Real Estate Update Spring 2013
Good News for San Francisco Bay Area Sellers.
According to Errol Samuelson of realtor.com, the San Francisco Bay Area is the hottest market in the country. This is corroborated by DataQuick, a Southern California real estate research firm, which reported that the Bay Area median home price increased 24.6% in February compared to February 2012. The CoreLogic Home Price Index increased nationally by 10.2% in February compared to the previous February. This was the biggest increase since March 2006 and marks the 12th consecutive monthly increase in home prices nationally indicating ongoing improvement in the housing market. Dr. Mark Fleming, chief economist with CoreLogic, noted that 8 of the top 10 highest appreciating markets are in California.
Local Bay Area Market Posts Gains.
The days on the market dropped and the median sale price rose in Piedmont, Berkeley, Rockridge, Crocker Highlands and Montclair during the 1st quarter of 2013 compared to the first quarter of 2012. Half of the homes sold during a period sold for more than the median price and half for less. The following data is from the Multiple Listing Service and includes homes sold for $500,000 and above.
A change in median home price does not reflect the actual change in the market value of your home. An increase in median home price indicates that fewer lower priced and more higher priced homes sold than was the case a year ago, and bodes well for the strength of the local housing market.
Tips for Pricing to Sell in the Current Market.
Even though the Bay Area housing market has improved considerably from a couple of years ago, your home may not be worth what it would have been at the peak of the market, depending on where you live. In some pockets of the Bay Area, your home may have surpassed that peak.
Listing at a price that's too ambitious for the market won't help you to realize a successful sale. Sellers, encouraged by the most recent sales in their neighborhoods, could compromise their marketing effort if they ask a price for their house that is based on the highest priced recent sales. The listings that attract the highest prices usually aren't those that are listed at the highest prices. They are often the listings that are priced to attract buyers' attention. This can create a multiple offer situation that drives the selling price up.
To find the optimum list price, analyze the comparable sales in your neighborhood before making a decision. See if there is a roadmap for success by checking the list prices of the listings that were over-bid. You may find that they cluster in a certain price range, say between $700,000 and $750,000. Then look at the sale prices and see if they cluster around a certain price range. Discard the odd ball high and low prices in both groups of comparables. You could find that the listings that sell quickly and for the highest prices sell for approximately 10% over the asking price. If so, you may want to back off the expected selling price for your home, which could be close to $800,000 and list closer to the asking price range of the listings that sold.
For this approach to work in your favor, make sure your home is exposed to the market before you accept offers. The listing should have broad Internet exposure including a lot of good photographs of the property, a broker tour for the real estate agents in the area and easy access for showing so that agents can show the property to their clients with short notice. You could leave money on the table if you let the listing be sold before it's adequately exposed to agents and their buyers. On the other hand, if you over-price the listing for the market, you could end up having to reduce the price until you meet the market for your home. Sellers usually come out ahead by pricing competitively. Then, let the buyers bid the property up to the new market level. Today's comparable sales are in the making.
Guidelines for Buying in the Current Market.
Some buyers are making offers on listings they haven't seen in person to get a jump on the competition. Contingencies for financing, appraisal and inspections are often waived in order to be competitive in a market plagued with way too few listings and an oversupply of eager buyers. This is the crazy reality of the current Bay Area housing market. Should you step back and wait for a return to sanity? Or, should you forge ahead? The risk of waiting is that you might have to pay more due to home price appreciation and higher interest rates. The risk of buying now is that you could overpay if the market corrects. Here are some guidelines to help you through the challenging buying process.
- Don't buy for the short term. If you have to move again soon and the market doesn't continue its current ascent, you could lose money when you sell.
- Don't buy a house just for the sake of buying if it's not a house that will suit your long term needs.
- Before waiving your rights to inspect the property, ask the listing agent if you can pre-inspect. If the sellers have pre-inspection reports from reputable contractors, talk to them to find out as much information about the property as you can before you make an offer without an inspection contingency. Better than waiving an inspection, include a short contingency of 5 days or less. Line up inspectors in advance. Some sellers don't want buyers to pre-inspect. Find out the sellers' stance on this. If you are going to pre-inspect, make sure to ask for the sellers' permission.
- Many buyers lose out in competition to all cash buyers who don't need to qualify for a mortgage in order to buy. If you need a mortgage and can amass a significant down payment, say 40% of the purchase price, and your lender or mortgage broker says there should be no problem with your loan qualification, you might consider waiving the loan and appraisal contingencies. If you do, understand that if you can't get the financing you need to close, your deposit could be at risk. This is not the preferred way to buy a home. However, some buyers are gambling and offering without contingencies to protect them in order to be competitive.
- Watch for listings that aren't receiving proper marketing. These are often properties listed by out-of-area agents who may not know the local marketing customs. This can offer an opportunity for a buyer to make an offer before other buyers hear about the property. Even if you're not in competition, you might offer more than the list price to entice the seller to accept your offer and not wait for more offers from other buyers. If you're the only buyer, don't waive contingencies, but keep them to a short time frame.
- Try making a pre-emptive or off- market offer. A pre-emptive offer is one that's made either before the listing goes on the market or before the date the seller has set for hearing offers. For this approach to work, you'll need to make a strong offer to encourage the sellers to sell to you rather than wait for other offers. Some sellers won't entertain pre-emptive offers.
- Write a love letter to the seller. Some sellers are emotionally attached to their homes. If there are several similar offers, a letter from buyers giving information about themselves and why they want to make the sellers' home theirs can make a difference.
- Working with an out-of-area agent can be disadvantageous. Make sure, if you use an out-of-area agent, that they are aware of local customs regarding who pays which closing costs. You'll have a better chance if your agent can refer you to a well known local agent who can advocate for you.
- Know the market. Look at every new listing that might work for you. Find out what houses you liked or bid on sold for. In a changing market, you need to become an expert on local prices so that you can determine how well a listing is priced. If it's priced low, it may actually be out of your price range when you consider the over-bidding that is likely to occur. In a multiple offer situation, you need to have a sense of how high you need to go to have your offer accepted.
- Be prepared to make your first offer your best offer if you're in competition.
- Lower your expectations and price range if you continue to lose out on listings that are bid up over what you can afford.
- Avoid buyer fatigue and burn out by only bidding on listings that you have a chance of getting.
Interest Rate Update.
Mortgage interest rates have moved off their historic lows, but are still in the mid-3% range for 30-year fixed-rate conforming loans as of the beginning of April 2013. Most analysts expect mortgage rates to move up to 4% by the end of this year. The good news is that lenders are easing up on the qualifying criteria-a little.
For help with all your real estate needs, call Dian Hymer, CRS, Associate Broker. 510-339-4777 (office); Email: email@example.com.