The Case for Stabilized Prices in Lamorinda Real Estate

18 12 2011

My post from earlier this week displayed statistics suggesting a favorable relationship between inventory and demand across most price segments in the Lamorinda real estate market.  Since markets are driven by the relationship of supply and demand, the local stats seem to be suggesting that we may have reached the point of price stabilization in Lamorinda.  This past week, national data was released that is very supportive of what I’m seeing in our market.

According to Corelogic, an independent provider of financial and market data, “many housing statistics are basically moving sideways.”  The Corelogic stats suggest an emerging trend of price stabilization when one removes distressed sale transactions from a given market area.  In the case of the Lamorinda real estate market, there are very few distressed property transactions, therefore even a stronger case can be made for the stabilization of our market.

Early in the housing downturn, non-distressed properties were falling in price at at the same rate as bank-owned, distressed properties.  Not wanting to hold inventory longer than they had to, banks quickly cut prices to move foreclosed homes.  The downdraft in prices took non-distressed properties along for the ride.  That appears to be changing as consumers differentiate between distressed and non-distressed real estate.  In fact, according to an article in the Wall St. Journal, “…while price declines are resuming, they are not yet falling from one-year ago for non-distressed homes. In fact, during the first nine months of 2011, prices of non-distressed homes remained relatively stable, with year-over-year declines between 2% and 3%.”  This is on a national basis, and analysts at Barclays Capital called this “the most important trend in the housing industry right now.”

Taking this a step further, Barclay’s housing analyst Stephen Kim stated, “a distressed home is increasingly being seen as a poor substitute for a non-distressed home….bifurcation between distressed and non-distressed homes will only widen with the passage of time.”  To a large extent, I have seen this in the Lamorinda real estate market, with buyers shying away from the small handful of distressed properties that we’ve seen hit the market.  They are often in poor condition, and with a bank’s limited disclosure obligations, the buyer must be extraordinarily careful during their due diligence period.

The greatest stabilization in Lamorinda real estate will be found in the sub-$1.2M price segment, with progressive softening as one moves up-market.  Once the market re-awakens from its seasonal winter hibernation, I am expecting a fairly robust spring market.


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Categories : Lafayette CA Real Estate Market, Lamorinda Real Estate, Uncategorized

How’s Lamorinda Real Estate Doing vs. the “National Market”?

10 11 2011

A flurry of media attention is once again turning to the performance of the “national real estate market” as third quarter performance shows less than encouraging results.  According to a Wall Street Journal article, US home prices dropped 4.7% for the third quarter 2011 over 2010.  A nationwide interactive map shows locally that the San Jose metro area dropped 5.3%, the SF-Oakland-Fremont metro area dropped 10%, and the Sacramento area continued its decline with another 10% loss over the same period.  Looking just at the Lamorinda market, we also saw a 10% dip in the third quarter on a year-over-year basis — clearly sharing in the pain of the uncertain European economies and a turbulent stock market.  Inventories in Lamorinda dropped almost 26% versus the same period last year, while the number of closed sales dropped 11.5%.

Looking at just the month of October 2011, we saw a healthy 30% drop in inventory over October 2010, while seeing only an 8% drop in new pending sales, representing the leading edge of the market.  The sub-million dollar segment has been the strongest of all price segments in the last couple of years, and we saw a 14% rise in inventory in October vs. September of this year.  Perhaps more sellers were trying to jump in and capitalize on the segment’s strength with the month’s unseasonably warm weather. Pending sales as a percentage of total inventory in the segment was very similar to 2010, yet the median price for the segment sunk by a surprising 13% over October 2010.

The $1M – $1.5M segment showed a remarkable resurgence last month in the world of Lamorinda real estate.  Inventories dropped 28% over October of 2010, while pending sales jumped up 62% to a total of 13 sales for the month against an inventory of 41 homes.  Pending sales in the $1.5M – $2M segment showed some improvement over Oct 2010, as well, with a total of 3 units in this category against an inventory of 16 homes. The Lamorinda real estate market above $2M continues to be almost non-existent. There was just 1 new pending sale in October against an inventory of 20 homes — equating to 20 months of inventory in this segment!

