Need to sell to move up or move down?

Need to sell your home to move up or down?

This is the typical conundrum that we face in our market: there are fewer homes on the market because, while it can be “easy” to sell your place in this market, it is not so easy to buy your replacement property.  This is why many people have postponed their real estate plans.

There are a few ways around this, all requiring to be well prepared:

-       Arrange for temporary housing, with the help of your friends or family: a short-term solution sometimes can be found if you turn to relatives or friends who may have a second home, a vacant rental unit, or even room in their house.  This is not ideal but could enable you to sell your house first, and have less pressure to find the replacement home.

-       Place a contingent offer: “subject to the sale of your property within ..xx days”.  This refers to a condition in your offer to purchase, with the condition that you will be “in contract” on the house that you have to sell within so many days.  There is quite a bit of preparation to be able to achieve that: you need to be ready to go, on the starting blocks, for the sale of your house - before you place an offer on another house.  That means all inspections done, all repairs done (if any), and the whole marketing file ready to go.  Usually, once your offer has been accepted, and if it is well negotiated, you have a few days before the other party can cancel on you, so that you do not find yourself having sold your home, and with no place to go.

-       Sell first, and arrange for a rent-back.  This means that you take an offer subject to you being able to stay in your home for a given time, renting it from your buyers, to enable you to find a replacement home and buy it.  If your buyers are buying with a new loan, the rent-back will most likely be limited to a maximum of 2 months.  If they buy all cash, then this limit disappears.  This gives you an additional chance that you will not have to move twice.

-       Arrange for a “bridge loan”.  This solution, in the most recent version, will let you borrow up to 70% of the value of both homes at a high interest rate for a few months, as long as you qualify for the final (purchase) loan.  The goal will be to purchase, then sell as soon as possible, and refinance the bridge loan into a "normal" loan.  An alternative is to get a line of credit on the 1st house and use the cash for a larger down payment on the second house, but in that case your lender will need to see you qualify for both loans + the line of credit.  You avoid that with that new "bridge loan".  It can be expensive, but if it is only for 2 to 3 months and it does enable you to move, it can be worth it.  Call me for further information.

Unfortunately, there is still currently no real bridge loan, as they existed a decade ago (see my previous blog from 2013:  "But, where did the old bridge loans go??").  But it is nonetheless possible, with good preparation, to “sell and buy”.  It is made a little easier lately by the fact that the local market is slowing down: fewer multiple offers, and more properties languishing on the market.  The inventory is going up nearly everywhere, and some sellers are more willing to accept a “contingent” offer, if it is otherwise a good offer.

For this to happen, it is also important to be aware of whether it is easier to sell a home or to buy one in the exact locations you are considering: the location you leave, and the location you want to buy in.  Your Realtor, a local specialist, is essential to help you with the research.

Thank you for reading - Let me know if I can help you with your real estate plans.

Francis

Silicon Valley real estate specialist

Detailed, local trends etc...

Current mortgage rates

A worthy local non-profit to remember: Community Services Agency in Mountain View.  Meeting you there next week to serve food? On Tuesday afternoon.

First-time home buyers

First-time home buyers make about a third of all home buyers, nationwide, according to the National Association of Realtors. 

The median age of a first-time buyer is 31, (making about $70k), while the median age of a repeat buyer is 53, (making nearly $100k).  It is safe to say that they do not have the same priorities.

While first-time home buyers usually settled in the past for a cheaper “starter home”, there are signs now that more want to have a home for the long term, holding back for a home that will work for them for a much longer time.  70% are willing to wait, rather than settle for that cheaper, smaller house with some repairs. 

Since we have been faced with a severe scarcity of “starter homes” for sale, compared with a few years back, the price tag of those properties went up drastically.  It is possible that first-time home buyers find that the price is not worth it any more and prefer to wait for more savings to buy a larger first home that will serve their needs for many more years.

Per the Residential Specialist (trsmag.com) the main home features that first time home buyers like most are, in order:

- updated kitchen and bathrooms (81%),

- an open floor plan (59%),

- low maintenance characteristics (43%),

- walkable communities (36%),

- energy efficiency (20%),

- cell phone service and wifi access (19%).

Those feature preferences are definitely evident in our market in the Silicon Valley, and with the exception of the last one, I think the order is pretty much the same.  Here, phone reception and wifi access is also close to the top of the list in my experience.

