Record NorCal Sale

While we're not in the habit of promoting other listings ahead of our own, we also understand the importance of good cocktail party conversation, especially around the holidays. With that in mind, we thought you'd enjoy reading about the recent $65 million sale in Belvedere. If any of you want to be notified if it falls out of escrow, just shoot us an email.

Local Market Continues to Cool

Check out this nice short article from the Chronicle. Sometimes we look for complicated explanations for market movements when the real explanations are fairly simple. In short, money is harder to get, buyers are more hesitant, inventory is low, and the market is cool. Simple as that...

North Bay Home Search

A while back, we offered up access to our CleanOffer account as a free perk to our friends and clients. Many of you took advantage of this. 2008 is shaping up to be a very good year to buyer real estate. For those who would like to track the market on their own, we've reposted our original invitation below...

Next Generation Real Estate offers CleanOffer to all clients and friends. This site tracks the North Bay MLS (including Marin, Sonoma, Napa, and Mendocino) and allows users to create custom searches, track listings, and review property details. We feel it's the most useful local site for buyers, sellers, and those who just like to keep up on the market in their area. CleanOffer is a pay site. Fortunately, Next Generation Real Estate has purchased an unlimited subscription that allows all our clients and friends to use the site for free. Simply register as our client and you'll get unlimited access. Registration instructions are below:
Click on the link above. (There is also a permanent link in the "Links" section of our blog.)
Click on “Buyers & Sellers Register Here.”
Click “I Agree” on the Membership Agreement page (assuming you do agree).
Fill in the registration form. Type “Jess Pearson” when they ask for agent’s name.
Click “Jess Pearson.”
Click “Submit.”
Click “I accept.”
Click “Submit.”
You’re done. Happy searching!

Who's The Victim?

It's been interesting to listen to the various politicos and economists talking about who's at fault for the "mortgage meltdown." Was it predatory lenders or naive buyers, bad lending rules or bad borrowing habits?

Either way, it's natural to assume that the now-foreclosed-upon borrowers somehow deserved a better fate. Even if they should have read their loan documents more carefully or considered the impact of an inevitable rate hike, there something about a hardworking family losing its home that tugs at the heart strings.

It turns out, however, that not every "victim" of the lending crunch was an "ordinary American homeowner" just trying to get by. According to the Chronicle, "More than one-fifth of 6,557 Bay Area properties that fell into foreclosure from January through September this year were owned by investors." House-flipping, as it's known, had become such a popular regional investment strategy that these small time real estate moguls now account for over 20% of our foreclosure "victims."

Read the whole article to see just how common this has become.

True, it's never a happy story when someone goes belly up, but it's a lot harder to believe that someone who owned eight investment properties didn't know the risk.

Tasty Freeze?

The unfortunate comparisons to drug addiction aside, this SF Chronicle article on the potential fallout of a rate freeze for subprime borrowers is worth a read. As someone currently parenting a three-year-old, I have to wonder if the proposed freeze is a way of rewarding bad behavior. "Since you didn't eat your vegetables, you only get one scoop of ice cream instead of two." Time will tell...

Supply & Demand

A recent Q&A from the Marin IJ featured the following information:
"Between 2000 and 2006, California's population increased 7.6 percent. During the same time period, housing units increased 6.3 percent. When you are talking about a population of 30 million people, a discrepancy of even 1 percent in available housing means there are 300,000 more people competing for a place to live.

"Again according to the Census Bureau, in California we have an average of 2.9 people per household. If you call three people a household, there were still 100,000 more housing units needed..."

While we at Next Generation Real Estate are not census takers, we believe it's safe to assume that the population growth rate will continue to be strong. If anything, however, housing starts have fallen off dramatically in 2007. Normally this would be a sign of broader economic decline. But that's what makes this market downturn so unusual.

Historically, real estate suffers as a result of broader economic troubles. Layoffs, inflation, and high unemployment cause corrections in the national real estate market. This time around, however, those traditonal problems were not the driving force behind the correction.

So we're left to wonder...with interest rates, inflation, and unemployment all relatively low, how long can the correction last? With the decline in new construction, is it possible that demand may outstrip supply by an even greater margin than before? Could the national market come roaring back to its 2005 heights? Stranger things have happened.

