A Home Buyer’s Guide to a Seller’s Market

Realtor.com| May 26, 2015| Annamaria Androitis|Link

In many parts of the country, this is a good time to sell a home. That could make it a risky time to buy one.

Houses are selling fast and prices are going up. Sales of existing homes nationwide are expected to reach the highest volume since 2006, according to the National Association of Realtors.

In the first quarter, median sales prices of single-family homes were at least 10% higher than a year prior in 51 metropolitan areas, according to the trade group. That included Charlotte, N.C., up 18%, and Denver, up 17%. Nationwide, median prices rose 7.4%, to $205,200.

A shortage of homes for sale is helping to drive the market higher, experts say, along with a gradually improving economy and a growing concern that a period of historically low interest rates may not last much longer.

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Competition among buyers can be fierce, and some are aggressively wooing sellers in an attempt to stand out.

Amanda Corona bid more than the asking price on a 2,100-square-foot townhouse in Atlanta, and she agreed to see the deal through even if the home was appraised for less than the purchase price.

“I guess I’m a risk taker,” says Ms. Corona, an insurance executive who is 38 years old. The appraisal came in above the purchase price of $365,000 and she closed on the house this month.

Buyers should consider what could go wrong in this kind of market. A bidding war could entice you to spend more than you can afford. An inflated price could leave you owing more than you can sell the house for down the road, if prices fall.

Some strategies could limit the danger. Study whether prices in your city are being driven by low inventory, which could be a warning sign, or a solid economy, which could sustain prices.

Set a budget and stick to it. And see if new homes may hit your local market soon, which could cool things down. On Tuesday, the Commerce Department said that in April construction on new homes rose to the highest level since before the recession.

Keep in mind that it could still be a good time to buy. Mortgage rates remain near historic lows and home prices could keep rising. Buyers should also factor in how long they plan to keep a home, because short-term volatility may not matter for a long-term owner.

Here is a buyer’s guide to navigating a seller’s market.

Supply and demand

House-hunting can be difficult when homes for sale are hard to find.

In a market balanced between buyers and sellers, there are enough existing homes available to satisfy demand for six to seven months, according to the Realtors association. But in the first quarter, the association says, there was only 4.6 months’ worth of inventory available nationwide on average, down from 4.9 months in the same period of 2014.

Listings have grown scarcer in many big cities. In Seattle, there were 8,465 homes listed for sale in April, down 23% from a year earlier, according to Redfin, a national brokerage based in Seattle. In Portland, Ore., there were 8,941 listings, down 27%. In Omaha, Neb., there were 4,158 listings, down 20%.

Some homeowners who bought at the top of the market are reluctant to sell because the value of their home plummeted in the financial crisis and still hasn’t fully recovered. Others are holding out for higher prices, experts say.

Whatever the cause, a shortage of listings can have a significant impact on prices even in an otherwise listless market.

In a March report, Fitch Ratings, a credit-rating firm, said that prices in many metropolitan areas are being driven up more by limited inventory than by a strong economy.

“With supply limited, small increases in demand can have outsized impacts on prices,” the report said.

Under construction

That puts a premium on taking the pulse of your local market.

Try to determine if the local economy is strong. If jobs are growing, incomes are rising and people are moving into town, that could be a sign that price increases are sustainable or that more houses will soon come onto the market.

Look for signs of new construction in the neighborhood. The number of lots that have been prepared for home building increased more than 21% over the 12 months through March, says Brad Hunter, chief economist at Metrostudy, a research and consulting firm that tracks the home-building industry.

The Commerce Department says the seasonally adjusted annual rate of housing starts increased 9.2% nationwide in April from a year earlier, and the rate of housing units authorized by building permits rose 6.4%.

Growth varies by region. In the Northeast, for example, housing starts increased 52% from a year ago and building permits increased 57%. In the South, the increases were 3.5% and 1.3%, respectively. In the Midwest, starts declined 10.5% and building permits declined 7.5%. In the West, starts rose 15% and permits rose 3.4%.

The Commerce Department provides data on building permits for many metropolitan areas. Other sources track local data on housing starts. According to Metrostudy. housing starts of single-family detached homes were up about 15% in Denver and Atlanta in the first quarter, compared with the same period last year, for example. In Las Vegas, they are up more than 36%, says Metrostudy.

Ask experts in your market what they are seeing. If construction activity is strong, you should be able to find evidence without too much trouble.

