Living Proof

So, right after I write that post about the storm coming…here comes the proof. Last night a 1700 sq ft 4 bedroom house at 908 Constitution hits the market priced at $1,358,000. The house looks nice, but the last 2 comparables of this floor plan in Foster City closed last April and May (that’s 2014 mind you) at 899 Constitution and 936 Constitution…for $1,230,000 and $1,258,000. Both of these places went over their asking prices by at least $130,000. Now we have this place listed a full $100,000 over the last comp for Foster City.

Here’s the problem…no inventory. As much as it pains me to say it, this place will almost certainly get multiple offers. How could it not? What does this all say about values around here in 2015? At least to start it certainly doesn’t mean that prices will decline. Been to any open houses lately? There’s certainly no shortage of buyers. It’s scary.

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.

 

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

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.

Buyer Fatigue

For the last few weeks I’ve been listening to agents in my office claim that the market is slowing down. Neighborhoods that were getting 15 offers in February are now getting one offer…or none. That’s according to the agents I hear talking now. The question I keep asking myself is whether or not Buyer Fatigue has set in and folks have stepped back from writing offers. I have a couple of groups of buyers myself that fall into that category. For whatever reason…they’re just not as motivated to go look as they were in the first quarter of this year.

What does all this mean? Who knows!!! Is this a sign of a prolonged trend or just a temporary aberration? I’m kind of thinking it’s the latter. Every open house I’ve hosted has been very well attended. There’s certainly no shortage of buyers out there. If the market was dying we wouldn’t see people out there looking on the weekend. Some price ranges are just high. Maybe some neighborhoods are at the top of their values? Actually in Belmont there’s about 12 houses priced over $1,300,000 that have been on the market for more than two weeks. Maybe $1,900,000 is a bit high for Hallmark in Belmont? Maybe folks are on vacation?

Meanwhile in Foster City…it’s still pretty warm. It seems. Today there are 8 single family houses on the market. 2 have location challenges, 3 have price challenges (I personally think they’re over reaching) and the other 3 seem poised to get multiple offers. In fact, the house at 920 Laguna is looking at them this afternoon. Here’s what the listing agent (Caroline Dinsmore) sent out yesterday:

 

We currently have 32 disclosure packages out and 7 confirmed offers.

 

That was yesterday. That kind of response isn’t exactly what I would categorize as a slowing market. Last week I got 8 offers with 20 disclosures out on 106 Williams Lane. The week before that 725 Marlin got 9 offers and sold 200k over asking. I guess the fact is that for houses in Foster City priced well are going to get multiple offers. More will be revealed.

 

Why Is Inventory So Bad?

Last week and blog reader asked why the inventory level is so bad. He mentioned that it’s been bad since 2012 and seems to be getting worse and wondered what the explanation could be. I used to do large charts here showing active, pending as well as houses that had experienced price reductions. Can you imagine that? Price reductions? I have a few reasons why I think this inventory issue is happening…and those really don’t make me think it’s going to improve a bunch either. At least in the short term.

1) Lack of Move Up Sellers

Way back when, you could list your house for sale, sell it and find a bigger house that fit your needs during the escrow of your first place. Right now you might be looking for months and not be able to find a replacement house. I wrote last month about a couple who sold their place a year ago and are still looking for the next home. I have some clients that I sold a 2 bedroom, 1 bath house to in San Carlos about 4 years ago for $650,000. Since then they have 2 little kids…it’s time for them to move up. Their house is worth at least a million right now. If they move up they very well might not find a replacement house in the 90 days they might get with their sale…and if they do it’s probably going to cost at least $1,300,000. Probably more. They don’t really want that monthly payment nor do they want that property tax burden. They’re sort of stuck right now as a result. Consequently, folks that are intimidated by the idea of not being able to find a replacement home, by the high cost they will incur are doing the next logical thing…they’re adding on to their smaller houses and staying. That’s an option…as long as you have a house! It’s not so great if you have 2 or 3 kids and you live in a starter condo! then it’s really problematic.

2) Inadequate New Housing

I don’t think this is much of a secret…there’s nothing new to buy around here. OK, there’s some condo projects here and there…but there really isn’t much. This isn’t Sacramento where there are large tracks of new and affordable single family houses. For all the spectacular demand around here there isn’t the kind of new construction that’s even kind of keeping pace with demand. If there was it would certainly reduce the burden placed upon the market by question #1.

3) Tons of Buyers

Making it all more dramatic is the sheer number of buyers out there. There’s simply WAY more buyers than available homes. Even if inventory quintupled there would still be more buyers than homes. The high price of rentals only helps people want to buy too. It’s a vicious cycle.

Outside of another financial catastrophe I can’t see how this stops. Maybe a steep rise in interest rates will slow it down…for awhile? As of right now, that doesn’t really help much huh? You can buy a house tomorrow after interest rates go up for less than you can today…and pay MORE per month since your rates are higher. Oh, boy.

A Window Into A Listing

As you all know…the inventory out there really stinks. I mean virtually NO inventory at all. Consequently, the sellers around here are holding a whole bunch of cards when it comes to marketing their homes and getting offers. The house at 381 Boothbay is a great example of that. It’s one of the few houses to come on the market in Foster City this year priced under $1,000,000. It’s listed for $989,000. Having said that, it’s a pretty cute little house on a big 7296 sq ft lot. It’s a really nice lot too. The house is cute and fixed up, but only 1440 sq ft. It’s right across from the park.

