Marin Market Update

Marin Market Update

Marin Associate Jaime Pera offers keen insight into the Marin real estate market as well as strategies for sellers… a must read for those buying and selling in Marin!

The 2017 Marin real estate market continues to move forward at a brisk pace and remains strong even though inventory is lacking. Buyers are definitely engaged as between February 1st and May 31st single family dwellings sold on average 3% over asking. Of the 645 properties that were listed and sold through the MLS during this period a whopping 345 or 53.5% sold over asking, with the highest over asking sale being 2360 Paradise Drive in Tiburon which was listed at $2,250,000 and sold for $3,300,500, or 47% over asking. Additionally, there were also 66 off market sales during this period with 24 homes (36%) selling over asking. Open house activity has been strong, property showings are up, and property viewings on the internet are up.

When you dig deeper into the numbers however the most startling statistic is that between January and May 2017, when ten fewer homes sold than the same period last year (695 vs 705) there were 109 fewer new listings that came on the market when compared to last year (1,008 vs 1,117), a 10% decrease (and 16.8% decrease when compared to same period in 2015). So in other words, the market managed to keep pace with last year with fewer listings! In May 2017 alone we had 61 fewer listings come on the market than May of last year (207 vs 268). If this trend continues I expect we will have at least 10% fewer closed sales in 2017 than 2016, and possibly more (1,870 single family dwellings sold in 2016)!

This leads me to the conversation of rising home values. Yes, they have continued to rise and given the trend of declining new listings I expect prices to continue to rise through 2017. I have calculated that prices for single family dwellings have risen 7% on average through May 2017 (1.4% per month). If this trend continues I expect home values to rise at least 10% in 2017. This means that a home with a market value $1,000,000 on 12/31/16 will have a market value of $1,100,000 on 12/31/17. This is great news for homeowners but not so good news for home buyers.

Anecdotally, I can tell you that Marin is very coveted and I am seeing an increase in out-of-area buyers. As a general rule these buyers are educated, financially well-off, have a plan, and are in perfect position to purchase homes in Marin. Many are coming from San Francisco and the Peninsula where prices are generally higher than Marin prices. It is this group of buyers that often times present all cash offers.

Another important development to note is the continued decline of single family dwellings that are priced under $1,000,000. As of May 31st only 65 single family dwelling listings or 19% of total listings were priced under $1,000,000 (75% of which were in Novato and San Rafael). Meanwhile, the percentage of listings between $1,000,000 and $2,000,000 increased to 37% from 33%, and percentage of listings over $2,000,000 declined from 47% to 44%.

Note to Sellers:

There is no doubt that this is a great time to sell! If you have been considering selling either to upsize, downsize, or relocate, I wouldn’t wait, I would do it now! Unemployment rates remain low (currently 3% in Marin and SF), and 30 year fixed rate loans are averaging 3.95% vs 3.64% last year. Furthermore, it is difficult to predict how long this strong real estate market will continue so if you have been thinking of selling this might be a good opportunity to review your options. The real estate market has historically run in 10-year cycles. The beginning of the last downturn began in 2006-2007. If this pattern repeats itself the next downturn will start in sometime in the next two years. Keep in mind that cycles vary by market and price range.

A big reason why inventory levels are declining is not only because buyer demand is strong but because sellers have anxiety about upsizing or

downsizing in a market where there just aren’t enough homes for sale, and are worried that they are going to sell their home and not find a suitable replacement. Sellers that have cash or can be approved for two mortgages control their own destiny. What I can honestly tell you is that with good planning and execution and by employing one or more of the following strategies it can be done!

Seller in possession after close – Seller rents back from buyer for 60, 90, or even 120 days after close of escrow to allow time to locate a replacement home. Often times we successfully negotiate all or a portion of the rent back period is at zero cost to the seller. Seller can now make an all cash offer on their replacement home, an enormous advantage in today’s market.

Sale subject to seller finding a suitable replacement property – The seller makes it known when the property is listed that they will move forward with the sale of their home on the condition that they locate, enter into contract, and remove contingencies on their replacement home.

Sell then move into temporary living quarters – Moving twice can be stressful but with this strategy sellers maintain strong leverage with buyers, have time to locate a replacement home, and are in position to make an all cash offer on their replacement home, an enormous advantage in today’s market.