Clearly, the last quarter was a very challenging one economically across ALL markets, not just real estate.  Ultimately, consumer confidence and jobs drive the real estate market, and we have a ways to go in both areas.  On a positive note, we’ve received several calls from agents representing buyers who are not finding good matches for their clients in the $1.5M+ segments, and have been seeking an opportunity to have us arrange showings of homes that are not on the market.  As the market continues to adjust, over-pricing is an issue in all segments, but particularly in the upper tiers of the market.


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Categories : Lafayette CA Real Estate Market, Lamorinda Housing Market, Lamorinda Real Estate, Lamorinda Real Estate Market Statistics, Lamorinda Real Estate Pricing

Six Reasons Why the New HARP Refi Plan Will Be Good for Lamorinda Real Estate

24 10 2011

Since all markets are governed fundamentally by supply and demand, keeping unnecessary supply off the market is a favorable outcome when it can be accomplished.  This is exactly what the administration’s new HARP Refi Plan will accomplish in the Lamorinda real estate market, and across the nation.  The new plan will allow borrowers to refinance to today’s much lower rates, regardless of how far their homes have fallen, according to today’s Wall Street Journal.

1)  The borrowers will be able to do it in a much more streamlined manner, in many cases without the need for a new appraisal or extensive income documentation, as long as the borrower is current on their payments and can demonstrate a steady stream of income sufficient to cover the new loan payment.

2)  If you’ve got a second mortgage, the good news is that most major lenders have agreed to subordinate the second under this new program.

3)  Fannie and Freddie fees normally charged to riskier borrowers will be waived if the borrower refinances into a shorter term mortgage, e.g., a 15-year term from the previous 30-year mortgage.

4)  Lenders are expected to start taking applications for this new program in early December.

5)  There’s an easy way for you to find out of your loan is owned by Freddie or Fannie.  Just click on the links provided — Freddie or Fannie.

6)  Finally, allowing these borrowers to refinance to much lower rates will put an estimated $24B back into our economy AND keep many homes from drifting into foreclosure.  Going back to my original premise that markets are governed by supply and demand, keeping unnecessary supply down will help bolster prices which is always good news in the world of Lamorinda real estate!

 


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Categories : Lafayette CA Foreclosures, Lafayette CA Real Estate Market, Lafayette CA Real Estate Refinance, Lamorinda Foreclosures, Lamorinda Housing Market, Lamorinda Real Estate, Lamorinda real estate loans, Lamorinda Real Estate Refinance

It May Be About the Inventory in the Lamorinda Real Estate Market.

23 10 2011

A recent Wall Street Journal article raised several questions about supply and demand in the housing market, and it struck a resonate chord with what we are seeing in the world of Lamorinda real estate.  The Journal article raised the question about whether “it’s low demand or poor supply that’s hurting the housing market.”   Due to the fact that we tend to market a substantial number of homes in the Lafayette real estate market, we’ve received at least 5 calls from other agents in the last couple of weeks, asking if we have any new inventory that will be coming on the market.  The agents all explain that their clients simply aren’t finding what they want among the current Lafayette real estate offerings.  Almost all of the calls have have been in the $1.5M – $2M segment — an area of the market that has been one of the most negatively impacted over the last couple of years.

The Journal article discusses a number of factors contributing to the perception of poor quality or inadequate inventory, and notes that over-pricing is a significant factor.  We have found this to be true, particularly over the last few years as the market has been declining. In at least 50 percent of all of our interactions with sellers, the challenge for us is to help the client understand the state of the market and where their home should be priced in order to compete effectively.  It’s often as emotional as it is intellectually challenging, because it is sometimes very hard for sellers to grasp that the home they cherish so much has been impacted by the broader market conditions. They often want to believe that they’ve somehow been spared from the degradation in home values, or that “the right buyer” will come along who “will pay our price”, but ultimately they need to face the market realities.  In the end, over-pricing hurts them as the market discounts their price over time, and consumers begin to wonder “what’s wrong with that house”.

