I heard the Bubble conversation last year when the market was just in it’s relatively normal mode of warmth and now, well now I’m hearing the pundits arriving louder than ever. The thing that’s so interesting to me about it is the people who always claim an escalating market is certainly a huge bubble that’s just about to burst would never in a million years claim that a slow or declining market was a sort of inverse bubble…would they? I mean, in some folks minds real estate values are only supposed to go downward. If they go up it’s a bubble and it’s just about to burst. Every escalating market I’ve ever seen in 22 years has been labeled a bubble and would disappear soon….so they said. If that were really the case, how come I can’t buy a house around here for $150,000 anymore?

First of all, will home prices eventually moderate and will values drop? Yes, of course. That’s just life, prices rise and fall. Before that happens though values are certainly going to go up. A bunch if you ask me. Why you ask? Simply because there’s SO many people around here who want to buy a home. I mean enormous numbers of people! Add to that there really hasn’t been any new construction other than condos and townhouses around here for quite some time and certainly nowhere near enough to satisfy the demand of the folks who want to live here. On top of that the overall population is growing, people are living longer and the Peninsula just flat-out has such a limited amount of space for homes and what you get has to be rising prices. Oh yeah…you also have to add the fact that none of these recent purchases are happening via subprime loans and a very large number are being done with all cash and I think it’s clear that a large percentage of this new price range is here to stay. It seems WAY hard to imagine a rash of foreclosures coming from any of the sales currently happening here in a few years. Most of these deals have at least 30% down!

I don’t know what the future really holds, but if your waiting for a new bubble to burst before you buy a home I think you’re going to be waiting awhile.

Over the weekend I met a really bright and articulate guy who wanted to buy a house in Foster City. I explained how the market is here and how the low inventory is a really big problem. he decided not to enter this insanity right now and will wait 6 months or a year to see how it all looks then. In an e-mail, he said he was “not in a hurry to move and I don’t want to get into a bidding war”. I sure get that! Who wants to get into a bidding war? Here’s the problem…unless you’re REALLY lucky you’re going to inevitably getting into a bidding war. In fact I can’t imagine how almost every buyer won’t get into a bidding war this year. Inventory is going to have to grow quintuple for multiple offers to abate…and I’d bet that even in that eventuality it won’t really matter…the good houses will STILL get multiples.

Oh sure, there’s a couple of houses on the market right now that have been on seemingly forever, but they have significant issues that effect their sale. Price and location to name a few. Almost every house will experience large demand as they come up if you ask me. It made me think about those statistics I wrote about last week…there have been VERY few times in the last 22 years since I’ve been doing this that there hasn’t been multiple offers around here. Really. When I first began in 1990 it was slow following the earthquake and then there was the first Gulf War. The early 90′s were pretty slow, and I was also pretty slow because I was new. I couldn’t tell a hot market from a slow one to be honest because I didn’t have any clients. In the mid 90′s though (after I did manage to find folks to work with!) I clearly recall sitting in somebody’s office waiting to present my clients offer amongst a throng of agents. It was that way until right after 9/11 in 2001 and the market came to a screeching halt. Depending on your perspective that halt only lasted until January of 2002 when it took off like a rocket again. Funny huh, for 3 months there was no competition at all because nobody made any offers and then they all jumped aboard again! That binge lasted until Sept 2008 and was followed by the slowest time I remember. Actually 2010 was pretty darn active too and even in the slowest times before that the really good houses got multiple offers.

I guess my point is that unless you’re spectacularly lucky the odds are WAY in favor of you competing. It’s sort of a bite the bullet thing. I bought 2 houses in multiple offer environments in 1999 and 2004. I wish it wasn’t this way…but it is.

No, this is not a Foster City house…but it easily could be. In some cases this is really a small amount of water too. It really seems to me that well over 50% of the houses in FC have water related drainage issues. It’s really common. It also seems to me that every house I’ve had clients interested in have had this issue in their disclosures. What’s really remarkable to me is the degree of denial folks in FC have about the water under their house.

I was recently in a gorgeous FC house where everything was upgraded and remodeled meticulously and it sure seemed that the seller was proactive about just about everything. The house had a foundation issue which was fixed prior to listing the house. The issues was the typical rust in rebar thing plus damage to the concrete piers that required replacement. I asked the seller if he had any water related recurring issues…”yes, he said. We used to have a sump pump down there but it broke and we never got around to fixing it”. OK, but most likely it was the water intrusion that caused the foundation and pier problem. In another house the water intrusion was typically so deep that there was dry rot on the floor joists and pier posts.

The truth is, the sump pump is really a band aid. It removes the water from under the house (a good thing) but the water is getting under there. The optimum fix is a french drain or system that prevents the water from getting down there in the first place. Of course, that’s not a cheap fix. The sump is alot cheaper. No matter what, leaving standing water under the house is an invitation to dry rot, mold and foundation problems.

Here’s an interesting link on this subject:

http://homerenovations.about.com/od/houseexteriorframework/a/WaterCrawlSpace.htm