We’re at the halfway point for the year, and the market is still….stable. Stable transactions, slight declines in pricing, with every town a little different, but in general, there is not a lot of change on a year-to-year basis.

Percent in contract remains steady, at 32%. Inventory is down from last year though, so it is actually harder to find a good house right now than it was one year ago. Last August 2  there were 1628 homes available in Marin; on the same date this year, there were only 1460. Are higher prices on the horizon? Not necessarily, but it certainly looks like the days of excess inventory are ending, as we have been trending below last year’s inventory numbers since the first week of May.

Transactions continue to track almost dead even vs. one year ago at this point. We are currently on track for around 2100 transactions this year, well below the long term average of 2745, but continuing the same steady rate we saw in 2010. That’s good news for the market - given the roller coaster the economy has been on, and the high unemployment rate, stable transaction numbers for the last two years are a positive.

Average sale price, a good long term indicator when measured year to year, is tracking down slightly, at $1,009,205 for a single family home Marin County, a 4.8% decline vs. one year ago. Price paid per square foot is off slightly as well, from $470 to $443. Taken together, these do indicate a decline in pricing, not just a lack of home sales in the higher priced categories.

Town by town, nearly every town is up in number of transactions. Interestingly though, there is an inverse relationship between sales price and transactions. For example, Mill Valley is up 9% in units, but average sales price is down 8.5%. Larkspur single family home sales are down 17%, but average sale price is up 4.3%. We think it shows the importance of pricing in this market: if you really want to sell your home, it must be priced correctly. Buyers can afford to be choosy, and will, and won’t jump on something just because it is in the right neighborhood or school district.

An interesting offshoot of this is that the rental market for single family homes in good Marin County school districts continues to be very tight. This is heightened in July and August, when families are scrambling to get into the right school district in time for the start of the school year. Cautious buyers are willing to rent for a year, or more, rather than risk paying too much for a property.

So despite the gyrations you read about in the paper that seem to show big shifts month to month, Marin continues to chug along in “normal” market mode.

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There is no perfect answer here for everyone, but this month we are going to discuss the strategy we think is the most advantageous from a financial perspective, which we call “Sell first, buy later.” Not surprisingly by this, we mean put the home on the market, get it into contract, and then put your offer in on the replacement property.

The advantages to this are numerous.

1.You’ll get maximum value from your house on your terms. You can sell your home on your timeframe, and negotiate the best price without having to worry about timing on the other end of the transaction.

2. You’ll know exactly how much cash you are working with to purchase the replacement property. This is especially critical for move up buyers, who often need the equity from their home sale to make the down payment on the new purchase. Assuming a 20% down payment, every $10,000 of cash used for a down payment translates into $50,000, with mortgage, that can be spent on the new home. So an extra $20,000 for your home can give you the ability to spend an additional $100,000 on the replacement property, assuming you wish to do so and can qualify for the mortgage.

3. The offer you make on the new property will be stronger, and you will get better value. If you put the offer in after the contingency period is lifted by the buyers of your home, you’ll have the option of writing the  offer on your new home without a contingency on sale of your existing property. This makes your offer cleaner, less risky, and consequently means the Seller should, in theory, be willing to take less money. Not all sellers will take a contingent on sale offer- and those that do typically want an offer that is at or close to asking price.

Inherent in this approach is some risk. The biggest one is that you, the Seller, can’t find the perfect home to move into once you’ve gotten your home into contract. And the worst case scenario here would be that you can’t find a home you like enough to buy, and end up moving twice, usually into some kind of temporary housing. This can be mitigated in two ways.

First, when the offer is being negotiated, we can negotiate a longer close of escrow, say 45 or 60 days, to give you more time. We can also negotiate a rentback, so that you pay the buyer’s principal, interest, tax and insurance cost for one month to stay in the house an additional 30 days. Combine a 60 day close with a 30 day rentback and suddenly, you’ve got 90 days to find and negotiate for a replacement property. Even in Marin County, this is a lot of time.

The second way is to make the sale of your home contingent on you finding a replacement property. This makes your home sale slightly less attractive, as now the buyers of your home are not certain they will be able to buy your home, so it may cost you a little on the buy end. But if you have already identified a replacement property, this can be a very short contingency period, say seven days, to let you get into contract on the new property.

Is it possible to buy the replacement property, and then sell? Yes, it is, and we’ll discuss that approach in a future post.

Questions about listing your home in Southern or Central Marin County? Call Bob at 415-945-2482.

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The sun finally came out last week. We were beginning to think March Madness was what was haunting our Sunday open houses, as it rained, sometimes torrentially, for every single Sunday in March.

Buyers typically don’t like it when it rains. Moving in and out of houses, taking off and putting on your own shoes is hard enough but when there are a couple of small children who need help as well, it really slows down the process. So traffic, which was downright crazy in January and early February, slowed considerably.