Thank you for reading!

Let me know if I can be of assistance to you, or someone you know, with real estate questions.

Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates
A worthy local non-profit to remember: Community Services Agency in Mountain View

The State of the Nation's Housing - 2016

The State of the Nation’s Housing - 2016               

With this last report from the Joint Center for HousingStudies of Harvard University, we have a comprehensive look at the state of the US Housing.

In it, one can find important stats which can be found here and there in various real estate articles and publications, - and in some of my blogs, like:

Inventory (fig. 10, page 10): 

-       There are 1.9% fewer existing homes for sale in the US than one year ago,

-       7.8% fewer entry-level homes for sale,

-       New home sales still at their lowest, for the past 25 years (although the inventory of new homes for sale went up by 8.2% in 2015, which is a step in the right direction) - see page 9 and 10.

 

Homeownership:  fewer people own their home in the US:

-       Homeownership rate is much lower than before the 2008 crisis, over all at 63.7% (see page 19),

-       This is the case in pretty much all of the age groups (page 2).

-        The number of renters has increased by 9 million in the past 10 years, with vacancy rates falling and rents climbing, as we all know (especially in the Bay Area). Not so well known: people in their 50s and 60s make up the largest part of the increase in renters.

-       The number of renters paying more than 50% of income for housing jumped by 2.1 million, to a total of 11.4 million. (page 4).

-       A growing supply of new housing being built may help ease these conditions.  Something to follow up on …

Affordability:

-        The percentage of all households that can afford to purchase a median-priced, single-family home is called the Housing Affordability Index.  It is 60% for the US.  Compare this to California: 30%, and the County of Santa Clara: 20%

-       The share of adults aged 20-39 with student loan debt went from 22% in 2001 to 39% in 2013, while the average amount owed went respectively from $17k to $30k;  - this has an impact on the housing market as a whole: fewer homes sell as a consequence.  Since housing makes a good part of the economy, one could deduce that it is not good for the US.

-       Homebuying activity is much lower than before 2007, but is now on the uptick (pg.21).

 

Property value appreciation:

-       Very uneven, depending on the area.  Some areas still lag in appreciation (pg 11). Some areas are higher than at the peak before the 2007 crisis, and some are still way below.

-       Of course, overall, fewer homeowners are “under water”.   

The report, for those interested, is a treasure trove of fascinating information about our society and the US housing situation.   In trying to keep some perspective on the real estate market locally in the Bay Area, I find it enlightening, and offer the following graph that I keep over the years:

click on the graph for better viewing.

Thanks for reading,
Francis

Silicon Valley Real Estate
Smart local Stats and Graphs 
non-profit organization worth noting: Partners for New Generations.

Foreign buyers - California - US

The number of sales to foreign buyers rose once again over the past year, although international buyers are shifting their preferences from luxury homes to less-pricey properties.

NAR (National Association or Realtors) economists think the change in the price of homes international buyers are after may be due to overall higher home prices, along with a stronger U.S. dollar, which both cost foreign buyers more these days.

“Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence” all had an impact on foreign buyers over the past year, said Lawrence Yun, NAR’s chief economist.  “While these obstacles led to a cool down in sales from nonresident foreign buyers, the purchases by recent immigrant foreigners rose, resulting in the overall sales dollar volume still being the second highest since 2009.”

Foreign buyers purchased $102.6 billion of residential property in the U.S. between April 2015 and March 2016, according to NAR’s report. The number of properties purchased rose 2.8 percent to 214,885. The value of homes bought by foreigners was typically higher than the median price of all U.S. homes.

Experts say a slight drop in dollar volume is due to the types of properties purchased, and the locations of those properties. There are signs that foreign buyers have begun looking beyond higher-priced markets like San Francisco and New York to purchase properties in smaller, less-expensive cities in the Southeast and Midwest.

Chinese purchasers continued to outpace all others, with their dollar volume exceeding the total of the next four ranked countries combined. Their dollar volume of sales, at $27.3 billion, was three times as much as Canadian buyers, who were ranked second. Chinese buyers also bought the most expensive homes at a median price of $542,084.

Five states accounted for half of foreign buyer purchases, according to the NAR report: Florida, (22 percent), California (15 percent), Texas (10 percent), Arizona and New York (each at 4 percent).

