Next Generation Real Estate

Feels Like Drought

2012-01-20T16:50:00.000-08:00

December was a weird month, real estate-wise. Sure, it's always a quiet time in the real estate market, but this year it was practically silent. Buyers kept asking us, "Where's all the inventory?" Everyone wondered if there were really as few homes for sale as it seemed. Then this appeared today, showing that, indeed, there really weren't many homes for sale. We've seen a perceptible uptick in January, but hardly what we'd call a deluge.

The Barbell Effect

2011-12-28T13:48:00.000-08:00

In the private school world, financial aid administrators often refer to the "barbell effect." The term was coined to explain what happens when very high tuition and large financial aid awards combine to create a school community with a bunch of wealthy families supporting a bunch of economically disadvantaged families in the name of diversity. Meanwhile, middle income families who can neither afford the tuition nor qualify for financial awards are largely squeezed out.

For the purposes of discussion, we wonder "aloud" whether something similar could be happening in the world of real estate. To wit...today's blurb on sfgate.com mentions that the upper end of the SF market is up recently and down only slightly year-over-year, while the lower and of the market has fallen by better than 9%. Put another way, if you've got a lot of money to begin with, your recent real estate investment has been relatively sound. Meanwhile, if you entered the bottom of the market a year ago, your investment has under-performed.

Okay. Admittedly, the private school analogy is a reach. But we wonder nevertheless why the "value" end of the market doesn't seem to be much of a value?

Hold Your Breath

2011-08-11T13:29:00.000-07:00

Check out this article for the latest news on Marin homeowners who are underwater. More than you thought? Fewer? Share your thoughts....

Listings Lately?

2011-07-31T07:42:00.000-07:00

And now for the self-serving portion of our blog...Here are a few of the properties we've listed or sold lately.

20 Rowley Circle
2169 Green Street #3
www.1383Masonic.com
9 Via Vandyke (representing buyer)
7 Castle Rock (representing buyer)

The End Is Near (Again)

2011-07-21T08:52:00.000-07:00

Check out the latest update from the Marin IJ on Marin foreclosure activity. We particularly enjoyed the quote from a competing broker, "This may be the point where we look back and say it's starting to go in another direction." If we had a loan modification for every time we'd read that, we'd be going in another direction by now. Not that we disagree with him, mind you. It's just that we think market shifts are like potholes; you never see them until they're in the rear view mirror (and usually your tire's blown out by then).

Foreclosure Database

2011-07-18T09:45:00.000-07:00

Because of the seemingly never-ending fascination with distress sales, we thought we'd again offer up the link to the Marin County foreclosure database.

As always, we add the caveat that many homes that are in the foreclosure process, especially those that have received a Notice of Default, may never be offered for sale. In some cases, homeowners have "deliberately" gone into default as part of a strategy to achieve a loan modification.

More advice...be cautious when pursuing foreclosures. Auctions on the court house steps are the first place that novices stumble. But even when purchasing through an agent, disclosures are limited and contracts tend to heavily favor the bank's interests. Do your risk/reward calculations carefully. And, as ever, please buy and sell real estate responsibly. We're always here to help.

Safety First

2011-07-18T09:41:00.000-07:00

For our many Mill Valley-centric clients, friends, and readers (and with apologies to those that aren't), here's a worthwhile read about Mill Valley's approach to disaster preparedness.

Op-Ed(ucation)

2010-08-29T23:08:00.000-07:00

A client sent us a link to a Times article yesterday. This is a client who's hoping to sell their house and this article paints none-too-pretty a picture. Give it a gander. Then come back to your favorite real estate blog and read below for my response to our client. (Reproduced with their permission, of course.)

"Interesting article. The two things I think the writer gets right are:
1. The illiquid real estate market is stagnating
2. The “shadow inventory” being a real issue

"In a more liquid market, prices drop rapidly until the market “reaches” the buyers. In real estate, prices tend to fall more slowly. The thing people forgot in the past decade is that real estate is fundamentally a long term, illiquid investment. You can’t just wake up one morning and decide to sell your property, as if it were stock in IBM. Admittedly, it seemed that way for a long time, but that’s not a normal reality for real estate. The liquidity of the market was, in part, a function of the liquidity of the mortgage market. Now that the mortgage market is tighter, so is the real estate market. Seems obvious, but we all sort of lost sight of this.

"I actually addressed the “shadow” market in a recent mailing. This is my biggest concern about the future, though it may come to nothing. There’s hard data (something not heavily embraced by the writer of the article) that says that the banks are holding back foreclosure inventory to prevent a flood on the market that would drive values down. In one sense, this is very troubling. Part of me wants to just let the bank-owned (REO) inventory sell off so we can see where we really stand, even if it means driving prices down; like letting a wildfire burn off all of the underbrush to allow for new growth. It might be painful, but at least it would be over. In another sense, it’s very reassuring. As long as the banks maintain this approach, property values should be somewhat protected. We might be able to pull the Band Aid off slowly enough that we hardly notice how much it hurts. (Excuse the mixed metaphor.) By all accounts, the banks learned their lesson in early 2009 when they released too much REO inventory at once and cannibalized their own market. Regardless, the shadow inventory makes people nervous, and for legitimate reasons.

"There is a doom and gloom school of thought that says that we have years to go before we hit bottom. This is clearly the point of view of the writer. Fair enough. Indeed, the notion that a 3 bedroom, 2 bath house ought to sell for $800,000, regardless of where it’s located, is, on its face, a little ridiculous. You could build a house for half that price. But this premise is built on a willingness to throw out decades of economic history. From 1970 to 2006, the median price of a home in Marin County went up every year, except for 1990 and 1991. Suddenly the price of a Marin County home is supposed to drop by 300%? I suppose anything is possible, but this seems unlikely unless a full scale reassessment of our economy is in process. And if you believe that prices will fall significantly further over the coming years, then that argues for selling now, while you can still get somewhat close to the top of the market.

"I am far from a glass-half-full person by nature. In fact, I tend to be a worst-case-scenario person. I willingly admit that things could get worse before they get better. But I think it’s worth noting that the writer’s source for the opinion that the price of an $800,000 home in the Bay Area is “unrealistically high” is a “blogger”; not an economist. (I have a blog, too, but I don’t expect to be quoted in the Times.) I’m cautiously optimistic about the market. In fact, I plan to invest myself in the next 12 months. These kinds of articles always smack of the blame game to me. It is popular to blast Realtors or NAR as being a false engine driving an unrealistic real estate market. It’s a fair critique, but one that’s based primarily in opinion, not fact. It’s a kneejerk reaction, like blaming SUV drivers for the war in Iraq; there may be a residue of truth to it, but certainly the real story is more complex. (Should we blame Best Buy when someone replaces a perfectly good, eight year-old television with a new 50” HD flat screen that they can barely afford?) There is very little actual data in the article. I don’t necessarily disagree with its premise, but I’m not sure I like its methodology.

"For whatever it’s worth ( I’d have to check to be sure), I think I’ve worked on more transactions in the past 12 months than in any previous 12 month period over the past five years. The point? Houses are still selling. Buyers are still buying. Lenders are still lending. I guess I question somewhat the motivation of the writer of the article. I agree that there’s plenty of bad news out there. We can all throw our hands up and decide that the sky is falling. Or we can put our nose back to the ground, get to work, and see if we can solve this."

Old School, New School, Bad School?

2010-08-19T09:01:00.000-07:00

It's a dilmma for every San Francisco parent (and the source of a huge percentage of our Marin County referrals). What are parents of school-age kids to do? Contrary to popular opinion, most parents we know would love to send their children to public school in San Francisco. The problem? 0 for 7. For the uninitiated, o for 7 has become scary shorthand for being assigned to a kindergarten that was not among any of parents' top seven choices. Say "0 for 7" to almost any parent in the City and prepare to hear a rant.

Today's Chron features an article that hightlights the issue. Recent reforms may address some of the problems. But we're guessing the rants will continue.

