The Most Expensive Home in The Country

The New York times published an article about the most expensive single family home in the country. It is on the market for $135 million and is located in Aspen. Only certain people can even have a tour of the property, but here is a link to the times article if you want a peak.

What's Still Selling

Hi everyone, I have been away for a little while, so I have been unable to post. Now I'm back with some notes.
It used to be, when I first started Real Estate, that the hottest part of the market was always the price range that encompassed first time home buyers. In the Berkeley area, that is the $550K to $650K range. Those were the people who had to buy. They were starting families, begining to settle down, and trying to get that whole living as an adult thing down.
In these troubeld times, the hottest part of the market in Berkeley is the $750k to just under $1m market. These are second or third time home buyers. These homes in some of the better parts of Berkeley like Thousand Oaks, the Gourmet Ghetto and the Hills, still seem to fly off the market with multiple offers.
Above $1m things are a little quieter. I can understand this. Those looking for homes above $1m don't have to move. They have homes, and they can wait.
But what about those first time home buyer's market. Why is that so sluggish? Part of the reason maybe because of the tightening of loan requirements. All those 100% financing loans based on stated incomes have dried up as the banks have tightened their requirements.
That has certainly taken a lot of people out of the market.
So what looks like a reletively healthy Berkeley Real Estate market, may just be skewed because of a segment that is leading all the others.

Going Up

As I left the office this afternoon, I ran into one of the loan brokers I regularly use. He was shaking his head, and I asked him what was happening. He said that interest rates got crushed this week.
Interest rates have been edging up for the last few months, but by very small increments. This week they increased by 3/8ths, and are starting to close in on 7%.
Part of the problem is that the Fed has indicated that they are not going to raise rates. While this has fed a growing stock market, it reduced the yields in the bond market. Traders have been getting rid of their bonds. but there has been no rush to buy them, and that has helped to push interest rates up this week.
In effect, even with lists prices for homes in this area holding steady, for the buyer, home prices just took a large step upwards, because the costs to borrow money went up sharply this week.
As I have stated before, even if you are in an area where home prices are falling, at some point, rising interest rates will cancel out that drop in price.
If the only reason you are waiting to buy in a down market is because you think home prices will drop further, take a careful look at what your mortgage payments will be with the rising interst rates, and make the smart move for you.

5 Things Buyers Should Consider

In talking to my clients this week, I am reminded of some of the things all buyers should think about when buying a home;

1. Don't Think That There is Only One Perfect House For You.New Homes come onto the market every week. Selecting the right home is a process of elimination, not selection. This is especially true in our area where you are looking at mostly existing homes, not new homes. Be open to all the possibilities.
2. Consider Your Long Term Needs. Don't just think about what you need now. Consider your future. What will you want 5 years from now?
3. Follow Through on All Inspections. I have mentioned this before. Inspections include not only the home, and the home systems such as heating and plumbing, but also the neighborhood, and your proximity to schools, transportation, friends and family.
4. Know the Total Costs in Buying a Home. You must plan for all closing costs, lender fees, escrow fees, on going property taxes and all the costs involved in owning property. Your Realtor can help you with all these things.
5. When You Choose Your Real Estate Agent, Be Sure He Is Commited To Forming a Strong Business Relationship With You. Make sure that agent is listening to your wants and needs, and is available to give you reasoned advice. Your Agent is your Advocate.

These are only some of the things you as a buyer must consider, but I think these are the top 5.

Flip that House Fraud

Every now and then I will watch the program on the A&E channel called "Flip This House". It is one of the most popular programs on that channel.
It showed people buying homes in need of repair, doing renovations with the advise of a Real Estate Agent, and, in a matter of months, putting the homes back on the market and making a tidy profit.
I could never really figure out how they were doing it. In the area in which I work it is very difficult to do a flip like this and in such a short amount of time, make any kind of profit once you include commissions, taxes, labor and materials.
It takes careful planning, and a thorough knowledge of the market and construction costs to even squeeze out a thin margin of profit, especially these days with what the Real Estate Market is doing. I would watch the show, and the participants seemed to be flying by the seat of their pants, and yet they would sell their flippers, and make a profit. How did they do it?
Well, it turns out, at least in one case, the whole thing was a sham. The homes were never truly renovated, and they were never truly sold.
In a Yahoo News Article you can read here, an Atlanta Businessman, Sam Leccima, who appeared on several episodes of "Flip This House" never did the work on the houses he said he was flipping, and in some cases, never even owned the homes he said he sold.
So the lesson is, don't rely on Reality TV to do your financial planning. Who would have thought?
I would love to say that it is simple as pie to find a home in need of just cosmetic fixing, a new bathroom, refinishing the floors, etc. and all it will take is a little sweat equity and in a month and a half, before the second mortgage payment is due, put that little jewel back on the market and watch the offers roll in.
That is the myth that "Flip This House" is trying to perpetuate.
You have to have a plan. You must be aware of the tax ramifications of owning a home and selling it in such a short time. You have to know the area in which the property is in. What is the inventory like? How long are homes on the market? What kind of prices are they bringing in? What are your costs going to be, and what if something goes wrong, because something always goes wrong.

It's Been a Dry Year

With parts of California already asking for voluntary water conservation, the New York Times has an interesting article about using gray water and installing home gray water systems to not only reduce water use, but also to create backyard wetlands that can filter that gray water and make it useable to feed gardens and fruit trees. The article focuses on a home in our very own backyard of Oakland California.
It is all pretty tricky, and some of it is illegal if not done with the proper permits.
But, in this time of what seems like near drought in California, this article is an interesting read for all you home owning, do it yourselfers.
Read the article here.

New Google Feature, Street View

If you go to www.maps.google.com there is an amazing new feature called street view. If you look up an address and hit the "Street View" button, a golden little man will appear on the screen. Take your cursor and move him to whatever location you want to, and you will get a 360 degree view of the street on which you put him. This feature, for now, is only available for San Francisco, New York and Miami, but as google compiles more and more photographs, more towns will come on line.
This could be a fantastic tool for home buyers in the future who want to take a look at a neighborhood, before they go out and look at the house. I'm sure at somepoint Google will also link the street images to the businesses you see in the Street View.
For now, it is a great way to see where you are going if you have to meet someone in any of the above mentioned cities, or, as I did, to view the house in which you were born.