Unlike the weather report though, the Marin County Real Estate Market has been stable. There has been a lot of new inventory coming on, but it appears to be getting absorbed by buyers at about the same rate. Percent of homes in contract is now at 32%, which is a balanced market. Inventory has been climbing steadily, and there are now 1,253 homes available. This is a pretty typical pattern for spring.

The main driver of this market continues to be, we believe, families with small children, searching for the quintessential Marin home: three bedrooms, two baths, some flat yard,in a great school district. Walking distance to some kind of shopping or school is a huge bonus. We could sell that home over and over in Southern and Central Marin right now - anything like that priced well moves very quickly.

Price segments are also reflective of this. FOr homes under $750,000, 39% are in contract. This has been consistently strong for months. For homes in the “move up” price range, $750,000-$2,000,000, 38% are in contract, which is a balanced market.

Most individual markets are mirroring the county averages. San Rafael has 36% of homes in contract, and Larkspur has 35% of homes in contract.

Volume is up, and pricing is stable. As of April 8, there were 541 homes sold in 2011 in Marin County, vs. 517 sold in the same period one year ago. Average sale price, which is indicative of which way prices are going, was almost identical - $619,327 in 2011, and $619,776 in 2010.

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In a short sale, the bank is owed more than the house is worth when it sells, so in order for it to close, the bank agrees to go “short”. For example, the Tiburon house noted above has at least $3,750,000 in loans on it, according to tax records. So if someone does eventually buy it (it’s been on for 314 days!) the bank will take a substantial haircut.

The Seller’s Perspective
The biggest question for a Seller is usually, “Why do a short Sale? Why not just let the house go into foreclosure?” In brief, here are the benefits of a short sale for a Seller.
- The Seller is in control of the sale, not the bank. You can still negotiate closing dates, live in the house until it closes, etc.
- You’ll be able to buy again more quickly. According to most published sources, if you have never fallen behind on the loan, you may be able to buy another home immediately. If you have fallen behind in payments, you may be able to qualify to buy again in two years with a Fannie-Mae backed mortgage.With a foreclosure, it usually takes seven years to again qualify for a mortgage.
- There appears to be less impact on credit. Negative FICO score drops are reported to be in the 50 to 130 point range for a short sale and it is usually reported as “paid in full for less than agreed.” A foreclosure will usually negatively affect credit 100 to 160 points, and will remain on your credit report for seven years, which makes it more difficult to get a rental.
- Future employment possibilities.If a prospective employer runs a credit check, the application may be denied if there is a foreclosure on your record.
- Deficiency judgements for a first trust deed are prohibited by law now in California, even if the property has been refinanced, so if the bank agrees to the sale, you are relieved of potentially massive debt.

Banks are now becoming more efficient in processing short sales. In our experience, they now have processes and procedures in place that at least make some sense out of the process. They seem to be able to get back with an answer more quickly, and are better at communicating what is going on.

The BPO, or Brokers Price Opinion, still drives the negotiation from their side, which can be difficult, as it does not always make sense. Often, BPO’s fail to take into account fairly obvious factors such as the condition of the house, which has an obvious and dramatic effect on price. We have developed strategies for dealing with this, but it is time consuming and slows down the process.

In Part 2 we will talk about short sales from  a Buyer’s Perspective. In the meantime, if you are behind on loan payments and your home is worth less than what is owed on it - don’t just think you need to let the bank foreclose. A short sale may be a viable option. Call Bob at 415-945-2482 if you would like to discuss your potential for a short sale. All consultations are, of course, confidential.

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After a difficult 2009, Marin real estate sales throughout the first half of 2010 have been showing increasing signs of strength. Here are seven key indicators that make us optimistic about the market:

1. Transactions are up dramatically, increasing 21% through mid-August vs. same period last year. There have been 1,445 sales so far this year, vs. 1,190 last year for the same period.

2. REO’s and short sales as a percentage of overall sales are declining. They represent 19% of all sales so far this year. Although this number is historically very high for Marin, it is down dramatically from last year, when 24% of all sales were distressed properties.

3. Average sale price has increased 11%, from $834,123 to $925,026. Average sale price is a good indicator of the general direction of the market, and reflects that higher priced properties are beginning to sell more now.

4. Multi unit properties are selling again, now to all cash buyers. There were seven multi unit closings in Marin in the last 45 days. Most of them - and all of the big ones - were to all cash buyers. One of them was our listing, 11 Hillside, and the Seller’s rationale was pretty simple: he felt it was time to move money out of the stock market and into real estate, as prices have come down and his returns would be higher.

