Friday, July 27, 2007

Bay Area Home Sales Still Down, Median Prices Up

Even though home sales were down nearly 30% for June, Alameda county experienced slight price increases to the median home price compared to June 2006. Contra Costa county was the least changed with a slight .3% decrease in home values. Marin and San Francisco counties experienced the highest increase, while Napa and Solano counties' values appear to have been the hardest hit.
"Obviously there's still a bit of a standoff between buyers and sellers. It looks like unsuccessful sellers would rather take the home off the market than bring the price down, which is remarkable after almost two-and-a-half years of sales declines. Mainly, the price adjustments we're seeing are in more affordable outlying parts of the Bay Area, and those adjustments aren't all that significant except for Solano County," said Marshall Prentice, DataQuick president.
This data supports what we have been experiencing in the East Bay real estate market. We are seeing more homes coming back on the market, or being withdrawn from the market as Sellers resist selling their home for what the current Buyers are willing to pay.

In past markets, we advised Sellers looking to move on from their current residence to buy first, without a sale of house contingency. The theory was; they would be in a better position to buy without a contingency, their home would show better if stored items and clutter were taken to the new place, and banks could accommodate help them finance the interim with bridge loans. The past market was so heated and quick that we could nearly guarantee a fast sale and a good price. The current market is less predictable. Now our best advice is sell first so that you know what you can afford on the other end. Too often Sellers equate what they need with what their home is worth. This equation does not work for Buyers, who have seen competing inventory and the most recent sales. As emotional as residential real estate can be, buyers use concrete data to support their contract price; including syndicated press reports, area inventory and past sales. If a Sellers expectations are not met through initial marketing attempts, more time on the market only works to decrease perceived value for the Buyers.

Who you chose to represent you is important. Sellers need to make sure they have the best marketing advice to help them achieve the highest possible price.

All Homes No Sold
No Sold
Alameda 2,198 1,536 -30.1% $600,000 $605,000 0.8%
Contra Costa 2,102 1,413 -32.8% $599,000 $597,000 -0.3%
Marin 453 350 -22.7% $830,000 $961,250 15.8%
Napa 195 128 -34.4% $680,500 $577,000 -15.2%
Santa Clara 2,763 2,163 -21.7% $681,000 $699,000 2.6%
San Francisco 705 633 -10.2% $790,000 $825,000 4.4%
San Mateo 906 755 -16.7% $770,000 $795,000 3.2%
Solano 773 453 -41.4% $475,000 $419,500 -11.7%
Sonoma 735 533 -27.5% $580,000 $532,500 -8.2%
Bay Area 10,830 7,964 -26.5% $648,000 $665,000 2.6%

Source: DataQuick Information Systems,

Friday, July 20, 2007

Preparing Your East Bay Home For Sale - Top Ten Value Added Improvements

Nearly every property we list for sale can benefit from some market prep. Buyers need to fall in love with the visual appeal of your home before the will notice any other improvements. Your agent can help you decide how to get the biggest bang for your pre-market buck. Here is our top ten list for showcasing a Bay Area home's best features:

1. Have your home professionally staged. Professional staging ups the ante on a home's emotional cache by creating a magazine quality interior; which in turn sparks the fantasy of that picture perfect life. For the price of one stainless-steel kitchen appliance, you can spread the impression of luxury to every room of the house. The impression of quality will stick, even though buyers have no expectation that the expensive looking stuff is included in the sale. Contemporary furnishings can update a home's interior for a relatively low investment. More importantly, 75% of all buyers use the internet during their home search. When these buyers view the on-line photos, it is impossible to get any perspective on a rooms size and/or best use without the visual map of well placed furnishings. Instead, the viewer's eye goes straight to the rooms back wall. This makes any space look substantially smaller. It has also become an industry standard to show a home "staged." The few homes we see that are not staged give the impression that the homeowner does not believe their home is as worthy as their competition. This impression further diminishes a buyer's perception of value.

2. Professionally paint the home's interior and bring out trim with a contrasting color. One of the benefits of our older housing stock lies in time-honored original details. Make sure buyers take notice by helping them stand out. Fresh paint also reflects pride of ownership and will help buyers feel confident in a home's overall condition. (If you attempt this one yourself, spend extra time on prep and be sure to take the time to achieve a professional looking finish. A sloppy job can have the adverse reaction of putting doubt into your buyer's mind about the quality of other home improvements.) One of our favorite neutral combinations is Benjamin Moore's Mongomery White for the walls (This cream with a tint of yellow looks sun-kissed in any setting) with White Dove trim.