If new homes are going up, patience could pay off. Chris Langan and his partner put their five-month house search in Atlanta on hold in April after the couple grew tired of looking at houses that cost more than they wanted to spend and more than they thought the homes were worth, he says.

“When I see a lot of people going toward one thing—this mass frenzy—I like to step back and evaluate it,” says Mr. Langan, 31, a sales consultant for a food distributor. He says they plan to rent for two years, by which point he expects the market to be calmer.

Winning and losing

Buyers who push ahead could get lured into bidding wars, where winning in the short term can later feel like losing if you pay too much.

Bidding wars were more common in the first quarter than they were a year earlier in several markets, including Denver; Fort Lauderdale, Fla.; Oakland, Calif.; Philadelphia, Pa.; Portland, Ore.; and Seattle, Wash., according to Redfin, which bases its figures on the number of bids submitted by its agents that face at least one competing offer.

Other markets saw fewer bidding wars over the same period, including Atlanta; Baltimore; Chicago; Orange County, Calif.; and Washington, D.C., according to Redfin.

Buyers often need to move quickly, which can add to the frenzy. In Denver, Houston, Oakland and Seattle, more than 40% of the homes for sale in the first quarter were in contract within two weeks, according to Redfin.

As a result, buyers should figure out how much they can afford to spend ahead of time. Consider getting a preapproval from the mortgage lender you select.

That doesn’t mean you should borrow the full amount for which you are preapproved. Be sure the monthly mortgage payments will leave enough left over for living expenses and emergency funds. Think about how you would cover the cost if you were temporarily unemployed.

Once you set a budget, stick to it. Be prepared to walk away if prices get too high.

Consider looking at houses that aren’t selling as quickly. The owners may be more willing to lower the asking price. But get a thorough inspection to make sure you aren’t buying a house with serious flaws.

In Denver these days, a house that hasn’t been snapped up within two to four weeks is likely either to be overpriced or to need fixing up, says Tim Davis, owner and managing broker at Weichert Realtors Professionals in Denver.

Self-defense

Buyers who are eager to purchase a home are also waiving rights that are standard in sales contracts, experts say.

In addition to promising to plow ahead even if an appraisal values the house below the purchase price, buyers are agreeing to forgo the option of dropping out if an inspection shows the need for costly repairs or if they are unable to get a mortgage.

“We’re seeing strategies and situations that have never been experienced here, and I’ve been in the real-estate business since 1987,” says Mr. Davis, the Denver broker.

These kinds of contingency clauses, as they are known, are meant to protect buyers. If you agree to drop them, you could end up forfeiting your deposit if you back out anyway. The seller could also sue the buyer, though that is uncommon in a seller’s market, says Bob Lattas, a real-estate attorney in Chicago.

There are other risks, too. If an appraisal comes in low, buyers could have to put up fresh cash in a hurry in order to go through with the deal. That’s because lenders typically reduce the loan amount if a house is appraised at less than the purchase price.

If, for example, a buyer agrees to pay $400,000 for a house, but the appraised value is $380,000, the buyer could have to pay the seller an additional $20,000 out of pocket.

In such situations, buyers essentially acknowledge that they’re overpaying. They believe “the house will increase in value so much that even if something is wrong with it [they] will still be fine,” says Doug Miller, a real-estate attorney and executive director of Consumer Advocates in American Real Estate, a nonprofit based in Navarre, Minn.

The risk is that prices don’t continue to go up—or, even worse, drop.

Unless buyers are certain they can assume the risks, they may be better off avoiding situations where they have to drop contingency clauses in order to strike a deal, says Richard Vetstein, a real-estate attorney in Framingham, Mass.

If you do decide to waive contingency clauses, try to determine how nasty the financial surprise might be.

Keep in mind that price and value aren’t the same thing. Carole Short, a real-estate agent with Coldwell Banker Residential Brokerage in Atlanta, says some agents are agreeing to list homes at high prices in order to win the business.

She says, “We are starting to see some greedy-seller overpriced listings at numbers where you go, ‘Oh my God, are you kidding? That house isn’t worth that.’ ”

The new normal for Silicon Valley home buying: 36 days on the market

October 21, 2014|Lauren Hepler| Silicon Valley Business Journal| Link

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Forget, for just a moment, all of the hype about Silicon Valley’s mythical millennial tech talent clamoring for newfangled luxury apartments.

New monthly data for September from Realtor.com reveals that the region’s for-sale housing market is also crazy as ever.

