East Bay Real Estate

For the first two months of 2008, there is a dramatic increase in home sales!

If Buyers are awaiting the “bottom” to hit the real estate markets in the Tri-Valley and San Ramon Valley, they may have waited two months too long!  Again, remember that all real estate is a local economy, and in some cases actually a micro-economy. There are not only differences within regions of the East Bay real estate markets, there are even micro-economies within zip codes.  What we are noticing is a dramatic increase in opened escrows in the Tri-Valley and the San Ramon Valley!

The real estate reporting firm for the Bay Area is DataQuick. Their statistics for the first two months of 2008 show an increase in sales in all but a very few communities in the East Bay real estate markets! Plus, the median home prices have also increased. One of the most dramatic increases have occurred in Pleasanton with a 128% jump in opened escrows compared the first two months of 2007. “Most encouraging are that the increases we found in units sold, pending sales, and median prices have occurred throughout the southern and eastern portions of the two East Bay counties, and are not limited to the traditionally stronger geographic markets,” said Melrose Forde, the 2008 president of the Bay East Association Of Realtors. “Traditionally, real estate sales activity is seasonal. These market statistics show that we’re moving out of the slow Winter months into the more active buying and selling seasons,” Forde said.

It is obviously too early to see if this is a trend in the East Bay real estate world, but it again demonstrates that the generalizations that are made in the media regarding real estate sales are not the basis a Buyer is to use for their buying decisions.  Remember, all real estate markets are “local economies”.  Another factor that is going to be a key factor is mortgage interest rates.  With the Fed’s interest rate reductions last week in the short term lending world, it will not have a direct effect on consumer mortgage rates. It does have an impact on consumer confidence. And, with the fears of  inflation still lingering, it is expected that interest rates may even rise by one percent by the end of the year because of the inflation factor.

So, the Buyers who are waiting for the “bottom” may want to notice that it may be already here. And, if they want to get the best mortgage rate of the year, today is the day to buy a home in the East Bay real estate markets! Even Sellers need to pay attention to becoming Buyers as soon as possible, so they do not miss out on the real estate opportunities that are currently present. Contact me if you would like to further discuss these trends I am noticing.  Until next time….

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If a Buyer has the money, they are crazy not to buy NOW!

 So, my earlier blog posting about Sellers need to become Buyers as soon as possible is even more credible today than ever! This is a Buyers Market in East Bay Real Estate! It doesn’t matter if the Buyer is an investor looking at the bargains in East Contra and Alameda Counties, or if they are looking for a price appropriate home in the Pleasanton to Orinda corridor, NOW is the time to act. However, today’s Buyers need to have the money for a 20% downpayment. If you have the money you are going to get a great deal! “Lenders aren’t cutting everone off. They’re reverting to sanity after yers of making bad loans,” says Dick Lepre, senior loan officer at Residential Pacific Mortgage, in San Francisco.

Today’s Wall Street Journal stated, “If you are about to get into the housing market, this is all good news.  But before you begin visiting open houses, recognize that the old home-buying rules no longer apply in March 2008. You want to approach buying your first house with a financially realistice point of view.” Buyers need to remember that they are buying a home to live in, not speculating in the stock market or even putting money into a savings account. So, keep it simple stupid is the place to start. Buy smart. Get the best price and terms possible.

There are five steps that today’s Buyer needs to take;

