With about 5-6 multiple offer transactions to look back upon as a listing agent over the last couple of months, none of the buyers over-paid for the homes purchased, and none of them had any issues with bank appraisals.  With clear memories of the recent, painful real estate downturn, buyers are bidding cautiously and armed with information on relative value — careful to not pay more for a property than it is worth.  My frame of reference spans price points beginning around $750,000, up to and including a property priced at about $1.9M.  The latter experience occurred last weekend with 4 offers for an extraordinary Orinda property on 2 acres with its own Cabernet vineyard!  In case you are curious, just click here.

So, what’s driving this behavior?  Aside from a rising stock market, encouraging economic data, a market that most see has having hit bottom, and essentially free money (after adjusting for inflation) — we are experiencing a case of severe inventory shortage.  As of today, there are 153 active properties on the market in Lamorinda and 131 pending in escrow — so, just over one month’s available inventory.  For realistic sellers, its a great time to be on the market.  For buyers… a bit more challenging.  Let’s compare our market to other parts of the country.

According to recent Wall St. Journal article, “Stunned Home Buyers Find the Bidding Wars are Back”, Chicago is sitting at over 9 months of inventory, San Francisco and Washington, DC are each at 3.4 months of inventory, and the heart of California foreclosures — Sacramento — is down to about 1.5 month!!!  The multiple offer environment is not unique to our world of Lamorinda real estate, but the demand for housing here is certainly stronger than in most areas of the country.  As reported in the WSJ, the online brokerage RedFin has stated that 84 percent of its agents have found themselves writing offers in a competitive environment across the Bay Area, and 71 percent in southern California.

There are certainly some potential headwinds ahead for the housing market, however the diversified strength of the local economy will mitigate the strength of them, if they start to blow.  All of these facts reinforce why this is such a special place to live… a belief clearly shared by many who are actively competing to call Lamorinda their home, too!

]]> http://blog.teamrothenberg.com/2012/05/02/lamorinda-real-estate-bidding-wars-at-fair-market-value/feed/ 0 teamrothenberg http://blog.teamrothenberg.com/2012/04/27/lafayette-ca-real-estate-still-a-bay-area-bargain/ http://blog.teamrothenberg.com/2012/04/27/lafayette-ca-real-estate-still-a-bay-area-bargain/#comments Fri, 27 Apr 2012 19:32:35 +0000 teamrothenberg http://blog.teamrothenberg.com/?p=754 ]]> Lafayette and the broader Lamorinda area may still be a bargain on a relative basis, compared to other parts of the San Francisco Bay Area.  A recent article published on 24/7 Wall Street, showed that two Bay Area cities are in the Top 5 most expensive places to live in the U.S. — San Francisco and San Jose.  In fact, San Francisco was listed as the most expensive housing market in the US at a median price of approximately $612,000 for a single family home — or $422 per square foot.  By comparison, the Lamorinda market average home price sat at $371 per square foot as of April 1st this year.

With the benefit of technology enabling mobile work environments and the highly diversified economy for our area, I believe we will see more migration to Lamorinda from San Francisco and potentially from the SF penninsula/Silicon Valley.  In fact, this was reinforced during a lengthy discussion I had with the head of residential lending and private banking for a Bay Area-based bank that targets higher net worth clients. With a broad view of what is transpiring in the SF and penninsula/Silicon Valley markets, she believes that buyers across the continuum are getting priced out of the market due to the enormous amount of wealth that is being created in the technology sector. Furthermore, with rental prices escalating at a phenomenal pace, renters will look closely at buying — eventually jumping into the market.  On a relative basis, our home prices are a “bargain” compared to other comparable markets in the south bay, peninsula, Marin, or SF.  This will feed all segments of our market, and due to Lamorinda’s geographically constrained supply of homes, market dynamics of supply and demand should push prices up.

Additionally, Lamorinda is one of the most commute-friendly suburban areas in the Bay Area, with ready access to San Francisco via car or BART.  San Francisco is undergoing a tech explosion in the south of Market area that is pushing further south past the ballpark. For a city that has not been particularly hospitable to business, it is encouraging to see the transformation taking place.  Unlike the previous “dot.com” tech boom, this one seems to have “legs” and is underpinned by a foundation based upon real market needs and revenue growth.  We will all benefit from the prosperity of this powerful new growth in San Francisco, and I believe it will result in even a higher demand for housing in our beautiful community.

