Why the time may be right in Lamorinda Real Estate…

7 06 2011

The national media jumped all over last week’s Case-Shiller data announcement that real estate markets had dropped to 2002 pricing levels and that we were entering a “double-dip” period of the housing market decline.  Bad news sells, and the media hounds were all over this one.

It’s important to look at matters like this with a sense of proper perspective.  When the tide goes out, all boats ride lower in the water, but that does not mean that they all sink equally low, nor that that some won’t rise to higher levels when the tide comes back in. The current downturn is being driven by a glut of foreclosures in the broader market, and an employment market that is still weak due to the vastly improved efficiency of America’s private sector employers.  The foreclosures are artificially lowering “the tide” in Lamorinda real estate, even though we have relatively few of them within our immediate market.

According to CoreLogic, national residential prices dropped 7.5% in April over April 2010 levels, yet stripped of the foreclosure sales, prices were only off one half of one percent (0.5%).  In Lamorinda, the April 2011 median price was down just 2.5% from April 2010 — a much healthier performance level than the “national” markets.  Ah… remember, there is NO such thing as a “national” real estate market, yet that is what the media keeps referring to in the myriad of bad news real estate articles.

It’s refreshing to see some balanced perspective in the press, for example in this past weekend’s Wall St. Journal article “Why It’s Time to Buy“.  According to the article, there are numerous reasons to buy now:

  • Mortgage rates at near 50 year lows, dropping to an average of 4.55% last week.
  • Moody’s Analytics reporting that the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average.
  • Nationally, Moody’s is predicting that the glut of foreclosure homes will subside by 2013, and that prices will begin edging upward then… sooner in areas such as the land of Lamorinda real estate where we have not been severely impacted by distressed properties.
  • Demographic indicators such as “household formation”—the number of new households each year—are on the rise, and will take a sizable “bite” out of housing inventory… helping the “tide” to rise.
So, what does the future hold? Once the foreclosure mess begins to clear up, say housing economists, the traditional drivers of the housing market—demographics, affordability, loan availability, employment and psychology—should take over. According to CoreLogic’s chief economist, Mark Fleming, “The regular housing market is hanging tough.”  With a highly diversified economy surrounding Lamorinda, record low mortgage rates, and foreclosure levels FAR below those found in most parts of the country, it’s hard to imagine a better time to buy for the long term.  Just remember, you’ll never know when the market has bottomed out until its on the way up.

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

Time to Jump into the Lamorinda Real Estate Market!?

27 05 2011

It’s easy to be negative about the economy and the real estate market.  After all, we’ve traversed economic territory over the last several years, previously unseen by anyone since 1929 and the Great Depression.  Our recovery has been sector-specific, and many people are still unemployed or under-employed.  If you were to spend time down in the Silicon Valley’s tech economy, you would never know that we are at the tail end of a recession.  Jobs are abundant and vast troves of venture capital dollars are searching for early stage investment opportunities.

I just returned from a short trip to NYC to attend our son’s graduation from NYU’s Finance MBA program. Judging from the employment opportunities available to the graduates and the over-flowing restaurants, shops and bars of Manhattan, the finance sector of our economy is booming, too.  John Paulsen spoke at the graduation.  Both he and his $4B+ are doing fine.

So… the economy is a mixed bag.  There are reasons to be concerned, yet equally compelling reasons to be positive about its outlook.  We are a nation of innovators with a history of large swings in our economy as we go from boom to bust.  I’m choosing to be positive about the long term prospects and the upcoming generation of entrepreneurs who are creating new growth opportunities in areas that we never contemplated before.

As an example, here’s a shameless plug for a company co-founded by my son while he attended NYU’s full-time Finance MBA program: SKILLSLATE.  Frankly, I don’t know how he did it since founding a startup company is a 70-100 hr/week undertaking.  It’s innovative, extremely well-received in NYC, and the company is moving to SF — hopefully launching in the Bay Area in the months ahead. Companies and innovation of this type are why I’m personally bullish on our long-term economic growth prospects.  Wealth can be created where there was none before.