Seller locates a replacement home and enters into a contract that states that seller will move forward with the purchase of the replacement home after close of escrow The success rate will be lower if the seller’s home is not on the market when this offer is made or if there is a lot of interest (multiple offers) on the targeted replacement home. This strategy is more likely to work when the targeted replacement home has been on the market for an extended period of time and that seller is running out of time and options.

Bridge Loans – Bridge loans are temporary loans that bridge the gap between the sales price of a new home and a home buyer’s new mortgage in the event the seller’s home has not yet sold. The bridge loan is secured by the buyer’s existing home. Underwriting is based on “make sense” underwriting approach rather than FICO or debt to income approach. Some lenders who make conforming loans (needed to close the transaction on the target home) exclude the bridge loan payment for qualifying purposes.

Security backed line of credit (margin loan) – This arrangement with your brokerage firm allows you to borrow from 50 to 95 percent of the value of the assets in your investment account depending on the value of your overall holdings and types of assets in the account. A margin loan may also allow you to avoid potential capital gain taxes because you don’t have to liquidate securities for access to funds. Plus you might also be able to continue to receive benefits of your holdings, like dividends, interest and appreciation.

Borrow against your 401k account – There are two types of 401k accounts. Under an employer sponsored plan you may be able to borrow funds from your 401k account for a 5 year period at a moderate interest rate (your monthly payments are automatically deducted from your checking account and are credited back to your account). With a self-directed 401k account you can withdraw and use funds for up to 60 days and not be charged with a fund distribution or incur taxes and penalties for early the withdrawal of retirement funds as long as the money is redeposited into your account within the 60 day period.

Home Equity Line of Credit – Useful for down payments on your target replacement home. Works best if you already have a HELOC set up before you list your home for sale since most banks will not approve a HELOC if your home is on the market.


 

 

Jaime Pera is a client focused, relationship based Realtor who has extensive experience in guiding clients through the real estate transaction. He firmly believes that the home buying and home selling experience should be collaborative and fun and that clear-cut goals and consistent communication are keys to achieving this. Jaime devotes quality time to studying real estate market trends and locating opportunities whether for personal use or investment. Jaime works in our Marin County Office and can be reached at 415-505-7197. You can also visit his website at www.LifeinMarinCounty.com

 

The post Marin Market Update appeared first on Terra Firma Global Partners.

Source: Terra Firma

2017 Residential Real Estate Market Forecast

2017 Residential Real Estate Market Forecast

As published in The Registry on November 22, 2016 and the North Bay Business Journal on November 28, 2016

North Bay Residential Real Estate Market is Decelerating and Showing Signs of Fatigue

The residential real estate market in the North Bay counties of Marin, Napa and Sonoma is decelerating and showing signs of fatigue after five consecutive years of growth, according to a recent survey from Terra Firma Global Partners, a residential real estate services firm with nine North Bay offices.

Using the most common metrics to measure the markets, single-family home and condominium sales in the three North Bay counties seem to have plateaued, and the forecast for 2017 is for home and condo sales to remain flat with a chance to actually decline in some micro-markets.

House for sale with sign

During the first nine months of this year, compared with the first nine months of 2015, 15% fewer homes and condos traded ownership in Marin County, 5.3% fewer in Sonoma and 9.6% fewer sales occurred in Napa counties.

Sales velocity is clearly down in all three counties and for a variety of reasons, some of which are true for each county. The common theme relates to supply and demand, with limited supply in high demand markets driving up pricing in all three counties but particularly in Marin and Sonoma County, where the median price of sold homes increased 9% during the first nine months of 2016 compared with the first nine months of 2015. In Napa County, the median home and condo sale price increased 1.75% during the first nine months this year.

The median sale price means that half of all homes sold above the median figure and half of the homes sold below the median figure. See table below for specific pricing in each county.

Lack of inventory is an issue in each county, with only 2.5 months of supply available in Marin (homes and condos listed for sale) as of Sept. 30 this year, 1.8 months of supply in Sonoma and 2.85 months of supply in Napa counties, according to data compiled from BAREIS® (Bay Area Real Estate Information Services) and NorCal MLS®. The data was mined by Terra Firma Global Partners’ Senior Associate Jaime Pera for Marin County, Senior Associate Trish McLean, CRS and Certified Green Real Estate Professional for Sonoma County and Senior Associate Ellen Politz for Napa County.

