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

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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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

Negotiating in the Lamorinda Real Estate Market

5 07 2011

Early in my business career, one of my mentors taught me the importance of understanding what the other party values in a negotiation and trying to appeal to those areas.  It’s important to put yourself in their place so that you can at least strive for the ideal “win-win” scenario.  You should also understand your limits in the negotiation… what you are willing to give up… how far you’ll go on key points, and also where you might give concessions with points that you don’t value highly.  As one of my former tech colleagues from Texas used to say, “Let’s give ‘em the sleeves out of our vest.”

I had the opportunity to observe a couple of unsuccessful negotiating strategies in the last week or so… one by a seller and the other by a buyer.  Both were in multiple offer situations, rare in the present market.  In the first scenario, the property was listed by another broker, and there was considerable interest in it the first day on-market. About 4-5 buyers and their agents requested disclosure documents and expressed interest in writing an offer.  All were told not to write their offers until a meeting had taken place the following day with the seller to discuss their offer review strategy.  The next day, we were all told that offers would not be accepted and reviewed for 5 days, so that the property could be fully exposed to the market.

When the “offer day” arrived, all but one of the parties had decided NOT to write an offer.  My client was one of the buyers who had decided not to proceed, but told me that they would have written an offer if the sellers would have reviewed it the second day the home was on the market.  In this case, the sellers of the property failed to value the buyers and their potential offers.  My client told me that the process “just doesn’t feel right” in this market.  They also decided that maybe they “weren’t in love” with the property.  Evidently, they weren’t alone in their feelings.

In the other situation, we found ourselves on the listing side of the transaction.  An offer came in on our listing within about 24 hours of the home going on-market.  The price was almost acceptable to the seller, but there was a term in the contract that would have legally been immaterial to the buyer unless they defaulted, but would potentially be very important to the seller in a buyer default scenario. Absent a buyer default, this particular contract term would have been financially neutral to the buyer.  The sellers countered the buyer on price and the contract term noted above.  It should also be noted that the sellers were countering the term in accordance with what is considered normal custom and practice in most of California real estate.  The buyers accepted the counter on price, but then countered out the change in the term mentioned above.  So, in this negotiation, the buyer had an opportunity to secure the property at an acceptable price, but countered out a term that would have had no financial or other impact upon them as long as they performed in accordance with the contract.

You can probably guess what happened.  While counter offers were being issued/reviewed, another buyer stepped forward with a better price and better contract terms.  When buyer #1 finally decided to concede on the term in question, it was too late.  The sellers had decided that they wanted to accept the second buyer’s offer. Buyer #1 failed to follow the Texas rule of conceding “the sleeves out of the vest!”


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

Does Anyone Really Know What’s Going On in the Lamorinda Real Estate Market?

28 06 2011

I apologize for the brief break in the continuity of my normally frequent blog posts.  The truth is that I’ve been swamped with real estate work, and getting that done is the first priority.  Quiet moments for reflection and writing have been few and far between the last couple of weeks.  With that said, does anyone really know what the heck is going on with Lamorinda real estate these days?

According to an article in today’s Wall St. Journal, “national” home prices were up a bit in April, even managing to get David Blitzer, Chairman of the S&P’s home index committee to refer to it in positive terms as a “welcome change”.  Naturally, it’s too early to tell if April was an anomaly, just a run of good weather, or if it’s the beginning of a national turn-around in the market.  I’ve given up on predicting these things as there are too many moving parts.  Besides, as I’ve said, there is no national real estate market, anyway.

There IS a Lamorinda real estate market, and I’m trying to figure it out.  Looking at the stats, one would come to the conclusion that anything priced over $1.5M will have an extended period of market time; $1M – $1.5M is looking fairly solid; and decent homes priced under $1M are a HOT item.  Looking at the overall Lamorinda real estate market and comparing it to the “national” market stats from Case-Shiller, we see some differences.  Whereas the “national” market was up in April over 2010, Lamorinda was down slightly with the average per square foot price dropping from $396 in April of 2010 to $379 in April 2011.  Since we’re a bit faster to record and publish our data than Case Shiller, the May prices took another drop — going from $442 per sq. ft. in 2010 to $389 per sq. ft. in May of 2011 — a 12% drop on a year-over-year basis.  One would think the market might be in trouble based upon the stats, but that’s not been my experience the last few weeks.