Holiday Happenings

The lead is buried half-way down this SF Chronicle article, but it's worth reading for anyone wondering what goes on in the market. It echoes what we're experiencing, especially in the City. Namely, that the market is more active over the holidays than it has been in recent years. Admittedly, not everyone wants to move over Christmas week, but the article makes one solid point: any buyer or seller out there right now is a serious buyer or seller.

Marin Median Home Price Goes Up

Since August, people have been asking us in hushed and hesitant tones, "So how's business going?" And for some reason, no one seemed to believe our answer, "You know things are really going well." So if you won't take our word for it, look at this article from the Marin IJ. We try to stay away from saying that Marin and San Francisco are bullet proof or evergreen markets, but sometimes a headline tells at least some of the story. True, strong sales in the upper end of the market are pulling the median price up. And true, total units sales are down. But for local home owners worried about their investment or for home buyers looking for the deal of a lifetime, the picture couldn't be clearer. The local market is a lot more stable than people want to believe.

Another thing to keep in mind (and something we've harped on before at your favorite real estate blog), there is no one local market. In San Francisco, South Beach can be cool while NOPA is red hot. (This is, in fact, the case.) In Marin, Kentfield sales can be up 63% through November 20th while Novato sales are down 35% over the same stretch. (Also not a hypothetical example.) As always, our local market it more complex than any headline can capture.

Private or Public

Check out this very interesting article from San Francisco Magazine about the world of San Francisco private schools. As a Realtor doing business in both SF and Marin, I can say with some authority that when it comes to buying a home, the "school question" is often as important as any feature of a particular house. And as someone who was raised in Marin and is now raising two kids in SF (not to mention that I went to school in both locations and am married to an admissions director at and SF private school), I can say with equal authority that the primacy of the school question in the minds of home buyers is utterly appropriate and legitimate. Hopefully the article provides some insight for those wrestling with this decision. If so, you might also check out the Marin public school resources in the link list on the right side of the page.

Waving Goodbye to a Local Legend

We're better than two months and 12 posts into your favorite real estate blog. Loyal readers have come to count on this little bit of cyberspace for local, useful, and timely real estate-related information. To date, we have yet to post anything that didn't fall clearly under that stated purview. Today, that's about to change. We promise not to go off topic very often, but we know loyal readers will forgive the rare self-indulgence.

Charlie Deal died last week. Charlie was a fixture in Mill Valley throughout my childhood; a singularly recognizable figure. A quirky, bearded, scraggly character, usually seen riding a rickety bicycle, often with one of his legendary toilet seat guitars strapped across his shoulder. Charlie was harmless; the strangeness of his appearance exceeded only by the gentleness of his spirit. As a bike-bound adolescent in occasionally "Still" Valley, our paths seemed to cross almost daily as we pedaled in opposite directions down Miller Avenue. At an age when I counted irreverence and defiance as my finest personality traits, I always knew enough to acknowledge Charlie with a wave, a "Hey, Charlie," or a doff of the little league cap. Even as an adult, I never failed to pay tribute to the man. In return, I rarely got more than a humbled and mumbled, "Hello." But that was enough.

When I read about Charlie's passing, on the heals of the closing of the Sweetwater and Village Music, I couldn't help but fall into a reflective mood. Mill Valley, still one of the most beautiful places I know, is not the town I grew up in. Of course, it hasn't been for a long time. And that's okay. But Charlie is a little different than Lockwood's Pharmacy, Mosher's Shoes, The Old Mill Bakery, Varney's Hardware and the other venerable institutions of bygone days. If a local drugstore, charming shoe store, or old fashioned bakery were to open in Lytton Square next week, I suspect they'd be welcomed by one and all. But if Charlie Deal suddenly appeared today, I wonder? Would he be embraced? Would he be respected? Is there still a place for the Charlie Deals of the world?

In the end, it doesn't matter. Because there was only one Charlie Deal. Mill Valley, nor any other town for that matter, will ever see his like again. I'm glad I got to wave to him. I wish I'd gotten to wave goodbye.

A Little Perspective, A Lot of Opportunity

A buyer said to me the other day, "It's a shame that now that prices are finally down, interest rates have gone back up." This sent me scurrying for some historical data. The buyer was happy to be reminded that while, on a regional basis, many sellers are more willing than ever to negotiate, 30-year fixed rates are still relatively low, typically below 7%.