Numbers Don't Lie (but they may fib a little bit)

2010-08-10T08:59:00.000-07:00

"Economix," a blog that appears on NYTimes.com, can be an interesting read for those curious about a more scientific approach to the national real estate market. Today's post by Harvard economist Edward Glaeser, looks at hard data for mortgage approval rates and loan-to-value ratios. The findings are inconclusive. In short, approval rates and LTV ratios were not significantly different during the real estate boom than they were in the years before. Statistical analysis, of course, is designed to take anecdotal observation out of the equation or even, as in this case, conventional wisdom. From a Realtor's perspective, this is a little like looking at a barometer to tell you when it's raining. Most of us would just walk outside and see if we got wet. Nevertheless, it's interesting to see that the data does not necessarily bear out what we might expect. The truth, as always, lies somewhere in the middle.

A previous entry in the blog tells us that housing prices peaked in May, 2006. This is a nationwide measure. Our considered, Marin-and-San-Francisco-centric opinion, is that our local markets first faltered in September, 2007. It would be reasonable that the boom in these areas would last longer than the nation's s a whole, due to more favorable economic factors and the relative lack of new construction. Why do we pick September, 2007? Because that was the month when we first heard about Jumbo mortgages failing to fund. This is a strictly anecdotal, but, we believe, entirely accurate conclusion.

We find it useful to compare local market observations and national market data to help inform our understanding of where we were, how we got there, and where we're going. If you are a Times or WSJ reader who tends to get caught up in national or even statewide statistics, remember there are always stories closer to home that may paint a different picture. And we're always happy to tell them.

Second to One?

2010-08-01T22:40:00.000-07:00

There are so many reasons not to buy foreclosure properties at auction, it's hard to know where to begin. Want to know just a few reasons, check out this article from the SF Chron on one family's unfortunate trip to the courthouse steps.

The More Things Change...

2010-07-20T10:42:00.000-07:00

These days, no news seems like the best news when it comes to the real estate market. And no news is just what we got last week when the June median home price for Marin County came in virtually unchanged from 2009. In an odd sort of way, this jibes with what we've been experiencing on the street. Sellers have been saying, "It sure seems like prices have gone up this year." (Hopeful thinking.) While buyers keep telling us, "I think the market is still going down." (More hopeful thinking.) It would appear that, as usual, the truth lies somewhere in the middle.

If you're looking for the glass-half-full take on the data, it's this...The number of units sold was up over 6% while the median price stayed nearly flat. Why is this news? Because until recently, the only thing that drove unit sales was falling prices. An upturn in activity without a corresponding decline in values is, in our opinion, an indicator of a market that's finding it's footing. And that's probably good news for everyone.

Fuel for the Fire?

2010-06-01T11:45:00.000-07:00

In nature, they say that wildfires and forest fires are part of the natural cycle. They clean out the dead and dying vegetation in one violent burn and set seed for a whole new generation of growth. Sure, it can be terrifying to watch as thousands of acres burn, but it may just be what mother nature ordered. In fact, sometimes the best choice is to just let the fire burn itself out until all the fuel is used up.

Of course, the issue gets cloudier when we find out that a fire wasn't started by a random lightning strike or other natural spark. We tend to feel differently when we find out that human negligence was involved. A cigarette butt tossed out a window or a camp fire left untended. When a fire was set deliberately by some nefarious individual, we may even be furious. And when that fire burns houses instead of mere trees and brush, we become enraged.

Which brings is to another buried lead in this article from sfgate.com. While it is certainly notable that the upper end of the market is feeling the foreclosure pinch, more interesting is the acknowledgement that banks are holding back REO inventory to prevent a freefall in property values. If you're a buyer looking for a bargain, you may find this irritating. If you're a pure free marketer, you may find it manipulative. But if you would prefer to see property values stay within shouting distance of where they were a few years ago, this doesn't seem like the worst strategy. Sure, it's in the banks' interest, since they're sitting on more real estate than they ever expected to own. But it's not necessarily bad for regular Joes or Joans who own just one or two properties and would prefer not to see those values decline even further.

How does this relate to a forest fire? The first question is, are we better off just letting this one burn itself out. Are bank-owned properties just so much fuel for the fire and does the long term health of our real estate forest depend on letting that fuel get used up in one massive inferno. (Forgive the belabored metaphor.) Or should should we control this burn and even try to put it out. And does it change the way you answer when you factor in the notion that human greed, negligence, and (cue the conspiracy theories) intent may have been the spark that started the blaze. Where do you stand?

A Leg...Sideways?

2010-05-28T15:43:00.000-07:00

Until about three years ago, home ownership seemed like the key to a better life for nearly every American. A first step up the financial ladder. And even before risky loans and reckless borrowing brought the dream to its knees, a more honorable approach to first-time home buying emerged in the form of "Below Market Rate" housing. Cities and counties throughout California began requiring that developers set aside a certain portion of new housing units in a particular development to be included in BMR programs that would allow people to own real estate who would ordinarily never have been able to afford it.

Sounds like a noble endeavor all the way around.

So check out this article in the Marin IJ. It's nominally about how the financial crisis is forcing counties to revisit how they handle these BMR programs and how this is causing an uproar among buyers of regular market rate units in those developments. The buried lead, however, can be found in paragraph three: Buyers of BMR units "must sell them at about the same price they purchased them for."

Forget for a moment that there's a financial crisis going on. Pretend it's business as usual in the world of real estate. Can anyone explain how a BMR program is supposed to help someone get a leg up in the world if the appreciation potential of the investment is essentially nil. We're not economists, but this has troubled and confused us for years. SF has a similar program and it's never made sense to us. Shouldn't BMR units at least be able to appreciate at rates similar to comparable unit in the development? Otherwise, what's the point? All the headaches of homeownership (repairs, maintenance or HOA dues) with hardly any of the financial benefits?

We welcome your thoughts on this. It's something we've wondered about for years.

Enough is enough?

2010-05-16T10:44:00.000-07:00

Scroll down to the real eastate-related blub in this nugget from the Bloomberg Report in today's Chron. It will come as a surpirse to many in the Bay Area to hear that foreclosures show no sign of letting up. It's nice to see the notices of default are down a tad, but that doesn't mean much for those looking a present problems (or opportunities). To us, this is a reminder that, while the recovery does appear to be fully on, it is still likely to be slow and fitful. We read recently that real estate prices aren't expected to return to their pre-downturn levels for another five years. Taking the temperature of our local markets, that feels about right.

Skipping Along the Bottom?

2010-04-15T15:51:00.001-07:00

Today's article in the Chron may be the first evidence that the bottom of the market may be in the rearview mirrow. Maybe. We're inclined to wait a month or three to see whether we're just skipping along the bottom or actually bouncing off it.

Shameless Plug

2010-04-09T15:02:00.000-07:00

We try to make this space informative and entertaining, but that doesn't mean we can't promote our listings every once in a while.

Here's our latest and greatest.
6033 Shelter Bay Ave., Mill Valley
317 29th St. #203, SF
290 Nevada St., SF
2248 15th St., SF

And while we're at it, we represented the buyers of this lovely Mill Valley home:
83 Sunnyside Ave., MV

Music To Our Ears

2010-04-09T14:50:00.000-07:00

We're on vacation, but this item in the IJ didn't escape our notice. Longtime readers of this blog who remember our tribute to Charlie Deal know that we've got a soft spot for the old Mill Valley. It appears that some of what made our home town great may be making a comeback. We say, welcome back!

Rate of Return

2010-03-31T22:08:00.001-07:00

We suppose there's a way to interpret this as something other than good news, but we sure can't think of one. Right now, low mortgage rates are just the thing to keep both buyers and sellers happy. Here's hoping...

Welcome to the Neigborhood

2010-03-21T07:50:00.000-07:00

We've been touting the evolving Divisidero corridor for a couple of year now. It may still be a bit gritty for some folks, but the neighborhood has vitality and genuine diversity more reminiscent of Brooklyn than the Mission district. From a real estate perspective, we think values already reflect the area's future more than its past. In other words, it's probably too late to bet on the come. But if your goal is to live in an exciting, vibrant, true urban neighborhood with decent weather and access to Golden Gate Park, you'd be hard pressed to do better. So the next time you're cursing the traffic as you travel from the Marina to Noe Valley, consider just parking the car and walking. You may be pleasantly surprised by what you find.

Taxing Situation

2010-03-15T13:59:00.001-07:00

Most people don't realize that there can be tax consequences to a short sale. Just when you think you've gotten out from under an unfortunate financial situation, you may find that you have a substantial tax bill. Today's Chron article spells out the pitfalls that may sellers are completely unaware of.