Last week, a property went on the market in Lafayette with a so-so ranch style home that needs significant remodeling and expansion, on a superb lot of almost a half-acre — perfectly level and centrally located.  I’ve heard that there are at least 7 agents writing offers on it today.  Another home went on the market Friday… close to the “magical” Lafayette bike trail, substantially remodeled, but within proximity to a fair amount of road noise.  There was so much interest in the home that the sellers decided to wait 5 days to review offers. Finally, we put a home on the market late Friday at almost $1.5M.  Late Saturday, we got an offer that our clients countered.  Without a response yet from the first party, on Monday a second offer came in, followed by a third offer!  I guess the Larmorinda market isn’t on life support when the right home at the right price comes up.

The truth is, I’m still scratching my head a bit about what I’ve seen in the last few weeks.  I guess I’m seeing people step forward and be less tentative than in recent months.  Perhaps there is a fairly large unsatisfied demand for housing in this area that is jumping into the market… perhaps, it’s just a blip.  It’s impossible to tell at this point, but it certainly presents a much more positive view of the market than what we’ve witnessed in the months leading up to now.  Stay tuned… it could be an interesting summer!


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

2011 Lamorinda Real Estate… Hitting Bottom and On Its Way Up?

9 02 2011

If we assume that Lafayette real estate and the surrounding Lamorinda real estate communities mimic the overall trends of 47 other national markets, we have officially hit bottom.   Moody’s Analytics tracks the ratio of median home prices to annual household incomes in 74 markets. Based upon that data, the affordability of housing has now returned to or surpassed the average reached between 1989-2003 in 47 of those markets. Most economists believe the housing boom took off in 2003.  ”Based on incomes, this is as affordable as it gets,” said Mark Zandi, chief economist at Moody’s Analytics. “If you can get a loan, these are pretty good times to buy.”

Naturally, it’s not all good news.  The price declines are leaving more borrowers underwater, or in homes worth less than the amount owed.  As reported in the Wall St. Journal, nearly 27% of homeowners with a mortgage were underwater at the end of the fourth quarter, up from 23.2% in the previous quarter.  The statistics for Lamorinda real estate aren’t nearly as ominous, but the financial distress sales will have a bearing on 2011 prices… likely keeping them moderated this year until such time as this inventory makes its way through the pipeline and gets cleared in the market.

With all of this said, there is clearly a sense of energy that I’m hearing from our buyer clients and from other real estate agents in our market that I haven’t felt in years.  As an example, we placed a home on the market yesterday in Lafayette and had 6 showings by agents during its first day on-market!    It was almost reminiscent of 2005-6 when agents would be seen calling their clients from homes on the Brokers Open, telling them to start baking cookies for the seller and to bring their checkbook!  I don’t think we’ll see anything that approaches that behavior for a very long time, but it certainly was a nice way to kick-off the official post-Super Bowl real estate season!

Would you like to see the video presentation of the Lafayette home that received 6 showings during its day on-market?  Here it is:

3620 Madrone Drive, Lafayette

 

 


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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

Beware! Appraisals in the Lamorinda Real Estate Market

20 10 2010

With so much being written about other areas of the housing market, I’d like to present a sobering view of what I’m seeing with bank appraisals and their impact on the Lafayette real estate market and broader Lamorinda market. Although I’ve written about appraisal issues in recent months, I think a brief review of the present system would put matters in the proper context.

The present Federally-mandated guidelines require that appraisers work “arms-length” from the lender and the real estate agents. This requirement created a new sub-industry of “appraisal management” companies that contract with the lenders for their appraisal business and utilize affiliated independent appraisers for the appraisal work.  It all sounds reasonable, except for how it has evolved.

As one might have anticipated, the appraisal management contracts are often awarded to the low-cost bidder.  The banks are finding that they are now getting appraisals done for close to half the price of what they used to pay when they directly contracted with “approved appraisers” on their lists.  The latter were usually local, experienced, and competent appraisers familiar with the market in which the subject property resided.  Naturally, the cost to the consumer borrower under the new model hasn’t changed since the lenders are using their new appraisal margin as a source of revenue.

So, how are the appraisal management companies getting their price low enough to win the contracts?  You guessed it!  They are dramatically cutting the fees charged by appraisers and they are often going far out of the geographic areas to find appraisers willing to work for the greatly reduced fees.  This has created all sorts of problems… angry local appraisers who are doing the absolute minimum to comply with the Fanny Mae form guidelines AND the widespread use of marginally competent appraisers from out of the are who know nothing about the Lafayette real estate market, Orinda, Moraga, or anywhere else around Lamorinda!  They can fill the forms out correctly, and that seems to be the only thing that the underwriters care about.  OK… let me now tell you about my latest appraisal “horror story”.