As of the end of March, the Lamorinda real estate market was down to 1.35 months of inventory against the market’s leading edge — pending sales.  It’s hard to remember when we last saw that, but I’m betting it was in 2005, or thereabouts!

Even more profound is the performance of certain segments of the market.  Properties under about $1.2M have been on fire, as evidenced by the following chart that shows that this segment is down to just 1 month of inventory:

Moving slightly up market to the $1.3M – $2M range, we see a rather substantial shift in the market with it approaching 3 months of inventory:

Finally, as we move above $2M into the luxury home segment of Lamorinda real estate, we see that we have a much different picture than in the lower price ranges:

As we conclude the first couple of weeks of April, the market momentum continues with 106 Active properties on the market and 84 Pending, as of today.  The appetite for homes in Lamorinda’s lower price ranges continues.  In the last month, we’ve had 3 listings in Lafayette under $1M, and all of them have had at least 3 offers — one going almost 7% over the list price with 4 offers.

Sellers and buyers alike are a bit tentative in this market, not quite sure what to make of it.  We clearly expected a much stronger 2012, and were confident that we had reached the market bottom in 2011, but we didn’t expect to see the energy that has been displayed in the last couple of months.  After having their way with sellers over the last 4+ years, buyers are struggling in the lower price ranges with the sudden shift in power.  Sellers in the upper price ranges are trying to gauge demand and set their prices appropriately, without being too aggressive, or leaving money on the table.

Stay tuned… we’ve got an interesting spring market unfolding before us!

Some of you may remember Dr. Kenneth Rosen, former Professor at UC Berkeley, and one of the people who was calling for the imminent demise of the housing market back in 2004-2005.  He now has his own consulting group and believes that the URI forecast is much too optimistic.  He is concerned that possible changes in capital gains treatment could negatively impact the real estate recovery.

Another random indicator that we are well on our way to “recovery” is the very significant number of real estate transactions occurring with investors and second home buyers. According to another article in the WSJ, real estate investor transactions rose a staggering 65% in 2011, and accounted for 27% of all home sales nationally!  When the “smart” money jumps into a market, it usually means that the downturn is over.  Also of considerable note is the jump in second home sales which accounted for 11% of all residential real estate sales in 2011.  These homes were the ones that were the first to dive in value as we entered the recession, and now they are reinforcing the foundation of a national recovery.  It’s all very good news!

In case anyone is doubting a “recovery” in Lafayette, CA real estate or the overall Lamorinda market, all they need to do is take a look at our stats.  As of today, March 31, there are 115 homes “active” on the market in Lamorinda, BUT there are 125 “pending” in escrow.  Based upon the market’s leading edge “pending” sales, we now have less than one month’s inventory available in the market!!!  This means continued challenging times for buyers who are suddenly finding themselves competing for scarce inventory, particularly at the lower price points.  I would be the first to admit that I didn’t see this aggressive resurgence coming at this pace.  After 4 years of uncertainty and encountering a multitude of clients facing challenging times, it’s nice to see much more positive economic times, both in the present moment, as well as ahead.

So, what’s life like, post housing crisis?  After being in hibernation for 4+ years, the buyers have awakened with a fierce appetite for homes, and there aren’t enough tasty properties to go around.  As a result, welcome to “multiple-offer city” — the new world of Lafayette, CA real estate.  The hunger to buy real estate is not evenly distributed across all price points, rather it seems to be fiercely concentrated in the sub-$1.2M market.  We’ve had three listings on in the last month within this price range, and all have sold with 4+ offers.  The craziest was our recent one at Attri Court in Lafayette where the property went on the market a weekend ago at 1pm Saturday.  Between that Saturday afternoon and 6pm on Sunday, 27 real estate agents had shown the property!!!  That was coupled with an open house where over 150 people showed up… stacking cars up 6+ deep in the court, and out onto Reliez Valley Road.  Our client called us at 6:30 PM and told us that people were still showing up at her door, long after the signs were taken down!

We had no idea what to expect as we accepted offers this past Friday.  Clearly, the furious level of activity caught many buyers off-guard, and they became hesitant to engage in what they believed would be a frenzy of offers.  As it turned out, we received 4 offers, and an experienced, professional agent properly coached her clients about what they needed to do to buy the home without over-paying for it.  The process demonstrated that we are in a transitional period of the market, with the delicate balance of power shifting to sellers in the most affordable price ranges.