Alawys Investigate

I was talking to someone on Friday who bought a new house out by Tracy about a year ago, and she is now regretting it.
her problem brings to light two of the main factors that everyone must consider when buying a home.
The first factor for her was that she wanted a large home, she could afford, on a good size lot. Everything in the home buying decision is a balancing act. If you have a certain amount you can afford, you must decide whether it is more important for you to have a new home, or an existing home. The balancing act for her was she wanted a new home, so she had to live farther away from where she works, downtown Oakland, to find that large new home that she could afford. That turned out to be Tracy.
Others may have decided that it was more important for them to live closer to work, so they would have chosen a smaller existing home nearer downtown Oakland.
One thing she did not consider was that during the morning rush hour it can take her as much as 2 hours to get to work from Tracy to downtown Oakland. She had only driven the route on weekends, and so had never encountered the weekday traffic. Now she is trying to figure out whether she should sell the house, because the commute is killing her.
When you decide to buy a home, you should do more than just the inspection of the physical systems of that home.
Investigate the neighborhood, and visit it at least twice at different times of the night and day. You are going to be living there. You have to look at not only the home, but also the location, how close are you to work, family, friends, and the places you like to go? Are you comfortable being farther away? Does the area itself suit your needs?
An Inspection means a full inspection of both the house and the area it is in if you are going to be happy in your new home. It is all a balancing act.
What can you give up to be happy with thosre things you cannot give up.

Half Way Through the Year

We are almost at the half way point in the year. I decided to take a look at what was happening this month last year, and this month this year.
To make the numbers simpler, I looked up the sold 2 bedroom, 1 bath homes in Berkeley for the month ending today this year, and the month ending today last year.
This month, last year in Berkeley, 17 two bedroom homes had sold with an average of 19 days on the market and an average sale price of $617,005.
This month, this year in Berkeley, 13 two bedroom homes have sold with an average of 17 days on the market and an average sale price of $641,940.
Berkeley generally represents the peak of the market in the area I work in, with the outer areas, Richmond, parts of Oakland and farther out falling away in value.
So, in this narrow category, Berkeley has seen a less than 4% rise in value over last year, with all other terms being basically level.
This is pretty much what I have been expecting. In Berkeley we saw a 2% rise in value last year overall, and I am expecting, by the end of the year, for home values to have gained about the same amount.
We are as we were last year; pretty much flat for value, and interest rates for 30 year fixed loans at near the same level that they were last year.
For Buyers, if you are waiting for prices to drop, I do not think that will happen, but I don't see home prices rising either.
For Sellers, you may not be happy that your home values are no longer growing like they were pre-2005, but you should be happy that your homes are maintaining their values, when, in so much of the country, Owners are seeing home values dropping.

It's Not All About Real Estate

It's not all about Real Estate. Sometimes you just want a fried chicken sandwich. I finally stopped by Bakesale Betty's to try their famous sandwich.
A wonderful, moist slice of fried chicken on a soft, white torpedo roll with a tangy coleslaw. It's big too. There will be a line, but it moves fast, and it is definitely worth the wait. There are also great cookies, and a luscious strawberry short cake, but the lunch time draw is the fried chicken sandwich.
Go out of your way for this one.

Bakesale Batty's
5098 Telegraph Ave at 51st
Oakland

104 Seaview Drive, El Cerrito

This Saturday I will be holding open this wonderful home on 104 Seaview Drive in El Cerrito.
It is a 2 Bedroom, 1 and 1/2 bath located just around the corner from Fat Apples and minutes to the Plaza and the El Cerrito BART station.
Beyond the 2 bedrooms is additional space downstairs for an office, and the home is framed with a fantastic garden. There is even a sauna in the home.
It is on the market for $595,000.
Come and see it this weekend, or feel free to email me for additional information.
erichwong@windermere.com

What gets Left Behind

I forgot, here is a link to a funny story in the New York Times about the kind of things that get left behind when a seller or renter leaves their property for the next occupant, just click here.

60 Minutes

On Sunday, 60 Minutes, Leslie Stahl did a story on Redfin, the on-line Real Estate company and their effect on traditional Realtors. If you missed it, you can go to CBS by clicking here to watch the story on line.
The world of Real Estate will change,. It has been changing. The internet has made knowledge much more freely available, and I think this is how it should be. Attempts by the NAR and others to try and keep knowledge private will prove to be a vain endeavor, and, I think, a foolish one. You cannot put the genie back in the bottle. The wiser position to take is to accept change, and evolve with the changes that are sure to come
More than ever the way the traditional Realtor can differentiate himself or herself from the on-line broker is with fine tuned, customized service to each of our clients. I put in a lot of time getting to know the clients who work with me, what their motivations are, what they hope for when they are buying or selling a home, and I make sure that it fits into their overall financial plans. I am a resource for lenders, gardeners, painters, plumbers, handymen and carpenters. I am a consultant who is always available to them to discuss my clients' concerns.
I pride myself on the work I do with my buyers. I often work with first time home buyers, and I make sure that they understand the process and its many pitfalls. I truly hear both their fears and their dreams, and I hold their hands through what can seem like a daunting process, especially for the first time buyer.
When we are looking for a home, I internalize what they want in their new property so that I always have that in mind when I am in the market looking at properties new to the market.
Again, for me, it has always been about a high level of service for all my clients.
There will always be room in the market for those looking for the fee approach to Real Estate that is Redfin's model, and for those looking for the services of a full service agent like me. And, if the market demands that I change my business model to fit the market, I will never be so arrogant that I will not bend as needed for the service of my clients.

60 Minutes and the NAR Tonight

Tonight Leslie Stahl from "60 Minutes" is doing a story on the National Association of Realtors (NAR) and how on-line companies are driving down Real Estate commissions and prices.
The NAR is already trying to do spin on the story before it even airs. I will watch. You should watch, and I will talk about it tomorrow.