Homes listed in the San Jose and San Francisco metro areas have only been on the market for a median 36 days, which leaves the Bay Area locales tied for the designation of the second-fastest-moving residential real estate markets in the entire country.

In what could be a testament to concerns about skyrocketing prices in San Francisco and Silicon Valley sending prospective buyers fleeing to farther-flung Bay Area housing markets, the neighboring Oakland metro area boasted homes with the shortest median time on the market at 35 days.

Oakland also had the most inventory, with 4,175 homes on the market as of September, compared to 2,050 in the San Jose area and 2,397 in San Francisco.

Median home prices were $500,000 in Oakland, $718,000 in San Jose and $949,000 in San Francisco.

See the chart at the bottom of this story for a breakdown of how the Bay Area housing markets stack up against other fast-growing tech hubs like Austin and Seattle when it comes to pricing and the amount of time homes are listed for sale.

The upshot for those looking to buy homes in the Bay Area — in case you haven’t heard the horror stories of competing with all-cash buyers or brokers specializing in selling homes before they even hit the market — is that competition to buy is extremely fierce, even if you can afford high boom-time prices.

As I have reported, median home prices that have in some areas surpassed $1 million also undermine the ability of even middle- or relatively high-income area workers to buy a home. Unaffordability pushed some would-be homeowners into the crowded rental market and some into buying in cheaper areas that can entail grueling commutes — that is, if they don’t decide to pack up and move somewhere much farther away that offers much more house for much less money.

Recognizing the potential economic threat posed to the region by unaffordable housing, local cities are now deliberating how to pay for and build new housing for workers at all income levels. Part of that debate is how much new housing should be single-family homes versus rentals targeted for more dense areas.

When it comes to the bigger picture for national home sales, Realtor.com Chief Economist Jonathan Smoke notes in the new report that baby boomers adjusting their real estate portfolios before retirement and booming employment in STEM fields (science, technology engineering and math) are likely two big factors driving the market.

“When we see homes moving quickly in a particular market, we expect the trend to be supported by signs of local health like growth in industrial production and employment,” he said. “This month, we also observed more out-of-the-ordinary trends, including high proportions of math and science professionals, as well as baby boomers in each of the fast-moving markets.”

Sunnyvale aims for influence on stalled Town Center

October 1, 2014| Silicon Valley Business Journal| Link

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Drive past the Sunnyvale Town Center today, and it looks much the same as it did four years ago: unfinished.

The 36-acre mixed-use project — located in some of the most desirable real estate in all of Silicon Valley — has been stalled for years thanks to a complicated court battle between its developer and the bank that owns it. It’s an incongruous sight in Sunnyvale, whose commercial real estate sector has been the envy of the Bay Area during the recovery.

Now city officials, led by new city managerDeanna Santana, are aiming to raise the pressure on both sides of the dispute — developer Sand Hill Property Co. and current owner Wells Fargo — to come to some kind of a resolution.

At the same time, city planners are studying a change to the project that could make the property more attractive to a potential buyer, they say, by increasing the amount of office and residential space and slimming down the retail.

The moves are unlikely to resolve the complex issues in short order. But they show renewed focus by the city on the incomplete project, slated to boast more than two million square feet of commercial space and housing, including more than 900,000 square feet of retail and 300 housing units.

“While it does look like we’ve been in a holding period, today’s my three-month anniversary (and) I would like to assure you I’ve been very active on this topic,” Santana told a frustrated city council earlier this month, during a session on the council’s goals for the coming year.

The project’s on-hold status has become a persistent thorn in the side of Sunnyvale officials. At the city council meeting, some council members sounded exasperated at the prospect of the town center sitting idle for years longer — a real possibility given the sluggish progress of the lawsuit through an overburdened court system.

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Silicon Valley median income now $94,572 — 43% higher than the typical U.S. household

September 24, 2014| Lauren Hepler| Silicon Valley Business Journal| Link

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Silicon Valley’s median income is now 43 percent higher than the typical American household, underscoring both the upsides (bigger paychecks for some) and the drawbacks (housing, anyone?) of rapid economic growth.

At $94,572, the region’s 2013 median household income dwarfed both California’s statewide $61,320 median and the nationwide $53,291 median, according to a new analysis of federal data by think tank Joint Venture Silicon Valley. The proportion of households in Silicon Valley bringing in more than $150,000 per year also jumped from 26 percent to 29 percent last year.

