The most common question asked always...How's the market? For those agents who started in real estate during the insane late 90's and early 2000's, it might seem as "tough" or a poor market. From my view, it is a normal market. Although the economy could allow for more people to become buyers, or people with a bit more confidence in the economy would allow them to enter the market as buyers or move-up buyers, there still is a healthy amount of buying activity. Interest rates are fabulous, the money is available, and there are a number of homes to choose from. Unfortuneatly, many of these homes are not very solid pieces of real estate, or, they are priced terribly. the results of both conditions are the same...the home sits on the market.
Buyers are back to being buyers. they take much longer to make decisions on property, they are more particular about what they buy and they will not consider property that has an element that they do not like or do not want. When the market was insanely hot, buyers were conditioned to act impulsively, they were forced to make quick decisions and often the tactic they used was to throw a bunch of money to the seller in order to be selected as the buyer. those days are not here, however, when real good real estate hits the market, buyers will come out of the woodwork for it and often that results in multiple offers. that is why I have always said, "good real estate sells in any market". If you compromised, and own a property that is not very desireable, in a poor location, or a property that contains an inherent weakness, you will likely have a difficult time selling your home. What you buy is so important, it is for many, the most critical investment they make in their lives. That is why the advice you get, the agent you hire, is so very important.
The most frequent comment I hear from people is "Wow, there are alot of properties on the market now". My favorite reply, is: "Hey, back in 1995, which was a normal market and almost five years beyond the tough market of 1990, there were almost 400 units available in Lamorinda. Today, there are under 280 units. When the market was so hot in 2005, the total inventory of homes only got up to 150 to 160 units. As a result everything sold, even properties in a poor location, poor condition, etc. had a buyer waiting for them.
The market now is back to normal, good real estate gets a whole lot of attention and properties that have inherent flaws, poor location, condition, problems, poor price, seem to never get sold. This is precisely why, what a buyer purchases is so important. Many buyers get bad advise, or more typically, no advise as to value. I have heard many realtors say, "i don't make a comment about the price, I let the buyer decide". I acknowledge that pricing is not an easy science. Pricing is very difficult to establish when there are not many transactions and properties often are difficult to compare. In other words a few sales don't make a market. What one potential buyer might be willing to pay for a particular property is vastly different than what many buyers might be willing to pay for a particular property. Price is a critical element for any property. The right price can generate action, even on properties that are not desireable. In the "normal" market, buyers are back to being buyers. They take their time deciding on purchases, move up buyers are only motivated by the right property. Accordingly, a great piece of real estate will get multiple offers today (unless the property is horribly priced...which does happen quite often). The market is littered with properties that might be 25% overpriced, these are the ones that sit and sit on the market. History has shown us that if a property is overpiced by 10%, it will not sell, and often it will not even generate a low offer. In the normal market, properties that have limited desireability, better be priced well, or these homes will not have a chance of selling. There also are poor property purchases today. Again it is difficult to understand value in real estate, but it does make you chringe when you see a listing that is greatly overpriced and then you see a pending sale, a sale from only one buyer who probably got some bad advise...or no advise relative to pricing.
18,000 IN COMBINED HOMEBUYER TAX CREDITS FOR A LIMITED TIME
Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state homebuyer tax credits. To take advantage of both tax credits, a first-time homebuyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive. Buyers who are not first-time homebuyers may use the same timeframes to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.
Under the federal law slated to soon expire, a first-time homebuyer may receive up to $8,000 in tax credits, and a long-time resident may receive up to $6,500, for certain purchase contracts entered into by April 30, 2010 that close escrow by June 30, 2010. Additionally, under a newly enacted California law, a homebuyer may receive up to $10,000 in tax credits as a first-time homebuyer or buyer of a property that has never been occupied. The new California law applies to certain purchases that close escrow on or after May 1, 2010 (see Cal. Rev. & Tax Code section 17059.1(a)(4)). California law generally allows buyers of never-occupied properties to reserve their credits before closing escrow, but buyers seeking to combine the federal and state tax credits will not be able to satisfy the timing requirements for such reservations (see Cal. Rev. & Tax Code section 17059.1(c)(1)(A)). Other terms and restrictions apply to both tax credits.
I have many clients ask me how tough it is to get financing, assuming that real estate lending has dried up and the borrowing consumer has few options. Quite the opposite, mortgage money is out there, lenders have funds to lend, interest rates are really low..only borrowers have to fully document their financial capacity to borrow these funds.
Loans are made now on almost an exclusive "risk base" analysis. Lenders want borrowers to have good credit, thus a fico score of over 700, hopefully over 750. Borrowers have to fully document their income, employment, and asset information. The better your standing, or the lower risk you are as a borrower, the better your loan will be. Gone are the days where lenders would simply take "stated income information" and coupled with a good credit score and some light documentation, you were good to go.