Get expert help when picking the color pallet. Choosing a modern, cohesive color pallet is the most cost effective way to update an interior. Those original details will more easily mix with a buyer's contemporary possessions if a designer color pallet is already in place. It doesn't cost much more to go with color. Just make sure you are getting sound color advice. In the 80's and 90's neutral, "blank slate" walls were all the rage. Then, buyers wanted spaces they could personalize. Now, our demographics reflect busy, often two-income households with limited time on their hands. An appealing color design represents real value to today's buyers.

3. Paint the outside entry, porch and window trim. This can be a good way to update your curb appeal without the expense of repainting the whole exterior. Do caulk, patch and paint any surface in need of attention. When painting porches and walkways, add sand to the mix to improve traction.

4. Professionally polish your hardwood floors. Hardwood floors continue to be a desirable selling feature. Professionally polishing is much less expensive than completely refinishing them, and the visual impact is nearly as impressive. Having your floors polished is often only 1/5 the expense of refinishing, but it has the benefit of bringing there original beauty approximately 3/4 of the way back.

5. Mini-makeover your kitchen. Kitchens sell houses. If yours is not likely to inspire an offer, consider the mini-makeover. Paint existing cabinets and install updated hardware. If the linoleum is dated consider installing Marmoleum over the top. This sheet product is gaining popularity because, unlike linoleum, Marmoleum is considered a "green" home improvement. Finish the look off with a solid surface counter, new sink and faucet. New appliances are a bonus and you may be able to negotiate with the buyers to take them with you to your next home.

6. Mini-makeover your bath. Second in the minds of buyers to kitchens are baths. Repaint chipped bathtubs with an approved enamel paint. Replace any cracked tiles and clean the tile grout. As needed replace the toilet, sink, vanity mirror and update the lighting.

7. Lighten up. A dark house can send a buyer back out the door. Look for cost effective ways to add light to a dark interior. Remove heavy draperies and window awnings. Opt for sheer panels instead. Prune trees to allow more light through the windows. Install a light tunnel to a windowless room or dark hallway. Light tunnels cost less than traditional skylights and are easier to install. Replace dated light fixtures with new ones. There are lots of low cost and stylish options now available online. Add floor and table lamps as needed to brighten a room. Finally install the highest wattage bulbs allowed by the manufacturer in all the homes light fixtures. Warm-toned fluorescents will keep the electric meter from spinning.

8. Freshen up the landscaping. Landscaping for curb appeal includes adding color spots (usually flowers) and the aesthetic pruning of existing plants. Plant themes can help define architecture: A Mediterranean drought resistant garden enhances a Spanish style home, while a cottage garden looks great in front of our California Bungalows. Fresh mulch can make the yard look well maintained. Meandering pathways and delineated outdoor living rooms can help small yards feel more generous. Water fountains can soften the sound of traffic.

9. Create storage solutions. People now days have lots of stuff. Helping buyers picture where there stuff can go can help them visualize living in your home. First on this list is clearing clutter. Clutter in a room will keep buyers focused on your things and they may not see the architecture. Also, if it looks like you no longer fit in the house, buyers will relate and worry where to put their things. A staged house is usually only about 60% furnished. You will notice that dressers are the often missing. Clear closets and cabinets down to the essentials. Add closet systems to maximize capacity. If a room doesn't feel like a true bedroom because it is missing a closet, install one or include an armoire in the sale. If the home lacks a garage, consider erecting a garden storage shed. Sellers often overlook this advice, but if a buyer can't bring their stuff, they will likely not want to live there.