A quick snapshot of some historical interest rate climates:
In 1983, the 30-year fixed loan rate was 13.95 percent
In 1987, the rate was 11.36 percent
In 1992, rates dipped below double digits to 9 percent
In 1997, the rate was 8.27 percent
In 2002, the rate was 7.16 percent

As is so often the case, investors willing to go against the grain, to enter a market many are leaving, may be rewarded for their courage down the road.

Just some thoughts for those trying to make sense of a confusing market...

Fall Into The Gap

Take a look at this recent article by University of Chicago economics professor, Austan Goolsbee. It originally ran in the New York Times. Mr. Goolsbee highlights an obvious but often ignored fact of residential real estate sales: a house is only worth what someone will pay you for it. Home values are governed by supply and demand just like any other product or commodity. But unlike wheat, widgets, and washing machines, homes are repositories of personal memory and emotion, neither of which have much if anything to do with market value. When farmers grow too much wheat, they lower their prices to stay competitive. Yet somehow, when there are too many homes for sale, sellers often prefer to price their homes for what they wish they were worth, not what the market will bear. This creates a glut of inventory in the marketplace, as buyers and sellers stare at one another across an ever-widening gap, each unwilling to accept the other's assessment of value. It is this gap that accounts for the gloomy sales statistics you've been reading in the newspapers lately. When buyers and sellers are so far apart, there's no room for negotiation and the market becomes stagnant.
So what's the lesson? If you're not ready to accept your home's true market value, then you're not really ready to sell. And that's okay, assuming you don't really need to. But if selling your house is a priority, take a tip from the farmers. Be realistic about what the market will bear and price accordingly.

August Mortgage Woes Come Home To Roost

The newspapers finally confirmed what we all already knew. Real Estate sales are way down, even in Marin and San Francisco. In the Bay Area, September '07 sales were down nearly 45% from September '06. San Francisco and Marin fared slightly better with drops of 30% and 24% respectively.

Why was September such a nightmare of a month? Because August was when the mortgage crisis hit its peak and most real estate transactions take 30 days or more to close. Thus, every buyer who couldn't get a loan in August became a house that didn't sell in September.

Take a look at these articles in the SF Chronicle and Marin IJ for more details on the slowdown.

The upshot? The next several months are shaping up as a spectacular time to buy real estate. For the first time in years, there are real bargains available. At Next Generation Real Estate, we are looking at Sonoma County (especially south of Santa Rosa) as a particularly intriguing market. Sales and prices are well off their over-valued highs from 2005-2006. But our hunch is that this market will recover more quickly than some other hard hit counties. We're always happy to discuss our thoughts on where opportunities lie. Call us any time.

Prop 60 & Prop 90

If you're over 55 (or getting close) and you own real estate in California, Proposition 60 and Proposition 90 are possibly the two most important pieces of legislation you may have never heard of.

In 1978, with the passage of Proposition 13, California placed limitations on property taxes. Ever since, property taxes have been based on purchase price with increases capped at 2% per year, regardless of how much a property's value actually increases. As a result, many longtime Bay Area residents own homes that are now worth $1,000,000 or more, but are taxed at a substantially lower assessed value.

This reduced tax burden, for so many years a boon to homeowners, can act as "golden handcuffs" as homeowners reach retirement age. Why? Because when longtime homeowners downsize they find that their property taxes do exactly the opposite. Here's a common scenario:

Paul & Judy buy a house in Mill Valley in 1980 for $200,000.
In 2007, their house is worth $1,200,000 but they are still paying only $3000 a year in property taxes.
Paul & Judy's kids are grown, they've retired, and they want to sell their house and buy a waterfront condo for $900,000.
By downsizing, they hope to minimize housing costs as part of their retirement plan.
Unfortunately, the property taxes on their new condo will be $11,250 a year.
Paul & Judy say goodbye to their retirement plan.

It is to address just such a scenario that Proposition 60 was passed in 1986. Prop 60 allows Paul & Judy to transfer their property tax basis to their new condo. Of course, there are restrictions. They must move within the same county. They must be over 55. They must buy down in price (with some exceptions). They can only do it once. And more...

