A Bet That Prices Will Appreciate
Palo Alto Weekly reports from California. “At Classics at Monroe Place, a development of 26 homes on the former Palo Alto Bowl site at 4329 El Camino Real, four homes previewed on Saturday, July 13. Bids were proffered by 6 p.m. Sunday and offers accepted by 6 p.m. Monday. The prospective new owners had 48 hours to back out. Officially, the houses were on the market for six days. The housing market has been competitive this year — and subject to bidding wars — so the quick sale was not a surprise to local Realtors.”
“The four homes were all three-story, a little more than 2,000 square feet. Two were free-standing; the other two shared a wall. The base asking prices were $1.51 to $1.62 million. ‘It’s not unusual for something to sell this fast,’ noted Coldwell Banker, Palo Alto, agent Nancy Goldcamp. ‘Especially new construction and in entry level.’”
The San Francisco Examiner. “After a meteoric recovery, San Mateo County’s residential real estate market might be flattening, but that has not driven down prices, according to a recent report. Susan Tanner, a real estate broker with Dreyfus Properties, said cooling off after a spring run-up on housing is typical in the county. Current home prices — with a median value of $960,000 — will likely hold for the remainder of the year, Tanner said. Even in those cities north of Menlo Park, entry-level homes are running for about $1.5 million, Tanner said. And many buyers assume they have to bid at least 10 percent above the asking price, which still can be insufficient to secure a deal, Tanner said.”
“The homes that are hitting the market are receiving multiple offers. ‘There were 17 offers for a house listed for $900,000,’ Tanner said.”
The Mercury News. “The median sales price for all types of homes in the nine-county Bay Area jumped 33 percent to $555,000 in June, the largest annual increase in at least 24 years. But in a reflection of the small number of homes on the market, the number of sales dropped sharply in a month when they typically increase, according to DataQuick. ‘Three factors that got us to this amazing yearly price gain are ultratight inventory, ultralow mortgage rates and record or near-record levels of investor purchases,’ said Andrew LePage of DataQuick. ‘Now all three are changing in a way that suggests these kinds of price increases won’t continue for long.’”
“Julie Pavlova lost out on two homes to offers that were $50,000 and $20,000 more than hers. Now she is buying a home in South San Jose for a little less than its owners’ $670,000 asking price. After selling her townhouse in less than a week in June for $165,000 more than she paid for it a year ago, Pavlova said she shopped around for about month and saw the market getting a little less intense. ‘I’m not sure if it’s interest rates going up or what the reason is,’ she said. ‘It’s gone down a little bit price-wise, and fewer people coming in with these huge offers.’”
The Santa Cruz Sentinel. “The median price for a single-family home in Santa Cruz County was $595,000 in June, spurring more people to put their homes up for sale. The recent increase in interest rates is making it harder for buyers on the low end and may keep values from rising further. Sally Bookman of Keller Williams, who has been in real estate since 1974, cited an example of buyers who had qualified at $540,000. ‘Suddenly they can only spend $515,000,’ she said.”
“The upside of rising values is more choices for buyers. ‘We’re seeing twice as many listings coming on,’ said Bookman, noting 16 pages of listings for brokers a week ago Thursday compared to the six to eight that had been typical. She sounded a cautionary note for sellers. ‘A lot of people are pie in the sky,’ she said. ‘They don’t want to list where we feel they should be. … You have to price very accurately.’”
From Bakersfield Now. “The local real estate market is making a comeback, but local experts don’t think it’s headed for another so-called bubble. Long-time appraiser Gary Crabtree says home prices in Bakersfield have gone up 36 percent in the last 12 months, but he predicts a ‘more normal’ market is ahead. ‘Housing prices are rapidly escalating right now,’ Crabtree told Eyewitness News. ‘As of today, for the month of May, our median price is $188,000.’ He compares that to data showing the local median home price at $175,000 in May of 2004 at the high point in the bubble, to the near the low point in May 2009 of $125,000.”
“‘If that vacancy factor goes up and it becomes more competitive in the rental market, rental prices are not keeping pace with price increases,’ Crabtree says. ‘And therefore, there’s going to be a point of diminishing returns where the investor is going to have to make a business decision whether to keep that rental property or to place it on the market for sale.’”
