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.

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?

 

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.

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.

 

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.