What if Paul & Judy want to leave Marin County? Enter Prop 90. This is a county-by-county "opt in" law that allows the same people who meet Prop 60 criteria to transfer their tax basis across county lines. Currently the following counties participate in Prop 90: Ventura, Los Angeles, San Diego, Santa Clara, Alameda, Orange, and San Mateo.

If you or anyone you know is 55 or older and considering selling their home, please look at this very helpful Q&A. (We've also added a permanent link to the link list on the right side of the page.) Then give Next Generation Real Estate a call. We're always here to answer your questions.

Property Tax Reduction (seriously)

As you might know, property taxes are "ad valorem" taxes. Ad valorem is Latin for "according to the value." As you also know, thanks to the golden handcuffs of Prop 13, many longtime owners of California real estate are paying property taxes that have little or nothing to do with the current valorem of their property. Thanks to a 2% cap on annual property tax increases, many Californians have watched the market value of their homes rise much faster and higher than the assessed value. Until now...

For the first time in a long time, some recent home buyers are seeing the assessed value of their homes outpace the market value. In fact, in some areas, they're going in opposite directions. Fortunately, there is a provision, called Prop 8, which allows these recent home buyers to appeal the assessed value of their home if they believe that it is inaccurate. Check out this article in Sunday's Chronicle for more details. Even if it doesn't affect you, you may know someone who could benefit from this information. Pass it on.

Front Page. Back Loaded.

We're sure many of you caught the front page headline in the Chronicle on October 11th. "State's Housing Market Agony Predicted to Deepen Next Year," it read. At Next Generation Real Estate, we agree. Statewide, the picture isn't pretty (unless you're a buyer with good credit, cash on hand, and a long term investment strategy, that is). And it doesn't look likely to improve right away. (Of course, headlines that include the word "agony" don't exactly soothe shattered confidence.)

But as we're always saying, do yourself a favor and read the entire article. Note the passage that says, "The median price for the state is expected to edge up 3.5 percent for this year." What?!? Huh?!? Why would prices go up when sales go down? Indeed, as the article points out, it's the lower end of the market that's really struggling. In fact, properties at higher price points are actually selling reasonably well and accounting for the uptick in median price. And guess where many of those high-end properties are located. Right here in San Francisco and Marin. Maybe you even own one.

As we're also always saying, you can't draw conclusions about a local market based on broader regional or national trends. Ask a Realtor (we know a couple good ones) how your local market is doing before you decide it's in the tank.

Of course, even Marin and San Francisco have come back to earth from their dizzying heights. "What goes up..." and all that. But looked at under a clearer lens, both local markets offer a prettier picture than you might expect.

If you'd like an in depth market analysis of your home or neighborhood, don't hesitate to get in touch.

TICs and Condo Conversion

Another quick one for our City readers. Many people want to know about the rules governing Tenancy In Common (TIC) and condo conversions in San Francisco. Despite the risks associated with them, TICs have become a surprisingly common way for first-time buyers to crack the high-priced SF market. Their increase in popularity has, naturally, resulted in a decrease in the gap between TIC and Condo prices. If you'd like to learn a little about the history of TICs or the implications converting TICs into condominiums, please contact Next Generation Real Estate at 415.717.0766 or NextGeneration@pacunion.com.
In the meantime, two websites offer invaluable information on this subject. In our opinion, no one should purchase a TIC unit without first reading every word of the condo conversion information page at sfgov.org. Perhaps even more important is a thorough reading of Andy Sirkin's website. Mr. Sirkin is a San Francisco attorney and the preeminent authority on TICs. Links to these websites will have a permanent home in the link list on the right side of this page.

Taking the Market's Temperature

Before we get to today's City-centric post, just a quick reminder that we regularly update your favorite real estate blog with helpful info and links. Rather than bug you with an email for every new addition, we encourage you to check back often to see what's new. This week, without telling you, we posted a note about the impact of the Fed rate cut (see post below) and added new links to recycling resources in Marin (see link list to right). Lastly, don't be afraid to leave comments about postings that you found helpful, interesting, or even confusing. Your feedback will help us tailor your favorite real estate blog to your needs.

Now without further ado, some illuminating data on the SF market.

First, for those who don't know (and why would you?), the City is broken up into MLS districts (by numbers) and subdistricts (by letters). For example, the central part of SF is Disctrict 5. Noe Valley is district 5C. Click here to see a map of all City districts and subdistricts.