School of Thought

2010-03-10T15:03:00.000-08:00

If you aren't raising children in San Francisco, this story might not seem like a big deal. But if you or someone you know has young 'uns in Baghdad by the Bay, then you know that the public school selection process is one of the single most important issues in town.

What's the real estate connection? The school board's decision to grant partial neighborhood preference could well have some impact on property values for homes near the most desirable schools. Of course, if the board had granted full neighborhood preference, the impact would have been huge.

In Marin, schools are a driving force behind property values. In San Francisco, schools are often a driving force behind people moving to Marin. Will the board's decision stem this tide? Time will tell. Did the board's decision only serve to further segregate SF's public school or did they not go far enough? We'd love to hear readers' thoughts (real estate-related or otherwise) on this very divisive issue.

Helping or Hurting?

2010-03-08T10:54:00.000-08:00

Missed this one a few weeks ago, but it's worth a trip back in time. New appraisal guidelines are making it harder than ever to get financing for a home purchase. These days, anti-reform and anti-regulation stances are less popular than ever, but reform for reform's sake can backfire.

In our sphere, we've heard innumerable stories of local appraisals being done by out-of-area appraisers. (Mill Valley house, Sacramento appraiser. San Francisco condo, Morgan Hill appraiser.) We talk often about the importance of working with a Realtor who really understands a local market. Well, that wisdom gets severely compromised when an out-of-area appraiser can step in and blow up a transaction.

So is this a good thing or a bad thing? Are regulators protecting us from ourselves or are they preventing the market from recovering?

The Biggest Investment That Isn't

2010-03-08T10:12:00.000-08:00

Apropos of today's earlier post, we were thinking about the conventional wisdom that one's home is usually one's largest investment. In light of the number of people walking away from their "largest investment," it's worth asking...if a person buys a home with zero down and an interest-only loan (as was the case for more than a few buyers during the boom time), is it really an investment at all? The only thing the buyer is risking is his credit score. There's no judgement or political statement implied by the previous sentence. Just an observation meant to spark debate.

Who's At (De)Fault?

2010-03-08T08:49:00.000-08:00

An interesting article in today's Chron raises the questions about what happens when defaulting on debt no longer carries much of a stigma. Up to 25% of foreclosures are occurring because homeowners simply walked away from their home; something what was all but unthinkable for previous generations. For those with a talk radio viewpoint on this subject, the piece makes the notable point that it's not just individual homeowners who are walking away from financial obligations. Developers are abandoning multi-million dollar projects. And, of course, we all know about the Wall Street bailouts, which resulted from similarly reckless behavior, with consequences softened only by the government's golden trampoline. We'd be interested in hearing what readers think about everyone from homeowners to Wall Street brokerages getting into trouble from which they cannot recover. Has fiscal accountability become a national afterthought? And if so, is this a temporary phenomenon or a permanent shift in how Americans view debt and risk? Can the shame of being a welsher ever be recaptured? (I'm one quarter Welsh, so I think I can use that word.) Should it be?

Money Train

2010-02-19T15:44:00.001-08:00

Another update on the progress of the SMART train. In case you're wondering why we keep reporting on this story, we believe that the SMART train (whether it makes it to the station or not) will have a big impact on North Bay real estate.

Clean Bill of Health

2010-02-19T15:38:00.001-08:00

In possibly the least shocking news story of the year, Marin was recently ranked as as California's healthiest county. It's a very nice sustainably harvested feather in our organic hats. Laugh all you want, but these are the things that help real estate values. We plan to celebrate with a Double Double and a side of fries.

Rubber-necking Real Estate

2010-02-19T15:31:00.000-08:00

Sometimes it's hard not to look. If you're curious to know more about foreclosures in Marin, check out the IJ's forclosure database. Please note, however, that while this information is public, it's also personal. Let decency prevail. You should also know that many home listed as "in the foreclosure process," will never become bank-owned. These days, most people attempting to do loan modifications are being advised to go into default on their mortgages. This starts the foreclosure process. In many of these cases, the lenders will modify the loan before the house is reposessed and the owners will remain in possession.

What's Your Point?

2010-02-15T11:43:00.000-08:00

In today's Chron, various parties weigh in on what will happen to mortgage rates in the coming months. Of course, to borrow from William Goldman, "Nobody knows anything." Nevertheless, speculation that rates could jump as much as a full point should give some pause to anyone with a stake in real estate. Higher rates usually mean falling values. With apologies to Mr. Goldman, one thing we do know is it's going to be a very interesting year in real estate.

Posted by Jess Pearson

Rising Tide?

2010-02-11T15:00:00.000-08:00

If a rising tide lifts all ships, then what do rising interest rates do? Unless, like us, you assiduously avoid television news and talk radio, you've already heard about Fed Chairman Bernanke's comments regarding eventual and inevitable increases in interest rates. Here's the article about it in the Times. When rates go up, lots of things will happen; some bad and some good and all depending one your point of view. But they won't all happen at once and they won't all happen right away. One thing we think we can say with relative confidence...if you're thinking about buying and you plan to hold on to your investment for a good long while, this might be the time to act. Conforming loan rates are under 5%. Even if prices fall, higher rates will mean higher cost of ownership over the long haul. Unless you're a cash buyer, you may look back on Q1 of 2010 as that rare moment when prices and interest rates were both low.

Orange You Glad I Didn't Say "Termite?"

2010-02-10T21:04:00.000-08:00

Some of you know that we're huge fans of the San Francisco Giants. If you're like us, you love to listen to their games on the radio. And if you listen, then you know that the Giants' flagship station, KNBR, runs a lot of ads for orange oil termite treatment. We've heard mixed reviews about orange oil, so we were happy to see a little Q&A in the Chron this week. We can't promise that this is totally accurate (it is the Chron, after all), but at least now you know more than you did before (or ever wanted to?) about orange oil.

Default Setting

2010-02-04T16:46:00.000-08:00

Marin IJ or SF Chron: two sources for the same info. Notices of default were down last quarter, but we're not ready to draw any conclusions yet. There are too many forces at play in the marketplace right now to say whether a trend can sustain.

More on the SMART Train

2010-02-04T16:40:00.000-08:00

The IJ had another update on the SMART train. Looks like a modified route is a possiblility. From where we sit, it's hard to get behind any option that doesn't include a connection at the Larkspur Ferry Terminal. How do other North Bay residents feel?

Slow Train Coming?

2010-02-03T09:11:00.000-08:00

For those who missed it, here's an update on the SMART Train that will connect Marin and Sonoma Counties.

Posted by Jess Pearson

ARM and a Leg

2009-09-22T11:38:00.001-07:00

If you visit us regularly, you know about adjustable rate mortgages; the pros and the cons. You may not, however, know about Option ARMs. This clever lending product is what made it possible for many not-so-wealthy people to afford very expensive homes in the Bay Area. In a nutshell, Option ARMs offer different payment options. The first option is a "full" payment of interest and principal. Option two is an interest-only payment. Option three is some amount less than the monthly accruing interest; a negative amortization payment.

Option three has the potential for big problems.

When you aren't paying even the total interest on your loan, you better hope your home's value is going up. Otherwise, you have no chance to build equity. For the last 2-3 years, as California home values have fallen, borrowers choosing option three have been falling farther and farther behind. Many are now well "upside-down" on their homes.

And that's not the scariest part. Like all ARMs, Option ARMs have lower initial rates. After a few years (usually three or five), the rates re-set. This means that all three payment options can go up. Borrowers who could only afford the negative amortization payment find themselves struggling to pay even that amount. And guess that happens?

Default. And guess what follows default?

Foreclosure.

Read this article from the Chron for some stats. To us, the scariest number is not the 50,000 or so Option ARMs floating around the Bay Area. No. It's the 94% of borrowers who've been making the minimum payment.

It will be interesting to see if another wave of foreclosures is on the horizon.

Whoa Nellie!

2009-08-26T10:41:00.001-07:00

For a more national perspective on the housing market, take a look at these two quick-hitters from the Times. The first one indicates what we feel is a disturbing trend. New homes sales are up and so are housing starts. Given the not-soon-be-over foreclosure crisis, it's distressing to think that developers are starting to build new homes when so many existing homes will soon be flooding the market at already discounted prices. The second op-ed piece dovetails nicely with the first, noting that a look at the supply side of the housing equation casts doubt on whether recent home price inceases will last.

