It has been a difficult year for Marin real estate. Total unit sales are off 35% for homes, and 38% for condominiums. Condominium average sale price is down 10%. Some realtors are learning new phrases, like “Did you say one or two shots of espresso in that latte?”

We see stability creeping in, however.

First, the percent of homes in contract has consistently stayed at the 23% level for two months now. That’s almost a normal market, and that number is staying consistent even though inventory is higher than it has been in years.

Second, Novato and San Rafael are two of the strongest markets in Marin County right now, with 27% and 24% of homes in contract. That’s important because these were the first two markets to really start to have problems when the market started to decline. It’s also important because combined, these two towns represent half the inventory in Marin County.

Why the strength here? According to agents who specialize in the area, Novato sellers are adjusting expectations, and pricing accordingly. In other words, they’re further along the learning curve, and adapting to the changing market.

Finally, we’re feeling an upsurge in buyer activity. We’re suddenly getting lots of calls asking about our listings, after a very quiet May. Maybe it’s just that school is out, maybe it’s a blip, but it’s fun anyway!

As always, call if you would like to receive our weekly updated market statistics.

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As noted by Carol Lloyd in the San Francisco Chronicle, the book explains in a very rational manner why Bay area home prices are far more stable than the national average. And of course, that has implications for Marin County real estate as well.

Is it the cappuccino? The cabernet? The politics?  None of the above, although they all help. Florida demonstrates that the Bay area is a center of economic innovation – as measured by the number of patents filed, the number of “star scientists” that reside here,  and the concentration of  big universities. Other measures such as health, education, culture, and safety add to the allure.

The result is that Florida believes the Bay Area, like other “superstar regions”, will go up and down in real estate values, but is far more resilient than other areas in the country.

Regarding real estate investment, here’s what he told Lloyd: “If I had to give advice, I would say to buy single-family homes closer to the core, not in the outlying areas where the more affordable housing is. The really knowledge-driven people have to be more effective, so they have to use their time more efficiently, so center locations have become more valuable.”

Hmmm…..sounds an awful lot like Marin County, doesn’t it?

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Someone forgot tell home buyers in Corte Madera. Real estate sales have picked up quite a bit here. For example, 247 Sausalito, asking $799,000:

Four offers, after 10 days, according to the Selling agent. Now in contract.

And 438 Oakdale, also Corte Madera, $850,000:

Four offers, five days, now in contract.

And 4 Wildflower Court? Asking $1,089,000.

Four days, two offers, now in in contract.

And then 215 Chapman just closed at $875,000 - there were five offers on that, asking was $799,000!

What’s going on?

First, they were all well-priced. Second, three were in Chapman Park, one in Madera del Presidio, both highly desirable neighborhoods in town. Finally smart buyers know that this is a good time to buy - we haven’t had a market this good for buyers in a very long time.

Combine that with some realism on the part of Sellers - and you get action. More about some great deals coming soon….

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I heard a great quote the other day:

“The time to buy is when there is blood in the streets. Not when everyone else is buying, when you’re fighting with five other offers to get accepted. It’s when nobody else is doing it.”

There’s plenty of blood out there right now, lots of deals are emerging too.

For example, there are a bunch of condos for sale right now in Southern and Central Marin, as well as some TICs, that make better sense as investments than anything we’ve seen in a long time. Prices have held steady, or even declined in some cases, and rents have risen. The result? You could be breaking even at 30% down, which was unheard of on anything in Marin County a few years ago.

And even if appreciation is ONE HALF of the historical rate of the last 41 years,  that $400,000 condo is worth $600,000 in ten years.

Can your stocks do that? And deliver income along the way?

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There will be three big effects on consumers that will positively affect house-buying activity.

1. Home Equity Loans. If you have one and it’s linked to prime, you’re monthly payment just went down substantially. All those 100% finance deals a few years ago? Well, 20% of that is probably a home equity line, and everyone just got a break.

2. Adjustable rate mortgages. Again, many of these are indexed to LIBOR, which is linked to this rate. So anyone with an adjustable indexed to this rate just got a huge break on what the adjusted rate will be. Our in-house mortgage broker estimated it could be of a magnitude of two interest rate points. That’s huge - it means more people will be able to hang on, and won’t end up in foreclosure.

3. Credit card debt. Anyone not paying off the balance every month will now pay less on a monthly basis.

All in all, the net positives here are potentially very large. Combined with the lowest interest rates since 2004 for mortgages,  it would be surprising not to see the market heat up a bit soon.

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The news is not good. But it’s not nearly as bad as the headlines.

First, some perspective. There were 40 foreclosures in Marin in the fourth quarter, according to the IJ. There were also 486 sales, according to MLS. In Contra Costa, for the same time frame, there were 1,558 foreclosures, and 1,559 homes sold, according to the Chronicle article. In other words, there were as many foreclosures as there were homes sold.