1. Determine what you can afford!  Lenders have tightened their standards and are requiring more of a downpayment. The lender guidelines are that they do not want a borrower to spend more than 28% of their gross monthly income on a mortgage payment, property taxes and insurance. Also, be sure you have cash for closing costs - somewhere around 2% TO 3% of the purchase price. In addition, factor in moving costs and the home’s maintenance.
2. Know your local market! Location, location, location is still a key to purchasing your home. Don’t forget great schools, the expansion of new home developments, public works projects, etc. Remember, 80+% of home prices are what is happening in the local economies - job growth, neighborhood conditions, and quality of life.
3. Look for values, but don’t pass on a home to meets your needs! As you consult with your local real estate professional she/he will provide you the local information regarding what the typical price correction has been in the community you are considering. You may find in the East Bay real estate markets that prices vary from what they were in 2004 to 2006.  Make every dollar count in your purchse.
4. Don’t be afraid to negotiate - take your time! We have found while representing our Buyers, that many of the homes for sale are represented by Realtors that are still not dealing with reality regarding comparable sales. During the negotiating process, you may want to check out how much it would cost you to rent a home after totalling up monthly mortgage payments, property taxes and insurance. If you can rent the same home for virtually the same price it would cost you on a monthly basis to purchase a similar home, the Seller may be asking too much for the home.
5. Always buy for the long term! Your home is not meant to be purchased on speculation of rising prices! In a downward market, people should purchase a home only if they intend to live there for five to ten years. If you are not planning on staying in your home for awhile, then you may want to watch from a rental. From past history, housing bubbles take a couple of years to deflate. You may have a different opinion, but I truly believe that we are close the bottom of the price corrections in the Pleasanton to Orinda house markets. There still may be more price corrections in East Counties where the majority of the 100% financing occured.

So, you have now read my opinion about why Buyers need to act now!  One other factor to throw into the mix is that mortgage rates are still at 20 year lows, and the adjustments that Congress just passed for Jumbo loans allows for East Bay real estate Buyers to benefit from the increase to $729,000 for Jumbo rates! This is a much BIGGER deal than the “economic stimulas package” that President Bush is trying to sell as the solution for solving the issues of the U.S. economy. Don’t hold your breath that printing more money will be the solution.  Until next time….

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Since East Bay real estate is currently a Buyers market, become one NOW!

Here we are in the first week of February and there are still Sellers who are living in “pretend” that there has not been a price correction in the East Bay real estate market place. The price correction obviously varies from the Berkley side of the hills, Orinda to Pleasanton, central Contra Costa, southern Alameda county, and East county region. No matter what region it is, Buyers are the ones running the show this month. So, Sellers, pay attention! You need to become a Buyer ASAP! As long as you hang out as a Seller you will not be having the opportunities Buyers have today - unbelievable mortgage rates, a selection of great homes from which to chose, and awesome values!

Here is the dynamic that Sellers need to consider. In the hyper-appreciating market of 2003 to 2005, it was a Sellers market, and new price highs were set each month in almost all of East Bay real estate. The Sellers were “going to the bank”, however, once they sold their home, becoming a Buyer did not allow them the same advantages of being a Seller. Why? Because the price of the next home they were purchasing in the East Bay just appreciated another 2.5% since they sold their home. So, the Seller who just became a Buyer was now chasing a hyper-appreciating market and needed to pay top dollar for their next home, and typically they were in multiple offers with other very competitive Buyers who wanted the same home.

So, here we are today. The reason a Seller needs to become a Buyer immediately is because of the complete opposite market dynamic in the East Bay real estate environment. The Seller may not be happy about their eventual selling price, but once they get over current market realities, they will be in the drivers seat of this market as a Buyer. It is not a market that is hyper-appreciating. It is a market that has had over 18 months of price corrections, interest rates are at a three to four year low, and the government is working hard to create the needed mortgage money and debt assistance extremely favorable to California Buyers.

And, when I hear Buyers talking about waiting on their next purchases, “… until the market hits bottom”, my question back to them is, “What information sources are you using to determine when the market will hit bottom?” Almost 100% of the time they say they are using newspapers and the media to make that determination. You must be kidding! Remember, if it “bleeds it reads”! Here is the latest snap shot from DataQuick for January 2008, that provides the real stats on what is happening in each local real estate market;

• Current months of inventory are down 25% in most East Bay real estate markets compared to thirty days ago! This is a HUGE shift!
• The mini-markets continue with large variations between cities, with the San Ramon Valley at 7.04 months of inventory, and Lamorinda at 6.95 months of inventory. ( Months of inventory means how long would it take to sell the current number of homes for sale in a given city if no more listings came on the market.)
• Overall, for the twenty-six communities in the East Bay, there is 10.33 months of inventory which indicates it is still a very strong Buyer’s market, BUT it is starting to shift!