So… back to real estate.  Our market has reflected the weather…quirky, sleepy at times, and sometimes wild.  As of this morning, there are 214 Active properties on the market in Lamorinda, and 112 Pending in escrow.  That’s a pretty healthy relationship of pending sales to available inventory.  Clearly, buyers are carefully evaluating the market and making buying decisions when they see strong value propositions.  Here are some additional reasons why I think it’s a good time to jump into the market:

  • Interest rates are headed up.  It’s inevitable, and it may be accelerated by the changing conforming loan limits at the end of September.  With the reduced Federal support of the mortgage market, rates will likely click up.
  • We might see the end of the 30-year loan?  It’s speculation at this point, but certainly possible as private lenders seek to reduce their mortgage portfolio risk.  I don’t see this as likely in 2011, but we certainly see a trend in this direction late this year and in 2012.
  • Mortgage qualifying requirements will become more stringent.  This is an inevitable piece to lenders reducing their portfolio risk.  I expect to see higher credit score thresholds for the best loan rates and perhaps slightly higher minimum down payment requirements.  This is a work in progress.  Stay tuned.
  • The alternative to buying is renting.  Rents are going through the roof!  It’s all supply and demand driven, but rents are getting to be outrageous in locations within the US where people really want to live… San Francisco, Lafayette, Orinda, and yes, Manhattan!  I probably get 4-5 calls a month from people hoping that I might know of a home to rent.  Its because they can’t find one through normal channels, like Craigslist or the MLS.  The overall cost of buying vs. renting may have tipped to the former, especially if you believe we’ve reached the market bottom.
Food for thought.  What do you think?

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Categories : Lafayette CA Real Estate Market, Lamorinda Home for Sale, Lamorinda Housing Market, Lamorinda Real Estate, Lamorinda real estate loans, Lamorinda Real Estate Market Statistics, Orinda Real Estate Forecast

Will the Changing Loan Guidelines Impact the Lamorinda Real Estate Market?

12 05 2011

The subject for today’s post has its origin in a comment posted by one of our readers, asking whether the changing guidelines for federally backed mortgages (FannieMae and FreddieMac) will impact our Lamorinda real estate market.   The person posting the comment believes our market is due for another downward leg.  For those unfamiliar with this subject, via Fannie and Freddie, the federal government backs loans below the current “high value area” limit of $729,750 .  These are referred to as “conforming” loans, whereas loans above this amount are privately backed as “Jumbo” loans.  Many politicians and voters believe that the government should get out of the mortgage business and should not be, in effect, subsidizing the purchase of “high value” homes that exceed the national median price.

It is not my intent to enter into a debate about whether Lamorinda real estate owners should get more federal loan support than someone buying in Witchita, Kansas or Detroit, Michigan.  Due to the desirability of this area and the richness of the economy, this is a MUCH more expensive area to live in than most places in the US.  The basic market force of supply and demand has pushed housing prices and almost every other necessity of life to higher price points in the overall Bay Area, than what is commonly found elsewhere.  Take gasoline as an example, it costs considerably more in Lafayette, less than 10 miles from the refineries, than it does when trucked down into the central valley.  Companies will charge what the market will bear, and that’s just the way it is in a free market system.  Housing is no different.

The person who raised this issue referenced a very recent article in the NY Times “Federal Retreat on Loans Rattles Housing.”  The article is definitely worth reading, but the question is whether a September 30, 2011 reduction in the conforming loan limit from $729,750 to $605,000 will cause further decline in our market.  My initial gut reaction is that although this is certainly not a positive for our market, I don’t believe that it will have a significant impact on it.  Let me explain.

The average home buyer in Lamorinda is purchasing a home for just under $1M.  With the requisite 20% down, the current $729K conforming loan doesn’t quite get them to where they need to be, so they either dive deeper into savings or borrow more money via a second mortgage.  We saw numerous cases of the latter in 2009 and 2010 where the lender packaged a conforming first with a variable rate line of credit that gave the buyer an extremely low blended rate.  Obviously, they had to qualify for the total debt servicing.

For more expensive homes, reachng north of the million dollar mark, we saw a number of lenders carefully working their way back into the jumbo loan market.  Some even went out of their way to market their jumbo loans to the real estate community and consumers.  In a recent conversation with a direct lender from a major bank, I was told that the bank was packaging up and selling off its first large portfolio of jumbo loans.  If it went well, as he expected it would, he felt that they would be even more aggressive in seeking jumbo loan originations.

Although loan origination fees may increase as more private lenders step in, that may not be a foregone conclusion.  I will be the first to admit that I don’t know the answer, and can’t predict how financial markets will react.  With private lenders, I will welcome a departure from the regid, often ridiculous underwriting guidelines of the Fannie/Freddie loans — many of them have been the subject of my posts over the last couple of years.  What we all want is fiscal sanity, with banks making good business decisions about offering credit, employing rational decision making criteria and not just intractible guidelines hoping to make one size/flavor fit all.  Life and business simply aren’t like that.  What we may find is that loans are just as accessible following the reduction in the conforming loan amount, and that any increase in cost doesn’t significantly impact home affordabiity.  I guess only time will tell.  In the meantime, we just need to cognizant of the possible headwind we may face in the housing market’s recovery.


