and I have to say it makes Foster City seem like Peoria by comparison. Seriously. The last place was a 4 bedroom, 2 bath rancher in almost original condition that was listed for $1,995,000. It’s original kitchen had those nice dark brown cabinets and tile counter tops. It has brown shag carpet in the living room and large patterned brown and black rings on a white background for wallpaper in the entry foyer. It did have a big 11,000 sq ft lot though…typical for Los Altos. I think you could put $200,000 into it without batting an eye…just to make it look like 676 Matsonia did! Matsonia was listed for $1,098,000 and got a bunch of offers.

We offered $2,370,000 for this place…and finished 4th out of 8. It sold for more than $2,500,000. Here’s a link:

http://matrix.mlslistings.com/Matrix/Public/PhotoPopup.aspx?n=12&i=0&L=1&tid=1&key=12969608&mtid=1&View=G

These pics actually make it look a bit more updated than it is too. This place handed out 19 disclosures. As long as there’s this kind of interest in areas like Los Altos and Palo Alto and Menlo Park, Foster City will maintain it’s values. It represents a DISCOUNT versus what’s down there. Plus the schools are equally great. Paying $1,300,000 for a rancher seems like a bargain to me now.

And We Have a Winner….

Well, I predicted, and not that long ago, that we would see a townhouse in Foster City close escrow at or over $1,000,000. It’s June 18…and it happened today. Now I’m not talking about Promontory Point where that’s happened before…I’m talking about the other projects in town. Projects that were hard to sell just a few years ago.

Today we witnessed the closing of 1028 Gull at Bay Vista. Pictured above. It was listed for $949,000 and closed at $,1,035,000. It’s a 4 bedroom, 2.5 bath townhouse in 1757 sq ft. The dues at Bay Vista are $235 a month. To me that’s obviously a contributing factor. This unit previously sold in 2001 for $482,000. Not bad , huh? Now the question becomes…when will smaller 3 bedroom units go over a million? How does that effect waterfront units at Isle Cove or Harborside?

Remember…the market has slowed down a little. Still, we have this happen. What an amazing place this is!

 

Steve Toler

So it’s my blog and I can say what I like. Right? Today was Steve Toler’s last day as an employee of Foster City. Yesterday he got a ride home in a fire truck along with a police escort. This is an individual who was loved by many, many people in Foster City…and elsewhere too. Steve was the Assistant City Manager in FC…and before that he was Finance Director and before that he was Administrative Services Director. I think of him as simply Mr. Foster City. I don’t know anybody who has represented his or her community more diligently, honestly and with more integrity than Steve has all these years. The guy is simply amazing.

Steve took the Assistant City Managers job in Millbrae and to say that his leaving is a loss and will leave a big hole is the understatement of the decade. You see, Steve’s not a politician. He was never running around trying to find a butt to kiss to either get or stay elected. (No, I’m really not trying to indict politicians…sort of) . Steve is a legitimate public servant who loves Foster City and wants to be a part of it’s future. He’s a humble guy. For what it’s worth, it’s an enormous shame that the environment became conducive for Steve to entertain overtures from other communities. It’s a big gain for Millbrae and quite a loss for Foster City.

Over The Top

If there’s anything that will eventually hurt this market it may just be the unbridled greed that some sellers are showing lately.  Understandably, there are sellers out there that have heard all about the multiple offer, enormous overbid insanity that’s permeated the market this year and want that experience for themselves. I get that. What I’ve been hearing though takes things way over the top…in my opinion.

There are folks out there who put their homes on the market and feel entitled to a huge overbid. No matter how crumby their house is or how grossly overpriced it was to begin with. I heard an example of this the other day in San Carlos where a house came on the market on a small 400 sq ft lot, needing lots of work and only 1300 sq ft. It was listed for just under $1,200,000. Unfortunately for the sellers, they didn’t get the offers they were expecting. In fact they didn’t get an offer. When one eventually did come in it was $40,000 under asking (about what it was really worth!). The sellers wanted to counter at $1,300,000. After all…they were entitled to an overbid like that, right? I mean, how dare the market not anoint their house like it did with others.

I’ve heard this a few time this year. I’ve actually heard it in scenarios where there actually was multiple offers and the price went more than $200,000 over asking. The sellers were disappointed…because they expected $300,000 over asking!

If you’re thinking of selling…here’s some simple rules:

1) You are NOT entitled to overbids

2) If you’re lucky and you prepare correctly you MIGHT get them.

3) Your overbids may NOT be $500,000 over asking…be prepared.

4) The market is telling you what the house is worth…no matter what you get.

5) If you get a nice clean offer you probably did great.

6) If you sell your house for 20% more than the last comparable sale for your floor plan but the buyers don’t offer you free rent…that’s OK. You did great. Really.

Simple rules.