New Wave

2009-08-25T15:26:00.000-07:00

If you've talked to us recently, you've heard us say that we're not out of this mess yet. The shadow inventory of bank-owned properties yet to be released to the market, and mortgage delinquencies that will result in additional waves of foreclosures are harbingers of further erosion in statewide real estate values. As usual, our local neighborhoods appear to be in better shape than most, but the damage is wide spread. Today's Chron spells out the ugly truth. The market will continue to be friendly to buyers for the foreseeable future. And if your were thinking of selling but thought you'd be better off waiting a year until things pick up, you may want to rethink that strategy.

It's Heeeeere!

2009-08-11T11:21:00.000-07:00

We've been saying it for a few months. SF and Marin ran, but they couldn't hide. How long will it last, maybe not as long as feared. Read today's Chron article for details.

On My Soap Box

2009-07-31T14:14:00.000-07:00

Ordinarily I try not to choose sides in the mortgage crisis debate. Was it caused by irresponsible borrowers, unscrupulous lenders, greedy investors? Short answer, yes. There's more than enough blame to go around.

But when I read an article in the Times yesterday morning about mortgage service companies dragging their feet on loan modifications because they can make more money from delinquencies and foreclosures...well, my stomach turned.

As many of you know, many home loans are owned by investors, but serviced by mortgage servicing companies. These companies collect and disburse payments and, among other things, notify borrowers who are in default. They also are responsible for negotiating loan modifications and/or short sales for borrowers in distress. While the new Obama administration plan offers financial incentives for mortgage service companies to modify loans for borrowers in distress, the Times article reveals that they can make far more money by allowing borrowers to languish in default.

We happen to know people who are working to get their loans modified. While these people are not clients of ours, they have sought our advice as friends and professionals. I have been amazed (though not surprised) by the challenges they've faced. It is all but impossible even to get a mortgage service representative on the phone. I chalked this up to gross understaffing are mortgage service companies coupled with the backlog of borrowers seeking relief. It appears that the reasons may be far more insidious.

Put On Notice

2009-07-23T13:47:00.000-07:00

The Dow cracked 9000 today. Ford turned a quarterly profit. Home resales were up 3.6%. All good news, right? Yes. But...

The broader economy my be starting to recover, but there are some troubling signs that our local real estate market may still have a way to go.

Specifically, Marin and San Francisco, which have had lower foreclosure rates than almost all other counties in the state, may not be immune much longer. An article in today's Chronicle indicates that Notices of Default (the firstpart of the foreclosure process) are up 30%-40% in San Francisco and Marin. This is a distressing sign.

It's Worth What?!?

2009-07-06T10:28:00.000-07:00

If you're buying, selling, or refinancing a home right now, your biggest problem may be one you've never even considered. Admittedly, appraisers were playing a little fast and loose over the past few years. We've all heard the stories. But now a disturbing emerging trend may prove to be a major over-correction. Check out this article from Sunday's Chron. While it's reasonable to ask for stricter controls in the appraisal process, common sense tell us that having someone from Modesto determine the value of your house in Larkspur just doesn't add up.

Jumbo News

2009-07-06T10:13:00.000-07:00

Believe it or not, some people still want to buy million dollar properties. Until recently, however, these visionaries have had trouble getting the financing they need. That appears to be changing. This is potentially very good news for all of us. In SF and Marin, stability in the upper end of the market may help firm up other price points. Just as the skyrocketing prices of 2001-2006 were not healthy or sustainable over the long term, today's fast-falling values, particularly in the lower end of the market, are not a true measure of long term value.

Buy Local

2009-06-15T15:49:00.000-07:00

Nice article in the Marin IJ on the importance of thinking locally when evaluating a real estate market. We couldn't say it better ourselves.

This American Crisis

2009-02-23T13:42:00.000-08:00

Last year, "This American Life," the loved-or-hated NPR show, took an in-depth look at the forces that created the mortgage crisis. Even if you are pretty certain you know what caused it all, you owe it to yourself to download the podcast or the transcript. I promise you'll learn something.

Map Makers

2009-02-03T20:33:00.000-08:00

Check out the map published this day at SFGate.com. The accompanying article is worth a read, too. Bear in mind that the data comes from Zillow, which is not always the most reliable source. But in this case, since they're drawing on actual past sales figures, rather than trying to predict possible future value, we're inclined to think it's pretty accurate.

The bad news? The Bay Area real estate market is in bad shape. The good news? Marin and San Francisco are in better shape than almost anywhere else. This accounts, in part, for an odd phenomenon we're seeing lately. Namely, a larger-than-usual disconnect between buyers and sellers. Buyers, even in Marin and SF, seem to think that every seller is desperate and eager to sell. Thus, they're tending to write really (often unreasonably) low offers. Meanwhile, sellers, especially in Marin and SF, are not in particularly dire straights and are disinclined to sell for below what they believe their house is worth.

The result is something that we've been talking about for years. In "destination" markets, like Marin and San Francisco, we historically see large swings in the number of units that sell during a given time period, while the median price remains flat or even increases. Why? Because people simply don't sell if they can't get what they think their house is worth. This limits the inventory on the market and helps stabilize prices.

Unfortunately, there are many other markets where sellers have no choice but to sell (or banks have foreclosed and are selling for dimes on the dollar). In these cases, inventory outpaces demand and prices fall dramatically.

There's no guarantee that Marin and SF will continue to perform so well. This crisis may be without historical precedent. But based on the past 30+ years of sales data (we checked), chances are we should be alright.

That New Construction Smell

2009-01-14T19:22:00.000-08:00

We're linking to this sfgate.com article not because we think any of our clients and friends have interest in Cubix (we'd talk you out of it in a nanosecond), but because it speaks to a broader trend in the world of new construction condos in the City.

There are great deals to be made on new condos right now, but you need help to get them. If you have any interest, contact us before you visit a sales office. If you go without an agent, you'll have to work with the sales agent who's employed by the developer. Sound like a good idea? We didn't think so.

Not only are prices negotiable, but upgrades and HOA dues may be thrown in, if you know how to ask. Let us know if you'd like to learn more.

Rate Cuts and Bold Predictions

2008-12-19T10:31:00.000-08:00

We’ve tried to keep an even keel during the past three months of roller coaster (if roller coasters went almost exclusively downhill) news stories. In fact, dating back to the first hints of the lending crisis back in September of 2007 (check our archives), we’ve tried not to overreact to bad news or trumpet promising moves by the Fed. It’s just too easy (not to mention, false) to extrapolate a single economic event and assume some kind of global impact on the market. There are too many factors playing out for that to be the case.

However, this week’s rate cut may be the exception to all of this. We’re not saying that it’s going to save the real estate market, let alone the economy. But a few years from now, when we look back on when the turnaround began, we may recall December, 2008.

To be sure, the lower rates are not going to save the houses (or owners) currently in foreclosure. They are not going to jump start housing starts. But what they will do is save some real people real money. They may not spend it right away. There are too many other scary things on the economic horizon. (The rash of recent layoffs hasn’t even shown up in unemployment reports yet. Welcome to Washington, Mr. Obama. Would you like some double digit unemployment numbers with your new presidency?) But some homeowners will feel safer. They’ll feel like their houses are worth more simply because it’s costing them less to own them. They’ll have more money at the end of the month. And this time they’ll save it instead of buying a new SUV. And then they might even start see their bank balances rise.

Since it’s still tougher to qualify for mortgage, these rate cuts will primarily benefit people who can now refinance. Yes, there will be a few more buyers out there, too, which is always good. But just as importantly, the cut will allow people who might have needed to sell, to stay in their homes a little longer. Baby boomers might wait another couple years to cash-out, now that their house payments are lower. (And they can leave money in securities markets while they recover, partially stemming the tide of sell-offs.) People whose mortgage payments were making them house poor can now stay put. Instead of frowning over the declining value of their homes, people will smile at the lower number on their monthly mortgage statement. In short, homeownership will feel good again. It may sound trite, but that’s half the battle.