So for openers, Marin County is much better than other parts of the state. Of course, if the patient is near death, that may not be saying much.

But in absolute terms, the number is small. Will it increase? Probably. Mortgages are going to continue to re-set through this year, and that is going to create more foreclosures.

I don’t want to make light of this. In my last post I talked about low offers, and said in one case I would have counseled the Seller to counter back way over asking price. (That’s one way to find out people are reading your blog by the way, lots of feedback on that). Foreclosures create massive pain, emotional and financial, for everyone.

But it’s not a panic situation in the least. In fact, homes are selling, on average, at slightly over 96% of list price. Is pricing lower? In many markets, yes.  But are Sellers jumping on offers at 80% of list price? Not from what we’ve seen among our listings and buyers, and not according to the MLS data.

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Buyers have a right to offer whatever they want. Sellers have a right to sell for whatever they want. And bottom line, property is only worth what someone is willing to pay for it.

But the reality is that very, very few of these offers, to my knowledge, really come to fruition. As the person making the offer usually says, you never know - and they may be right. Perhaps the Seller will take an offer 20% off the list price. And as a listing agent, I always encourage the offer - because you never know, if the buyer gets the counter offer, they may well sign it, and getting a dialogue going is the first step to a sale.

I just checked the ratio of sale price to list price for a number of Marin markets, and the story is almost exactly the same. This ratio measures how much of a discount property actually sells for - so if it is 90%, that means on average, property sells for 90% of the asking price.

In Mill Valley, for the last six months, the numbers are all in the 96% range. In Greenbrae, homes have been selling for 96% to 98% of list price. In Corte Madera and Larkspur, homes are selling for 96% to 97% of list. And in Novato - the toughest market in Marin all year - average sale price is 96% to 97% of list price.

So the vast majority of the low offers don’t go through. The reason, as noted in an earlier post,  is that when properties are overpriced (and plenty of them are!),  the typical pattern is that there is a series of price reductions. When the home hits the magic number, boom - off it goes, sometimes with multiple offers.

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At Pacific Trail Townhomes , we are very careful to explain these are not condos. However, living in this development is very similar to living in a condo.

For openers, it looks like a condo - two buildings, multi-units, nicely landscaped and cared for, unlike most apartment buildings. Every unit gets it’s own parking space and storage unit, just like a condo. There’s common areas that everyone can use, like a condo.

And probably most similar to a condo, there is a TIC agreement that creates a Homowner’s Association, just like in a condo. This one is very heavily regulated by the state, and is therefore pretty conservative - something we haven’t always seen in Marin County Homeowner’s Associations. The funding for reserves is very strong, and now that it is up and running, the reserve fund will probably build quickly.

Each unit is individually financed, and you are free to buy, remodel, and sell when you want to - just like in  a Condo.

There are more similarities than differences, so the overall experience is, we believe, like living in a condo.

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We’re trying to make it easier by creating this video that explains the details of TICs, and shows how they compare to living in a condo. Not to tip our hand here, but guess what: living in a TIC is just like living in a condo!

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The TIC agreement for Pacific Trail was developed by Andy Sirkin, the leading attorney for TICs in San Francisco. Andy has done over 5500 joint ownership agreements, so he really knows what he is doing.

We were fortunate enough to have Andy come to Marin County recently and give a seminar on TICs. I’ll summarize his thoughts on the topic in the next few posts.

First, TIC is short for tenants-in-common, which is a way of taking title when you purchase property. When a married couple purchases property, they often take titel as joint tenants. Tenancy in common allows unrelated people to own property more easily, as it does not have the right of survivorship. That means if one of the owners dies, the property does not automatically pass on to the other tenants.

So a TIC is not a kind of real estate, like a house, or a farm, or an office building, It’s a way to own real estate. Every owner owns a portion of the property, and it can be divided in different ways. For example, it can be divided by time - every owner gets to use the property for a certain week or month. Sounds like a timeshare, doesn’t it? That’s because that is exactly what it is.

The typical TIC unit we’re talking about divides property by space. Every owner owns a percentage share in the buiding. In the case of Pacific Trail Townhomes, it’s a 1/16 share. When the owner closes, that is what gets on title.

A separate agreement, called a TIC agreement, divides up the space. At Pacific Trail, everyone gets a living unit, parking space, patio or deck, and storage space. So in many ways, it’s like a condominium, only less expensive. In fact, Andy pointed out repeatedly the TIC industry is where the condo industry was 25 years ago - new, interesting, but to many people, untested.

Well, this one has been tested - and like condos,  early adopters will reap the benefits.

Opportunity for TICs occur when the price of an individual unit in an apartment building is significantly less than a condo. We’re at that point in a number of markets in Marin.

More to come on Andy’s comments on TIcs.

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