 It is interesting to note that California is home to about 25% of all of the foreign-born population of the US.  Florida has only 9% of the foreign-born population of the US, as shown on the graph below:

 

Thank you for reading,
Francis
 

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates
A worthy local non-profit to remember: Community Services Agency in Mountain View.

California: Millennials - Baby Boomers

The definition of a Millennial is not straightforward as evidenced by the many resources found online. However, if we follow the general guidelines of the Pew Research Center we can agree that these would be the people between the age of 19 and 35 as of 2016  (i.e. born between 1981 and 1997).
For the 3rd straight year nationwide, millennial homebuyers made up the largest part of all homebuyers: 35%, edging out Gen X (26%), boomers (31%) and the silent generation (9%).

Lots has been said and written about the level of indebtedness found associated with this slice of the American population (see for instance the article by Maya Pope-Chappell that I show on my previous post on my FB page:  "buried-in-debt millennials...").  Because they are the largest part of all homebuyers, we can only assume that more people nationwide would be engaged into the process of owning a home if the Millennials were not so saddled with student loans.  This could have in turn very positive repercussions on the US economy as a whole.

In California, these are some of the stats for Millennials and Baby Boomers (born between 1946 and 1964):

Click on the picture to see it larger.

Thank you for reading,
Francis

Silicon Valley Real Estate
Smart local Stats and Graphs 
non-profit organization worth noting: Partners for New Generations.

News from the trenches .... in the Silicon Valley.

Taking the pulse of the local offices, and managers and agents in the local cities.  It does not get more "down to earth" and "raw" than that!   ;-)

SF Peninsula – Listing inventory is steadily increasing in the Burlingame area, and so are sales, according to our local manager. Across the hill in Half Moon Bay, there has been a continuous increase in inventory. Our local manager provided this update for the area of Half Moon Bay, El Granada, Montara, Moss Beach, and Pescadero market update: The average listing price is $1,428,716, highest listing price is $3,388,888, and the lowest listing price is $699,000. Pending Average listing price is $1,372,445, highest listing price is $1,988,000, and the lowest listing price is $785,000. Sold average listing price is $1,062,552, the sold price is $1,071,980, days on the market is 14 days. ...  Our Menlo Park manager said the local market is steady but cautious. No throwing money at houses now like caution to the wind. She adds that sellers are more likely to look at a pre-emptive offer now realizing that we could be close to the ‘top of the market’ if anyone can really see that without it being behind them.  Our Redwood City-San Carlos manager reports lots and lots of frustration out there for everyone (sellers, buyers, agents). It’s a definite alteration in the market (which was needed). Only the ideal homes with the ideal location and the ideal price are selling quickly. All the rest are remaining on the market with very little, if any, showings. The San Mateo market has slowed down, our local manager says. Our Woodside-Portola Valley manager says that
Woodside continues to be a good/bad market. It is a month to month thing. Big buyers are out there but always waiting for the RIGHT house. The market is feeling cautious, she notes.

Silicon Valley – Our Cupertino manager says homes are staying on the market longer and need to be priced right. Open houses are spotty. That can be a good thing because agents have more chances to engage visitors in conversation, and perhaps get new clients. She adds that the luxury segment has been slowing. In the Los Gatos area, competition remains heavy for entry-level homes listed under $2,000,000. More inventory is hitting the market in the $2,000,000 plus range. Our San Jose-Almaden manager says we’re starting to see an increase number of active listings as well as a lower number of homes pending in Santa Clara County. The available inventory is actually higher than the number of available in 2014. Not surprising were the lower number of units sold for May. There were 35 properties sold in Almaden for the month which is down 25% from last month and 18% from the previous year. Blossom Valley was slightly better with a total of 101 homes sold for the month which is down 8.5% from the previous year. Cambrian was almost flat, with 78 properties selling for the month which is just down 2.5% for the previous month and year. Santa Teresa had 27 homes sold which is down 16% from the same time last year. Willow Glen had a sleepy Memorial Day week. Sales were slow and not many new listings came to the market. The following week things started moving again we had one of our better sales weeks and listing inventory is back up to 92 units. We are still hovering at 3-4 year highs for active listing inventory. The local market seems to be driven mainly by price point. Anything under or around the $850,000 price point is drawing lots of attention and still attracting multiple offers well over list price.