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Categories : Lafayette CA Real Estate Market, Lafayette Real Estate Forecast, Lamorinda Housing Market, Lamorinda Real Estate, Lamorinda real estate loans, Uncategorized

The Lamorinda Real Estate Market – Spring 2011 – April Sales

7 05 2011

We’ve officially got the first real month of the typically vigorous Spring market completed, and the sales data has just been released. Let’s take a look at it’s overall performance within the Lamorinda real estate community:

The Lamorinda April 2011 Market April 2011 inventory is down about 18 percent from April 2010, however sales are down about 20 percent, too.  The leading edge of the market, “pending sales”, shows about an 8 percent reduction from April 2010, likely due to the absence of the powerful influence that the first time home buyer credit had last year.  Arrayed against a significantly reduced inventory, the important relationship between supply and demand is shifting toward the firming up of Lamorinda home prices, also reflected in the nominal 2 percent reduction in median price from 2010 to 2011.

Let’s take a look at specific price segments, beginning with the sub-$1M price point:



Clearly, this is where the action is!  Inventories are down and the leading edge of the market, pending sales, are up.  This has clearly been reflected in our experience this past month, with a very clear high level of demand for attractive homes in the sub-$1M price range.

The picture changes dramatically as we move slightly up-market and look at the $1M – $1.5M price segment:



Inventories are down about 11 percent, but the “pending” sales are down a significant 37 percent!  It’s surprising that this follows a very robust March where pending sales in this segment were up about 31 percent over the prior year.

To show you how unpredictable statistics can sometimes be, you’ll be surprised by the following look at the $1.5M – $2M segment where sellers experienced the best market conditions of any segment:


Inventories dropped close to 37 percent in this segment over 2010 and about 44 percent of the available inventory went pending last month!  Some of this demand may have come from the annual 6 percent drop in median price within this upper-mid market price segment.

Finally, let’s take a look at the $2M+ segment:

For potential home sellers in this segment, this chart must be disturbing.  Inventories are climbing and demand was non-existent in April, following an almost dead month of March.  As I’ve written in numerous posts over the last couple of years, this is the segment that was initially the least impacted by the recession, but it is now the segment that will see the largest price adjustments to rekindle demand.  For those with the financial ability to purchase in this upper market segment, you are clearly in the driver’s seat.


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

What’s “QR” About Lamorinda Real Estate?

29 04 2011

Since it’s Friday, let’s have some fun!  So what the heck is this thing?:

Possible answers:

a)  A mini-Roshak inkblot test

b)  A thumbnail-sized version of a SF Museum of Modern Art piece

c)  An impressionist photo of ants running through a maze

d)  An abundance of information crammed into a little box about a home in the land of Lafayette real estate

e) An invitation to the Royal Wedding

If you were astute enough to guess that “d” is the right answer, you won.  Pour yourself an extra glass of wine this evening and celebrate your knowledge of the latest in consumer applications for smart mobile devices such as your iPhone, Android phone, or RIM Blackberry.  These clever little boxes are called “QR Codes”.  They may not be stylish unless you are a fan of modern art, but they certainly are very powerful!

Let’s put the little box to the test.  For those of you who own any of the smart mobile devices mentioned above, or one of the many with an iPad, go to the “App Store” and download one of the many free “QR Reader” applications.  I’ve got one on my iPhone that simply has the name “QR Reader”.  It’s nothing fancy, but it does the job.

OK… now that you’ve got this powerful new tool on your device.  Launch the application and hold your device up to the QR code at the beginning of this blog post.  Assuming you’ve used the app correctly, you’ll be whisked away to a vast amount of information that previously could not be communicated via text.  In this case, you’ll be taken to an informational website for one of our newest listings, complete with a photo slide show and the sort of information that you’d want as a prospective buyer.  It’s impressive, powerful technology that will add a whole new dimension to dull paper-based marketing.

You’ll find this technology embedded in all of our paper-based marketing collateral and print advertising.  It opens new doors to information for savvy real estate consumers. Armed with your new QR reader and this new tidbit of consumer knowledge, a whole new world of information is before you.

Want to try one more before you go?  Check out this one… it’s rather amazing! :  


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Categories : Lafayette Real Estate Marketing, Lamorinda Home for Sale, Lamorinda Housing Market, Lamorinda Real Estate, Real Estate Technology, Uncategorized

Lamorinda — Spring 2011… A Buyer’s or Seller’s Market?