Photo Of White Puzzle House On Green Grass

The average price per square foot increased nominally in Marin and Sonoma counties for the reporting periods, largely because home prices have been rising since 2011 with the biggest spikes coming in 2014 and 2015. That left little room for big price increases in 2016 – at least in Marin and Sonoma, which is another sign of a decelerating market. In Marin, the price per foot increase was 3% in 2016 and stood at $662 a foot at the end of September this year compared with $642 per foot at the end of September in 2015. The price per foot was 4.9% more in in Sonoma County ($381 vs. $364) yet in Napa County, the price per foot shot up 19% ($483 vs $391) during the first three quarters of this year.

Days on the market (DOM), while an imperfect measurement because DOM is reported differently by all of the sales agents in the industry, is still a good indicator as to which direction the markets are heading. DOM in Marin declined by 9% in the first three quarters of this year and by 1.5% in Sonoma, yet increased by 4% in Napa County. The 9% median price increase in Marin combined with the shortened DOM has taken the Marin County housing market to unprecedented heights and begs the question – how much higher can it go, if at all? The relatively flat DOM in Sonoma County and modest increase in days on the market in Napa County indicates the markets have stabilized there.

As markets go, Marin County typically lags and follows home sales trends in San Francisco, while Sonoma lags and follows Marin County and Napa lags and follows Sonoma County.

Total Homes and Condos Sold 1Q2016 through 3Q2016
Marin: 1,928
Same Period 2015: 2,264
Percentage Change: -15%

Total Homes and Condos Sold 1Q2016 through 3Q2016
Sonoma: 3,953
Same Period 2015: 4,156
Percentage Change: -5.3%

Total Homes and Condos Sold 1Q2016 through 3Q2016
Napa: 1,242
Same Period 2015: 1,123
Percentage Change: -9.6%

Average Price Per Square Foot 1Q2016 through 3Q2016
Marin: $662
Same Period 2015: $642
Percentage Change: 3%

Average Price Per Square Foot 1Q2016 through 3Q2016
Sonoma: $381
Same Period 2015: $364
Percentage Change: 4.9%

Average Price Per Square Foot 1Q2016 through 3Q2016
Napa: $483
Same Period 2015: $391
Percentage Change: 19%

Median Price September 30, 2016 of 2016 compared with September 30, 2015

Marin: $1,014,817 vs. $930,786
Percentage Change: 9%

Sonoma: $545,000 vs. $500,000
Percentage Change: 9.0%

Napa: $629,000 vs. $618,000
Percentage Change: 1.75%

Average Days on Market First 9 Months of 2016 compared with First 9 Months of 2015:

Marin: 49 vs. 54
Percentage Change: -9%

Sonoma: 62 vs. 63
Percentage Change: -1.5%

Napa: 89 vs. 85.5
Percentage Change: 4%

Shifting Markets

“In Sonoma County, we are seeing more price adjustments and more negotiations for repairs occurring. Repairs and repair credits are hard to quantify, but it is an indicator of a softening market, or at least movement toward a more level market. While this is one indicator of a stabilizing market, we are still seeing strong competition among buyers for available homes. There’s an interesting subset of data in the percentage of agents reporting “Multiple Offers” in MLS. This isn’t a required field, so there may be more sales getting multiple offers than are being reported, but we know at least these number of homes have received offers from more than one buyer. In Sonoma County, through Sept 30 this year, 1,438 homes sold with multiple offers, compared to 1,335 homes during the same period of 2015, or a 7% increase,” reported Trish McLean.

Yet asking rates for homes have not lowered on any wide scale in Marin County, Jaime Pera reported. However, Pera wrote that the lower end of the market is shrinking and so is the middle part of the market, while the high end market is growing. Based on homes and condos listed for Blue button with house on computer keyboardsale, as of 9.30 this year there were 163 homes on the market priced below $1 million, or down 16% compared with Sept. 30 of 2015. There were 252 homes for sale priced below $1.5 million – 11% fewer than a year earlier. Yet 32% of Marin homes for sale were priced at $2 million or more at the close of the third quarter this year, or 7% more than the same period a year ago.