10. Clean, clean, clean. A spotless house will inspire buyer confidence because it speaks directly toward home maintenance. A thorough cleaning can also bring life back to many surfaces. We routinely set up the following for our clients:
  • Professional window washing - the best way to bring the outside in and add instant sparkle
  • Power washing of decks and entryways. Wood decks and mildewed concrete undergo a spectacular transformation with a jet stream of water.
  • Carpet cleaning
  • Interior cleaning with attention to sometimes neglected areas like light fixtures, ovens and the tops and insides of refrigerators.
Share your money conscious improvement ideas here. (Click on text)

Tuesday, July 17, 2007

First Time Home Buyers Struggle to Enter the Market

This is a follow up to my last post. As previously mentioned, the meltdown in the subprime market has not pulled the doormat out from under Bay Area home owners. Still this economic phenomenon has not left the real estate market entirely unscathed. We had hoped that a leveling of the market would turn a greater percentage of housing dreams into realities. Unfortunately for some first-time home buyers, the carrot remains just out of reach. USA Today reports:
Rising mortgage rates have eroded almost all the financial relief that buyers might have derived from the slight decline in prices in most areas. On top of that, lenders are now demanding that customers produce larger down payments, more cash reserves in the bank, higher credit scores and less debt — all of which many first-time buyers lack, especially in high-cost states such as California, New York and Florida.
As we look into our crystal ball, we can't help but be concerned for our infrastructure. If the trend continues, how will our teachers, police officers, and firefighters afford to live here? The Bay Area housing market has held strong due to a strong and diverse economy, the area's intrinsic desirability, and limited sprawl. But, what will happen if the people who service the needs of our community can no longer afford to live here?

Given increased housing costs and gentrification, how do you see our East Bay culture changing? (Click on text to leave your comment.)

Monday, July 16, 2007

The Subprime Crisis

Subprime lending, also called "B-Paper", "near-prime" or "second chance" lending, is a general term that refers to the practice of making loans to borrowers who do not qualify for market interest rates because of problems with their credit history. Subprime loans or mortgages are risky for both creditors and debtors because of the combination of high-interest rates, bad credit history, and murky financial situations often associated with subprime applicants. A subprime loan is one that is offered at a rate higher than A-paper loans due to the increased risk.
Some of you may be wondering, why we haven't talked much about the "subprime lending crisis." We have noted that buyers have been seeking alternative financing to compensate for decreased afford ability. Some of these buyers have turned to suprime loans in order to qualify for their home purchase. Subprime loans do help some buyers who would otherwise not be able to enter the market. The downside is that the flexibility has encouraged misuse by some predatory lenders. As a result, we have seen an increased number of foreclosures and short sales. This fact has prompted us to caution buyers about their lending options (See the post titled, Would You Risk an Extreme Mortgage.) However, the impact on housing prices has not been great enough to affect our forecast for the general East Bay real estate market.

An independent real estate market forecaster, Housing Predictor, reported the following:
Hundreds and perhaps thousands of local real estate markets scattered throughout the U.S. are insulated from the sub-prime loan crisis and as a result are not suffering from fall out of the sub-prime fiasco, according to the latest Housing Predictor study.
Beginning in late 2006, subprime mortgage lenders began filing bankruptcy. This meltdown prompted some economists to fear a fallout similar to the U.S. Savings and Loan Fraud Crisis of the late 1980's. Although our market has experienced a healthy leveling, this gloomy prediction is not being realized. The subprime crisis seems to have been limited to less affluent areas with less healthy local economies.

Saturday, July 14, 2007

Weighing the Odds As a Bay Area Home Buyer

Purchasing a home is a balancing act. Buyers have to weigh fears about a changing market against sometimes unrealistic seller expectations. Add to that the tight-rope multiple offer situation; that fine line between the safety net of buyer protections and the free-fall of incentives that prompt sellers to accept an offer. In a perfect world we want buyers to have the benefit of all applicable contingencies. However, in this marketplace it sometimes behooves a buyer to present a clean offer. A "clean offer" is an offer that is well-written and often contingency-free.

Incorporating contingencies into a purchase contract may seem like the best way to protect buyers' best interests. Not true, if these complexities preclude them from buying a house. Even a contingent offer reaches a point when the contingencies expire. In any market, it is impossible for your agent to keep you safe from all liability. However, a good agent can give you a deeper understanding of the nuances associated with the risk and grant you the clarity to overcome peril.

A financing contingency is an example of a manageable risk. A loan contingency buffers the risks inherent to the loan application process. Why would buyers write an offer without a loan contingency? The best answer is because; they fully understand the risk, they feel empowered to manage that risk, and they can improve the chance their offer will be accepted.