5. Average days on market is heading down, from 98 days on market in 2009, to 91 for properties year to date.

6. Luxury properties, above $2 Million, are moving again. Unit volume almost doubled in this segment this year, as 113 properties have sold, the highest being $14,000,000.

7. Price per square foot is up slightly, from $458 per foot to $471.

Increases are being seen in almost all towns, although the increases skew to more affordable markets. Fairfax sales are almost double what they were last year, as is Greenbrae. Novato is way up, as is Mill Valley. The only town showing a decrease in sales is Ross, but the number of transactions per year there is so low - 12 so far this year - that it is really a statistical anomaly.

Inventory continues to build. There are now 1,622 homes on the market for sale, and 24% of them are in contract. Technically, that’s a Buyers Market, and that level has held steady for the last few weeks. August is typically a slow sales month, with volume traditionally picking up again in September. We’ll let you know if that pattern holds in the next few weeks.

Source: Bareis MLS 8/15/2010

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April numbers are UP! The market is continuing the trend we’ve seen the last several months, with transactions and average sale price up, days on market down, and inventory building.

There were 204 closed sales in April, a very healthy 40% increase from last April. Average sale price increased significantly as well, to $1,000,682, 17% higher than last year. This is reflective of movement in the higher price categories, which drives the average higher, rather than an increase in pricing. We are, for the most part, seeing pricing hold very steady for the last few months.

In fact, on a per square foot basis, price per square foot this year to date is EXACTLY the same as it was in all of 2009: $445 a foot, for all of Marin County. So prices are not going up - inventory coming on is meeting buyer demand.

Today’s buyers are careful, analytical, and patient. They know the numbers when they walk in to a house. We are getting more questions about cost per square foot than we ever have before at open houses, as the wealth of information available on the internet becomes more widely used. They discuss lot size, comps, lots of data that before was not nearly as important.

They also aren’t afraid to wait, as there are plenty of choices out there. Inventory is pouring on to the market every day right now. Right now there are 1,615 homes for sale in Marin County, which is about as high as we have ever seen. We’ve been involved in several transactions where the ultimate buyer was one who had made an offer, did not come to terms, waited several weeks, and then came back to purchase, as either side changed their position.

The heart of the market is still great family homes in good school districts. Right now, we have 34% of homes in contract in Marin. The lower the price point the stronger the market. For homes under $750,000, 44% are in contract, very strong but down a little from last month. Move up homes, from $750,000-$2,000,000, are at 24% in contract, almost a balanced market. Luxury homes over $2,000,000 are holding steady at 16% in contract, which is better than that market has been in a long time.

Corte Madera and Larkspur continue to be very strong, with 32% and 30% of all homes in contract. Novato is on fire, with 45% in contract. Sausalito still lags the rest of the county with 16% in contract.

Pent up demand, on both the buy and sell side, is driving this market. People’s lives have been on hold while they were waiting for the market to shift, and now that they see signs of life, they are moving!

Source for all data: BAREIS MLS.

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1. Buyers usually get a great deal.

2. Sellers get out from under a crushing load of debt.

3. Old inventory gets absorbed, at a realistic price, which helps the overall market.

Most fulfilling for us has been that in a short sale, the “win-win” that we all search for in a successful transaction takes place at an even deeper level. We’ve successfully negotiated short sales for several clients in the last year that resulted in no definciency agreements to the seller at all. Believe me, when someone is staring down a possible foreclosure and the resulting hit on their credit, and then they end up free and clear of the whole thing with minimal damage, well, it makes all the pain and suffering worth it.

Logically, banks should want a short sale to go through also. This is primarily because by the time the home goes through foreclosure, the home will be worth less from neglect and declining values than if they completed the transaction now.

And it’s not like people aren’t trying. There are currently  257 homes for sale in Marin County listed as short sales as of today, and an astonishing 72% of them are in contract! The price range is from $112,000 to $2,900,000, so in Marin County, short sales are happening everywhere now, even Kentfield!

This home in Kentfield, new construction, originally priced well over $4,000,000, is now a short sale at $2,900,000.

So why aren’t banks moving faster? A conversation with a family member over the holidays finally made the light bulb go on for me. He works in a prominent position for a large bank, and said, “So you want to know why the banks won’t approve these things, even though you and every other knucklehead involved are calling all day, making us add staff just to handle all the calls and tell you we’re working on it? It’s all because of the change the government made to the mark-to-market rules.”

Here it is in a nutshell. When a bank carries a loan for $1,000,000, it does not matter anymore from a bookkeeping standpoint if it is only worth $600,000. In the past, the bank had to change the value to reflect market value, i.e., “mark to market.” Last year that changed.

