San Francisco Bay Area Housing Market 2014

by Rick Turley, President of Coldwell Banker Residential Brokerage, San Francisco Bay Area

Four Reasons 2014 Could Be A Very Strong Year for Local Housing Market

Happy New Year! As we kick off 2014, it's a good time to take a look at what might be in store for the local housing market in the coming year. While I don't claim to have a crystal ball, I feel very optimistic about the potential for a strong housing market in 2014.

The Wall Street Journal reported this week that home prices across the country ­ – but especially in Silicon Valley and other parts of the Bay Area – have zoomed back to near record territory. Valuations jumped 25% or more in some communities over the past year, nearing or even exceeding their pre-recession highs. Prices in Palo Alto are nearly 40% above their 2007 peak, one of the largest gains in a recent survey.

So what do we do for an encore in 2014? I see four major reasons why the Bay Area's housing market will continue to be strong in the coming year:

1. A robust local economy. The Bay Area economy is one of the strongest in the country. Silicon Valley, the Peninsula and San Francisco are the high-tech, Internet, VC and social media centers of the world. CNNMoney's tech job forecast for 2014 is "Hot and Getting Hotter." Tech job site Dice.com reports that 55% more employers — a record high — say they're ready to hire a large numbers of techies, up from 42% in the second half of 2013. These well-paid knowledge workers will provide an even stronger, better-capitalized pool of buyers for our housing market in the coming year.  Just noted in USA Today, the bay area’s fourth largest city, Fremont, has seen a  return to a strong housing market, and is regarded as one of the best run cities in the country.  http://usat.ly/1crnbWi   From the Wine Country in Sonoma, south to Carmel and Pebble Beach, and across to Livermore, we are fortunate to have healthy, diverse, and prosperous cities and towns in our nine Bay Area counties.

2. Supply and demand. While the demand side of the equation was extremely strong last year with buyers out in force, the supply continued to be historically low. This resulted in prices getting bid up in multiple-offer situations and many would-be buyers walking away empty-handed.  No one knows for sure what will happen to inventory in the coming year, but our agents are telling us more listings are expected in the coming weeks. I suspect homeowners are reading the same news stories we are and seeing that prices have been shooting higher, and they may finally be ready to cash in. Rising prices also change the dynamics for many homeowners who had been underwater in their mortgage as recently as six months or a year ago and weren't in a position to sell. With prices jumping, many of these homeowners now have positive equity once again and have the option of selling and walking away with cash for the first time in years.

3. Interest rates. Interest rates remain historically low, but make no mistake about it: They are moving higher once again. Some economists are forecasting mortgage rates could rise a full percentage point before the year is over. This is a clear wakeup call for those buyers who have been on the sidelines waiting for the perfect time to get into the market. The time is right now before mortgage rates move higher.  An increase of just one percentage point on a $500,000 mortgage adds $300 to a monthly payment or $3,600 a year. Buyers know that and will be rushing to beat the next rate hike.

4. Increasing costs of renting.  As the Bay Area economy comes roaring back from recession, available apartments are drawing long lines of potential tenants and rents are spiraling higher, according to a recent story in the San Francisco Chronicle. "Rents in San Francisco are escalating at breakneck clips this year, largely driven by an influx of tech workers. Oakland and San Jose likewise are seeing steep run-ups," the article notes. Median asking rents for San Francisco apartments listed on www.livelovely.com hit a record $3,398 in the third quarter, up 21 percent from 2012, according to the Chron. Such huge rent increases continue to make buying a home a better financial proposition. My sense is that buyer demand will only increase in the new year as renters see their personal economy improving with a better job market and higher salaries.

Three of the four above are particularly unique to our Bay Area.  Few cities around the US have this same alignment of economic conditions. NAR is predicting growth in the 5+% range across the nation in 2014 and I feel that number is conservative for us.  Every one of our offices expect a strong first quarter as some new inventory comes to the marketplace.  

Visit www.RealtorLisaWu.com or Email to RealtorLisaWu@yahoo.com

Have Your Friend Bought a Property at Real Estate Auction? How Do Buyers to Determine - It's a "Good or Fair" Deal or Value of the Property Bought? How Much The Closing Costs, Premium plus Offered Price?

Talking Points

• Many home buyers think that real estate auctions are the best way to get a good deal on a home.  While there are certainly deals to be had, auctions also can be dangerous for buyers.

• Buyers planning to attend an auction are advised to do their homework and know what the property is worth, especially since auctions generally do not offer appraisal contingencies.

• Buyers should know what repairs are needed and what it will cost to make the home livable.

• Setting and sticking to a maximum price and not forgetting to include the buyer’s premium is critical.

• Most importantly, maintain control.  Many auctions turn into feeding frenzies. The excitement of the moment leads to bidders getting carried away. 

www.RealtorLisaWu.com

Why & When do property come BACK on Market for sale or delay Escrow Closing

Talking Points

• Financing delays, low appraisals, title problems, home inspections, and even buyer’s remorse can interfere with a seller’s ability to close a sale.

• The good news though is that many of these problems are preventable if sellers are proactive and involved.

• Sellers should seek out a buyer who has been preapproved for a mortgage.  Typically, the buyer’s agent will be eager to share this information with the seller’s agent.

• Real estate agents report that low appraisals have prevented transactions in recent years, because appraisers – who are hired by the lenders to assess the value of the home – are overly conservative in their valuations, even though home prices are rising in many locations. To avoid appraisals problems, sellers should price their home in line with comparable homes for sale in the area.

• Some listing agents include a preliminary title report as part of their package, and a good agent will be able to spot red flags when reading that report for their client. Problems such as an unpaid sewage assessment, deed that was never recorded, or an easement that was granted which the owner is unaware of, should be addressed early on.

• Sellers also should encourage buyers to move quickly on things like the home inspection.  If a deal is going to collapse, it is better to know sooner rather than later so the home can go back on the market. 

 www.RealtorLisaWu.com

What to do when an appraisal comes in below the selling price

As the real estate market heats up and prices continue to recover, more home buyers and sellers are likely to encounter the problem of an appraisal that is lower than the agreed-upon sale price.

Making sense of the story

 Appraisals must be based on recently settled transactions, and in a rising market those past transactions are likely to be lower in price. Whether a buyer or seller, it’s important to understand the risks involved around low appraisals – and the options available.

 Because of new restrictions on the relationship between lenders and appraiser – aimed at curbing the appraisal abuse that contributed to the housing bubble – buyers and their mortgage representatives have less control over the process. Lenders simply order an appraisal from a list of approved appraisal companies, and a third party directs the individual to perform the appraisal.

 Resulting from the third-party rules, the appraiser who is assigning a value to the home may not be from the immediate area. It can help to inform the appraiser of the quality of the school district or the amenities in the local neighborhood, as well as improvements to the property as compared with other recent sales in the area.

 One appraiser recommends sellers prepare a package of information on the home, including data on comparable houses and any improvements that have been made that should influence the value of the home.

www.RealtorLisaWu.com