So the upshot will be that resale housing inventory will finally drop sometime later this year, especially as the speculators finish snapping up the foreclosures. And demand will tick up slightly among those who can qualify for loans. We’ll have lower supply and higher demand. Not much of either, but enough. Just watch. Come the third or fourth quarter of 2009, you’ll see headlines exactly the opposite of the ones you’ve been seeing. They’ll say things like, “Housing Sales Drop as Prices Stay Flat” and then, “Resales Continue Decline as Median Price Rises for First Time in 18 Months” and finally, in early 2010, “Median Price Rises for Second Month in a Row: Sales Stabilize.” And when you wonder what finally caused the market to start its long slow recovery, think back to December, 2008. These rate cuts won’t be the only reason, but they may be the first one.

Is this too rosy an outlook? Maybe. Are we trained economists who have real insight into market matters? No. But do we understand the psychology of buyers and sellers of residential real estate? Absolutely.

So we’ve made our bold prediction. Now we get to see who gets to say I told you so.

Inner Circle

2008-12-14T20:00:00.000-08:00

It was hard to miss the article on the front page of today's Chron. Bad news for sellers of SF real estate (and good news for buyers, of course).
Those of you who read our snail mail newsletter may recall the piece I mused about the two models of a boom and bust market. We called the second model "The Pebble in the Pond." Here's what we wrote:
"This requires some visualization. Imagine tossing a stone into a pool of still water. The rings or ripples created by the stone get larger as they get farther away from the point of impact. In this model, the point where the stone meets the water represents San Francisco and Marin (or New York, Boston, Seattle, or any other market that’s performing better than average). The concentric rings are the outlying communities. The smaller rings are, perhaps, Albany, San Carlos, or Petaluma. Larger rings represent Tracy, Morgan Hill, or Santa Rosa. Do you have the picture in your mind? Okay, here’s where the real estate part comes in.

According to this theory, when the market starts booming, the first signs of strength will be in the regional center (i.e. San Francisco and Southern Marin). As buyers get priced out of these markets, they will look to the next concentric ring, or the next, or the next, and so on. In time, the boom market affects the whole region. Then the bust comes…

But the bust follows the reverse pattern. The outermost rings will feel it first. Just as we’ve seen now, outlying communities (especially those that thrived on new construction) see property values fall and foreclosures rise. Slowly, the chill moves to the smaller, inner rings and soon all but the markets in the middle are feeling the cold. And, brace yourself, those of us at the center are the last to experience the bust. But we will feel it. Possibly even as the outer rings are starting to stabilize. If this model is “correct”, we may be tricked into thinking that we’ve avoided the bust altogether, but it’s only a matter of time. And our time may be here soon."

Or it may be here now.

Get What You Pay For?

2008-12-01T12:38:00.000-08:00

This morning's Chron features an article about Bay Area homes listed for under $100,000. Thankfully, the article points out that many of these homes will bring headaches to equal the money saved. In truth, buying a home in the greater Bay Area for around $100,000 is probably a pretty smart play, but please talk to us about the pitfalls before you start writing offers. And assuming you don't plan to live in the house, expect to pony up at least 30% down for any non-owner-occupied property these days.

Speaking of financing, our local rag also has a useful article about the current mortgage lending climate. This is a nice reality check. In short, lenders are lending. When you're hearing that it's hard to get a loan, that's primarily a reference to the past few years when nearly anyone could get a home loan. All that's really happened is that lenders have returned to responsible lending practices. What a concept!

Zip Code Red

2008-11-09T00:05:00.000-08:00

An interesting SF Chron article on local market changes in the Bay Area, by zip code. Near the bottom, you'll find a link to a database of changes in median prices for specific neighborhoods.

A Higher Authority

2008-10-27T21:48:00.000-07:00

A fairly grim article from the Wall Street Journal. Not a lot a new news here, assuming you've been reading our posts for the past few months, but we found it useful to see a national authority like the Journal essentially echoing what we've been saying about our region. Enjoy (if possible).

Ups and Downs

2008-10-23T20:35:00.000-07:00

Remember back on August 19 when we tooted our own horn about predicting the next move in the broader real estate market? For months we'd been telling you that home sales would spike dramatically when prices got low enough and foreclosure rate rose high enough. It started back in August and it's only continuing as we near year end. Our belief is that this buying up of bargain property is the first necessary move toward the stabilization and slow recovery of the State's real estate market. The inventory is being appropriately reduced. When supply gets low enough, prices will flatten out. It will take time, but we believe we are sowing the seeds of recovery.

Moving On Up

2008-10-23T19:58:00.000-07:00

Are you on the move? Good news. Next Generation is now a sponsor with One Simple Move™. Our clients can now register with this exceedingly helpful website and get valuable help, resources, and coupons to assist with their move. One Simple Move™ offers free move planning guides, checklists, and move coordination services. If you or anyone you know is planning a move, we urge you to take advantage of this service. It's free, courtesy of Next Generation Real Estate. There will be a permanent link in the link list on the right of this page. Register today and get immediate help with your next move.

ARM And (Not) A Leg

2008-10-21T12:15:00.000-07:00

Adjustible rate mortgages have largely fallen out of favor these days. Blamed for the mortgage crisis and, by extension, the financial crisis, ARMs are suddenly viewed as risky propositions. This after years of popularity. Indeed, ARMs are the reason many people were able to be come homeowners in the first place.

These mortgages continue to make sense for a lot of people. If you're thinking about buying or refi-ing, don't rule them out automatically. This Times article (courtesy of SFGate.com) give a measured evaluation of the benefits of this loan propduct.

Have Basis, Will Travel

2008-10-20T21:59:00.000-07:00

A client of ours recently took advantage of Prop 60 to carry his old property tax basis over to his new home. In brief, we listed his house in Mill Valley in 2006. It sold for over $1,000,000. His tax basis, however, was calculated from when he bought the house for $150,000 in 1985. He wanted to buy a new condo and bring his old tax basis forward. With some nifty and nimble work, we were able to close on his new home within three weeks, exactly two years to the day after we closed on his old one. Two years is exactly how long homeowners over 55 years of age have before losing their Prop 60 exemption. The result? Our client will save over $10,000 a year in property taxes for as long as he owns his new condo. That makes retirement far more realistic for many.

Want to know more about Prop 60 or its sister law, Prop 90? There are permanent links on the right side of this page. Or just click here.

Silver Lining?

2008-10-20T21:54:00.001-07:00

Let's face it. It's been ugly. While regular readers know that we're hardly afriad to post bad news in this space, it's our feeling that anyone who thinks they know where or when the current troubles will end is kidding themselves (and us). All we know for sure is that, as we've always said, the longterm outlook is the only one worth looking at. Investment. Not speculation.

Of course, a little good news is always welcome, even if it's in the form of not-so-bad news about our local economy.

New Listing

2008-09-23T22:00:00.000-07:00

Take a moment to check out a new listing. We have this property co-listed with another agent from Pacific Union to maximize exposure.

Call If You Need An Agent

2008-08-28T07:45:00.000-07:00

The St. Regis is probably our favorite of the newer, luxury condo high rises. We think it compares favorably to the Ritz Carlton Residence and the Four Seasons, in aesthetic, amenities and location. The under-construction Millennium Tower will but nice as well, be it will also be next to the bus station. Not that we wouldn't be happy is someone offered us a unit in any one of them.

We've had clients look at several units in all three finished properties, so if you happen to have interest in the latest listing at the St. Regis, don't hesitate to get in touch. With some patience and our negotiating skills, we think we can get it for $10-$20 million under the asking price.

It's a Two-fer

2008-08-19T19:07:00.000-07:00

Two interesting articles in the Chron today. The first reports plummeting Bay Area home prices and increased home sales. Regular visitors to this (cyber)space know what's going on here. Bottom feeding on short sales and REOs is pulling the median price lower, while the proliferation of those same types of sales accounts for an increase in total units sold. Some may remember that at the beginning of the market decline, the opposite conditions were present, as still-strong upper-end sales pulled the median price up, as a steep decline in sales at the lower end caused a drop in total units. It appears the lower end has finally gotten low enough to begin a reversal of the trend.

The second article, somewhat apropos of that last point, reports that the number of people who can afford a home in California is up dramatcally. They may not be buying yet, but this trend would seem to bode well for the market's overall recovery.