So even if the loan is in default, and there hasn’t been a payment in a year, the asset is valued at $1,000,000. The day the bank approves the short sale at $600,000, the bank’s assets decrease by $400,000. That’s $400,000 they don’t have anymore to loan to other people, or at a five to one ratio, $2,000,000.

Even though the bank will eventually need to take the loss, they are, in effect, rationing them out gradually, so the effect on capital isn’t too severe. Approve too many too quickly and the bank could suddenly be in violation of federal guidelines for capital reserves.

Short sales are still a great way to get a good deal for those with patience and guts, even in Marin County. But unless government laws change, don’t expect there to be any change in how quickly the process moves. The banks just don’t have an incentive to do it.

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This is an easy one for us, even though our children went to St. Patrick’s until high school. It should be an easy one for you too.

First, schools are the cornerstones of our communities. People move into a community  for the schools. We hear it every day…how are the schools? What are the teachers like? Are the API scores good?

Second, the schools desperately need money. California ranks 50th in the United States in per capita spending in the schools. Yes, the Golden State, with an educational system that was once the envy of the entire country, now spends less per capita on education than states normally reserved for Jeff Foxworthy “You might be a redneck if…” jokes. The only way to make up the shortfall is through local bond measures and parcel taxes.

Third, it is the best investment you will make in your own home, period. The better the schools are in your community, the more people will pay to live there. We’ve done our homework to prove it.

For example, home values in San Rafael vary widely, driven mainly by school district.Dixie schools command a significant premium in home prices compared to San Rafael Elementary. And within San Rafael Elementary, specific elementary schools command higher values than others.

In Larkspur and Corte Madera,where significant bond and parcel taxes passed in the last ten years have resulted in highly visible new construction projects, average sale price has increased much faster than the County average. In the last ten years, the County average sale price was up 117%, but Larkspur was up 152%, and Corte Madera up 183%! The weather or views didn’t get any better in those ten years, but Neil Cummins, Hall, and Redwood all got new gyms, classrooms, and major facelifts. Home buyers notice that when they drive by the schools.

Ross Valley schools will be voting on a bond measure, as well as a parcel tax. No one is in the mood to pass new taxes right now. But even if you think the schools are wasting money (and if you do, start attending school board meetings to see how they address these issues) be selfish. Vote for the parcel tax - it’s the best investment you can make in your home.

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6.Transactions are tracking at even lower rate than last year, but recent trends indicate an increase for the second half of the year.

2008 saw the fewest real estate transactions since 1982. Right now, we are tracking slightly below that rate.

It can’t stay that low forever. People have life changing events that make them want to move, such as retirement, new babies, divorce. There is going to be pent up demand for movement in the market, and when the market does turn, we think it will do so fairly briskly.
7.”It’s not a buyer’s market. It’s not a Seller’s market. It’s a lender’s market.”

That’s a quote from one of our co-workers at Frank Howard Allen, and it is absolutely true. Lenders are the ones that hold all of the cards in this market. In their efforts to make up for past sins, they are, we believe, over correcting in the other direction.

Ask anyone who has gotten a loan or refinanced in the past six months. What used to be pretty simple and handled over the phone now bears a much closer resemblance to a major medical procedure, and a very invasive one at that.

How jumpy are the banks? We were representing a seller recently and there was a price reduction negotiated after the home was in contract for work that needed to be done on the house. The loan was approved, everything was in gear, and we were three days away from the close. We got a call saying that the price REDUCTION triggered something at the bank that made them want a new appraisal. Closing was delayed two weeks, the new appraisal came in, everything was fine, except now the banks wanted to review all of the inspection reports. Once they did, they demanded that all of the work be done BEFORE the sale closed! No one had the cash or the interest to do that.

It does have a happy ending. We found another lender, and the transaction closed three weeks ago.

And that’s really the moral of the story. We are finding ways get to deals done. Don’t believe everything you read.

Is it tricky and stressful? Yes. But there is always a way, and with patience and persistence, we can get you there.

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This year average sales price in Marin County may actually decline. It would be the first such decline since 1992, and 1991. They didn’t fall far then, just 1.2% and 1.4%. If it declines this year, it would probably be of a similar magnitude.

So will prices start to rapidly increase again? We predict several years of price stability, not rapid increase. Here’s why.

After the decline in 1991 and 1992, average price increased, but very slowly - about 3% annually, or slightly higher than the inflation rate. And just like the period we’re in now, the prior 14 years had seen average price triple.

Marin is a very special market. It really is different, because the supply of housing is fixed. But it can not continuously rise, as housing affordability is directly related to income, employment, and the overall economy.

We don’t pretend to know when the market will turn. But we do believe that when the market stabilizes, pricing won’t come roaring back. Instead, expect it to follow the path established in the late 90s. Prices will stabilize and stay there for a while, as incomes catch up to housing prices, before other macro trends drive pricing up.

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