One other indicator to watch closely today is interest rates. As mortgage rates decline you will see an increase in sales, which will begin to stabilize home prices, which will begin a slow shift to a level playing field for both Buyers and Sellers. The window of opportunity for Buyers is starting to close before your very eyes. So, Sellers, become a Buyer ASAP and enjoy the buying experience of the current East Bay real estate markets. Until next time…your real estate and lifestyle detective remains on duty. I always welcome your comments and perspectives.

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The Sellers need to price accordingly and calculate holding costs.
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The East Bay real estate buyers may be playing a dangerous game in their attempt to time the bottom of the real estate market. From the statistics of 2007 the East Bay real estate market above $1 million has not had much of a decline in pricing. From a Sellers point of view of this price point, the Buyers are not as much in the driver’s seat as they may think. This is the biggest market opportunity for Sellers getting close to their price in 2008.
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When you are talking about the $600,000+ price point in East Bay real estate, it is a completely different story. WOW! What a mess for the Buyers who leveraged their mortgages with 100% or 95% mortgages. The market has corrected in this price point, big time. All you need to do is take a look at East Contra Costa and Alameda counties. The price corrections are causing Sellers to stop making payments on their mortgages because there is no reason for them to throw good money away at a selling price that will not payoff their mortgages.
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If a Seller in the $600,000 price range who is in trouble with their mortgage wants to sell their home FAST, they need to look at the lowest third of the price points in their slice of the market and get their homes priced there immediately! They will not get a sales contract on their home if they are not willing to take the PLUNGE. If you are speaking with any of these Buyers, just blame me for the suggestion I just made.
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Another very effective strategy for Sellers in this market is to offer a “buy down” of the interest rate for the Buyer. What his means is that the Seller would be willing to pay a 1% fee of the loan amount that the Buyer qualifies for in order to lower the Buyer’s interest rate. For example, if the loan amount was $600,000, the Seller would credit $6,000 towards the buy down of the interest rate. This has a dramatic effect on the amount of the Buyer’s monthly payment. This may end up being the key feature of the sale of the home that allows the Buyer to afford to actually buy it.
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We must get our creative juices flowing with “out of the box” ideas in order to stimulate the sale of homes instead of just having over priced homes sit on the market for months. It doesn’t serve the Sellers or the Buyers if creative solutions are not created for our East Bay real estate customers. Contact me if you want to discuss any of these ideas further. Until next time….

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What does the crystal ball for East Bay real estate look like on New Year’s Day!
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So, 2008 has arrived and many of you will be making decisions this month regarding when to buy or sell real estate this year. The word on the street we are hearing is Buyers are saying they are, “…waiting for the bottom of the market…”, before they make buying decisions. The response question is, “What information are you using to determine when the bottom of the East Bay real estate market has arrived?” Buyers typically acknowledge that the only information they are using is from the media. Does that make sense? Not to me? Here are some factors a buyer may want to consider regarding when to buy in 2008:
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• The highest closed prices of the year typically happen with the escrows that close in April and May.
• Mortgage rates for “real buyers” are still at 20+ year lows.
• When you are considering homes in the East Bay which are priced at $1 million or more, the price changes during the past two years has been UP not down! What are buyers waiting for?
• The biggest price values in the East Bay are in east Contra Costa and Alameda counties. The big value price points are in the $500,000 range. (Many of these homes are in a “short sale” or “bank owned” status. Values abound, but a buyer will need to be VERY patient regarding the lengthy of time it will take to actually close the escrow.)