It is my experience that in Los Altos / Mountain View / Palo Alto the market is a little slower like elsewhere, but still quite active: anything priced right is selling quite well, even if sometimes it is not right away (like the first week).  I think the consensus is that prices are going to be flatter unless the property is among the most desirable in its category (and not overpriced).
The least expensive house in Mountain View sold in April for $1,050,000.
The least expensive house in Palo Alto sold in February for $1,325,000  (with a lot of 2,875 sq.ft.).

Thanks for reading, and hoping each finds his/her own area in the above ;-)
Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates

non-profit organization worth noting: Partners for New Generations.

Direct news from the City of Mountain View Affordable Housing initiatives.

The City of Mountain View has earmarked $36 million for affordable housing.   (See: "The View of Spring/Summer 2016).

Of these funds, $22.25 million were allocated by the City Council to contribute to a project  of a new 116-unit affordable family development located at the corner of East Evelyn Ave and South Bernardo Ave.  This project aims to benefit people with incomes at or below 60% area median income (AMI), with a particular focus on those who live or work in Mountain View.  This development by ROEM Development Corporation is anticipated to be fully occupied by late Summer 2018.

Another project by Palo Alto Housing Corporation is a 67-studio unit development located at 1701-07 W. El Camino Real.  It will provide 30 units of veteran housing with the remaining units available to extremely low-income households earning 30 % AMI or less, and very-low income households with annual incomes at or below 60% AMI.  Here the City Council reserved $8 million funding in Oct 2015 and the completion of construction is anticipated for late 2017.

For more information on these projects, or to sign up on the interest list for the proposed affordable developments, go to the Affordable Housing tab of the City of Mountain View web site.  

Separately, but in the same vein on the affordable housing subject, the City is updating its companion unit regulations to allow for and encourage additional diverse housing opportunities.  What is more commonly known as "granny units", or "in-law units", or "accessory dwelling units" currently need to fit fairly strict guidelines, some of them laid out in this part of the City of Mountain View "City Code" page (Chapter 36 - Zoning).
Will we see loosening of the guidelines soon?  Some people like the idea. 

Thank you for reading,

Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates

A non-profit of interest:  the Salvation Army - Silicon Valley.

Is it too hard to get a loan nowadays?

Mortgage lenders are easing up on credit, but not much…. 

“Credit is expanding very, very slightly from absurdly tight levels”  said Laurie Goodman, Ph.D., Director of Housing Policy at the Urban Institute.  (see CAR's magazine - Nov/Dec 2015).

The Institute’s Housing Credit Availability Index (HCAI) measures the probability of a loan ever going 90 days delinquent.  Based on the Index, the fourth-quarter 2015 default rate was 5.6%.  As a comparison, the average default rate for the whole mortgage market in the years 2001 to 2003 was 12.5%, and considered standard. 

Lenders are taking much less risks nowadays, and it shows in the current process that buyers have to go through right now in order to get their loan.  Underwriters have to show that they have been super careful.  As loose criteria lead to abuses - as we have seen too well 6-8 years ago, this is a good thing. But current criteria are too tight for some, who would like to see more "willing and able" buyers have access to home ownership.  Indeed the renting alternative can be brutal and in some cases more costly, actually. 

"Current criteria" also include the lack of bridge loans, which were so prevalent up until the financial crisis.  In my opinion, this is one of the main reasons why the market is currently so tight: most people who would like to move up, or down, do not have the means to qualify for both houses, which is what lenders currently demand.   Before the crisis, banks would only ask the buyers to qualify for their new purchase, not both the new purchase and the currently owned home.  All they wanted to see was some proof that the currently owned home was going to be sold (i.e. a listing agreement with a Realtor).  But this is not the case any more.
The reason why bridge loans are not available is a mystery to me: there is no risk at all for the banks in the Bay Area (and many other appreciating areas, see my last blog on underwater properties), to lend money on a move-up or down purchase. The demand for housing is so strong that the previous home will sell very fast.  More houses sold means more loans made by the banks, doesn't it?
These new tight lending rules certainly contribute to the lack of inventory, which also make it harder for buyers to make a purchase.  I have several clients would have moved by now if real bridge loans were available.

As is often the case, the pendulum swung too far the other way in my opinion.

Thanks for reading,
Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates
A worthy local non-profit to remember: Community Services Agency in Mountain View - our last event there.