The Right Offer

I specialize in working with first time home buyers, and amongst the various parts of the process making a bid fora home, one of the stickiest is making the right offer. There are two major parts to an offer. One is the conditions of the contract, and the other is the amount of the bid. These two parts work together to form a successful bid, but the heaviest burden lies with the amount of the offer. That is the part I am going to discuss in my entry today.
For the first time in many years in Berkeley and the surrounding areas, the buyer is seeing situations in which they are either the only person making an offer on the home, or the buyer is making an offer on a home that has been on the market for awhile, and , again, they are the only people making an offer. The strategy in this case is to make an offer low enough to prompt a counter offer from the sellers, but not so low that it is rejected out right. This stratagy should get you the property at the lowest offer the seller will accept. This will be different with each home, and it will take some knowledge of the state of the market, the inventory of homes, and the ability to recognize the real value of a home apart from it's list price.
If the buyer is making an offer on a home, and they are in competition with other buyers, a different stragy is called for.
I have seen it time and again, when there is competition for a home, there will be one or two low offers, a majority of offers bunched up around a single price, and one, maybe two offers that rise above the others.
If you truly want a home and there is going to be competition for that home, you must be able to determine where that price is around which most of the other buyers will bunch up , and come in with an offer above that.
In most cases, that number is going to be obvious.
When in competition, I want my buyers to reach a bid price where they are happy if they get the home, and they are happy if they do not, because they would not have paid over that price for the property.
Both these stratgies for making an offer in 2 different situations do take a good understanding of the market, and a good understanding of your own motivations and desires.

Look at the Offers

It looks like 525 Pomona will be going into contract before the end of the day. This week, a month after it went on the market, 2 weeks after the day they were to receive offers and got none, 525 Pomona got 4 offers. I can say that the home did not get an offer at its list price, but it did get a better offer than I thought it was going to get, because of the 4 offers vying against one another. I can't reveal it until after escrow has closes, and, in this, 525 Pomona may offer one last lesson.
This home seemed to reach a certain ripeness last weekend. I could feel it as I held it open on Sunday. The home had been on the market long enough so that potential buyers were feeling that there may be a deal to be had. In the end, there were enough buyers who felt this way that the home created a second wave of competition with these 4 offers that appeared, thus creating a bounce in the final bid price.
The really smart move would have been the buyer who recognized the value in this property a week before everyone else did. If a smart buyer has gotten an offer in early, before competition appeared, they truly would have gotten some value for their money.

525 Pomona in Albany

I am once again holding open 525 Pomona in Albany for a colleague from my office. This home has been on the market for a month. As a reminder, this home has 3 bedroom, 2 baths and is in one of the most desirable cities in the East Bay.

What is happening? Why is this home not in contract?

There are a series of reasons.

The keystone to selling any property is the price. All the other marketing is built upon the price. If the Seller and the Agent get that wrong, it all will have been built upon a faulty foundation. When the agents in our office came to visit Pomona, before it came onto the market, the consensus was that the listing price should be $649,000. Fo various reasons the seller decided that they wanted the home to come onto the market at $675,000. Not a huge difference, but it became one of many factors in the why is this home still on the market.
The home itself is in a wonderful area. Not too far from the schools of Albany, within walking distance of Solano Avenue, the El Cerrito BART station and El Cerrito Plaza, but the home itself is a bit eccentric.
Pomona does open upon a wonderful, light filled living room with hardwood floors, a box beam ceiling and a fireplace, but the eating area is small. You move from there to the remodeled kitchen, which, though very nice, has a strange oven placement, off to a corner.
The kitchen opens to the master bedroom suite that was a later addition, and feels like it.
Up some rather steep steps are the two remaining bedrooms, and additional space that has been carved out of the attic. Some families, and that is the main audience for Albany, feel a bit disconnected by the idea of the children's rooms being upstairs while they are downstairs in the master bedroom.
There is also no garage. There is simply a parking pad in the front.
Nome of the things I have listed are deal breakers, but taken as a group, and with more homes coming onto the Albany market, these factors have lead to a home that is still available.
All that being said, if a buyer can see beyond the those eccentric qualities of the home, there could be a bargain to be had in this home in Albany.
525 Pomona has been on the market for a month. The sellers want to talk.

New Home, Used Home

As I'm sure many of you saw, existing home sales were down in volume in March. Today the numbers on new home sales came out, and they were slightly up.
Before I go on, it is worth mentioning that these are nation wide numbers, and as I have been drilling into all of you who read my blog, Real Estate happens on a local level. Even when the pudits are talking about the California Real Estate Market, they are usually talking about Southern California. Real Estate is all about what is happening in your neighborhood, or the neighborhood in which you want to buy, not about the nation as a whole.
Still there are lessons to be taken from these numbers. The Sellers of New Homes are, by in large, developers. To them it is all business and little sentiment. If they numbers add, they will do it. They can;

• Offer incentives to buy a home like upgraded kitchens or floors
• Offer below market financing packages
• Offer incentives such as paying for closing costs or title insurance
• Lastly, though theyt will usually try the above strategies first, they will lower the price.

Since developers sell homes on a yearly, monthly, weekly, daily basis they are very tuned into the market and adjust to it with greater flexibility than say the seller of an existing home.
Existing home sellers, at most, sell a home once every 3-4 years. They are not as tuned into the ever changing market as developers. We saw it in 2005 when it seemed to take almost a full year of bad press, and a downward trending market to get sellers to catch on that they had to change something if they wanted to sell their properties.
Even in a flat market, or even in one that is shifting towards the buyers, a well priced home that shines like a diamond, will sell in days and attract more than one offer.
The entire marketing effort when selling an existing home is biult on the corner stone of a good price based on the inventory, the condition of the home, market conditions, and competition. Beyond that, great presentation like new paint, staging, new counter tops, etc. can make an existing home sell quickly and at a good price in any market.

Did You Hear?

This was a rough news cycle this week. A lot of news got pushed to the side, because of the tragedy at Virginia Tech so you may have missed this piece of news.
On Friday, during a speech to the House Appropriations Committee, Treasury Secretary Henry Paulson said that the housing down turn was at or near the bottom:
"This is a complicated issue, but from the standpoint of the overall economy, my bottom line is we're watching it closely but it appears to be contained,"
Secretery Paulson went on to say that the economy was robust, and that he feels that the crisis in the sub-prime marketmay be coming to an end.

Well...that is interesting. In my previous entry I had similar feelings about our local market, and all Real Estate is local. You buyers should be very aware of these conditions.