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Well, if you are a Seller, what is the best time to sell your home in 2008? Again, if we are looking at the crystal ball of past statistics, here are some factors to consider:
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• The highest sales price for homes the past several years have been the ones that closed escrow in April and May. This means your home needs to be on the marketing starting mid-January. We are talking about NOW!
• With the above information it is critical to be represented by a Realtor who has demonstrated they know exactly what to do in this entertaining real estate market.
• The homes for sale that have the shortest time on the market must be in “turn key” condition, and staged in a way where buyers have the experience of walking into “their new home” – light, bright and completely uncluttered.

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There are many consumers and Realtors that are glad to see 2007 come to a close. However, there are many of them who actually had their best year in real estate sales and purchases. Some of the comments of the Realtors who have had a record year in 2007 are:
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• Top Realtor, Ann Marie Nugent said, “People generally will not take the time to properly research and understand their local East Bay real estate market, particularly in these challenging conditions. They need to know I am doing it for them everyday, which is why I did not reduce my marketing spending in 2007. I actually increased it, and it paid off for all of my clients, and it was my best year ever as a Realtor!”
• Another Realtor comment, “I continue to focus on internet advertising since 72% of the consumers in the Bay Area start their real estate search on the internet”.
• Finally, “Because of creating a very successful real estate practice in the early 1990s, I have earned the reputation as an East Bay market expert. I need to really know the local market statistics, so my clients know how experienced and knowledgeable I am.”

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There has never been more opportunities in the East Bay real estate markets than right now! Let me know what your experience was in 2007 regarding the East Bay real estate markets.

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Some homeowners who have great credit and can’t afford their home anymore are in trouble!
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We have a customer who owns a home in the East Bay that has lost his job, he maximized a mortgage on his home purchase two years ago – which means he put as little down as possible. His lender – one of the country’s largest banks, was very cooperative in providing his current mortgage.
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Our customer is a very hard working person, who has worked hard to meet all of his financial responsibilities. Because of his credit payment history he has great credit. We started a discussion with him several months ago regarding what alternatives he had regarding keeping his home after a sad turn of events in his life because of a downsizing company. Because of the price corrections the past two years his home will likely sell in today’s market $50,000 less than the mortgage owed.
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During the past month of discussions with his lender we began to understand the alternatives that were available to him. What we discovered was very disturbing to us. Again, our client’s first objective is to do the right thing with the bank mortgage holder and to do all he can to protect his credit. As of today it appears the bank has no interest in doing either.
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We have been dealing with the bank’s customer service office in the Mid-West. They do not know our customer and they don’t know the East Bay real estate market. All they know is they have a huge stack of foreclosures on each of their desks that they are dealing with more everyday. The current bank policy is to not deal with any homeowner regarding negotiating a short sale of their home until:
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• The homeowner is at least three months behind in their mortgage payments.
• The homeowner will need to have been served the notice of foreclosure – the homeowner brings the three month’s of mortgage and interest payments current.
• The bank has delivered the eviction notice to the homeowner after the notice of foreclosure has been served.
• The homeowner has no other assets to bring their mortgage current or pay for any difference in the sale of their home.

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Given this timetable our client’s best game plan with the bank would be to stop making all mortgage and property tax payments until the bank legal evicts him out of his current home. What a ridiculous game plan! The homeowner will ruin his credit, however he will be able to live in the home for seven or more months before he is required to vacate the home! The bank would probably get a higher price for the home today rather then what they will net months from now when they have a vacant home to sell. Plus, they will not have received any debt service on the home for months!?
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Because of my disbelief in what I learned from this lender regarding our client’s situation, I called several of my contacts in local banks. I discovered that a consumer has a much better chance to work through mortgage problems with a local bank than a national one. The local banks understand the local needs and you are even able to meet face to face with a foreclosure counselor in many of them. We are beyond frustrated and our client is in disbelief that this is his only alternatives. We welcome any of your experiences with similar situations with foreclosures and short sales.

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