Second, one way we measure the temperature of a local market is by looking at the percentage of active listings under contract. In other words, how many listings have sold, but not yet closed? Generally speaking, when 35% or more of active listings are under contract, we consider this a seller's market. (This was widely experienced over the past five years.) When 25%-35% of active listings are under contract, we consider this a balanced market. When less than 25% of active listings are under contract, buyers are in the driver's seat.

On Friday, September 22, 2007, here's what the market looked like:

District 1 (Northwest) - 27% under contract

District 2 (Central West) - 32%

District 3 (Southwest) - 21%

District 4 (Twin Peaks West) - 29%

District 5 (Central) - 33%

District 6 (Central North) - 35%

District 7 (North) - 32%

Distrcit 8 (Northeast) - 32%

District 9 (Central East) - 29%

District 10 (Southeast) - 21%

Citywide, active listings spend an average of 48 days on the market prior to selling.

(Statistics include all single family homes, condos, lofts, and TICs. Multi-unit listings were not included.)

We will track this data over time so that regular readers can get a sense of which way the market is moving. Remember, markets are seasonal. Expect Decmeber to be cooler (read: more buyer-friendly) than September.

Comments welcome...

Fed Cuts Rates. Now What?

During today’s highly anticipated Federal Reserve Meeting, the Fed announced a reduction of the Fed Funds Rate and the Discount Rate by 0.50%.

What does this mean for home loan rates? Not as much as you might think. For now, anyway. To be clear, a cut to the Fed Funds Rate impacts the “Prime Rate,” which affects home equity lines of credit, credit cards, business loans, car loans and other consumer loan rates. This rate change, does NOT, however, have a direct correlation to home loan rates. That said, a reduction in the discount rate increases liquidity in the market. How this liquidity will impact lending rates is anybody's guess. Moreover, its impact on the gap between conforming rates and jumbo rates is unknown. As always, you need all the facts before making any decisions.

If a purchase or refinance is in your future, please contact us. We’ll be glad to put you in touch with a knowledgeable and reliable mortgage broker who can answer all of your questions.

Outstanding Online Resource

Next Generation Real Estate offers CleanOffer to all clients and friend. This site tracks the North Bay MLS (including Marin, Sonoma, Napa, and Mendocino) and allows users to create custom searches, track listings, and review property details. We feel it's the most useful local site for buyers, sellers, and those who just like to keep up on the market in their area.

CleanOffer is a pay site. Fortunately, Next Generation Real Estate has purchased an unlimited subscription that allows all our clients and friends to use the site for free. Simply register as our client and you'll get unlimited access. Registration instructions are below:

• Click on the link above. (There is also a permanent link in the "Links" section of our blog.)



• Click on “Buyers & Sellers Register Here.”



• Click “I Agree” on the Membership Agreement page (assuming you do agree).



• Fill in the registration form. Type “Jess Pearson” when they ask for agent’s name.



• Click “Jess Pearson.”



• Click “Submit.”



• Click “I accept.”



• Click “Submit.”

You’re done. Happy searching!

When Sales Go Down, Prices Go Up

Only in Marin...

Faithful readers of Thanks for Your Referrals, the occasional newsletter from Next Generation Real Estate, will recall an article from our January, 2007 issue, in which we encouraged nervous properties owners to maintain a long term outlook on their investments. To illustrate that point, we offer newly available data to support a buy-and-hold strategy.

These statistics strongly suggest that major fluctuations in the Marin real estate market have a greater impact on housing units sold than on sales prices. Translation: In "down markets," Marin County home owners simply stop selling, rather than selling for less. The first chart below tracks average Marin County sales price from 1975-2006.

This next chart shows average units sold per year in Marin County over the same period.

We find these two charts highly illustrative. When it come to stocks and bonds, we've often been told that trying to time the market is a fools errand. It appears the same edict applies to Marin County real estate, as well.

You Never Forget Your First time

Next Generation Real Estate is getting blogged down. And it's about time!

Welcome to our latest resource for clients, friends, relations, and people with too much free time at work. Check back often for timely reports on the state of the Bay Area real estate market, as well as updates on the lives of your favorite intergenerational real estate team.