As we look at the current Lamorinda real estate inventory, there is a fair amount of over-pricing in certain segments that is undoubtedly keeping buyers away, coupled with overall declines in inventory over the last year.  Some sellers have simply taken their homes off the market and are deferring plans to downsize until they see stabilization in prices.  That stabilization is already happening in certain price segments, and may spread to others if we see broader confidence in the economy as we move into the Spring market. Ultimately, that may solve our inventory problem.


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Categories : Lafayette CA Real Estate Market, Lafayette Real Estate Forecast, Lamorinda Housing Market, Lamorinda Real Estate

A Look at the Lamorinda Real Estate Market YTD 2011 and What Lies Ahead

21 10 2011

Let’s look at our local market as we work our way into the last quarter of the year and near the end of October.  Inventories have decreased significantly from this time last year… running about 25%+ below where they were last year.  In fact, we have been experiencing about 3 months of inventory in the Lamorinda market over the last several months – representing a very sound relationship between supply and demand.  This compares favorably to the 4-5 months of inventory that we were running at this time last year.  Absolute sales volumes have decreased from last year, particularly in August and September where we saw a reduction of about 20 percent from 2010.  This clearly reflects the uncertainty emanating from global financial markets, and the extreme volatility we’ve seen in the US stock markets.

As one would imagine, the most active markets have been those most approachable to buyers.  Approximately 70 percent of all Lamorinda sales this year have been at price points below $1M.  Other trends worth noting include the move toward more central, urbanized locations.  This began on a more macro basis as people began moving back to urban centers such as San Francisco several years ago.  It has been a function of rising gas prices; aging baby boomers selling suburban homes; and general movement favoring locations where one can walk to shopping, entertainment, and restaurants.

This trend has played out within our community, too, as we’ve seen distinct premiums paid for perceived central locations such as Lafayette’s “Trail Neighborhood” and Happy Valley.  In some cases, a 5 minute commute differential can command a 15% premium in the market.  As an example, we had a recent listing near the “Trail Neighborhood” get bid up by $100,000 in the sub-million dollar price range within 3 days of going on-market.   There have been larger properties in this area that were bid up several hundred thousand dollars during the peak of our spring 2011 market.  Other segments have been much slower, such as the $1.5M – $2M range where there wasn’t a single home that went pending in the month of September throughout Lamorinda.  Sales above $2M have been scarce this year, averaging about 1 per month in Lafayette.

So, what lies ahead?  As we enter the wet winter months, we will see normal seasonality seize control of the market, and overall transaction volumes decrease.  Typically, the market lies mostly dormant until mid-February when it seems to slowly come out of hibernation.  Interest rates will remain low for the next couple of years, so job creation and consumer confidence will play the most dominant role in dictating the performance of the housing market as we enter 2012.  Another “wild card” in the equation involves the disposition of bank assets… the properties in some phase of financial distress and not yet in the marketplace.   Recent bank industry announcements have suggested this process will accelerate — a necessary element to cleansing the market and creating more stabilization.  In the short term, it could increase inventories and put additional pressure on prices.

Finally, with immense amounts of cash on their books, we could also see significant hiring increases from corporate America in the months ahead if our elected representatives can find some common ground to provide the needed confidence and incentives to grow their businesses.  Should that happen, we could see better than expected improvement in consumer confidence and the housing market as we move through the coming year.


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Categories : Lafayette CA Real Estate Forecast, Lafayette CA Real Estate Market, Lamorinda Home Search, Lamorinda Housing Market, Lamorinda Real Estate, Lamorinda Real Estate Market Statistics

Refinancing in Lamorinda? Some Tips to Think About…

14 10 2011

An article in today’s Wall Street Journal is providing the stimulus for today’s post, as well as some very recent and highly mixed interactions I’ve had with appraisers in the Lamorinda real estate market.   With so many people refinancing their existing loans, the potential pitfalls of the appraisal process becomes very relevant to the achievement of your objectives.

On a fundamental basis, there are wide swings in the competence levels of appraisers, and the lender has does not control who does the appraisal.