 

Regarding inventory, McLean wrote that “we’d have to go back to 2011 to find more than two months of inventory…indicating that (at least for now) under two months of inventory is the new normal.”

Ellen Politz attributes the lack of inventory to broader ownership trends with lower turnover, citing a California Association of REALTORS® report that homeowners are staying in their homes for an average of 10 years instead of a range from five-to-seven years.

Hispanic Couple Viewing Potential New Home“Marriage is down, and the millennials aren’t pursuing the American Dream of getting married, buying homes and having kids the way

previous generations have. Instead, they are looking to experience life and travel. So housing is not turning over at the same rate as the households are not changing as they once did,” Politz wrote.

Mortgage rates are likely to rise, making it harder for first-time buyers and move-up buyers to afford to buy their first homes or to trade up. With real wage increases occurring in the U.S. following regular monthly gains in employment, the Federal Reserve appears poised to increase interest rates by a quarter point when it meets in December, and Fed bankers have publicly stated that another rate increase is likely in the first half of 2017.

The Fear Factor

Both McLean and Pera cited fear as a market driver in written comments that they included with their data findings.

“Another factor affecting inventory is fear… sellers who are concerned that they won’t be able to find a replacement property so they don’t want to sell their home,” wrote McLean.

Similarly, “there are a lot of sellers on the fence about downsizing, not knowing where they are going to go plus as a general rule they have fear about downsizing and making a mistake,” Pera wrote.

Looking Ahead

Higher borrowing costs are nearly a certainty and “could feel like a double whammy,” Politz stated, because borrowing rates actually declined by nearly 50 basis points from the end of the third quarter 2015 to the end of September this year. The 30-year fixed rate mortgage average in the United States was 3.9% at the end of the third quarter in 2015 and had fallen to 3.45% by Sept. 30, 2016, according to data compiled by Freddie Mac and reported by the St. Louis Federal Reserve. Even so, Politz noted, “assuming that rates go up, we will only be moving from super low to low, historically speaking.”

“The silver lining in the shifting market is that the move-up / move-down market is gaining strength as more and more agents are willing to broker deals between parties involving contingencies for sbuy house Mortgage calculations, calculator with Magnifier Searchingelling or buying property. I just closed two transactions for a client who was doing a move-up purchase. They were concerned about selling their house and ending up homeless. We got their home “ready” to sell…pest inspection, cleaning, professional photography, etc. so that we could take action the moment they found a house they wanted. We also found a house that had been on the market for two weeks (which can seem like an eternity to the seller). That seller was willing to accept our full price offer and give us time to find a buyer for our house, largely because they also needed time to find a house to move to! So both buyer and seller had the same challenge…wanting to move and needing someone who would be understanding. In the end, this “daisy chain” of escrows closed successfully with a minimum of drama. It’s cooperation like that and trust that keeps the market moving,” McLean wrote.

“Over the last five years we have seen the housing market increase at a rate that significantly outpaces income growth. In 2017, with the (forecasted) increasing interest rate environment, simple economics tell us housing prices have to respond by softening to absorb the rate increases. Well priced, updated homes will continue to be highly sought after as buyers generally are willing to pay more for them, rather than fix up a property themselves. Today’s buyers are weary that we have reached new heights in the real estate market and they are watching and waiting to see if things hold or fold,” Politz wrote.Giving house keys

“I’d say that 2017 is a good year to start taking some chips off the table particularly if the goal is to downsize in the next couple of years. There is no point in waiting. I expect next year to be like this year with relatively low levels of inventory. Properties that are priced correctly, are updated, and are in the right neighborhoods will sell quickly with multiple offers. Homes that are overpriced with inflexible sellers will sit and likely end up selling for less than if they had been priced correctly in the first place. I expect prices to continue to rise, but at a slower pace than 2016 as buyers are starting to resist price increases. Downsizers will continue to ponder the question: Where do I move to? When they finally figure this out we will have more inventory. If they wait too long and sell during a period of rising interest rates, slowing sales, and growing inventory they will pay the price for having waited too long to make a decision,” concluded Pera.

We are here to answer your questions about the future of the real estate market.
Email us anytime at info@terrafirmaglobalpartners.com

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Source: Terra Firma