The First Quarter

A few weeks ago I wrote about how the market seemed to be taking an aggressive jump as the Spring Real Estate took off. We seemed to be getting into a market of multiple offers, and properties once again going into contract well above the list price. It was a surprising change, and early in the season, I was unwilling to say whether it was just the normal Spring up tick, or an actual shift in the market, though my gut told me it was just a seasonal shift.
We are now a little further into the year, and I am willing to take more of a stand. When you look at home values this year compared to last year, they are basically flat with a slight increase of just .9%. That is from Dataquick.
But what is making it seem like such a lively market, so many offers, so many going over list price?
Part of part of the reason is that there are even fewer homes on the market in the relatively hot areas like Albany and Berkeley. We've never had a large inventory of available homes anyway, and now there are even less. You have the same number of cats, buyers, chasing even fewer mice, available homes, so from the outside it looks like a lot of activity. You also have the situation where sellers have really caught on to what is happening in the market. They could hardly miss it with the nightly news filled with stories about the bubble bursting. Home sellers had to figure it out sooner or later, and for the most part, they have. The result is that they are pricing their properties even lower to match the market. That just makes the cats scramble even more.
That is why in a market that is basically flat when compared to this time last year value wise, even though it can often feel like there is a lot going on.
Sellers should still be happy. A flat market is a lot better than what is going on elsewhere in the nation. Buyers should still be happy too. Instead of seeing home values rise out of reach, they are still where they were last year, and so are interest rates.

Its All in the Negotiations

Of all the skills a Realtor must possess the one that should be in the top five for any client, whether a buyer or a seller, is the agents ability to negotiate. This is especially true in today's market with buyers feeling more in control of the process than they ever have been.
Your Realtor will help you negotiate the price, the number of days in escrow, the number days for the contingencies, whether or not to have contingencies, and then the negotiations that revolve around any discoveries made during the inspections.
The Realtors will be looking after your best interests and working with your instructions, but it is the style with which the Realtor approaches the negotiating that differentiate one agent from another, and, ultimately, the successful outcome.
Some see negotiation as a battle with a clear winner, and a clear loser. They want to dominate the other side. I think this is the wrong approach. It merely invites bad feelings, and can ultimately lead to the end of the contract over petty issues. This does not mean I favor a negotiating style that invites the other side to push me around like a rag doll, and that I will ignore the needs of my client.
There is a midle point in which differences can be discussed in a calm and rational matter. This is a business negotiation, not an emotional brawl. Differences should be categorized from most important to the least, so that the discussions do not get held up or even ended by something trivial.
While staying firm, there should be an atmosphere of "let's see how we can move things forward" prevading all discussions. It is not an ego contest between the Realtors. It is a negotion between a buyer who wants to buy a home, and a seller who wants to sell a property. The Realtors are facilitators and advocates in this process.

525 Pomona, Albany

This weekend I will be holding open this 3 bedroom 2 Bathroom home in Albany.
This home is filled with light, hardwood floors throughout, box beam ceilings and a remodeled kitchen. The large master suite in back opens out to a lovely yard. I will be holding this home open from 2pm - 4:30 on Saturday and Sunday.
This is actually the third weekend of open homes for 525 Albany. Why is this home still on the market? Over 300 people came to see the house on the weekends. It seems to be the perfect size for a new family trying to get into the Albany School district. It is a little eccentric, but charming none the less.
Some of the people who were considering writing an offer for the home saw all the people at the open houses, the location and size of the home, and they decided that there was going to be too much competition, and so decided not to make an offer. This news came from their agents. This would sometimes happen in the Real Estate market we had pre-2005. The perception of a highly desirable home can drive potential offers away.
This is a lesson about having your agent keep in close touch with the listing agent regarding offers. Someone could have walked away with a great value purchase. Someone still might. I predict all those people who wanted to make an offer, but chose not to, will see that 525 Pomona is still on the market, and at least 2 offers will come in next week, and they will get the home at a great price.

The Real Estate Rollercoaster

speculativebubble.com took the average US home price from 1890 to the present date, adjusted it for inflation, and then took that graft and made a roller coaster out of it. Keep your eye on the bottom, right hand corner at the dates as the years go by, and enjoy the ride.

It's Important to Show up

I just listened to offers with my clients for their home on Oregon street in Berkeley. I gave the agents bringing offers for their clients the opportunity to present them to the sellers. Half took the opportunity and the other half simply dropped the offers at my office.
That night I saw clearly how having your agent present your offer directly to the sellers can give your offer a clear advantage.
First let me say that when you are in competition for a home, it is the offer itself, both the amount of the offer, and the terms of the contract, that are the most important features in a successful bid.
But, in a situation where two bids or even a series of bids are close in amounts and terms, it is the agent telling your story to the sellers that can really make the ultimate determination.
My clients were clearly touched by the stories they heard from the agents. It swayed how they thought of each offer, and they felt a real connection to the buyers making the offers. Those offers became more than black and white contracts. They could see the buyers behind all those numbers and words.
It is important that given the opportunity, when you are making an offer to buy a house, that your agent go and tell your story.
It could make all the difference.

What you want.

I was having a discussion with one of my clients the other day about the homes we have been looking at for her to purchase. I was telling her that every buyer, from the person looking for a studio condo to the family looking for the grand estate, always wants a little more than they can afford.
My client always seems to fall in love with that place that is just out of her price range. She said that it was just human nature, and that people, including herself, are greedy.
I told her that it was not being greedy, rather it is the natural desire of any buyer looking for property. It is the desire for value. You just want to know that what you are buying is in fact worth more than what you are paying for it, so you want the extra bedroom, or the bigger family room, or the better neighborhood.
It is always important to be a value buyer, because that is being a smart buyer, but it takes time and exposure to the inventory to really understand when you are seeing value, and when you are simply looking at something that is out of your price range.
In this market value often resides in future equity and equity growth often comes from improving conditions, whether it is an improving neighborhood, adding to the features of a property by fixing things or adding things, or simply taking advantage of a change in the market.
In any Real Estate Market, recognizing true value is the best approach to purchasing a property.
There is a lot to be said for the adage, "Buy the worst home in the best area you can afford."