The seller has a tad bit of leverage and I’m sure there’s been a ton of interest already. I’m sure because I requested disclosures for a client of mine and got a response yesterday in the form of an email. Here’s what it said:

“Thank you so much for your interest in the property located at 381 Boothbay Ave. As of today, over 20 disclosures have been downloaded, or emailed to agents of potential buyers. 
I currently have 3 offers, rest assured no offer will be responded too until after 4/23/2014.
No inspection reports are being provided by the seller, buyer is encouraged to obtain their own inspections. The TDS and seller supplemental is informative.”
WOW. 20 disclosure requests and 3 offers sent in already. (I can’t imagine sending in an offer that far before the offer date…but hey, I believe it happens).  These are houses that were selling for $800,000 just a couple of years ago…and back then there would be complaining because it was right across the street from the park. Go figure.
I may have said this before…AMAZING!

The Million Dollar Townhouse

The title above says it…but I’m sure plenty of you (me too!) can’t quite wrap our heads around it. That’s the prospect of townhouses in Foster City selling routinely for $1,000,000. Surely you jest you say! I clearly remember selling a townhouse on Juno Lane in Isle Cove that we listed for $395,000 and got the astonishing price of $402,000 for. We were absolutely amazed and I recall a neighbor being sort of annoyed with me because he thought we were crazy to be asking such an outrageous sum as $395,000 in the first place. I was clearly an idiot in his eyes.

Now we’re seriously looking at those same townhouses approaching the 1 million dollar mark…and I don’t think it’ll be long until that happens. Of course they’re already there at Promontory Point…but I’m not talking about Promontory Point! I’m talking about Winston Square and Bayfront Court and Bay Vista and Treasure Isle. Don’t believe me? Since the first of 2014 two units have gone over $900,000. A waterfront at 1115 Lord Ivelson sold for $930,000 (but the waterfront thing is sort of expected) and a unit in Treasure Isle at $728 Chebec that was listed for $868,000 sold for $955,000. That’s NON WATERFRONT townhouses.

Right now we have pending sales at 845 Balboa (Water…listed for $899,888), 391 Catamaran (No water…listed for $865,000) and 881 Cabot (no water…listed for $858,888). They’re all going to close over asking. I can’t wait to see where. It might not be this month or next…but sometime this year we’ll see a closing at or over a million for one of these townhouses. That’s absolutely freaking unbelievable! What’s more incredible though is the fact that we’ll get used to it and the standard for townhouses will be a million dollars. Just like the standard for single family homes is now about $1,300,000 in Foster City. You can be sure I’ll report on the first one that does…and don’t be surprised if it’s sooner rather than later.

 

A First

Just when I thought I’d seen it all…something new arrives! As you’ve all heard before and I’ve harped on continuously here on this blog, the market is totally crazy. That craziness seems to constantly be taken to new heights and this week it hit the stratosphere as far as I’m concerned.

I have a listing in San Francisco that’s a really popular multi unit building in lower Nob Hill. It’s a vacant building that’s been used entirely as units for the owners family for generations. It’s listed at $2,099,000 and like lots of other properties, it’s getting a ton of interest. 17 disclosure packets are out as of this post and I’m looking at offers next Thursday. Yesterday an agent both texted and emailed me and stated that her client just HAD to have this property…and if I’d be willing to help her achieve that goal she would pay me for that service. In other words, she offered me a bribe. Holy Cow! I thought. I immediately called my wife and told her…to which she replied; “Doesn’t that happen a lot?” “Hell no!” I said. That’s NEVER happened before!

People are now so desperate to secure a property that their agents are willing to offer bribes to achieve it. The State’s attorney general thought it was inappropriate for Title company reps to give real estate agents desk calendars and key chains thinking it would unfairly influence business…and now agents are offering cash bribes for consideration of their clients offer. AMAZING! I’ll just say this…I will not be accepting any inducement to assist anyone to get this, or any other property. Offers are due on March 20.

Technology

The last big item that’s powering this market is undoubtedly technology. In 2000 when this all really started booming, people didn’t use technology anywhere near as much as we do now. Plenty of people were downright intimidated by a computer. I clearly remember agents who didn’t want to enter their own listings because it scared them to do so. Now everybody uses the internet all day every day. It’s on our phones and tablets…it’s a 24/7 use. Because of that us there’s SO MUCH more participation in the wealth being created by players that are a part of it around here.

Folks being a part of IPO money are certainly more plentiful now than ever before. How about the small number of WhatsApp employees about to take a slice of the 16 billion Facebook is giving them? Earlier this week I saw a 2 bedroom, 1 bath house in original condition on an average size lot in Menlo Park sell with 18 offers. It sold for $1,706,000! This kind of money is NOT flowing in Sacramento or Reno or Portland. It is relevant in this area.

The kind of wealth being created around here is fueling the boom we’re experiencing and I can’t see how this will all disappear. Can you? It actually feels like it has plenty of life left in it.