Twin Markets

2008-08-17T20:13:00.000-07:00

There was a classic buried lead in an article in today’s Chronicle real estate section. The article is about challenges currently facing real estate appraisers. About half way down, you’ll see a brief bit about how short sales and foreclosures are affecting appraisals. It isn’t much, but we found this section particularly interesting.

An appraisal, after all, is really only one person’s opinion of value. Nevertheless, lenders rely heavily on appraisals to determine the “market value” of a particular property on which they may loan money. It comes as no surprise then, that in a declining market, the appraisal is the sticky wicket that causes many real estate transactions to fall apart.

A quick overview of this process: Mr. Buyer agrees to buy 123 Main Street from Mr. Seller for $1,000,000. Mr. Buyer plans to borrow 80% of the funds necessarily to buy the property. He goes to a lender and fills out a loan application. Based on his credit score and income verification, the lender agrees to lend Mr. Buyer 80% of the property’s value. The lender sends an appraiser out to the property to determine the market value. Said appraiser reports that the current market value of the property is $900,000. The lender may very well be willing, as promised, to lend Mr. Buyer $720,000, which is 80% of the property’s newly determined market value. The problem, of course, is that Mr. Buyer needs to borrow $800,000 to buy the property at the agreed upon purchase price. Now, if Mr. Buyer was working with us, we would have advised him to have an appraisal contingency, which would allow him to walk away from this transaction right here and now. If not, Mr. Buyer might well have to find $80,000 to make up the difference between what the lender will loan and what he agreed to pay. Without an appraisal contingency, Mr. Buyer could well be in default if he does not buy the property, thereby putting his deposit at risk.

But here’s the thing. The fact that appraisals are coming up short is not exactly shocking to anyone who has been following the real estate market for the past 18 months. Which brings us back to our buried lead.

Drive 45 minutes away from San Francisco in nearly any direction and you will find communities in which upwards of 50% of the homes for sale are either short sales or foreclosures. The other 50% of listings are, of course, owned by ordinary people who have equity in their homes and are selling for “normal” reasons (job transfers, kids moved away, retirement, moving up, downsizing, etc.).

Regular readers know that we often harp on the importance of looking at a specific market to determine what a property is worth or which way its value is moving. Real estate is a local business. Examining national, state, or even regional trends is often a waste of time. But what do we do when two distinct markets emerge within a single location? How do we determine value when, even within the smallest of communities, two marketplaces exist? We’re only just learning the answers.

To help find those answers, it’s worth looking at a textbook definition of market value. Literally. We went back and looked at an old real estate textbook to shed some light on the subject. We must allow for five key elements to determine if a property is selling for market value:
1. Neither buyer nor seller is acting under duress.
2. The real estate has been on the market for a reasonable length of time for a property of its type.
3. Both buyer and seller are acting with full knowledge of the property’s assets and defects.
4. No unusual circumstances exist, such as a sale involving related parties.
5. The price represents the normal consideration for the property sold, unaffected by creative financing or sales concessions granted by anyone associated with the sale.

In a short sale, 1, 4, and 5 are arguably not present. At a minimum, the seller is acting under duress (1) and the lien holder is granting concessions to facilitate the sale (5). In a foreclosure sale, the lender, who is also the seller, has probably never seen the property and has no knowledge of the property’s assets and defects (3).

Clearly, short sales and foreclosures sales do not meet the definition of “fair market value.” So what do you do if you want to sell your house and the house three doors down sold six months ago in a foreclosure sale? It is unlikely that the neighbor’s house sold for fair market value. Nevertheless, that sale will be used to determine the value of your house.

This is the challenge facing everyone in the residential real estate world right now: appraisers, lenders, buyers, sellers, and Realtors. And that’s why it’s essential to work with a Realtor who is aware of these factors and uses them in advising you on your decisions.

Interesting times, these.

Model Home

2008-08-14T15:51:00.000-07:00

Pleeeeeeease read the excellent Times article examining various economic models for determining when the housing market will hit bottom. Fascinating stuff. One model, at least, says SF is still 1% undervalued. Perhaps most interestingly, each model the article discusses seems to make good sense, which, to us, means the best advice is, “Anybody who says they know when it’s going to end with confidence is delusional.” But we've got to close, right?

Marin Takes The Rest Of The Country To School

2008-08-08T12:53:00.000-07:00

Ever wonder why people pay so much to live in Marin County? There are plenty of reasons. Too many to list here. One of the biggest is the public school system. But are you getting your money's worth? As it turns out, yes! And then some.

A recent article in Forbes examined "per-pupil spending in public schools and weighed it against student performance--college entrance exam scores (SAT or ACT, depending on which is more common in the state), exam participation rates and graduation rates." Guess which schools ranked highest. If you guessed Marin, you're right. (Maybe you went to school there, too, smartypants.)

What's Done Is (Not Quite) Done

2008-08-08T12:09:00.000-07:00

Check out this update on the SF Planning Commission's approval the the rezoning of the City's eastern neighborhoods.

The City's Changing Landscape

2008-08-07T14:02:00.000-07:00

Have you ever been to Dogpatch? Ever heard of it? It's the super hip neighborhood along San Francisco's Central Waterfront. Due to its relative isolation and not-always-glorious past, this gem of a district is unknown to even many longtime locals. That may be about to change.

The SF Planning Commission today is likely to approval a plan that may forever change the face of the City's eastern coridor. UCSF and Biotech development in the area has shined a spotlight on the area. (And of course yours truly was married there.) But this new plan stands to bring thousands of new residents to neighborhoods that have not always been thought of as residential. Read more about the proposed changes in this Chronicle article.

Welcome Home

2008-07-30T08:29:00.000-07:00

We managed to take a brief summer respite at Stinson Beach. Then we came back to this. Welcome home, indeed!

REO Speedwagon

2008-07-09T15:15:00.000-07:00

Everyone seems to be interested in forclosures these days. Real Estate Owned (REO) listings are everywhere and everyone wants to cash in. Not surprisingly, it's not as easy to get into this market as it might appear. This article in today's SF Chron spells out some of the pitfalls.

For Better or Worse

2008-07-03T10:45:00.000-07:00

After a blogging sabbatical, we're back with an interesting article from today's SF Chron.

One of the reasons it's so difficult to tell where the market is going right now is that lenders don't seem certain what's in their best interest. Many are willing to work with struggling homeowners to keep them in their homes. Others "are really convinced that a repayment or modification is not in their best interest; that a foreclosure may be a better thing."

Stay tuned...

Golden Handcuffs

2008-06-06T11:10:00.000-07:00

Today's Prop 13 article in the SF Chron is not to be missed. It's easy to forget the history of this proposition or to underestimate its signifcance. When you read the aritcle, you'll realize or remember that Prop 13 changed not only the way we pay property tax, but also the way Californian's view taxes and government in general. Moreover, ask any veteran educator in the state and they'll tell you that no single event in California history has had more impact on public (and by extension, private) education than the passage or Prop 13.

Upside down

2008-05-20T21:33:00.000-07:00

Sales were up in April! The recovery is on! Be the first to buy in to a down market and make a fortune in real estate speculation! Uhm...not so fast.

Actually, we think this is a good time to buy, but don't make too much of the recent month-over-month increase in sales. The recovery may be starting, but it won't be measured month-by-month. We suggest tracking real estate investments year-over-year. Remember, the word is "investment," not "speculation."

If you decide to wade into these still-troubled waters, call us. There are bargains to be found out there, like no other time in the past seven years. We're tracking properties that we think have good investment potential. But you have to be selective. And patient.

"Off to the Principal's Office You Go"

2008-05-19T13:06:00.000-07:00

Whether you're genuinely interested in school performance records or just looking for a way to waste time at work, you're bound to enjoy this handy tool. Wondering about your kid's school or maybe about the district you're thinking of moving to? Now you can find out the rate of school suspensions (and the reasons!) for every public school in California. Happy snooping.

Bottom Feeding?

2008-05-14T16:09:00.000-07:00

We get asked almost daily whether the market has hit bottom. No one knows for sure, but we've been saying that, barring a major change in mortgage rates or an economic sea change (election year, anyone?), we think our feet will touch the bottom, so to speak, sometime between now and Q4, 2008. Well, one economist thinks we've hit the bottom already. Check out this WSJ article for a very interesting take on the market. Whether he's right, we cannot say for sure, but we definitely agree with his secondary point: the rebound will be slower (and hopefully more sustainable) than the boom.