Don't Panic

Yesterday I got the following message from a loan broker I have worked with in the past;

Many of you have heard that there is a contraction going on in the Mortgage business. This is accurate information and not being nearly as overstated as the incomes which were used to underwrite many of the problem loans leading to this so-called “meltdown”.

The following are areas of concern in our mortgage market and subsequently have brought about a violent reaction by the top lenders in our country and aimed directly at reducing their exposure to the riskier loans.

I read this sobering info this morning..

Loan To Value’s(LTV) of 98% or more combined with FICO scores of 680 or less accounted for 12% of home purchases in 2006 and 77% of delinquencies!

100% financing with Lower credit core borrowers(below 660 mid-score) using a stated income or reduced documentation loan structure. This is the single largest place where we have seen a constriction. It used to be pretty easy to get done but no longer.

100% financing below 620 mid-score, regardless of documentation. This is the 2^nd largest sector we have seen constriction.

This is most likely the leading edge of a vast change in the mortgage market. This is not the end for all of you with FICO scores lower than 680, but it does mean that you have to do more work to qualify for a loan. You may have to put things of for a time to correct your credit score, and to save more money to buy a home.

For you sellers, when accepting offers, be very much aware of the type of loan the buyer is coming with. Really investigate the loan officer. You do not want things to fall apart at the last minute.

1521 Oregon, Berkeley

I helped my clients buy this home three years ago. Now they have a little boy, and they are feeling the need to stretch out, so their starter home in Berkeley is on the market.

This home is a charming 1922 Bungalow with two Bedrooms and one and a half baths. It is affordable and just right for someone who wants their first home in Berkeley. 1521 Oregon has a grand backyard, perfect for parties and BBQ's. Any gardener will relish all the space for planting flowers and landscaping. There is also a detached studio for extra space. It is currently being used as a recording studio.

View the virtual tour at here.

This charming home is on the market for $499,000. Just right for someone looking to start out in Berkeley.

Education

Sorry I haven't posted in a few days. I have a new home coming on to the market this weekend, and 2 new clients. As I have stated before, one of my goals is to have the smartest buyers and sellers on the market.
It is important to have a good understanding of what is happening in the local Real Estate market both when you are looking to buy a home, and when you are selling. This is a first for both my new clients. Both are moving towards a good understanding of the inventory of the homes on the market, what the expected sales price of any given home should be, and the importance of the days on market for any given property and how that affects value.
My buyer is learning about valuating those features she wants in a home, and trying to figure out what she must have, and what she is okey with letting go. Since we live in a market of existing properties, it is hard to find that one with all the features she wants that is also within her price range. Some things she may have to wait for, or install herself.
My seller is learning the importance of pricing a home, and how all the marketing is built on this cornerstone. He is learning about staging a home, and how spending a dollar here may mean gaining $5 at the close of escrow.
Both of them are learning about market value, and how everything is a balancing act.
Education can be a long and tedious process, but you have to be smart about your personal goals, and about the prevailing trends to make the best decisions when it comes to buying or selling a property,

A Link to an Excellent Article in the NYTimes

Sometimes someone else writes something that should just be required reading. In the New YorkTimes this week, Roger Lowenstein has written an excellent article on the preceived bubble bursting in the Real Estate market, and why leveraging your wealth by owning a home is better than renting. It is definitely worth your time.
Just click here to read it.

More Than A Realtor

Being a Realtor has put me in the unique position of being involved with my clients at both an emotional and financial crossroads.
This year it has become even more apparent to me that my career as a Realtor involves so much more than helping people buy and sell their homes.
As I stated in an earlier post the skill set that it takes to be a Realtor today also involves helping people manage their wealth, and leverage themselves towards the next step of their financial plan. This involves counseling them on what is and what is not a good investment, making sure they do indeed have a plan, and, almost more importantly, making sure they have an exit plan.
But, even beyond this, the role of the Realtor can become one of an even more intimate consultant. Buying or selling a home involves not only that next step in a financial plan. It can also be the next step in an emotional plan, and sometimes there is no plan at all.
Unexpected things happen in life; a child is born, a new job becomes available, a partnership ends, an old plan fails, and a new one takes hold.
I have been asked to be the resource for information way beyond Real Estate. I am honored that my clients have come to me to help them find the right person to advise them. Sometimes they just want someone to tell their new story too, and I am always available to listen and offer emotional support when it is needed, and be a resource for specialists when that is needed.
I treasure my relationship with my clients, and I feel like they are a part of my new family.

Spring is Here! Well...Almost

Something strange is happening in the local Real Estate market. On Mondays and Thursdays when I tour, all the other agents I have talked to have been involved in multiple offer situations. I know of 2 homes in the Berkeley Hills that took offers last week, and both of them had more than a dozen buyers competing to buy them.
In a year when we were preparing for, at best, a level market, and more likely, a market retreating in values in the 3% to 5% range, this sudden activity is a bit of a surprise.
Now this could be a few things. Firstly it is Spring, and we almost always experience an up surge in activity in Spring. Though I don't remember this happening last year.
Secondly there is a very low inventory of homes on the market right now, so if you want to buy now, there are fewer choices, so there is more competition for what is on the market.
Thirdly, after a year of being pounded on by the press and the market, sellers are realizing that they are in a different market, so they are taking much more care in pricing their properties. It takes much more careful consideration to price a property to attract the most qualified buyers than it ever has.
So, is this just a Spring anomoly, or is the market shifting again? It's just too early to tell. We should all know in a month or so.

What's in the Future? Part 3

One of the factors that lead to the over heated Real Estate Market of 2000 – 2005 was the easy availability of cheap money. While the Fed was driving down interest rates, the banks, with the permission of the government were putting together loan packages that made it extremely easy for the average American to buy a house.

With interest rates down to 4% on some loans, you could arrange to get a loan with no down payment and no documentation. You could get 5 or 7 year adjustable rate mortgages. You could even get a negatively amortized loan if you wanted to. Home ownership in the United States grew from 50% of the population to 70%.

This easy access to money only further fueled an already hot real estate market. Now all of these exotic loans have begun to backfire on the home buyers who used them. With home values at a stand still or even dropping, those who used zero down payment loans have very little room to maneuver. A zero down payment only works in a Market where values are growing. You can depend on the growing value of your home to make a zero investment into something of value, with the growth of the equity in your property.. In a downward trending market, you are going deeper and deeper into a whole, and rising interest rates are making it cost more each month..