Most buyers are pre-approved with their lender when making an offer. A well-qualified buyer's pre-approval letter will have three outstanding lender conditions. If the conditions are not met, the buyer will not get the loan. Here's what's at stake:
  1. The lender must approve the contract. (You can limit this risk by using an approved CAR form and having an expert help you draft your offer.)
  2. The lender will require an ALTA policy of title insurance. This is the title insurance that protects the lenders interest in the property against any liens or encumbrances unknown to the lender. (This one is easy, the approved form contains language which incorporates CLTA and ALTA policy into the agreement.)
  3. The lender will need to approve of the properties value in respect to the loan amount through a bank ordered appraisal. This is the doosie. If the house doesn't appraise, you don't get the loan. (Believe it or not, this last risk is also manageable. In fact, the lender is not even concerned wether the house appraises at your contracted purchase price. Lenders do not care if you are not getting your money's worth. They only care that property's value (their collateral) is strong enough to justify the loan amount. To the primary lender this works out to roughly the loan amount plus 20%.)

We have not seen many issues with appraisals, but this could change as the market fluxes. At any rate, it is safe to assume that every house will appraise at some value. Based on your pre-approval, your liability -should the home not fully appraise- is not the entire contract price, but rather the difference between the price you promised the seller and the appraised value the lender accepts. A buyer can manage this risk and successfully avoid breaching the contract with the seller.
  • First, research comparable sales with your Realtor. We do care that you get your money's worth. Your agent can and should help you become a savvy consumer well before your contract is accepted. Then, if the appraisal falls short, your agent can advocate on your behalf by providing the appraiser with the comparable sales.
  • Next, check the strength of your own pocketbook. Do you have any resources to bridge the gap between the appraised value and the contract amount? If the house does not appraise, a home buyer can provide the additional funds necessary and complete the transaction. Similarly, if you have a large down-payment (greater than 20%) you can more confidently waive your financing contingency, because the lender is more likely to find the desired collateral.
  • Last of all, your mortgage broker can be a great resource. They can sometimes save the day by finding a secondary lender who is willing to loan you the additional funds required.

Each buyer is unique. Each house represents new circumstances.
"We think in generalities, but we live in detail." These suggestions are not universally applicable. They are listed to illustrate how your real estate agent can help manage your risks by brainstorming the available options. We do not believe in advising our clients to act on what is "customary" for our marketplace. We do not follow the crowd just because that is the current trend. Rather, it is our objective to serve our clients well. To think outside the box -and in it, when necessary or prudent. Dialog is essential in assessing the needs of the individual in relation to the virtue of our professional experience.

Thursday, July 5, 2007

Is It a Buyer's Market Yet?

I keep reading that Bay Area home sales are at the lowest level in 12 years. This headline has left buyers scratching their heads wondering, "where are all the resulting deals?" Unfortunately for buyers, it's the number of sales that have declined not the prices. Fewer homes on the market have resulted in the recording of fewer sales. This translate to low inventory for buyers. This in turn creates competition and results in multiple offers. The Median Price for a single family home in the Bay Area has increased to $660,000, the highest recorded level yet.

There is good news for buyers despite the confusion. The current median price reflects a modest 3.4 percent gain over last year, as reported by This is a small gain compared to the 20 percent increase from 2004 to 2005. (In 2005, the median price for a single family home in the Bay Area was at $556,000.) This isn't a windfall for Buyers, but it does indicate a healthy leveling of the Bay Area market.

In our office, we are seeing buyers react cautiously to a sometimes spotty market. The market is "spotty," because some, but not all houses, are drawing the competition from buyers that results in sales prices which exceed market expectations. For our sellers, we do our best to increase the odds in their favor (which makes our track record better than most) but the current market is more susceptible to buyer whim. As sellers work to rally scattered enthusiasm, buyers gain an improved bargaining position.

This brings more good news to Buyers. In addition to the tempering of competition on some houses, buyer contingencies have regained some strength. In particular, buyer inspections have returned along with the negotiations associated with their findings.

We have also seen a continued increase in the number of homes "back on the market" as buyers struggle to develop a well rooted sense of value in what has been a changing market. Sellers too struggle to rationalize the reports from the neighborhood grapevine (with tantalizing instances of sellers who seemingly still hit the jackpot) with the realities of a leveling playing field.

We will be watching to see how this market plays out in July as we head toward August. August traditionally slows down as Bay Area residents take their summer vacations and prepare for the coming school year. As a result, what happens in July often informs the September market.

