Archive for the 'Market updates' Category
Last Sunday I held open a wonderful country property in Sebastopol, listed by my good friend and colleague Izetta Feeny. It is a great value, a four bedroom house on nearly two acres withing good commute range of San Francisco. The family that currently owns the house home schools their four children there and there is an assortment of goats, chickens, geese and two miniature donkeys and four big dogs that round out the family. The house is nicely situated on a knoll with 360 degree views of the surrounding countryside and hills. This morning I bet they can even see snow on some of those hills.
As the house is set at the end of a series of country lanes, I was curious how people found me. It turns out that all of the eight parties or so who came by had found about the open house via our on-line ads. People had driven from as far as Fremont and Oakland with their children to see this one house, and one person came with her realtor. We had a great time chatting and comparing notes. In 1998 I was doing the same thing, driving up to look at properties on weekends from my home in the East Bay.
Like me many of these people were looking for a different lifestyle, but concerned about what they might give up by being “so remote”. I had to laugh because I certainly don’t feel that way any longer. Seems like a lot of people want more room to roam, either for themselves, their children or their four legged friends.
As we enter 2008, everyone is wondering what this year will bring for the real estate market.Â Â Typically January sees relatively low inventory levels as sellers wait to bring their homes on the market for the conventionally busy spring buying season.Â Many properties that didn’t sell in the previous year are withdrawn for the holiday season and brought back on in the new year.Â Â According to Ann Scherbert’s post, the situation is similar in parts of San Francisco.
How to know what to expect as spring comes on?
Â In looking at this winter’s inventory levels, it is interesting to see the disparity in three distinct Sonoma County real estate markets.Â Â Market activity here varies greatly depending on location and price point but some cities on an aggregate level appear to be more hurt by the slowing market and morgage trends.Â For example, Santa Rosa inventory levels are down this January over the peak last summer and fall.Â However there are nearlyÂ 1100 single family homes for sale versus just over 700 at this timeÂ last January.Â Â There remains a lot of undigested inventory from last year and some incredible bargains are to be had.
In Healdsburg and Sebastopol, levels are very similar to last January’s, and still showing a seasonal adjustment.Â Â What do you think that bodes for each marketin terms of prices?
You can see that in Sebastopol, inventory figures have trended down from a peak in August of 2006 and are actually over 10 percent lower than a year ago at this time.
Â Â Healdsburg inventory levels are just slightly (10%) higher than last January with a much smaller sample size than Santa Rosa, certainly within the same ballpark as a year ago.Â Both Sebastopol and Healdsburg are smaller communities than Santa Rosa, and real estate values there tend to trend higher and to attract a higher percentage of second home or lifestyle buyers than Santa Rosa as an overall percentage of sales, whereas Santa Rosa has a much larger chunk of entry level homes and larger scale housing tracts, which have been more impacted by the subprime mortgage crisis.Â Â Â How will this glut at the lower end ultimately effect our higher end market?Â Â Â Kevin Boer has an excellent post on this phenomenon in the mid-peninsula market of the San Francisco Bay Area.Â I’ll comment in more detail on this topic and prices in another post.
I heard a great story from one of my wonderful colleagues, Delia Nieto at Coldwell Banker yesterday.Â Â I spotted her meeting with clients in the office so that they could remove all contingencies on the purchase of their first home, priced well under $500,000 in Santa Rosa.Â Â They have rented the same tiny apartment for 6 years and are bursting at the seams with 3 children.Â Two years ago at the peak of the frenzied Sonoma County real estate market, the median home was priced around $600,000.Â Although this family worked closely two years agoÂ with Burbank Housing , a Sonoma County non-profit that works with low-income residents to get them into affordable housing, their jobs as a special needs teacher and landscaper did not quite qualify them to buy at the peak prices.Â Â Â But the downward spiral of entry level prices and their diligence over the last two years,Â as well asÂ the Acorn Housing Loan program offered in this case in conjunction with Bank of AmericaÂ Â are enabling them to buy their first home.Â Through the Acorn program they each took numerous classes in home ownership and responsible credit management.Â Â Meanwhile, the house they would have paid $540,000 for two years ago, will now cost them $460,000!Â Â Â Astonishingly, Bank of America’s appraisal for this same house for their CURRENT loan, came in at a hefty $530,000.Â Delia and I are both puzzled but this occurence, but her very happy clients will take it.Â Â Meanwhile, yesterday’s Press Democrat newspaper’s front page story, confirmed my little anecdote as a trend.Â Â
Â Nice to see the press making some lemonade (along with smart first time buyers) of the current market.
Have you ever visited the US Army San Francisco Bay Model? It is really great to see when the model is running and you can view the really complex tidal patterns that circulate through San Francisco Bay–I had the chance once when I attended a sailboat racing lecture there–tides being really critical to your success racing on SF Bay. With Homescopes, I hope that we can use our informal network of agents on the ground, to help us as a region get a feel for the ebbs and flows of our inter-related Northern California marketplaces.
Many of us in the real estate market in the North Bay are fairly convinced that our market in Sonoma and Napa is very influenced by the strengths and variations of the Bay Area real estate market whether in terms of general trends (Hot, Cold or Indifferent) as well as localized effects such as the tides of Palo Alto and the Peninsula, San Francisco and the East Bay Insterstate 80 corridor. I spoke to my friend Izetta Feeny yesterday, a long time Coldwell Banker agent in Sonoma County and shared with her the 3 Ocean’s Real Estate recent post about rapid median price apprection in Palo Alto and other selected markets in the Bay Area.