That increase reflects the dynamism of a market rapidly adding high-paying jobs in fields like engineering and finance. But that picture of prosperity is clouded by declining economic mobility for those in lower-wage jobs and a decline in middle-class jobs, which doesn’t mesh well with skyrocketing costs of living.

“We need to call it like it is. We need to own up to our dysfunction,” Joint Venture CEORussell Hancock told me. “We like all these jobs, but we don’t want to provide the housing.”

As it stands, the region is on a path to an even more divided society where public-safety workers, teachers, restaurant workers — and, increasingly, white-collar workers like doctors and lawyers — can’t afford to live here, he said.

As I have reported, one major driver of the region’s $2,000-plus rents and million-dollar “average” homes is a jarring imbalance in the supply of workforce housing. Palo Alto, for instance, has more than three jobs for every one housing unit in the city. That jobs-housing mismatch becomes even more extreme when factoring in Silicon Valley’s much-discussed income polarization.

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August slowdown hits Bay Area housing market after red-hot year

9/11/14| Pete Carey| San Jose Mercury News| Link

After a red-hot start to the year, the Bay Area’s housing market is heading toward a fall and winter hibernation that should be easier for buyers battered by frenzied competition for a scant supply of homes for sale.

“We’re edging back to normalcy,” said Andrew LePage of CoreLogic DataQuick.

 This year’s big annual price gains came early, with February recording a 30 percent yearly gain for Bay Area single-family homes; March, 28.7 percent; and April 17, percent, as homebuyers strove to outbid one another for the few homes on the market. Price gains began leveling off in June and July. And August continued the trend, with slowing sales and more moderate sales price gains — especially in the South Bay — the real estate information service CoreLogic DataQuick reported Thursday.

In August, the median sale price of a single-family home in the nine-county Bay Area was up 10.5 percent to $650,000 from a year earlier. That compares with a 35.2 percent year-over-year price gain in August of last year, according to the Irvine-based company.

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LePage said trends show there are fewer investors competing with regular buyers, and banks are making more loans that are over the so-called “conforming jumbo” limit of $417,000, which can carry lower interest rates and are vital to buyers in the high-cost Bay Area.

Prices were up the most in Alameda County, where they rose 17.3 percent to $668,500.

Smaller gains were reported elsewhere. Prices were up 9.9 percent to $478,000 in Contra Costa County; up 6.1 percent to $790,000 in Santa Clara County; and up 4.2 percent to $904,000 in San Mateo County. That compares with last August’s year-over-year gains of 32 percent in Alameda County, 39.4 percent in Contra Costa County, 24 percent in Santa Clara County and 33.5 percent in San Mateo.

Alameda County is essentially back to its pre-crash peak set in 2007, according to CoreLogic DataQuick, while Santa Clara and San Mateo counties have already surpassed their former peaks. Contra Costa County still has a way to go — it’s still nearly 27 percent below its high.

Some real estate agents in the East Bay said they were beginning to see price reductions as sellers realize they have missed the big buying season.

Sales of single-family homes were down 8.1 percent in the nine-county Bay Area in August, compared with a mere 3.2 percent year-over-year drop in August 2013, CoreLogic DataQuick said. Santa Clara County sales sagged 15.7 percent and Alameda County sales dropped by 12.2 percent from last August. Defying that trend, Contra Costa County had a 4.2 percent gain and San Mateo County sales rose 4.5 percent over the year.

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Los Gatos says ‘no’ to North 40 planning guidelines, for now

September 17, 2014| Nathan Donato-Weinstein| Silicon Valley Business Journal| Link

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The Los Gatos Town Council on Tuesday night sent city planners back to the drawing board on the North 40 specific plan, declining to pass an environmental impact report and instead asking for “more information” on potential traffic and school impacts.

The 3-2 vote is a major blow to the development team of Grosvenor, SummerHill Homes and Eden Housing because the environmental report was crucial to advancing a process that would allow the area to be redeveloped. They’ve been working for years on a development proposal for a portion of the North 40, which is actually a little larger than 40 acres and is considered the last large undeveloped site in the town. (St. Anton Capital, a Sacramento-based apartment builder, also controls several acres of land but has not turned in an actual development project.)

The council on Tuesday was actually only taking up the issue of planning guidelines for the area, not the Grosvenor-led group’s specific project. But by declining to certify the plan’s environmental impact report, the council essentially delayed the timeline by months while town staff and consultants open up the report to add more detail. That will likely mean that the report comes back for consideration after a new town council is elected.