27 04 2011

Sometimes there is a precarious equilibrium that exists between a buyer’s vs. seller’s market.  I hesitate to suggest that there may be a subtle shift occurring in our Lamorinda real estate market, but there certainly are some signs of subtle change… perhaps only for a brief period of time.  A recent column in the Wall Street Journal discusses the shifting dynamic between buyers and sellers.  It’s something that we’ve observed this year, too.

Fundamentally, there is a significant amount of unsatisfied demand for quality housing within our Lamorinda market place.  The demand is higher at the lower price points, and it tapers off significantly as one climbs above the $1.5M mark.  The key here is “quality”, a highly subjective adjective.  Buyers are being cautious, so “quality” usually means that a home is located in one of the most desirable areas of the Lafayette real estate market… Orinda or Moraga; that it’s in turn-key condition; presented in pristine, turnkey condition; and that it is priced so that buyers will perceive it is a strong value.  When those elements line up,  then the properties are selling, and often selling fast.

I recently wrote an offer on a Lafayette home that had been on the market for two days prior to my clients being able to take time from their very busy schedules to see it.  We wrote an extraordinarily strong, full price offer on a $1M+ home; about $500K in down payment; offered to accept the home “as is” following a week’s inspection contingency period; 30 day escrow; and even offered the seller’s an extended rent-back period so that they could find a replacement property.  We didn’t get the property.  Another buyer either outbid us, or offered some other term that the seller’s preferred.  Coming out of 2-3 years of the most challenging housing market in US history, it was objectively and rationally very challenging for my clients to write such a strong offer.   Knowing that they had really stepped outside their comfort zone crafting their offer, they graciously accepted the fact that they didn’t get the home, knowing they had done the very best they could.  With patience, we’ll certainly find another home.

From the other side of the market, we just listed our 3rd home this year that is priced around $1M.  The first home on Madrone in Lafayette had 21 showings during the first week on market, and went into escrow after 9 days.  We clearly saw strong demand from prospective buyers.  A few weeks later, we listed a home on Orchard Road, Lafayette .  It had about 25+ showings and sold after approximately 3 weeks… closing escrow last week.  If it had a garage, it would have sold within a few days.  Two days ago, on the Saturday of Easter weekend, we put this Quail Ridge Road, Lafayette  on the market, and had about 7 showings that day!  Two agents contacted me yesterday and said they thought they would be writing offers today!  We’ll see.  Hopefully, our clients will receive at least one compelling offer!

Clearly, we are seeing significant energy within the most affordable segments of the market.  Buyers are being very careful about their selections, unlike the heights of the market in 2004-2006.  The winds of change are certainly moving in the right direction.


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Categories : Lafayette CA Home for Sale, Lafayette CA Real Estate Appraisals, Lafayette CA Real Estate Forecast, Lafayette CA Real Estate Market, Lafayette Real Estate Marketing, Lamorinda Home for Sale, Lamorinda Housing Market, Lamorinda Real Estate, Lamorinda Real Estate Pricing, Uncategorized

Town-Central Living in Lafayette CA!

23 04 2011

The quest to find that “special” home that’s central to town just got easier! Whether you are a among the growing number of Lafayette residents who find themselves as “empty-nesters”, wanting to downsize and stay in town, or perhaps buying your first home for a young family… this is one to consider as it is also in the coveted area for Lafayette’s Happy Valley Elementary School.  It just went on market today, and had 6 scheduled showing appointments before noon!  It’s fun to watch the power and reach of online media, and it’s nice to see the market respond positively.  April is shaping up to be a very strong month for Lamorinda real estate.

Check out the video presentation below:

3802 Quail Ridge Road, Lafayette

Join us at the first Open House

Sunday, May 1st  1-4PM

For additional property information, click here.


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Confounded with Lamorinda Real Estate

13 04 2011

Every once in awhile, I just have to scratch my head and wonder what some agents are thinking when they price and market real estate. Perhaps, I’m just too darn idealistic about the importance of trying to maximize a client’s proceeds upon sale in this sometimes challenging market.  Clearly, these principles don’t seem to be shared by some of my contemporaries.

We just emerged from Spring Break week in Lafayette.  Many families were away on family vacations.  It’s traditionally a very dead week for local businesses, and also for real estate.  So, what does one of our local agents do?  The agent under-prices a prime location home on .75 acres of level land; puts it on MLS late Friday afternoon with instructions that it’s not viewable until Saturday afternoon; and then states that offers must be submitted by 4pm on Sunday!!!  If the objective was to sell the house, then mission accomplished.  At least one offer was received and it’s now “pending”.  Was it done at the expense of the client?  Probably.  Most buyers and agents never got a chance to see it or get their client out to see it.  I guess we’ll see what the home closes for in 30+ days and see if the seller got close to fair market value.  I doubt it.

