Bubble, Bubble, Toil and Trouble... But Not in Our Market

We hear talk of bubbles, especially during increasing markets, but we don't typically know what to look for beyond high prices and a feeding frenzy of buying. 

Bubbles expand, blowing larger and over-inflating the market; we are in more of a constriction as available inventory remains at near-historic lows. That's not to say these prices will continue their current trajectory, but more on that later.

A component of real estate bubbles beyond lack of supply for high demand is speculative buying and building. Sure there are people flipping houses again and yes, that is considered speculative, but at these prices there's not nearly the number of flippers out there that there were a decade ago. People are paying high prices as they look toward living in their new home "forever" (which tends to be around 10-15 years, depending on the growth of the market and their family size). On the side of speculative building, we're not seeing that in the Bay Area. There are few, if any, builders betting on the Field of Dreams, "if I build it, they will come" philosophy. Instead we're seeing building in response to demand for housing from incoming jobs, and thus new residents needing somewhere to live. And even still, the builds are slow going as cities negotiate percentages of affordable housing with developers.

The chief economist at Realtor.com put together a list of six factors he used to create a "bubble index" which he then used to create the graph below comparing how this index measured up in 2005 in cities around the country compared to today. The six factors are: price appreciation, the prevalence of house flipping, the share of buyers financing their purchases versus paying cash, price to income ratios, price to rent ratios, and housing starts to housing formation numbers.

Based on the graph above, there are some cities that are pretty close to bubble territory, if not deeper into it than they were in 2005, however you can see that San Francisco and San Jose have a ways to go. Still, that doesn't mean we will continue to realize the kind of gains we have in recent years (17% since 2012 in Oakland alone). 

The steady average increase of 5% year over year is not likely to continue forever, though it's doubtful we'll experience a crash like we felt in 2007-2009 which resulted in a 30% dip in values. No, instead it's more likely that we'll see a gentle slowing, more of a plateau than a real dip. In fact, San Francisco's condo and loft market began to feel a slowing down earlier this year with more price reductions and longer time on the market. 

Curious what you can keep an eye in our Bay Area market? In addition to the aforementioned speculative building, my eye is on the tech money. Anecdotally I've heard there are big tech companies opting to scrap the ESOPs and other stock based incentives and instead pay their employees the cash value of those options. Talk about a cash infusion in the market! I'm also eying the not-so-elusive unicorns, companies with a valuation of $1B or more. They are not as rare as they once were and according to techworld.com, between 2000-2003 it took 8.5 years for a company to become a unicorn; between 2009-2013 we're down to 2.9 years on average. Unicorns are dying too as investor confidence softens or user numbers dwindle. Tech is big money in the Bay Area. We are lucky to be home to so many giants with solid future growth securing the livelihoods of their employees, but not everyone can be a Google, Apple, Intel, or Facebook.

If you've been thinking about selling, this is a great time to begin planting seeds. No one has a crystal ball and though it doesn't look like a bubble, we could be hitting a plateau in prices. Get the most you can out of your investment now and time your purchase plan well by moving swiftly and smartly. Call me to learn how to reap your largest benefits.

How much did that house sell for? April 5th - 11th

How much did that house sell for?

If you've been following along since the beginning of the year, you know the real estate market has been battling low inventory, as evidenced by the 21 homes that sold last week. The savvy reader will have noticed that the Sunday Open House lists are beginning to grow, which is good news! I talked to more than a couple colleagues with many homes coming on the market over the next couple months, so there will be more data and more lovely homes to look at soon! What does that mean to the market as a whole and to buyers and sellers alike? In a more balanced market not so starved for inventory it could forecast fewer multiple offers and more balanced sales numbers. However, in this market, that has not been the case. Any influx of inventory is quickly gobbled up and the buyers whose offers didn't win hastily move on to the next property -- more exhausted by losing bids and more ready to do what it takes to win.

The California Market Will Survive, Despite Stock Market Volatility

California had a sharp increase in sales year-over year after a slight pull-back in November. The jump in the statewide sales in December was attributed partly to the Consumer Financial Protection Bureau’s “Know Before You Owe” disclosure rule, as some sales that should have been closed in October or November were delayed due to the implementation of the new regulations, but were finalized in December. For the year 2015, California existing single-family home sales increased 6.4 percent from 2014 after declining for two years. The improvement in sales was also the largest since 2009, jumping 24.5 percent. 