My list of appraisal imperatives:

1.  Screen the appraiser when he/she calls for the appointment.  Make sure the appraiser is LOCAL and EXPERIENCED in doing Lamorinda real estate appraisals.  Even though the lender may think that a San Jose, Fremont, or Vacaville-based appraiser is “local”, they are not and they won’t be competent in our market.  If the appraiser does not meet this initial criteria, do not allow them to start the appraisal.  Ask your lender to resubmit the appraisal order and insist on someone who is truly from this area.

2.  First impressions can make a difference.  Put your home in as close to “show” condition as you possibly can.  You want the appraiser to “like” your home and believe that it stands above the “average” home he/she sees in the community.  If it has obvious deferred maintenance, weeds over-grown in the yard, and the rooms are overflowing with 20+ years of accumulated junk piles — your appraisal will reflect this.

3.  Sell your improvements.  If you don’t tell the appraiser what you’ve invested in your home’s improvements, they’ll never know about them.  This is not to suggest that you’ll see a return on all of your investments in improvements, but the knowledge of them can help to make your home standout, and may tip the scale in your favor during the final determination of value.

4.  Help your appraiser with the “comps”.  Appraisers are required to find “like” properties, ideally sold within the last 90 days and within a 1 mile radius of your home.  It always helps to go online and to pull sales data on homes that meet this criteria.  Even though Zillow’s “Zestimate” of value has little grounding in reality for homes in Lamorinda, the site does allow you to search public records for the needed comp info.  Consumers can utilize a wide variety of other real estate sites to find this information, too.  Since appraisers almost never see the interiors of the “comps”, any personal knowledge you may have about these properties should be shared IF it helps support a higher valuation for your home.

5.  Rigorously scrutinize the final appraisal.  Do not assume that the appraiser accurately completed the appraisal.  Last year, I had an appraiser almost cost a client $50,000 in a contract renegotiation when the appraisal came in that far under the price agreed upon between buyer/seller in the purchase agreement.  The appraisal had been subjected to two levels of underwriting review, but no one caught the computational error that I found when I reviewed the appraiser’s work.  As it turned out, the appraisal should have come in OVER the contract purchase price, NOT under it.  The appraisal was corrected and the transaction proceeded to a successful close.

Last month, a “local” appraiser was sent from Concord to appraise a client’s Lafayette property.  The appraiser passed the initial screening, and we provided him with a detailed set of comps, including written explanations of each property.  The appraiser ignored our comps, and decided to go OUTSIDE the Lafayette School District for two of his six comps, and then threw in two bank foreclosure properties for good measure.  No valuation adjustments were made for these factors.

The appraisal was absurdly completed and came in $100K under the purchase contract value.  I ended up spending hours writing a detailed rebuttal to the appraisal which ultimately helped set it aside, allowing the transaction to eventually close at the contracted purchase price.  It was an incredibly frustrating experience that could have potentially caused a client to lose their buyer or up to $100K in their sales price.

In the final analysis, it’s important to be your own advocate in the process.  Never assume that the appraiser will see the value in your home, nor accurately complete a competent appraisal.  A set of watchful eyes on the process is imperative.


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Categories : Lafayette CA Real Estate Appraisals, Lafayette Home Sale Resources, Lafayette, CA Real Estate, Lamorinda Housing Market, Lamorinda Real Estate

Fall in Lamorinda Real Estate… Travels Abroad

25 09 2011

For those wondering if I fell off the globe for a few weeks, the answer is, “sort of”.  There never is an ideal time to take time off in this business, so early this year we planned an adventure to Italy and Croatia for early September.  The trip was epic, but the internet connectivity was marginal, at best.  So, with the best of intentions of keeping up on the blog, reality dictated otherwise.  In many respects, we take so much for granted here — the internet and ready-access to technology fall into that category.

Not a lot has changed in the market, but perhaps a fresh impression of matters upon returning from the trip has some advantages.  My sense is that in many cases, people are still struggling to find that delicate equilibrium that brings a willing buyer and seller together to consummate a sale.  Sellers of upper end homes are having a very difficult time processing whether their home is not selling because of price, or simply due to the the thin nature of the market.  Since there is almost always a willing buyer at the right price, the reality of the market is painful for many.  As always, when moving down-market closer to the $1M price point, simple supply and demand results in much more vigorous activity.  The world economic factors have clearly exacerbated matters, and the volatility of markets in the last week has certainly brought the issues front and center.