The Merced County Times. “The ground was broken last Friday on the first major housing development in Merced in years and already half the homes have been presold. The price range of the new homes is very affordable at $215,000 to $225,000. Roselin Charitar, lead broker for the homes, said since bank owned properties are now bringing 20 to 30 bids and many above asking price. ‘We felt it was an ideal time to add new housing to the market.’”
“Bernie Heyne, the developer, knows how few homes have been available in the Merced market area. At one point recently there were only 82 homes on the market. Heyne said, ‘This led me to believe that it is an opportune time to start construction.’”
The Daily Pilot. “An ‘urban industrial’ housing project in Costa Mesa’s Westside is being marketed with Millennial buyers in mind. Sea House — a 33-home tract — will feature three-story homes starting in the low $600,000s. The homes — which have two or three bedrooms, two full bathrooms and two half bathrooms — are between 1,587 and 1,785 square feet. The ground levels have attached, two-car garages and an entry room that can be used as an office or den. The second story has the kitchen and a combined living and dining room. Some also have second-story balconies. The third story houses the bedrooms.”
“When asked about the nearly $600,000 asking price to a young generation — many of whom, according to recent studies, are burdened with college debt and a lack of full-time employment — Timothy A Kane, MBK’s president, said sales will be aided by the Newport-Mesa area’s affluence and proximity to the ocean. Furthermore, there are good-paying jobs and high-end restaurants nearby, he said. He used surf/skate/snow company Volcom, based on nearby Monrovia Avenue, as an example.”
“‘Volcom is down the street, so there’s all those executives at Volcom that need places to live,’ Kane said.”
The Burbank Leader. “The median price for a single-family home climbed roughly 10%, from $544,500 in June 2012 to $598,750 last month, according to Realtor Eric Benz with Dilbeck Real Estate in Burbank. Realtor Marion Goodman, a member of the Burbank Assn. of Realtors board, said that although prices were still rising last month, she’s starting to see the market flatten out. ‘There’s a plateau that we’ve reached, and I hope it’s just temporary,’ she said.”
“Goodman said a number of factors could be contributing to the market’s leveling off, including first-time buyers who are taking a step back from buying aspirations because they have seen their offers rejected in favor of all-cash transactions. ‘It does something to your psyche. You think you’re making a good offer and then you get beat by all-cash buyers,’ she said. ‘It’s a tough market for first-time buyers right now.’”
From Bloomberg. “Jung Lim plans to offset the cost of rising mortgage rates by using an adjustable-rate loan to buy a home for his expanding family. For the California endodontist, the money he’ll save makes up for the ARM’s risky reputation. Lim is leaving a two-bedroom condo in Los Angeles’s Hancock Park to buy a four-bedroom house in the city’s Sherman Oaks neighborhood for $1.12 million. His lender offered him a rate for an adjustable mortgage that is about a percentage point cheaper than a fixed loan.”
“‘If I could have gotten a 30-year fixed at the interest rate I’m getting the ARM for, I would have felt a lot more comfortable,’ said Lim. ‘But I’m hoping to refinance in five years or less. And we’ll be in the house for about 10 years so we could also sell. Hopefully prices have bottomed, so we won’t be underwater.’”
“Vivian Cohn in Hollister, California, lowered her monthly mortgage payments to about $940 from $1,400 in May when she took out a 5-1 ARM, meaning the rate is fixed for the first five years. After that, her 2.2 percent initial rate could adjust as much as 5 percentage points higher. Cohn doesn’t see the threat of a rate change as a problem. When she retires in two years, she and her husband are moving to Panama, Cohn said. If they can’t sell the house at that point, they’ll rent it for the next three years and sell then, before the loan adjusts, said Cohn.”
“‘A fixed rate isn’t for everybody,’ Cohn said. ‘We know we’re moving, so there’s no point in paying for a guaranteed rate if we won’t use it.’”
“In Los Angeles, Lim is happy to be locked at a 4.6 percent rate for an adjustable mortgage that is fixed for 10 years, about a percentage point cheaper than a loan fixed for 30 years, he said. ‘It’s a bet that prices will appreciate, that your income will stay the same or increase and that rates will stay stable,’ said Leah Guerra, the agent with Rodeo Realty who is helping Lim with the purchase. ‘It’s a bet that confident people make.’”