Talkin' 'bout Mill Valley

2008-05-14T15:57:00.000-07:00

A former client and friend sent this our way. We couldn't resist linking to it. For those clients who always look at us funny when we talk about how much things have changed in Marin, here's proof.

Duration, Duration, Duration

2008-05-14T15:52:00.000-07:00

A belated post here. Some of you probably saw Kathleen Pender's piece in the Chron last week. We second just about everything she writes in there. Tons of good information. First time home buyers, in particular, would be wise to read and remember.

Getting Foreclosure

2008-04-22T22:09:00.000-07:00

This article says it all about the state's real estate market. In short, we've never seen anything like this before. Silver lining? Marin and San Francisco have the lowest and third lowest rates of foreclosure of all California counties. Opportunity? As we've been saying for a while, Sonoma County seems like a market that went from overvalued to undervalued very quickly. What's next? Our best guess is another few quarters of scary statistics before a blessedly slow and and steady recovery. We suspect that those who have the moxie to buy in 2008 will eventually be very glad they did. Stay tuned...

Fireside Chat

2008-04-21T11:11:00.000-07:00

As a Mill Valley native, I am often asked by clients, Marin newcomers, or visitors from SF about the rundown, old, white brick building at the doorstep of my hometown. Many people remember the Fireside Motel, which sat behind the white brick building and welcomed people exiting Highway 101, headed toward Stinson Beach or Muir Woods. Still others once enjoyed a cold beer at the decidedly funky El Rebozo, the last business to occupy the white brick building. (Both establishments had reputations for allowing a little more fun that the local laws allowed.) These establishments were part of the Southern Marin landscape for a long time. Old timers might also remember The Brothers Tavern, Varney's Hardware, La Veranda, Dowd's Bard, and the Unknown Museum in the same breath. But I learned something new about one of Mill Valley's landmarks in this SF Chron article. If you've ever driven into Mill Valley and wondered about that rundown old building on the side of the road, you might enjoy the read.

Varney's Hardware closed in 1988

The fire that destroyed Dowd's and La Veranda in 1984

An "exhibit" at the unknown museum

Feeling So Loan-ly

2008-04-12T22:26:00.000-07:00

Remember the heralded economic stimulus package that was supposed to bring relief to the lending markets and increased conforming loan limits? Well, it hasn't quite worked as planned. Check out this article from the SF Chronicle. It spells out what borrowers are facing these days. Bottom line? Loans are still being made, but without high income, great credit, and a big down payment, many borrowers are finding the pickin's awfully slim.

Property Tax Reductions

2008-04-02T22:19:00.001-07:00

Fortunately, most of our clients, or more accurately, their properties, in Marin and San Francisco have weathered the real estate downturn well. In other areas, however, people who bought in recent years may find that their property has declined in value. Sometimes significantly. Oddly enough, when these folks get their property tax bill, they usually find that the assessed value of their home has not been reduced in kind. Fortunately, there is a rememdy. This helpful SF Chronicle article explains how to get a temporary reduction in the assessed value of your property. Share this with anyone you know who ought to take advantage of this opportunity.

TIC-Talk

2008-03-17T08:11:00.000-07:00

Another SF-centric post (sorry, Marinites). This time we focus on TICs; that mysterious property type that's not quite condo, not quite co-op, and completely confusing. (In truth TICs, or something like them, are popping up in other areas as well, but they are still primarily an esseff phenomenon.) This article does a good job of spelling out the facts, history, and controversy surrounding TICs.

One important corrective comment: very few newly forming TIC groups have a single loan any more. The vast majority now have fractional financing, a fact the article doesn't address until well "below the fold," and one that has, in our opinion, assured the long term viability of TIC ownership. In this sense, the New York co-op analogy isn't far off. In most places, buyers (and lenders) have understandable hesitation when it comes to co-ops. In New York, they exist right along side condos as a perfectly normal form of home ownership. We suspect that in another three to five years, TICs will have reached similar status in SF, if they haven't already. We also think we know what else needs to happen to speed this process, but that's a longer discussion. (Call for details!)

If you're considering TIC ownership, please call us. We like TICs . Heck, we own one! We just want our clients to have all the information before they buy.

For even more TIC talk, check out the link list at the right of the page. You'll find links to Andy Sirkin's (TIC guru and attorney) website, as well as to the SF.gov condo conversion page. Enjoy.

Now that's an article!

2008-03-10T16:29:00.000-07:00

We've complained a few times in this space about newspaper articles that don't tell the whole story or try to tell the whole story based on half the information. We understand. They have to sell papers. And histrionics and hyperbole sell papers.
Since we've been critical in the past, we thought we ought to point out an article that deserves praise. James Temple's piece in the Sunday Chron did a terrific job of digging deep into a specific market; namely newer construction in South Beach/Soma/Rincon Hill. Temple is the new real estate writer at the Chronicle and, despite a couple of hiccups that we're choosing to blame on the editors, he does a consistently good job. This article acknowledges that the dynamics of this market are unique to the market itself; not determined by forces in Washington, Wall Street, or Sacramento. Moreover, Temple does a great job of informing interested readers about what's really going on in a part of the City that captured the interest of many local residents.
Give it a read. Whether you're curious to see who's moving into this area or what the future hold for their home values, we think you'll get a good look.

FH-What?

2008-03-06T12:23:00.000-08:00

When you take classes to get or maintain your real estate license in California, the textbooks have a section on financing. There are many pages devoted to something called FHA (Federal Housing Administration) Loans. Until now, these loans were so rare in our state, that most of these classes glossed right over that section of the book. Why worry about something that's never going to come up? Here's why. FHA Loans are actually an exceptional way for less qualified borrowers to buy homes. (Better than, say, sub-prime lending practices, eh?) And in most of the country, they've long been a popular way to enter the real estate market. The problem was, the limits for FHA loans have remained low as California real estate values have skyrocketed. That's finally changing (though perhaps temporarily) and we at Next Generation Real Estate think that's a good thing.

Where Did It Go?

2008-02-17T10:00:00.000-08:00

A few people have asked what happened to the piece I wrote about the passing of Charlie Deal. Still others missed the link to the SF Magazine article about private schools. Click the links above to see them both. In the future, you can always click "older posts" at the bottom of the blog page for a quick trip back in time.

More on Conforming vs. Jumbo Loans

2008-02-17T09:39:00.001-08:00

This article from today's Chron spells out what is likely happen to mortgage rates as a result of the economic stimulus bill. In a nutshell? It may be a while before the new conforming loan limits result in more affordable loans. But it will happen.

However, the piece notes, "waiting is not without risk. Mortgage rates are pretty low right now. If they shoot up in the next month or two, you could lose whatever advantage you might get from holding out for a conforming loan. There's also a chance lenders will continue to tighten their credit requirements so much that you no longer qualify for a loan. And once the new loans come out, you will probably have to get in line with lots of other eager borrowers." There have been some rumblings that the Fed's recent lowering of the shorterm interest rates may actually drive long term rates (i.e. mortgage rates) up. If this happens, it's possible that the new comforming rate will be the same as the existing jumbo rates.

Stay tuned.

Economic Stimulus and Conforming Loan Limits

2008-02-16T15:34:00.000-08:00

Everyone wants to know how the new economic stimulus bill will impact mortgage rates, specifically when we will see the results of the new conforming loan limits. Here what the loan brokers at Union Trust (a Pacific Union affiliate) have to say:

"The bill includes higher conforming loan limits through December 31, 2008. There are still many details to be worked out so it is doubtful if any lenders are going to jump right in until more guidance is issued by HUD. We are expecting that the earliest this will realistically affect loans funding will be in the May-June timeframe (and that is only an educated guess based on how slowly things in politics work). Keep in mind the the new limits will apply to 30 year and 15 year fixed rate, fully amortizing (sorry, no interest only), and owner-occupied. ARMs are being considered, but if allowed, the increase will likely apply to one ARM type (for example, 5/1's).

"Who will likely benefit?
Someone that has a loan amount up to $729,750 and wants a 30 Year Fixed mortgage. A note of caution is that we are uncertain what the final interest rate and closing costs will be since we can safely assume that FNMA and FHLMC will charge higher fees to compensate for the higher risk.
Today the best conforming interest rate, for someone with 720+ credit score and full documentation, is 6% with no points and 5.75% with 1 point. The market continues to be concerned about the inflationary results of the FED's lowering of their overnight rate and if the concerns continues, we will see the conforming interest rate increase.

