There’s a Storm Coming

The last year or so have been really insane. The first part of 2014 was particularly crazy too…if you ask me that is. It slowed down just a tad since the early summer but I’m firmly of the opinion that a storm is coming and the first quarter of 2015 is going to be just as nuts as 2014 at it’s worst. How’s that possible you ask? It’s simple supply and demand. Right now in Foster City, San Mateo, Redwood Shores, San Carlos and Belmont there’s a grand total of 27 active single family house in all price ranges. That’s from $2,349,000 to $685,000. It’s sort of hard for me to imagine that the lowest priced house in our area is now $685,000…but there you have it.

Do you suppose there’s a few more than 27 parties interested in buying a house in these towns? Have you been to an open house lately? Let’s break it down though…it makes it even more vivid. Here’s the town breakout:

 

Foster City….2

San Mateo….17

Belmont……3

Redwood Shores….0

San Carlos….5

Interestingly, there’s a new Foster City listing here at 249 Shearwater listed for $1,748,000. It’s a flip. These sellers bought it in September for $1,525,000. Nice, huh? I can clearly remember when 100 active listings in San Mateo was normal. Even 2 years ago 20 active listings in San Carlos was normal…but low compared to other markets. Now we have 5? It seems like I’ve done nothing but complain about the lack of inventory here for the last several years. We’re in an extreme drought around here. Worse than California is having with water. Oddly, this morning I read that even with all the heavy rains in the last few days we’re still a long way from ending the drought. It’s going to have to rain another 49 inches this season to catch up to where we should be. That’s after the rain we just got!

That’s sort of what this inventory thing is like around here. We need an inundation of new houses to come back to normal….and that’s simply NOT going to happen. Prices are going to continue to climb.

Light Years Apart

See that house up there? It just closed on Martinique in Pitcairn. It’s a 3 bedroom, 2.5 bath house. The floorplan has a huge master suite. It was listed for $1,298,000 and closed at $1,383,000. In my opinion it needed work. It also had this weird feature, the seller cut a hole in the wall between the living room and the garage and enclosed the laundry area (formerly in the garage) allowing access from the living room. I guess it felt more convenient that way?

I guess it struck me as remarkable because I sold the identical floorplan right across the street in 2010 for $960,000. It was in a lot better shape and it took 26 days to sell. In fact it was originally listed for $988,000 and sold under asking. The fact that the house above did what it did is certainly amazing. It had foundation issues too. This is where we are now.

Currently in Foster City there’s a whopping 2 active houses for sale. One is a probate that’s already received offers and is just waiting for a court date to make the sale official. In other words…it’s sold. The other is an Eichler that’s being used as an elder care facility. It needs some work. It’s been off and on the market for 200 days now. It’s priced at $1,288,000. Since it’s the ONLY house for sale maybe they’ll get it now?

It’s really amazing what’s happened here. A house that sells for $1,200,000 here seems cheap now. I’m actually not sure you can buy a house that cheap here. Seriously.

 

The Latest Thing

So I found this very cool new technology that I think will totally change the way we look at virtual tours online and I’m proud to share it here. We’ve all gotten used to virtual tours with lots of still shots and a few 360 degree images that allow you to sort of spin around within a given area, either inside or outside the house. Now, a local startup called Matterport has created the technology to shoot fully 3D images inside a house that’s attached to the home’s overall floor plan. It’s sort of the virtual tour version of Google street view. You simply click on the arrows and the technology will allow you to “walk” through a house…just as if you were there.

It’s really wonderful stuff! Click this link below and you’ll see what I mean. Click on the little icons in the corner once you’re there to get the floor plan.

https://my.matterport.com/webgl_player/#model=PtML5Lr3Ens

All About Timing

A client of mine asked me the other day about whether it was better to list this fall or wait until after the first of the year when the inventory situation could be better. Their goal is to move up from their condo into a single family house and they’re rightfully concerned about being able to accomplish that with an escrow and a rent back without being made homeless. Buying being as tough as it is and all.

It’s a great question really, because there is certainly a feeling that buyers have that lots of new inventory will save the day. That shining horizon of the first quarter of 2015 seems like it’s filled with possibilities too. It’s also true that November and December tend to be slower and folks tend to not list their homes then. The problem is, so many more buyers enter the market after the first of the year. Seems like every year January and February are very hot months for selling. Indeed, there’s new inventory, but there’s tons of new buyers as well. In December of 2013 a nice house on Verdun in San Mateo sold with 3 offers and went over asking. In January another nice house on Verdun in San Mateo sold with 34 offers and went WAY over asking.

It’s all a crap shoot, but I really think that selling now is better than waiting on the potential mirage of vast new inventory on the horizon. We’ve been waiting for that for years now…and it’s proven to be pretty illusory.

 

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!