By the 3^rd quarter of 2005 fully half the home loans made were either sub-prime or adjustable rate mortgages. Now that the market has changed 21% of sub-prime lenders have gone out of business and that number will likely increase as more and more people default on their loans. Even the big institutions cannot absorb all the defaults.

By September of this year Freddie Mac is going to tighten up its requirements for loans, and they have already signaled that 50% of those sub-prime loans out there will not meet the tougher requirements. In this arena of lending, there is still quite a distance to fall.

The silver lining in this will be a more controlled lending market leading to a more stable Real Estate market. At least, that is the hope.

How Did We Get Where We Are, And Whats in the Future? Part 2

During the local Real Estate boom of 2000 to the third quarter of 2005, the role of the Realtor changed from that of a facilitator for finding a home, and closing a sale, to a consultant who helped t property buyers leverage their wealth. It is a role change that reflected the change in the perception of Real Estate for the average buyer, and it is a role that is even more important today.
Starting in 2000 the ability to get a loan became easy and money was cheap. Real Estate values were growing by 20% every year, and more and more people began to amass second and third properties, not as homes, but as investments for the future.
Unfortunately these same factors that lead to the explosive growth of property values, were the same factors that have cooled the current market. Speculation drove prices for homes higher and higher furthering the vision of wealth through the purchase of Real Estate. The existence of no documentation loans, low interest rates, no down payments and negative amortization added fuel to the fire. It all had to end sometime.
When the Fed tightened the money supply in 2005 , I think it gave buyers time to really consider what was happening. After being beaten up for 7 years buyers simply were not going to take it anymore. It really took a couple of months for the Real Estate market to change course, but for we Realtors in the 3^rd quarter of 2005, it felt like it all changed overnight.
All Real Estate is local. National trends are interesting to look at, but in the end, the most valuable information you can get is about the local market where you are interested in buying. While Real Estate prices fell in many areas in the United States, in the Bay Area prices actually rose. It was a mere 2%, as opposed to the double digits we were used to, but it was still a rise. For 2006 buyers, for the most part, sat back to see what the market was going to do. The volume of sales dropped by 20% in 2006, and buyers did not really come back to the market until the last quarter of 2006.

My next blog will bring us to the present day with the crises in sub-prime lending, and what the market has in store for the future.

How Did We Get to Where We Are, and What's in the Future? Part 1

On Wednesday some of my colleagues and I went to hear a speech given by Carol Rodoni. Carol Rodini was the President and CEO of Alain Pinel Realtors, and is now a Real Estate Consultant.
Part of understanding where we are in today's Real Estate Market is understanding where we have been.
In the year 2000 there was a great crash in the stock market when the tech sector blew up. Many saw reductions in stock values of up to 50%. Money fled the stock market, and found a new home in Real Estate. At the same time the government opened up the loan process and the Fed made it easier for the average American to leverage their way into home ownership. This was done by lowering interest rates, and allowing for more creative loan packages, i.e. adjustable rate mortgages, zero down payments, no documentation loans, etc.
Home ownership zoomed from 50% of the population to 70%. Renters became Buyers and the Real Estate Market started to heat up rapidly.
Buying Real Estate became not just a way to find a home, but rather a way for the average American to leverage wealth. With 20% yearly growth in Real Estate values from 2000 - 2005, speculative property buying began to take over the market, which lead into even more hyper growth in Real Estate values.
In my next post I will write about where this has lead us, and where we are going.

Can You Still Flip a House in Albany California

On last Thursday's tour I saw a home in Albany that was such a wreck the rain had come in through the roof and had flooded the kitchen. The listing agent was there sweeping the water out the kitchen door to the backyard. The house has 2 bedrooms, is about 1200 square feet, and is definitely a fixer.
It brought to mind, is it still possible, in todays Real Estate market, to buy a home in need of repair, fix it up, and sell it to make a profit? This fixer in Albany is priced at $479,000; about $400 a square foot. For the last 6 months, homes in Albany of this size have sold for around $560 a square foot.
That is a pretty tight margin. Add to that the fact the homes in Albany have always sold for a premium, because of the excellent reputation of the Albany schools all the way through high school. A home, even a fixer,that is priced around $475K will draw a lot of attention from other speculative buyers who will want to flip it.
Its time to delve deeper into the data. Those 2 bedroom, 1200 square foot homes that sold at the top of their class, $700K+ had an average per square foot sold price of $640.
That is still a pretty tight squeeze considering construction costs, and the fact that these homes that sold above $700K were in excellent shape with added amenities, kitchens, bathrooms, and aesthetic charm that buyers are looking for.
Speculative buying is still part of today's Real Estate market though not as much as it was pre-2006. The margin for profits are slimmer, but there will always be some speculation in the market as long as there is even some profit.
Just like everything in a tightening market, you have to be smart in your choices, and be focused on what the buyer's are looking for in a market that is now favoring them.

What's Happening Today

What I am about to tell you is purely anecdotal, just what I have seen and heard about the local Real Estate market in the past 2 or 3 weeks. I understand that it goes against the trends everyone else is writing about, but it is just my experience in the market.
It seems like things are tightening up a bit, especially over what was happening last year. I am hearing about, or participating in, many more multiple offer situations than I would expect in a slowing market. I think this can be chalked up to 2 main factors.
One is that sellers are getting wise. Through 2006, sellers still believed they were in a pre-2005 market. They believed that they could price their properties at any price, no matter how high, and get multiple offers. It has taken a year, and many newspaper and magazine articles, but they now know the realities of today's market and they are pricing their properties with more realistic expectations.
Secondly there are simply fewer properties on the market, so, even though there are fewer buyers, they are chasing far fewer homes.
Thus the phenomenon of multiple offers, less homes at lower prices and everyone, agents, buyers and sellers, getting smarter.