"The "hot" loan program today is a 5/1 Interest Only Jumbo loan at 5.5-5.625% or a 10/1 Interest Only at 6%. AND these rates and loan programs are available now!"

Now you know what we know.

Median Prices Up. Here's Why.

2008-02-16T15:16:00.000-08:00

Two things to know about this article from today's Chron...1) It tells you everything you need to know about why the median price of SF and Marin real estate continues to rise despite dropping unit sales, and 2) James Temple, the writer of this article, is the same guy who wrote Friday's doom and gloom piece that we we linked to in our previous post.

It's this second point that illuminates our running pleas not to read too much into what you see in the newspaper. On consecutive days, the Chron's lead real estate article informed readers, first, that the market is at a 20-year low, and second, that "people are willing to pay ever higher prices for luxury Bay Area real estate." While both things are technically true, we feel that this kind of reporting makes it very difficult for owners, buyers, and sellers of Bay Area real estate to form an accurate opinion of the strength of the market. As ever, we merely wish that the papers focused more on the bigger picture and the longterm view than on headline-grabbing or heartstring-tugging case studies.

Brentwood, Anyone?

2008-02-16T07:18:00.000-08:00

If you read yesterday's Chron, you saw the article, but we'd be remiss if we didn't call it to your attention. Another in a series of very gloomy reports on the regional housing market. Once again, Marin and SF sales are down (along with every other county) and once again the median price for both areas is up. Haven't we read this before? Call us Pollyanna if you wish, but we still say that this all adds up to a rare opportunity for buyers willing to wade into the lower half of the market. The headline for this article in the print-version of the Chron was, How Low Will We Go? A fair question to be sure. What if you buy now only to find the market worsenes in the second half of '08? Also a resonable concern. But if your plan is to stay put for a while and the house you want is on the market now, we suggest you may risk more by waiting than by acting. In other words, whoever said "Buy up in a down market," probably knew what he was talking about.

Is Sub-Prime To Blame For Broader Economic Downturn?

2008-02-16T06:57:00.000-08:00

We've written often in this space about what caused the now-famed "mortgage meltdown" and who or what bears the responsibility. Current concerns, however, are more focused on the health of the broader economy and why markets other than real estate and mortgages are on shaky ground or already failing. An interesting op-ed piece by Paul Krugman in today's Times posits an compelling argument. Krugman suggest that, "Troubles that began a little over a year ago in an obscure corner of the financial system, BBB-minus subprime-mortgage-backed securities, have spread to corporate bonds, auto loans, credit cards and now — the latest casualty — student loans." This perhaps is not a revolutionary concept, but his explanation of how the financial sickness spreads is worth a read.

When Is Your Home Not an Investment?

2008-02-11T14:52:00.000-08:00

"Shelter. Memory Box. Labor of Love. Artform. Retirement account. Get rich quick scheme. Showcase for conspicuous consumption.

"The American home has always been a receptacle for our myriad needs and desires. Yet lately many experts have observed that the real estate boom has skewed the meaning of our homes. In the wake of stagnating incomes, regressive taxes and the expectation of Social Security collapse, middle class home owners increasingly looked to real estate as a source of financial redemption. When God, pensions, the stock market and the government failed, the humble house provided more than a modicum of security, and with any luck, several hundred thousand dollars in untaxable capital gains."

These words began Carol Lloyd's "Surreal Estate" column in this Sunday's Chron. Lloyd's column has not always been kind to Realtors, but this week we found her echoing a sentiment we've been sharing with many of our clients lately. Namely that the real estate boom of the last several years severly altered people's sense of what their home was meant to do. For far too many homeowners, their principal residence became the repository of all their financial dreams; a way to pay for early retirement, kids' college tuition, and a chance to drive that fancy car. Along the way, we forgot about a home's first and foremost purpose: a place to live.

This is not to suggest that we shouldn't view our homes as investments. Rather, we only suggest that, unike your I.R.A, 401K, C.D.s and stock options, a home is not purely a financial instrument. Seems so obvious, yet so easily forgotten.

Another Rate Cut

2008-01-23T14:46:00.000-08:00

Here's a quick take on how the latest cut to the Fed Funds Rates affects mortgage rates, coutesy of Union Trust Mortgage Services, a loan brokerage affiliated with Pacific Union:

"Jumbo rates decreased 0.125% yesterday (1/22/08) and conforming rates (loan amount under 417K) decreased 0.25%. A Fed cut was already priced into the bond market and that is why we have seen interest rates go down in the last month. Wall Street was counting on a 0.5% cut and now it was 0.75% so that is why we saw just a little drop. If the Fed would have cut just 0.5%, the bond market would not have reacted and we would have seen interest rates stay the same. Remember that mortgage markets are "open" every day whereas the Fed meets just eight times annually. This gives the markets a ton of time to interpret news, listen to Fed speakers, and generally prepare for the next Federal Reserve meeting.

"The big winners yesterday were people with home equity lines of credit, and those that carry credit card balances. Effective January 22, 2008, your borrowing rates just fell 0.750%.

"The Prime Rate is now 6.500%.

"FORECAST for Long-Term Interest Rates: We believe conforming interest rates (loan amounts under $417K) will probably continue to go down another 0.25-0.5% over the next 6-12 months. Jumbo loans are a different story though and we believe those rates will decrease only about 0.125-0.25% since there are still very few lenders that are willing to lend on large loan amounts."

Note that predicting mortgage rates 6-12 months down the road is a little like walking around with something green in your teeth; no matter how confident you are, eventually someone's going to notice and you are going to look foolish. Consider yourself warned...

2007 Round-Up

2008-01-14T13:57:00.000-08:00

A belated welcome to 2008 from your favorite intergenerational real estate team. We are rested, nourished, and energized after some fun holiday travel, yummy eats, and a sudden respite from the rain clouds.

A special "thank you" goes out to those of you who bought or sold homes with us in 2007, as well as the many friends and former clients who helped us build our business last year. Your referrals are the the lifeblood of our business. We can't express our appreciation enough. One way we try, however, is to make donations to Ritter Center in Marin County and Glide Memorial Family Services in SF for every opportunity you send our way. We were thrilled to make many donations to both organizations throughout the year. And if the number of calls we've received during the first two weeks of 2008 is any indication, this year will be even better.

While 2007 was a busy year for Next Generation Real Estate, it was not so busy out there in the broader market. The fourth quarter in particular was not kind to sellers. Check out these end-of-year stats for a complete picture. The first number shows the percentage change in the total units sold in 2007 vs. 2006. The second number reflects the Q4 year-over-year change:

San Francisco -9.69% -19.11%
Marin -12.0% -29.0%
Sonoma -23.26% -39.04%
Napa -25.13% -42.02%
Solano -40.02% -48.43%
Alameda -27.53% -42.91%
Contra Costa -29.30% -42.89%

This next set of stats shows the percentage change in the median price in 2007 vs. 2006:

San Francisco +3.25% +4.3%
Marin +4.15% +4.4%
Sonoma -5.91% -13%
Napa +.84% +1%
Solano -8.13% -17.2%
Alameda +1.0% -3.36%
Contra Costa -1.0% -14.35%

As we've noted before, the upper end of the market out-performed the lower end in 2007. This accounts, in part, for why Marin and SF had an increase in median price despite a roughly 10% drop in total units sold.

We think there's good information in the above charts, as well as hints as to where the market may be headed in 2008. Please get in touch if you or someone you know is considering a real estate transaction this year. We'd love to talk about it!

All the best in 2008.

Record NorCal Sale

2007-12-21T15:49:00.000-08:00

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

2007-12-20T20:46:00.000-08:00

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

2007-12-18T15:07:00.000-08:00

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?

2007-12-18T14:29:00.000-08:00

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?

2007-12-06T11:35:00.000-08:00

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

2007-12-05T22:41:00.000-08:00

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

2007-12-05T22:06:00.000-08:00

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

2007-11-24T14:09:00.001-08:00

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

2007-11-16T12:04:00.001-08:00

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

2007-11-07T10:36:00.000-08:00

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

2007-11-05T12:00:00.000-08:00

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...