A few weeks ago, a pristine Lafayette home went on the market with about 2400 sq. feet of remodeled living area.  An out-of-area agent listed the home at under $800,000… around $333 per sq. ft.  That is substantially below the Lafayette average price, for a home that would ordinarily be in the most active segment of the market. Perplexed, we made a comment to the agent… something to the effect that “you know that you priced the home at least $100,000 under the market?”  She smiled and said, “Oh, I’ve got a really great client that trusts me and does what I recommend.”  Terrific!

So… I invite your opinion!  Where should the responsibility of the agent reside, even if a client says they want a quick sale?  Is there a duty to try and maximize the property’s exposure and to price it close to market?  We think that duty exists, and that we have a responsibility to tell a client if they are proposing to significantly under-price a property. What about the downstream impact of an under-priced home to other future comparable homes.  Their value gets impacted, too.  It’s an interesting question.


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The Jury May Still Be Out on the Lamorinda 2011 Spring Real Estate Market

29 03 2011

Whereas my last post was quite optimistic about the performance of our market based upon the February stats, it may be too early to predict a robust return to a “normal” Lamorinda real estate market.  The national press continues to be rather pessimistic, and inevitably that can wear off on consumers.  According to today’s Wall St. Journal, prices nationally slid from August of 2010 through January of this year, hitting lows not seen since 2003.  March was also not a good month for consumer confidence based upon a report released today that showed gloomier expectations about the economy and labor market.  Escalating petroleum product prices and the world-wide impact of Japan’s tragedy aren’t helping matters.

“These data confirm what we have seen with recent housing starts and sales reports,” said David Blitzer, chairman of S&P’s index committee. “The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery. At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing.”  Even with the microeconomic uniqueness of the Lamorinda real estate market, and its display of strength, it cannot separate itself entirely from what is happening on a national basis.  As Mr. Blitzer has pointed out, we are clearly not yet at a point of resurgence in the housing market.

With that said, let’s drill down a bit and see where the strengths and weakness lie in our present market.  Based upon the published February 2011 data, the median price of a sold home in Lamorinda was $836,000.  That should tell you a lot about the present market.  After all, it wasn’t that long ago that people used to joke about anything under $1M being sold for lot value alone.  Looking at the market’s leading edge, of the 43 “pending” sales in February;  a whopping 25 were priced at under $1M; 10 were priced between $1M – $1.5M;   only 4 were priced between $1.5M – $2M; and just 4 priced over $2M.  With some quick math… almost 60 percent of the sales were under $1M.

March looks like it’s been a very strong month based upon homes that are presently pending as of today.  In fact, it looks much stronger than the same period in 2010. Since the official stats won’t be released for about another 10 days, we’ll see how they look upon publication.  If you are interested some additional diversity in opinion on the local market, you might want to read the recent feature article in Diablo Magazine, “Boom, Bust, Bargain”.   You’ll see a photo of one of our beautiful, and now “pending” listings on page one, and you’ll find me quoted on pages two and three.   Stay tuned for what lies ahead in the Spring market!


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

Preparing Your Home for Market

9 03 2011

A very substantial segment of our business in Lamorinda real estate is the listing of homes for sale.  Undoubtedly, the number one question that is raised by our clients pertains to what they should do to prepare the home for market. Most of the time, sellers want to discuss the cosmetic preparatory items, but are reticent to discuss evaluation and preparation of the home’s infrastructure… it’s systems, and overall physical condition.

We all recognize that some people are very aware of their home’s maintenance needs and have cared for their home in an exceptional manner. Others have placed their priorities in other areas, and have a considerable amount of deferred maintenance. Some fall somewhere in between.  In the latter two situations, we try to encourage clients to have a general home inspection done by a highly-respected professional prior to going on-market.  Many sellers are reluctant to spend the money for the inspection because they know that the buyer will pay the cost when they get into escrow.

As pointed out in a recent Wall St. Journal article, buyers will impute about $2-3 of cost to each dollar of actual cost to fix a problem. Knowing, and addressing potential issues in advance can save a seller significant amounts of money in negotiations when they find themselves in a vulnerable position during escrow, learning about an unanticipated problem for the first time.  Just as important, sellers will often save substantially more than the $500 or so for a home inspection by being able to address problems on their terms, not on the buyer’s.  We believe that knowledge is power, so understanding your home’s condition in advance of having a buyer make unpleasant discoveries can be very empowering and helpful in your negotiations.  Peace of mind is worth a lot, too!


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Categories : Lamorinda Home Inspections, Lamorinda Housing Market, Lamorinda Real Estate

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