The Wall Street Journal quoted a senior economist, Sam Bullard, from Wells Fargo Securities, “With economic growth sputtering, the modest recovery we have seen so far in home sales is likely to become even more sluggish.”  The article goes on to mention that a survey of over 100 economists released by MacroMarkets, LLC,  predicts that national home prices will show a drop of about 2.5% this year, and then rise at just 1.1% annually through 2015.  Their chief economist is Robert Shiller of the noted S&P Case-Shiller Index. Even though we know that there is really no such thing as a “national market”, and that individual markets perform with some independence, “when the tide goes out, all ‘boats’ ride lower in the water.”

Let’s take a quick look at the latest Lamorinda real estate market statistics with data through August.  The number of pending sales dropped in August from July by 30 percent, and also declined by 14 percent from August of 2010 — likely reflecting the global market uncertainties that have clouded the economic news in recent weeks.  The upper end of the market continues to bear the majority of the pain with pending sales in the $1.5M+ segment dropping by 45 percent from the previous month, and an even 50 percent from August of 2010.

The good news is that economists seem to show some consensus that we’ve hit the bottom of the market, and it might diminish the uncertainty harbored by consumers. Furthermore, with equity markets displaying incredible volatility, perhaps people will look to real estate as one of the safer havens for their dollars.  We’ll see.


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Categories : Lafayette CA Real Estate Forecast, Lafayette CA Real Estate Market, Lafayette Real Estate Forecast, Lafayette, CA Real Estate, Lamorinda Home Search, Lamorinda Housing Market, Lamorinda Real Estate, Uncategorized

Lamorinda’s July Defies National Markets

17 08 2011

I couldn’t resist the sensationalized headline to this post, especially since traditional media sources have been relying upon these types of headlines to broadcast how anemic the “national” real estate market has been.  If you are a regular reader of this blog, you KNOW there is no such thing as a “national” real estate market.  Until such time as someone can convince me that a Lamorinda real estate buyer is concurrently considering buying in some place like Oshkosh, WI, I’m holding firm to my belief.  No offense to Oshkosh, I’m sure it’s a lovely place, just not for me!

In recent days, we’ve heard that housing starts are almost non-existent and even that the “Bay Area market” took a dip in July with a decrease in sales over a more robust June.  Although it’s certainly not on fire, the Lamorinda market performed much better than most.  The leading edge of our market is always represented by our “pending” sales… those that actually entered escrow in a given month.  Looking at the transition from June to July of this year, we saw a 29% jump in pending sales in July.  That also represents a 24% improvement from July of 2010.  An amazing 63% of those July 2011 pending homes were priced under $1M, so it’s pretty clear where the action is!  Just think back to about 2005 when you could not find a habitable home in Lamorinda for under $1M.  Even moving up-market a bit, July was a pretty good month.  Seven homes in the $1.5M – $2M segment went pending, representing one-third of the total available inventory.  Finally, we reach for the life support systems in the $2M+ market where only 2 homes went pending against an inventory of 21 homes — both were in Lafayette.

Most certainly, we have interesting times ahead.  The Fed has committed to low interest rates, and has shot what might be their last economic bullet to infuse life into the economy.  With essentially zero to negative returns for cash positions, the Fed is trying to stimulate investment in the economy… either in equities or real estate.  Jobs drive housing, so we should keep a keen eye on those numbers moving forward.  The good news is that Lamorinda real estate continues to distinguish itself from other markets.


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Categories : Lafayette CA Real Estate Forecast, Lafayette CA Real Estate Market, Lamorinda Housing Market, Lamorinda Real Estate, Lamorinda Real Estate Market Statistics

Crazy Times with a Jittery Stock Market!