Another area of "fallout" from the loan crises is the appraisal process. If one pays attention and is around for a long enough time, one sees that everytime the real estate market downturns, loans go bad and homeowners loose their homes. It happened in 1990, it was over 18 years ago and people forget. Pursuing the modern day philosophy of "it's gotta be somebodys fault", the appraisers get alot of blame for bad loans and declining values. This, of course, is ridiculous but nevertheless, the appraisers get new, more stringent guidelines and standards for appraisals. Soon mortgage brokers and borrowers will not even be able to talk with the appraiser, even though the borrower is paying for the appraisal. Pressure for conservative appraisals will continue and lenders may even limit the adjustments an appraiser can make when trying to compare a comparable sale property to the property being appraised.
So the moral of the story is simply, "if you're a good borrower...you'll have little problem getting financiing". Just be ready to hand over everything from your tax returns to your 3rd grade report card. But if you are financible it is a great time to be a buyer.
Take notice homeowners, you can apply to the County to have your property tax assessment adjustment for declining value. The burden is on the homeowner to provide evidence of the lower valuation. If the county approves the lower valuation you're property taxes can be lowered. What impact does this have, really? Do you loose your prop 13 limit of no more than 2% increase per year?
The truth is that many properties, particularly in Lamorinda, have not decreased in value. Also the tax bill is based on a 1% rate on the valuation then assessements, like sanitary sewage fee, school fees, bart fees, etc. are added to the base tax rate to make the overall rate something close to 1.28%. Your potential savings will be derived from the 1% of the potentially decreased value. Thus, if you make a case that your property value has declined, say $50,000. then you will have your taxes lowered approximately $500 for the year. But, take a look, if you have purchased your home some years ago the tax assessed value is far below what you think is the value today. Because of the proposition 13 limits on increasing the taxable value, the assessed value is likely lower than the new market value you might think your property is now worth. You may feel your property has dropped from something like 1.2 million to about a million dollars and your assessed value is about $400,000. In this case you will not be able to support the lowering of your assessed property value.
Also, once your taxes are lowered, the county keeps track of where your property valuation would be if you were still getting your 2% increases in value each year. They are now not limited to the 2% each year until your value is restored to the value it would have been assessed if it were never lowered. And unless, you purchased in the last year or so, you will find it extremely diffiuclt to finding supporting evidence of a lower value. So, you won't loose your prop 13 limit overall, only temporarily while the county catches up to your old assessed value. Lamorinda homes have typically just leveled off in tough markets while homes in other areas have fallen up to 50%. So when you read in the paper that values in Contra Costa County have fallen by 35%, keep in mind that includes areas like east county, Richmond and other areas that have been hit hard by declining values. Location, location, location....this is an example of the real world meaning of that old time real estate expression.
As you might imagine the general real estate market depends upon where the marketplace is located. Unfortunately, news is generally national, statewide or at minimum regional in nature and such geographic areas cannot adequately address the condition of any real estate market. Statistics do not count, neither does regional real estate results. If Contra Costa County home prices (average prices of sold properties) are down 30 plus percent, does that tell us anything? No, the prices are down by about 50% in east county (Antioch, Oakley, and Brentwood) and are basically level in Orinda, Lafayette and Moraga. Is there much similarity between the real estate in Orinda with the real estate in Richmond? No, and the two cities are only 15 minutes apart by car ride. There is a difference in Orinda, between Oak Springs off Brookwood and Barbara Rd and the Orinda Downs, etc. etc. etc. So the old "Location, location, location" by-line really is true.
Some factors in the market have a general effect. Factors such as interest rates, the general economy, etc. These factors will tend to impact the number of buyers entering into the marketplace to purchase. Overall market conditions can impact general market results, not unlike we are seeing currently. But we see certain areas and segments of the market that appear to be performing better than others. For example, the higher end market in Lamorinda, 2 Million and above, has performed reasonably well compared to other price ranges. The general economic factors have slowed the rate of purchasing overall, but certain areas and price ranges are still doing reasonably well.
Agents that have been around awhile remember poor and normal markets in the real estate world. The real estate market, particularly in Lamorinda, was hyper strong for over 10 years. This environment was seen as "normal" for agents entering the business in 1996 and beyond. This was a market where everything sold, even homes in poor condition, poor location, and with inherent problems. Moreover, these homes sold without much price penalty for being in their location or condition. Now, the true "normal" market is a market where buyers are paricular, good real estate, as long as it is not mis priced, sells; and poor real estate struggles to sell and will not sell unless there is a fairly significant discount. In 2005 a house on Moraga Way might sell for pretty much the same price as a similar house on Ivy Drive. Today, that house on Moraga Way will need to be discounted by 20% over the same type in a better location in order for it to sell. This is what happens under normal conditions. Our last "bad" market was in 1990. Not too many agents have been in the business for 18 years.
Many see the current market and say, "there sure are alot of homes on the market". Currently there are about 210 properties on the market in Lamorinda. During the "hot markets" we experienced, the inventory never got above 200 units, thus the imbalance between the supply and demand. But I remind people that in 1995, which was by all rights a Normal market, the inventory in Lamorinda was very close to 400 units. There is still not an abundance of available properties in Moraga, Orinda and Lafayette. Additionally, there is not alot of good real estate on the market in our current markeplace of 210 units. There are buyers out there, they simply are not in a hurry and are back to acting the way buyers naturally act, slow and cautious.