As a buyer, it is clearly a difficult time… much more so than I would have predicted. While I admit to getting “scooped” on the “multiple offer” story by the Contra Costa Times over the weekend, while much of this post lied dormant in “draft” mode on Word Press, I did go on-record months ago correctly calling the market turn-around this year.  After 3-4 years of a recessionary market, it’s going to take at least a couple of months for buyers to learn that retrospective “comps” are no longer an indicator of market value — particularly when those comps were from before the market reignited.

Stay tuned as we take a look at what’s going on up-market in the days ahead.  Fasten your seat belts… 2012 could be an interesting ride for Lafayette, CA real estate and the greater Lamorinda real estate market!

According to a Wall St. Journal article from earlier this week, “Sales of previously owned homes in the U.S. rose last month to the highest level in nearly two years, and the inventory of unsold homes contracted to a level considered healthy by economists, positive signs for the housing market.”  Additionally, Guy Berger, U.S. economist with RBS Capital Markets, wrote that some of the recent growth in home sales may have been the result of the mild winter. “But for the most part, it seems that the housing sector may have turned the corner.”

It’s too early to see all of the positive indicators reflected in the housing statistics for the Larmorinda real estate market.  Sometimes it’s simply the intangible, subjective factors that one has to run with to anticipate a turn in the market.  A week ago I was working with our client on the evaluation of 4 offers received on a Lafayette home priced just under $1M.  While I can’t yet share where the offers came in, the quantity of offers and their financial strength certainly was a quick litmus test for the market.  Furthermore, as part of my due diligence, I spoke to the respective agents and gained further insight into the buyers’ motivation level.  Clearly, the experience reinforced my positive outlook for the market.

We have another Lafayette home that is just about a week away from closing escrow and was purchased before completion by a reader of this blog.  Ironically, within about 2 weeks of going into escrow, we received several online inquiries about the property via its website — from both agents and buyers.  One buyer said that she found it by searching for “Coming Soon” real estate in Lafayette!  She is highly motivated to buy and frustrated by the low inventory in her price segment.

Sometimes, just talking with other brokers can yield insight to the market and a feeling for what lies ahead.  While viewing new properties to the market on Tuesday,  we had numerous agents ask us what sorts of properties we have on their way to the market — all telling us that they have many buyers with unsatisfied needs based upon current inventory.

If you’ve ever been at the bottom of a canyon, you know that the climb out can be slow and sometimes fraught with some setbacks along the way.  I think we’ve begun our journey out, and will soon be able to look down and see some of the scattered debris left in the tracks of the market below.

There is always demand in a healthy Lafayette real estate market for great homes at fair prices.  One of our blog readers is the fortunate buyer of a spectacular, newly-constructed home in Lafayette that he was able to purchase prior to it going on-market. In fact, there seems to be so much pent-up demand for great homes in this price segment that we received numerous inquiries about this property via it’s website. Unfortunately for those people, the home was already in escrow.  The whole experience did validate the power of blogging, online marketing,  and proper use of Search Engine Optimization to insure that the client websites we build are actually found  by real buyers.

Other Thursday musings… if you haven’t yet attended any of the speaker series events at the incredible Lafayette Library and Learning Center , you are missing one of the great resources of this community.  As some of you may know, I am a life-long, passionate photographer who spends much of my time away from real estate, immersed in photography.  Last Sunday, the Lafayette Library brought in world-renowned portrait photographer, Michael Collopy, who spoke for over an hour about his impressive career photographing  the last 5 US Presidents, Mother Theresa, and almost every notable celebrity you can think of.  It was a fascinating glimpse into a man who has been able to live his passion, as well as into the personalities of many of the celebrities on the other side of his lens.  You can sign up for notifications of upcoming events via the Library website, or by “Liking” them on Facebook.  By the way, don’t forget to “Like” us on Facebook, too!

For buyers and sellers in 2012, it may be best to engage the market earlier, rather than later due to the historically low interest rates.  If demand for loans increases significantly, lenders will increase rates slightly to moderate demand.  This will impact home affordability.

Today’s buyers are sophisticated and market-savvy by the time they write an offer on a home.  It is therefore imperative that sellers realistically price their home to the market and not simply try and “test” it, hoping for the “one right buyer”.  The latter “strategy” never works, and only serves to devalue the prime selling opportunity when a home first hits the market.  The old adage that “you only have one opportunity to make a good first impression” applies to the marketing and pricing of a home.