Meanwhile, the annual statewide median price continued to rise from 2014 but the increase was mild when compared to previous years. In fact, it was the smallest annual price gain in the last four years. The California median home price for 2015 increased 6.2 percent from 2014 to $474,420. 

The statewide housing supply remains an issue as the demand for housing continued to outpace inventory. While it is a welcome sign to see steady improvement in housing demand, the lack of supply is definitely a concern. The imbalance between the two sides not only intensifies market competition and pushes home prices higher, but it also leads to housing affordability issues that ultimately lowers homeownership rate if the problem persists. 

These figures underlie an important fact about American households, a smaller proportion of people and households have been moving between states since 1970, and this continues to decline. California, especially is becoming more homegrown and less migratory.

The supply constraint in the Bay Area is more pronounced and had led to fewer homes being sold in the high-cost region. On the other hand, demand in regions with more affordable housing continues to improve and more home sales will likely take place in the coming year. As such, a further slow-down in home price appreciation at the state level is anticipated as the mix of sales changes in favor of lower-priced properties in 2016.

Looking forward, the California housing market is expected to have a decent performance in 2016. The Federal Reserve is expected to raise the federal funds rate two to three times. Modestly higher interest rates should not present that much of a direct challenge to the housing market. With the economy expected to grow, housing demand should continue its upward trend with sales of existing single-family homes projected to increase 6.3 percent in 2016 to 432,570. The statewide median price is predicted to increase modestly by 3.2 percent this year from 2015. 

While the recent volatility of the stock market has been drawing attention in the news, it is more of a distraction rather than a disruption to the continual improvement in the housing market. The drop in values of equity in January reduces the overall wealth and may have a small negative effect on the economy in general. Its impact to the housing market, however, should be minor, as solid employment conditions, anticipated increase in household formations, and record-low interest rates continue to provide support to the fundamentals of the housing market.

Source: California Association of Realtors Market Snapshot

How much did that house sell for? (Jan. 19-25)

What's interesting to note on this report is that while there are some outlier sales with large differences between list and sales price, many fall within a 5% differential. It's encouraging to see homes priced closer to market value and only time will tell if this is a trend we'll see more of in 2016. 

Oakland's Restaurant Week Starts Today!

I remember when I first learned of this annual festival of feasts across my town -- it was after it had ended and it was like that for more than a couple years. Somehow I just kept missing Oakland's Restaurant Week and my annual tradition became lamenting lost luscious bites of restaurant fare from establishments both new, and tried and true. But all of that ended in 2015 when I dashed from door to door, catching deals where I could and using the week as intended: to try new places, new dishes, and to do so with friends. In 2015, Rockridge's Bourbon & Beef was the dinner stand out and I've eaten there multiple times since my first taste a year ago. This year The Barrel Room is on the list as is Salsipuedes -- the beginnings of yummy list I'll happily lengthen.

I'm not the only one who's been foraging the restaurant week menus, hunting for the best deals and most interesting places to check out. Here's what others have to say:

The East Bay Express offers their "best bargains" for the coming week, here.

SF Eater breaks down the top 3 best and worst deals of the week, here.

On the heels of Oakland is Berkeley's Restaurant Week running Thursday, January 21st-31st which runs concurrently with San Francisco's Restaurant Week (which begins one day before Berkeley).

Don't let the rain keep you hostage in your home! Get out there and be warmed by open kitchens and good conversation as you eat your way through our nationally acclaimed restaurants one deal at a time.

How much did that house sell for? (Jan. 5-11, 2016)

The sales numbers below represent properties that went pending in & around early December -- the middle of the winter market. The winter market is the market that, until 2015, was seen as the slowest of the annual cycle. What you'll see reflected is a market starved for inventory. 

Numbers are out comparing inventory from 2012 and earlier to 2013 through 2015 and they are so much lower it's no wonder we're seeing the competition we are. Though we've lamented the "low inventory" of the past year or two, it's beginning to look like it may be a new normal for a while. Buckle up, we're headed for another competitive year with strong sales ahead.

How to refer the right Realtor

With somewhere around 185,000 licensed Realtors in California, you can almost throw a shoe and hit one of us (but please don't). Given that number, the odds are that you personally have a Realtor or two (or five) in your circle. We've all been trained from day one to ask our friends and family for their referrals, but when you know more than one good real estate agent, how do you choose which to refer your friend to? Do you refer them to anyone, or do you end up keeping quiet to avoid causing offense? Here's a simple solution: base your referral on best fit.