The Thursday Broker's Tour

On this Thursday's Brokers tour the one home that really stood out above all the others was a home at 59 Vicente in Berkeley. This home is in a very select price range at $3.4 million, and I know this is going to sound strange to most of you, but this is actually a very well priced home.
As a Realtor, I do get the opportunity to see many homes in the million dollar and over range, and many has been the time when I've muttered to my self, "A million dollars for this? Why?"
This is not the case for 59Vicente. This is a 3 bedroom 4 and a half bathroom home of 52oo square feet sitting on a 10,750 square foot lot just above the Claremont Hotel. It was built in 2006, and all the fixtures, from the heated floors, to the bathtubs, and 2 person showers, to the wall finishes have been well thought out and considered for their aesthetic appeal. It is a somewhat masculine home, two men lived there, but it could be easily converted to a more family environment with color and some softer furnishings. It is very modern and sleek, but you can really feel the care that went into all aspects of the home. The balconies over look a small wooded valley, and the out door seating areas a very serene. With its fabulous kitchen that boasts a built-in espresso maker and man made quartz counter tops, this home was made for entertaining.
If you are around this Sunday, give yourself a treat and visit59 Vicente in Berkeley.
By the way, the home I featured in last weeks Thursday Tour, gorgeous Craftsmen in a so so area, got 6 offers. Its a good lesson. A well priced, special property can overcome the weaknesses of a neighborhood.

A Little Bit of This and a Little Bit of That

Yesterday Fed Chairman Bernanke testified before the Senate that he believed the economy to be strong and that there should be slow to moderate growth for the year. He also indicated that inflation was no longer an issue, and the Fed would not be raising rates in the near future. Wednesday's stock market rallied on this news, and the DOW rose to a new high.
Today during his second day of testimony before congress, Bernenke seems to have become a bit more guarded. He saw a strong economy, but with inflation still being the major obstacle. Bernanke warned that the Fed was still on guard and ready to battle any signs of inflation with higher interest rates. Again, the markets reacted to Chairman Bernanke's more nuanced statements.
Congressman Barney Frank seemed to sum up the Chairman's testimony when he told Bernanke, "It seems a little odd to say 'here's what I think, but it might also be worse than I think."
This week interest rates dribbled down again for 30 year fixed mortgages.

The Numbers for 2006

Today's post is all about the numbers. Some times that is all my clients want; some facts to mull over and chew. The California Association of Realtors (CAR) has come out with their statistics for the past year 2006.

• First time home buyers in 2006 were a smaller share of the Real Estate market, dropping from 30.5% in 2005 to 27.1% in 2006.
• Those using zero down payments increased dramatically from 4.5 % in 2000 to 21.1% in 2006, and of those using zero down payments, 2/3 were first time home buyers.
• 6% seems to be the magic threshold for interest rates and market activity. Since 2002 as interest rates fell below 6% market activity increased, and activity slowed as it approached 6% for the years 2003-2004. Activity has decreased as rates went above 6% starting in late 2005.
• Bay Area home sales decreased 10% in 2005 from 2004, and in 2006, home sales decreased 19% from the previous year.
• The state wide median sales price increased 14% on a year to year basis until we reached 2006 which closed out with a 2% increase for the year.
• The typical first time home buyer was 35 and married in 2006. Typical repeat buyer was 45.
• The typical home seller was 50.
• Median net cash gain peaked in 2005 at $220,643, and declined in 2006 by 8.4% to $202,000 for the first time since 1997.

Those are some of the numbers for 2006.

The Comfort of Home

The rains have finally come to the Bay Area. In the business of Real Estate we can sometimes forget that the whole point of buying a home goes way beyond investments, loans and the conditions of the market. In the end it is about finding a place to settle in and to find comfort in. It is warm, safe place in which you can gather the people you love best. Rainy days can bring back the true meaning of "home" as you cozy down against the weather.

Here is an easy recipe for Mac and Cheese. It is truly the homiest of dishes, and this recipe is easier than the box version. You don't even have to boil the noodles. A green salad and a glass of wine makes this a meal.

Easy, Great Mac and Cheese

2 Tablespoons Butter

1 cup Cottage Cheese

2 cups whole milk

1 teaspoon dry mustard

Pinch cayenne

Pinch fresh nutmeg

½ teaspoon salt

½ freshly ground black pepper

1 pound extra sharp cheddar cheese grated

½ pound elbow macaroni

Preheat oven to 375F and position rack to upper third of oven.

Use 1T of butter to grease your pan.

In a blender, puree cottage cheese, milk, mustard, cayenne, nutmeg, salt and pepper.

Pour puree into a large bowl, and fold in the grated cheese and uncooked macaroni. Reserve ¼ cup of cheese for the topping

Pour into pan, cover tightly with aluminum foil, and bake for 30 minutes.

Remove foil and gently stir macaroni. Sprinkle remaining cheese on top and put back in oven, uncovered. Bake for 30 minutes.

Allow to rest for 15 minutes before serving.

You can add ham and frozen peas to make it more interesting, or some julienned sun-dried tomatoes to give it some punch.

Rainy Thursday Tour

It was a strange tour today. After a Monday Tour that was full of new homes on the market in Piedmont, the Thursday Tour was strangely quiet. I wish I had a spiffy theory about it, but I don't.
There was one surprise on tour today, 954 43rd Street in Oakland. This home is located just below Market Street in North Oakland. It is a surprising listing, because it is a gorgeous Craftsman in a neighborhood in which you would not expect to find one. It is full of wonderful details like the original built-ins and wooden pillars, and it sits on a fantastic 5000 square foot lot It is a 2 bedroom home, but all the rooms are generously sized from the formal dining room to the wide hallway. It is a lot of house for $510,000. You just have to decide whether you like the area or not.

After the Superbowl

Except for the half time show with Prince and the first 7 minutes of the Superbowl, the game was its usual once a year bore. The commercials weren't even that good.
But, as I thought, this week sees a flood of new properties on the market.On the Monday Broker's Tour it was like the city of Piedmont just made it to the map with a half dozen new properties on the market.
I was talking to a loan broker this morning and 30 year fixed mortgages are at 6.375% percent, and adjust ables are at 6.25%. With so little difference between the two, most buyers are moving towards the 30 year fixed mortgage, which is actually healthier for the market in general. One of the things that lead to the hyper inflated Real Estate market of the last few years were the overly creative packages that banks were offering that allowed buyers to offer way more for a property than they could normally afford.
In fact, as my loan broker told me, those people who bought homes with 5/1 ARMS are now showing up seeking to refinance their loans. In the beginning they were paying as low as 4% for their mortgages, but now they are looking at payments as high as 7.5%. Of course when you tell someone that they will be paying 6.375% when they have been paying 4%, you still get a scowl, eventhough you saved them from an even higher payment.