7 08 2011

To those of you who regularly read this blog and have come to expect frequent new market insights offered up, I heartily apologize! I’ve been VERY preoccupied over recent weeks by how busy we’ve been in the world of Lamorinda real estate, and have not had the time to be thoughtful or creative in writing new blog posts. Ah… such a burden! If only I could suppress my semi-Type A personality and it’s ongoing battle for perfection! With my days averaging 12-14 hours long, 7 days a week for the last several weeks, I clearly need to find a way to immediately plunge into REM sleep and get by with about 4 hours a night! I know people who can do that, and I envy that capability. Fortunately, a more normal business life is just around the corner as the final month or so of the summer selling season winds down.

So, let’s not belabor the craziness in Washington, the uncertainty in Europe, or the slight downgrade to our debt rating by Standard & Poors. Aside from limiting ALL politicians to two terms; reshaping their pension plan to be appropriate to my newly imposed term limits; giving them the same sorts of health care choices as the rest of the American people; eliminating special interest campaign contributions; barring them from taking private sector jobs with the same companies that donate to their campaigns, etc… I don’t have much to say about these people or the mess that they’ve created. Enough said!

Let’s look at local real estate where things seem to be a lot more logical. Like I said earlier, the last few weeks have been extraordinarily busy within our little corner of the Lamorinda real estate market. In fact, there were few signs that people really cared what was going on in Washington or with the stock market.  We had a Lafayette home that had been on the market for about a month, suddenly end up with multiple offers; and we had another Lafayette home last week end up with 4 offers within 72 hours of going on-market! Another Lafayette property that has been on the market for a much longer period of time is expected to get an offer today, following a price reduction. And, we’ve had other buyer clients make offers on properties within the last couple of weeks. So, in spite of the external economic turmoil, it appears that confidence remains reasonably high in Lafayette real estate.

The July market data will be released in the next few days, and I’ll promptly share it with you. I’m expecting to see a reasonably strong market under $1.5M, and continued stagnation above that price point. Inventories remain in check, and are considered normal and balanced by historical standards. Stay tuned for the details!


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Categories : Lamorinda Housing Market, Lamorinda Real Estate

June Swoon in the Lamorinda Real Estate Market?

7 07 2011

The stats were just released for June real estate sales, and it looks like buyers took a break from the market, while sellers were busy putting their homes on the market.  Let’s start with a broad brush view of what transpired last month. Inventories grew by 12% over May, but are running about 10% less than June of 2010.  Most notably, pending sales activity dropped by 29% from May of this year, and ran 22% under June of 2010.  The average price per sq. ft. for a Lamorinda home dropped by 7.65% from June of 2010.  The most positive stat for June was that home inventories held relatively steady at an acceptable level of 3.9 months of inventory, based upon pending sales.

The hardest hit segments continue to be the upper price ranges, so let’s take a brief look at some sub-segments.  The $1.5 – $2M segment has 6 mos of inventory.  The $2M – $3M segment actually showed some life in June, and has only 3 months of inventory.  The over $3M market in Lamorinda is essentially dead.  There have been only two pending sales in this segment since January 1st, and both occurred in February, yet only one has closed escrow.  There are presently 10 homes on the market in the $3M+ market and no buyers.

So, where’s all of the action.  Well, by volume, it’s clearly in the sub-$1M price range where 35 Lamorinda homes went pending in June, and where there is only 3 months of inventory.  Even with all of the activity, prices dropped about 7% in this segment from June of 2010.

None of these stats surprise me.  June was a tough month in the financial markets, and consumer confidence clearly slid.  We’ve recently seen some improvement in the European monetary crisis, and better than expected reports hitting Wall Street.  As a result, the stock market has been up over the last week, and we’ve also noticed a lot of showing activity on most of our listings.  I have a feeling that July will turn out to be a relatively strong sales month as buyers strive to buy ahead of the upcoming school year, and before the ceiling on conforming loan rates decreases this fall. More on that point in a future post.


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Categories : Lafayette CA Real Estate Forecast, Lafayette CA Real Estate Market, Lafayette, CA Real Estate, Lamorinda Housing Market, Lamorinda Real Estate, Lamorinda Real Estate Market Statistics, Lamorinda Real Estate Pricing, Orinda Real Estate Forecast, Orinda, CA Real Estate

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