For Buyers and Sellers: Berkeley Hills Realty works hard to improve the odds in your favor. We remain ever vigilant and strive to think outside the box as it relates to all new information. For our Sellers, we have put new strategies in place designed to expand market exposure and to increase a property's perceived value. We also consult with our Buyer clients on factors that create and protect value as it relates to the purchase of their new home. As we embrace this new marketplace, we invite you, your friends, and family to call with any and all real estate related inquires. As always, we are happy to share our thoughts.

Tuesday, July 3, 2007

Good Fences Make Good Neighbors? (revisited)

My last post has a stealthy link to a Robert Frost poem called Mending Wall. Published in 1914, Frost questions the artificial construct of a privacy wall. Today someone sent me a link to a SF Gate article that brings back the radical notion of doing away with fences in our Bay Area backyards.
Taking down the fence had another outcome: She established a more communal relationship with her neighbors. No longer playing in tree houses, Westberg, Pettler and their neighbors share barbecues, garden tips and a glass of wine at sunset, all accomplished without the formality of front doors.
We have examples of overwhelmingly successful boundary-breaking in our East Bay neighborhoods. The article mentions one area in North Berkeley around Mariposa and there is another popular South Berkeley communal backyard nicknamed, the Meadows. The logic is particularly adaptable to our neighborhoods, where small lots can be expanded by open minds. Experience tells me that expanding verdant outlooks will also increase a property's value in the real estate marketplace. What do you think? Can you imagine tearing down your own backyard fence?

Monday, July 2, 2007

Is it in a Safe Neighborhood?

Good fences make good neighbors? Hopefully this blog will do more to build bridges than mend fences. Although sometimes there isn't a fence high enough, if the neighbor is truly a nuisance. We repeatedly advise buyers to spend time in the neighborhood where they want to live. There are a lot of things about a house that you can change as your needs dictate. Location isn't one of them. Learn who your neighbors are before you sign on the dotted line. As for that pesky little question, "is it in a safe neighborhood?" There are lots of websites that provide crime statistics, but only you know what kind of surroundings make you feel comfortable. Only you know you. Even so, you are apt to feel comfortable in different places during different stages in your life. I lived in the Tenderloin neighborhood of San Francisco once. It was my last years of college when poverty felt like a badge of honor and the invincibility of youth gave me courage. Later, my first pregnancy sent my bravado packing as my mothering instincts gained ground.

Still that first apartment, filled only with furniture collected off the street and the rare salvation army splurge, had me thinking of my role in the bigger picture. In some ways I was a better person then. I was certainly more sympathetic, or at least more aware concerning the issue of homelessness. Beyond the education brought on by the state of my own meager means, a walk from the Civic Center BART station through Civic Center Plaza was a bit like immersion therapy for the armchair activist. The experience ignited in me the eternal optimism that takes seed easily in the collegiate mind. The homeless have been mostly pushed out of the area now, with only a small presence near Market Street. It's a shame that the problem was shuffled not solved. Back in the day, such open evidence of great need strengthened conviction, and even humble college students wanted to make a difference. A small group of us used to make a weekly foray into the Plaza with a box of peanut butter and jelly sandwiches, fruit, carrots and surplus cheese. After repeated questions about which religious institution we were affiliated with, we dubbed ourselves, "the Peanut-Butter and Jelly Church." Talk about putting a face on homelessness, I still remember some of the characters we met. (Are you out there Hobo and Red?) I hope they are well, but that renewed mothering instinct has me worried.

Today, I get great satisfaction in helping new buyers into their first home. (Thank you to our clients for the opportunity.) Our office makes annual contributions to places where we think the money might matter. In addition, our agents also make contributions from their earned commissions to the Berkeley Association of Realtors Community Fund. We can go home saying, "I gave at the office." However, every year homelessness fosters old and new faces, and my stage in life has me reconciling a check book and hoping it will truly make a difference.

Buyer Tip: When you're interested in a house, walk the neighborhood. Meet the people that live there and ask questions. Call the non-emergency number for the local police department. They can often put you in contact with the beat officer for the area. Also, check out our previous post (and user comments) on the new Google Street Views.

Seller Tip: Disclose any issue you are aware of that affects your home or neighborhood. Full disclosure buffers your liability and can give a buyer more confidence in the overall transaction. Be specific about the problem, not the individual. If a neighbor is loud enough to be considered a nuisance, describe the noise level and time of day. This is more useful to the buyer (and less offensive to the neighbor) than any attempt to define the individual's character.