Let's look at it from another perspective. Your favorite restaurant is a little Mediterranean place in your neighborhood. You have friends visiting from out of town who ask for a restaurant recommendation, but you know they don't like Mediterranean food. Would you still refer them to your favorite restaurant because you believe it's the best? Hopefully not, you'd be setting them up for disappointment and they might not ask you for another restaurant recommendation. In the same light, you wouldn't recommend a professional to a friend if you know they wouldn't work well together.

In your pool of real estate professionals you know a person's style and personality. Real estate is a personal profession; people invite us into their homes and lives so we can best assist them. Because we spend a lot of time with our clients, the right client-professional fit is important for a successful working relationship and a satisfied client. So when you have the opportunity to refer one of your denizens of Realtor friends to another friend, family member, or acquaintance, consider who would be the best fit.

Other things to consider when referring a Realtor:

Are they a full time professional, or is this a part-time gig?

What is their communication style?

How experienced are they in the industry?

Do they specialize in the target area?

Pragmatics of referring:

People are busy. With the permission of the person who needs help, pass their contact information on to the real estate professional to whom you're referring them. Let us remember to call them so they can focus on other things.

How much did that house sell for? (Leaving 2015, Entering 2016 Data)

The closing sales data for 2015 reflects the busy-ness of the market I've been touting throughout the holidays. Through an informal poll in my office the feelings for what's coming in 2016 are split between prices somewhat leveling or continuing to rise. No one has a crystal ball to accurately predict market nuances or fluctuations, however based on the minimal impact of the recent rate increase and the strength of the holiday market, my guess is that 2016 will be another very strong year for Bay Area real estate. The market is starved for listings, so if you've been thinking about selling, now is the time to start planning and preparing so you can take full advantage of the current surplus of ready and able buyers. Contact me today to make the most of the market.

How much did that house sell for?

The volume of closings are down for the week with 36% selling for more than $100k over asking price. In the next couple weeks you can expect similarly reduced closings as we head into the new year anticipating new inventory.

The spring market is the time when new inventory bursts on the market, when the flowers are blooming, the skies are more blue than grey, and the market is primed and ready for movement. This used to happen in late February or early March, however in 2015 we saw the "spring" market begin in late January. I don't think we'll have to wait even that long to see an influx of inventory hit the market in 2016.

As I've mentioned in previous posts, this holiday season has been unseasonably hot with copious buyers competing for dwindling inventory. Those buyers will still be here come spring, in addition to those who sat out the holidays.

If you're thinking about moving in 2016, now is the time to get started making that happen. Don't wait. They say luck is where preparation meets opportunity, set yourself up for a lucky 2016 by calling me now to get your ball rolling before the ball drops for new year's.

Simple ways to clear out clutter

Ahhh Christmas, Hanukkah, & all the holidays that are about so much more than gifts, but which ultimately leave our houses filled with an excess of decorations, toys, gadgets, housewares, clothing... you get my point. As soon as next week we will all begin to consider our goals for the coming year, and for weirdos like me being more organized is toward the top of my annual list of resolutions. I know I feel better when the spaces where I live and work are (relatively) clear and clean of clutter. The space around me tends to be a reflection of my mind, and vice versa, so keeping it open and organized feels better than cramped and cluttered. Rather than waiting for the spring cleaning season to be upon us, why not get a jump on things now? An easy first step could be when putting away gifts from the holidays, pull out whatever they may replace and decide if you're going to donate, give away, or throw away the old item(s). Here are some more tips on ways to declutter:

From Style at Home:

• Identify problem areas. Take "before" pictures to help plan and measure progress.
• Be prepared. Keep items where they're most likely to be needed (gloves & keys by the door, for example)
• Utilize open spaces for organized storage. Consider under the bed, a bench with built-in storage, or an ottoman to keep throws and extra pillows inside.
• Use bookshelves to display your favorite tomes and keepsakes. Donate books you've replaced with digital versions to make space to showcase items that bring you joy.
• Keep a donation box at the ready. Rather than make a huge to-do of decluttering, keep a box open and ready so you can toss things in whenever you decide they're no longer wanted or needed in your space. When it gets full, take it to a local donation center & being anew.
• Use those reusable shopping bags! Keep them near your keys so they're easy to grab on your way out to the store.
• Be true to yourself. As much as I appreciate a minimalist look, it is simply not the way I live and that's okay. Sometimes my piles of organized chaos get a bit high, sometimes my display shelf gets a bit full, sometimes I need to cull problem areas, sometimes I enjoy the fullness. Be where you are and allow your home to reflect the best of you.