Normally, I’d be vague about the parties involved, except when their incompetence deserves to be pointed out.  This latest mortage/appraisal nightmare is brought to you by Charles Schwab Bank (CSB).  The buyer is a high net worth client of Schwab brokerage who submitted a sufficient amount of personal info to CSB to receive a “Pre-Approval” letter prior to submitting an offer on a Lafayette home.  The purchase agreement allowed for a very liberal 21-day finance contingency period for the lender to get the appraisal completed and do their final underwriting review.  After not hearing from an appraiser within about 7 days, the buyer and I both inquired and were told the appraisal had been ordered.  At 14 days out, still no word from an appraiser, so I escalated the matter to a VP at Schwab who took the matter up with a regionally based CSB person. We were told that a “Rush” was being put on the appraisal, and that it would be done prior to the 21-day contingency period expiration.

The appraiser showed up at the property on day 19 or 20 and knew nothing about a “rush” order.   He zipped through the property in no more than 15 min, and showed no interest in learning about any of the home’s enhancements, remodeling, or the installed PV solar system that has virtually eliminated all PG&E charges… returning a clear $7000 annual benefit.  Instead, he spent about 15 minutes complaining to me about the underwriters that he has to deal with and how he can’t give the property additional value for it’s enhancements because the underwriters are “$20 an hour idiots” who will demand “comps” of other identical homes with the same amenities,which would be impossible to find.  He then told me that the present system has about halved his income and that he was going to turn down the job the appraisal management company had just called him about… an appraisal in San Jose, 50+ miles outside of his market area, for $284 including his RT travel.  It’s no wonder the quality of appraisals is so poor.  The story gets even better…

The appraisal came in 2 days late because Schwab really didn’t put a rush on it, or the appraisal management company didn’t tell the appraiser.  The buyer and I received an email  from Schwab Bank (CSB) stating that the appraisal was about $50,000 under the contract value and the email listed the options for the buyer, including seeking renegotiation of the contract.  I asked for a copy of the appraisal.

Upon review, I noted that the stated “contract price” on the first page of the appraisal was in error… $25,000 under the true, negotiated purchase price.  Furthermore, the appraisal showed that the value was equal to the incorrectly stated purchase price, not what Schwab’s email had stated.  In other words, the appraised value was $25,000 higher than what Schwab bank communicated in writing.  It gets even better…  I decided to look at the appraiser’s analysis in fine detail.  I ran the calculations on his weighted “comparable sales” which indicated that he could have easily supported a value far in excess of the true purchase agreement price.

It is almost inconceivable that the loan processor at Schwab could make such a large error in misstating the appraisal, but it was an even more egregious error in their underwriting that failed to discover the incorrect purchase price on the appraisal.  Had I not taken the time to delve into the matter, both parties might have decided to terminate the contract, or the Schwab error could have cost the Seller almost $50,000 in the renegotiation of the contract.

How could this happen, and why does the system tolerate the gross inaccuracies we are seeing across our market with appraisals? The answer is simple… the “system” only seems to care about form over substance.  As long as the appraiser completes the “grid” correctly, no one really cares if the buyer or seller have been fairly served by the process.  As a result, we’ve got the “tail”  wagging the dog — the market.  Had the above sale been renegotiated at $50K less, the subsequent sales in the area would have been compared unfairly to the artificially reduced price… ultimately eroding the market.  It’s a flawed process, and it’s having a detrimental impact on our market.


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Categories : Lafayette CA Real Estate Appraisals, Lamorinda Housing Market, Lamorinda Real Estate, Real Estate Finance, Uncategorized

Lamorinda Real Estate — The Upper End Market

13 10 2010

For many years, a high proportion of our business has involved the purchase or sale of homes that would be considered to be in the upper tier of the Lafayette real estate market, as well as broader Lamorinda real estate market.  It has been particularly challenging over the last couple years, as most would imagine.  We are grateful to have had a very successful 2010, with the majority of our business residing in the upper tier of the Lamorinda market, and also one of the very few sales in Lafayette real estate with a closing price of over $2.5M.