“Oh! That’s good,” she said, “That means we’ll see the effect up here in 18 months.” As if the rising tide of the heart of the Bay Area’s market would eventually ripple north to Sonoma and Napa counties and lift our boat. When our boat is eventually lifted by the Bay Area high tide, we attract at least 2 types of buyers from out of town: entry level buyers who can’t afford to live where they work in Marin or San Francisco, and upper-tier buyers with equity in strong, competitive Bay markets that want a lifestyle change and move here full time, or who are looking for a weekend getaway or wine country estate. As the most desireable markets in the Bay Area are strong, then we see a more immediate impact on the markets that will serve the budding country squire (and squire-ess). Virtually all the buyers I have worked with this year fall into this category of new “lifestyle” immigrants to the wine country.
As you view the upper quartile median price points for many of Sonoma County’s cities (well, towns), the cities with the most cachet for out of town buyers: Sebastopol, Healdsburg, Glen Ellen, Kenwood and Sonoma, all have much higher upper quartile price points. Counter-intuitively, there are wide fluctuations in the upper quartile of some of our markets (Kenwood and Glen Ellen, Healdsburg) but that is because upper quartile price ranges are much broader, and with the small sample size of these areas, are subject to wider swings when a large vineyard estate sells for $4 to $6 million or so one month but not the next.
The greater majority of our upper tier markets hover in the $1M to $2M range, with increasing forays into the $2M range.
There are different tidal patterns and forces pulling these buyers to the North Bay. So a typical Palo Alto homeowner who wants to stop and smell the roses (or the grapes) can trade in their little rancher ($2 to $2.4 million) near Hamilton or Emerson and live like the landed gentry up here with 2 to 10 acres of privacy, views or room for horses or farming. Or a stunning retreat property for weekends and holidays. This Sonoma County potential buyer has been pretty immune to the ups and downs of the general market and the subprime lending crisis. They keep the upper and sometimes the 2nd quartile markets steady and strong. Which is why we see well-priced and presented country properties moving quickly (i.e within a month or two) while many many single family tract homes and condominiums in suburban locations in Petaluma, NW Santa Rosa and Windsor are languishing. The lower quartiles are currently more impacted by the uncertainties in the mortgage markets, plus the hordes of amateur investors are back in the stock market and not investing in real estate.
These are the types of homes (typically the bottom one or two quartiles) that will be snatched up by Bay Area renters and workers who will commute to their jobs from the North Bay. Yesterday I showed one of my listings to a young, first time buyer and his agent from San Rafael. He is on the hunt because he perceives value in the lower quartile of our market, and rates are down, affordability is up. So the currents ebb and flow.
These buyers have been staying away but seem to be cautiously returning. The Palo Alto potential country squires never really left. Many of the smartest buyers know that now is a good time to buy, with low rates and lots of choice. The real illusion that some buyers hold is that they can somehow divine the low point of the tide and time their entry into the water. That is even harder to do with real estate than the stock market. Just take a look at the San Francisco Bay model to see how complex these currents can be.
One of my colleagues asked me to accompany him to a home auction at the fairgrounds in San Mateo County last weekend. Now, when I think of auctions I think of the Keeneland Yearling Sales in Kentucky, the Napa or Sonoma Wine Auctions or livestock auctions. The concept of auctioning peoples’ HOMES, I found depressing and sort of difficult to imagine, as if the homes would be paraded around the livestock ring on a lead rope, with numbers stickered on them, and the happy buyers would roll them away in shopping carts. So last Saturday I decided to go, and to help Miguel and Cecilia, his wife, as their agent, and see what the scoop was.
The auction was run by LandAuction.com, a company which primarily has run land sales, but recently has started to move more homes due to the subprime mortgage situation and the amount of homes in default. The process of buying a home in this way is appealing to a lot of people (they think they are getting a deal, and the average time of a home on the block (2 minutes–or 500 homes a weekend) certainly shortens the sales cycle! In Australia, many homes are sold at auction. The process is fraught with risks however, and is about as different as can be from the “standard” California home purchase transaction as it can be, without completely disregarding California laws concerning seller disclosure and buyer investigations in real estate transactions.
In the case of the auction, the buyer generally must
do ALL of their investigation prior to bidding on the property
buy the property as is and with no contingencies
close within 21 days of the auction
Unless you are very familiar with an area, and have thoroughly investigated a property, you could find yourself in the position of losing your earnest money deposit if you change your mind after your “winning” bid and decide not to go through with a purchase. This is the reverse of the sequence and a vastly different process on a “normal” purchase where the buyer is in the driver’s seat during a negotiated contingency period and can cancel a purchase during their timeframes if the property does not pass their inspections or their loan is not approved, for example if the property doesn’t pass muster with either the bank or the appraiser. There is no loan contingency period unless you use the lender affiliated with the auction company, which might not be the most competitive. This did not stop hundreds of people of all ages, races and persuasions to turn out to find a deal. We had to wait five hours for the house we were interested in to come on line, and it sold for $25,000 more than we thought reasonable, so the day, while interesting, did not leave us with a full shopping cart.
By the way, 10 of the 500 homes were from Sonoma County. I don’t think there were any screaming bargains, but a few of the homes might have been 5 per cent below market, with most of the nicer homes coming in pretty close to market.
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