Be wary of placing too much credence on the national or even the local media that regurgitates “national market” real estate statistics.  We don’t live in a “national market”, and the statistics that get broadly published are many months out of date.  Even the coveted S&P Case-Shiller housing index is always looking one quarter in arrears, and even at its narrowest focus, it lumps us into a measure of performance for the entire bay area market.  In fact, a  Wall St. Journal  article from this week stated, “But right now, the connection between what the S&P/Case-Shiller index says and what is actually going on with housing may be lukewarm at best.”

We believe the tide has turned and that 2012 will present a unique opportunity to reengage the real estate market, either as a buyer or a seller.  Don’t hesitate to contact us with your questions or for assistance in navigating you through the market.

Looking in a more focused manner at the Lafayette real estate market, the $2M+ segment is still extremely slow, while the $1M – $2M market has been very active and suffers from a lack of quality inventory.  As of the end of December 2011, there were only 10 homes on the market in this segment, with 8 closed sales during the month and 1 pending sale.  Below $1M, 6 homes went into escrow during the month of December against an inventory of 22 homes — so a little better than 1 in 4 homes found a buyer.

A number of other external factors appear to give rise to further optimism for the 2012 market.  Since most people require a mortgage in order to purchase a home, the underlying interest rate of the note plays an important role in determining home affordability.  Interest rates for 30 year fixed rate mortgages have fallen to an all-time low, averaging about 3.89% for conforming loans – those under $729,000.  For those able to afford a higher payment in exchange for only a 15 year term, they are being rewarded with conforming loan rates averaging just 3.15%.  Jumbo loans – those over $729,000 – are readily available for qualified buyers from most major lenders at rates in the low 4% range!

Nationally, foreclosure filings have dropped to the lowest level since 2007 – another signal that the tide may be turning.  Some believe the decline may be due to delays by the banks in processing foreclosures and that we’ll see an increase in them as we head deeper into 2012.  Even if that is the case, the increase may be more than mitigated by new programs packaging large blocks of foreclosed homes for investors.  Numerous large commercial enterprises are now entering the single-family home market, seeking to bulk purchase large numbers of properties that will be turned into rentals.  One of the recent market entries is the private equity fund, GI Partners, out of Menlo Park.  They envision expanding their investment in single-family homes to about $1B in the next two years.  A very recent 26-page paper by the Federal Reserve outlined programs for converting the glut in foreclosed homes to rental stock.  Both Fannie Mae and Freddie Mac are expected to announce pilot programs in the weeks ahead.  What’s it mean?  It strongly suggests more decreases in inventory which will result in additional shoring up of the market, and will be supportive of strengthening home prices.

When you check back next time, we’ll finish up with where we think the Lamorinda real estate market is headed for 2012.

Although our micro-market of Lamorinda often behaves much differently than the overall Contra Costa market, and profoundly different than the “national market”, it is worth evaluating the encouraging trends we are seeing on a county-wide basis.  Keep in mind that an enormous proportion of the county sales data is comprised of Antioch and Pittsburg which have been at the forefront of the national foreclosure market.  As a result, strong positive movement in the county inventory and sales statistics serve to make an even more significant statement about the improving conditions of our market.

The December 2011 market data showed a profound 44% drop in inventory from the same period in 2010, while pending sales grew by 17%.  This resulted in reducing the 3.2 months of inventory in December 2010 to only 1.8 months in December 2011.  It’s a very significant improvement in the market, and we believe it signals price stabilization and perhaps even selective shoring up of prices in some areas.

Within our Lamorinda real estate market, the inventory decline tracks with the county, experiencing a reduction of 46% over December of 2010.  The statistic that we didn’t really expect to find is that inventory levels for December 2011 dropped to the lowest level we have seen for 5+ years!  To underscore the apparent health of the market, closed sales for December 2011 were up 36% over the previous December.  Pending sales, the leading edge of the market, were up slightly over last year.  This was likely due to the depletion of inventory and the shortage of homes in many price segments.   Prices decreased 4.7% in Lamorinda when evaluating the 2^nd half of 2011 over the same period in 2010.

When this series continues… you’ll find out about the strength and weakness of particular segments of the Lamorinda real estate market, and what we believe lies ahead!

]]> http://blog.teamrothenberg.com/2012/01/21/lamorinda-real-estate-2012-where-the-market-is-now-and-what-lies-ahead-part-1/feed/ 1 teamrothenberg