One of the biggest challenges that we face begins with the initial pricing of the home.  The  Wall St. Journal’s Real Estate section reinforced what our experience has been in this market with their recent article, “The Holdouts — Some of the nation’s wealthiest home sellers refuse to lower their asking prices.  ’I feel the property is worth every penny…’ “

The article talks about high end sellers allowing their homes to linger on the market without budging on the asking price, often telling their agent that “it just takes ‘the right’ buyer”.  It may be true that it takes only one “right buyer” to sell a home, but this cliche’ is more often than not, simply a denial of the realities of the market.

According to Moody Analytic’s Chief Economist, Mark Zandi who is quoted in the WSJ article, ”Everyone, from bottom to top, got hurt in the financial panic, and it’s reflected in the high-end of the housing market being frozen.”  He adds that price declines, originally confined to the bottom of the market, have begun migrating upward.  This is, unfortunately, the reality of our market, yet contrary to what many upper-end home sellers believe.  Historically, many successful people have operated under the assumption that “those who have money will always have money”, thus feeling impervious to the market.  At the beginning of the latest market cycle, this was true.  The more moderately priced homes in our market began to decline prior to the upper end homes.  Now, the simple market dynamics have reversed.  There are far more willing buyers for more affordable homes than there are for those that only a minority are able to buy.

In the end, there is nothing to be gained by “testing the market” at an unrealistically high price.  There is nothing to “test”.  The longer a home is on the market without selling, the more the market discounts its price.  Buyers in this community are well-educated and market savvy.  Those that can afford the highest priced homes in this community often are very successful, sophisticated business people who will only buy properties priced in a manner that makes them compelling.  For most, the days of making quick, reflexive purchases without seeking the best price possible are well behind us.  A sale can only occur when there is a willing buyer and a willing seller.  Right now, the balance of power is weighted heavily in favor of the buyer.


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Categories : Lafayette CA Real Estate Appraisals, Lamorinda Housing Market, Lamorinda Real Estate, Lamorinda Real Estate Luxury Market

Time to Jump In… but, Leave the Irrational Exuberance on the Sideline

25 04 2010

So many of our Lafayette real estate and other Lamorinda real estate clients have asked us over the last year or so whether “the time” has arrived to “jump in”, either as a buyer or seller.  My answer has always been one tempered with caveats about the unknown elements of world events and the economic implications of the recession that could impact my answer, but I also have always told these clients that one never knows if a market has bottomed until we’re looking at it in the “rear view mirror” after it turns up.  Last year, I told clients that I felt we were “bumping along the bottom” of the market and that I couldn’t see more than 5% downside risk as we moved from 2009 to 2010, with most of that risk at the upper end of the market where there had been very little transactional activity in 2009.  In retrospect, it appears to have been a pretty good market call.

As reported recently in the Wall St. Journal, the S&P/Case-Schiller survey results “suggest housing prices bottomed out around April 2009, when its 20-city composite index was down 32.6% from its peak reached in June/July 2006.”  The article goes on to say that, “Since then it has gained 3% through January 2010, with some markets much stronger, especially San Francisco and Minneapolis.”  This is very encouraging, but I would caution clients in their interpretation of local housing statistics that show rising prices, for they can be very misleading.  As an example, I mentioned a week or so ago that there were 7 homes over $2M that had gone pending within the Lafayette. CA real estate market inside of about a 14-day period. Assuming most of those homes close escrow in the May time frame, we’ll see the May statistics report a very significant rise in Lafayette’s median price. If the media picks up on our relatively small Lafayette real estate market, it will undoubtedly report a “sharp jump” in prices that won’t be truly reflective of the market.  Never take statistics at face value… always interpret them within the proper context.

Bottom line, there are lots of positive reasons to believe that the worst of the market is a ways behind us and that the outlook for the future is much more positive.  Other indicators include:

  • Sales of new single family homes jumped 27% last month on a nation-wide basis per the Wall St. Journal.  Sure, most of this is due to the expiring tax credit for first time buyers, but don’t forget the fact that we need to see this segment firm up to underpin the overall housing market.
  • The 30-year fixed-rate mortgage averaged 5.07% for the week ended April 15, down from 5.21% last week.  As reported, this rate is only slightly higher than the 4.82% average for a year ago during the depths of the market.

If you haven’t decided to jump in yet, now is probably the time to do so, but be sure to do it with reasonable expectations.


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

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