Waiting for the Superbowl

Today's Broker's Tour was very small. The feeling in my office is that agents are waiting until after Superbowl weekend to bring their properties onto the market. The logic being that no one will be looking at open homes on Superbowl Sunday.
I have always found Superbowl Sunday to be a very productive day for open houses, and those buyers who are out looking at homes on that day, are very serious about finding a new place to live. We Realtors are really good at coming up with theories.
One home that was on tour today, and stood out above the others was 31 Idaho out at Point Richmond. For all of you who have not been out to Point Richmond, along 580 on your way to the Richmond Bridge, it is a wonderful hidden village full of great little cafes and shops right by the water. 31 Idaho is a charming 1908 California Bungalow with tons of updates, and all the storage you will ever need in the attic and the basement. The detached garage was converted to a little studio with a half bath. The home is within walking distance to downtown Point Richmond, and it offers a great little retreat, not too far away, and not too close. Worth a look!

All Mixed Up

The NAR (National Association of Realtors) continues to take a rose colored view of the Real Estate Market, despite what the numbers are telling them. They have called 2006 the third best year for Real Estate, after 2005 and 2004. This despite the fact that sales for December 2006 dropped almost 8% when compared to December 2005. This is all of course based on National statistics, not local.
Locally, for 2006, we did see a rise in value of 3.6% over 2005, but I think there can be no denying, even to the most casual observer, that home values in Oakland, Berkeley, and Richmond have taken a step back. I definitely had buyers who were able to get a lot more house than they could have gotten in 2005 for the same amount of money. I really don't know what to attribute the statistical rise in value, however modest, to the values in 2005.
I do continue to believe that Buyers will be more in the driver's seat this year, and now, more than ever, there are going to be great values to be had.

Thursday Broker's Tour

I continue to be amazed at how fast homes are coming on the market this year. With January being one of the slower months for real estate, and the slowing of the market in general, I am still seeing, each Monday and Thursday, more and more homes taking an early leap onto the market.
One property that stood out amongst all the rest today was a huge home at 785 Kingston in Oakland near Piedmont Avenue. The home is a grand old place sitting on a wonderful lot with mature trees. The home itself boasts over 3000 square feet, and this does not even include a massive attic space and basement. It also has a well thought in-law that was carved out of the first floor. This home is a fixer, needing a new roof, foundation work and general updating, but it is priced with this in mind, $895,000.
It has great bones, as we agents say, and is well worth the investment to bring it into the 21st century. It is in good enough shape to live in while the work is being done, and you would definitely be living in style.

Interest Rates Edging Up

For the week ending January 18th, long term interest rates have edged up again, this according to Freddie Mac. Though the increase is only slight, it does represent the highest rate since November.
Still, when you look at the numbers, the rise is a minimal one. 6.23% for a 30 year fixed loan versus 6.21% for the previous week. This does represent a 13 basis point rise over last year at this time.
For a definition of basis point, click here.

My Sunday Open House

Yesterday I held a colleagues listing on 75th in East Oakland Open. There seems to be a lot more activity on the market than I was expecting for January. While not a flood of new homes, I saw about a dozen homes open in the area of my open house, as well as many more new listings on the Monday and Thursday Broker's tour.
I had originally expected that most people would be holding back for the much more active market in the Spring, but I think I am going to have to reevaluate my opinion. Each new week of 2007 there are more homes on the market, and not just the ordinary 2 bedroom homes, but also the larger, higher end properties.
There may not be any waiting until March for the smart buyer. Sellers are coming out early.

Best Burger in Berkeley

I have found the best burger in Berkeley, and a wonderful little café for breakfast and lunch. It is called 900 Grayson, right at the corner of Grayson and 7th Street. It used to be just another greasy spoon in the industrial area of Berkeley. It was bought and revamped and it has become a stylish café offering homey food with a modern twist. The hamburger comes stacked with little onion rings and bacon. It is the beefiest tasting burger I have had in a long time.They also make a fantastic Cobb Salad. Check them out

Martin Luther King Jr.

I Have a Dream

The Thursday Broker's Tour

It's Thursday, and another Broker's tour has come and gone. Things are just starting to wake up on the market. While the volume is still low, the larger more expensive homes are starting to come out, and as all listing agents know, the real way to a Realtors heart is through the stomach. Thursday Tour always has a lot of food at each stop.

If you read the buzz from the National Association of Realtors (NAR), and the California Association of Realtors (CAR) and their economists, you will hear that the market will start moving upwards come the Spring. I am a little less sanguine about our local market. Most Industry analysis seems to take the position of the listing agent and the seller, and they are telling the seller's that come mid-year, there will be a stiffening of the market, and perhaps even an upward swing in prices.

I feel that sellers will be lucky if things just remain even for the rest of the year, and they should really look for a 2% to 5% decrease in value, with the hopes for a leveling in the market in 2008. Most economists point towards a rise in interest rates to 6.5% to 6.8% for a 30 year fixed loan by the end of the year.



I know I keep harping on this, but 2007 is going to be a great year for buyers.

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Monday's Broker Tour

Today was the Broker's Tour for most of Oakland. There is still not alot of new listings coming onto the market, but I think in the next 2 months there will be an onslaught of new home listings.
With the market being what it is, listing agents are being careful to bring homes onto the market with as much advantage as they can give them. This means that most listings will be staged and painted, and many of the repairs will be done and all the reports will be available.
Timing a sale to get maximum effect is part of the stratagy, and a March introduction of a new property when more buyers are traditionally out looking is part of that.

Most observers, me included, think that the market has corrected for the most part, and that now we are in a leveling off period. Part of this is because towards the end of 2006, buyers started to become active again. They saw that home prices had dropped, and interest rates were about as low as they were going to get. This put a little squeeze on the market that leveled home values out at the end of the year.
This does not mean a return to the over-heated market we have known in the Bey Area. It means just another factor that is returning us to a more sane, and even market.

I still see 2007 as a great year for those looking to buy Real Estate.