Council members Diane McNutt and Joe Pirzynski voted to certify the EIR, while MayorSteven Leonardis, vice mayor Marcia Jensen and council member Barbara Spector voted against it.

The no voters asked city staff to study the impact of new projects in the area, which they said were not included in the EIR and could bring traffic to the area that would be much worse than anticipated. They had particular concerns about the Dell Avenue area plan, a study being undertaken in Campbell that would add development capacity to that city’s R&D district. They were also concerned about the impact on schools, which they said were already overcrowded.

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Santa Clara County Inventory Update

Weekly Santa Clara County Inventory Update 8/25/14:

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Since the beginning of August we have seen both single family home and condo/townhome inventory go down slightly overall, while pending sales of both types of properties have gone up.  It looks like during the month of August, with kids returning to school and the summer ending,  we are experiencing fewer homes coming on the market and an uptick in sales due to a stabilization of prices.

Here are the latest numbers from 8/18 to 8/25:
Active single family homes decreased from 1367 homes to 1363 and pending sales increased from 1199 to 1218 homes.

Active condos and town homes decreased from 483 to 450 units and pending sales increased from 490 to 499 units.

Chinese developer buys downtown San Jose tower site from KT Properties

August 19, 2014| Silicon Valley Business Journal| Nathan Donato-Weinstein| Link

In one of the most substantial downtown San Jose deals in ages, a Chinese real estate giant has acquired a major high-rise apartment development site with plans to start construction next year.

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KT Properties just sold its roughly 2-acre site at 190 W. St. James St. — which is fully approved for 643 units in two towers — to Full Power Properties LLC, according to title records. Sources who have been tracking the deal said the buyer is an affiliate of Guangzhou R&F Properties, a major landlord in China that has been increasing its activity abroad. The price was not disclosed.

Shaoyong Liu, a representative of Full Power Properties LLC, declined to discuss the new owner in detail, but said the company was excited to invest in the city.

“They want it to be a milestone project in San Jose,” he told me in a phone interview from the company’s San Francisco offices. “The next step is to get all the building permits and then start excavation next year. Definitely the new owner, Full Power, is going to build it.”

Ken Tersini, president of Cupertino-based KT Properties, also declined to discuss the deal in detail or confirm the buyer’s capital source.

He described the Full Power as “the ownership vehicle that’s going to continue to move the project forward at full speed,” and added that his firm — which has already developed two high-rise towers downtown — “is going to continue to be very involved and active in the project on the development side all the way through completion. We’re very excited about our association with Full Power.”

KT bought the land about a year ago and immediately started going through the city approval process for a high-rise apartment development. It is currently a surface parking lot.

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How expensive is it to live in Silicon Valley?

August 13, 2014| Lauren Hepler| Silicon Valley Business Journal| Link

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How do Silicon Valley’s notoriously high costs of living — $2,500 rents$9 one-way public transit fares, etc. — actually impact local residents on a daily basis?

Santa Clara County wants to know. It’s hosting a Aug. 25 public forum with the tagline ” The Price We Pay for Living in Santa Clara County,” which will be held as lawmakers consider changes to minimum wage and other economic policies that stand to impact large numbers of area workers.

In particular, the county is interested in ” Issues such as the high cost of housing; the need to work more than one full time job to make ends meet, the high cost of health care and education, inability to save for emergencies or retirement, young people having to move back home because they can’t afford to live on their own, reliance on pay-day lending, etc.,”according to an event listing on the website Eventbrite.

The Aug. 25 forum will be held at two times: 2-4 p.m. and 6-8 p.m. Attendees will have two minutes to air their concerns and provide lawmakers with personal anecdotes about increasing costs of living. The event listing asks residents to specify the number of people in their households and the household’s income and ensures that the information will remain confidential. Those who cannot attend may email their testimony to the county.

The event comes as the county studies a sweeping package of labor policy changes, from a higher living wage for government contractors to mandatory paid-sick days and a new ranking system for businesses based on how they treat employees. Labor unions and allied nonprofit, religious and academic groups have some momentum to push for such changes following resounding voter approval of a minimum wage hike in San Jose during 2012.

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Silicon Valley Workers Bring Home More Money

Silicon Valley real wages outstrip next best market by $10K — despite sky-high housing costs

July 15, 2014| Lauren Hepler| Silicon Valley Business Journal| Link

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With Silicon Valley’s $2,000-a-month rentsand $4.6 million median priced homes, it might seem like even a big paycheck is quickly eaten up by the high costs of living.

But a new analysis shows that Silicon Valley workers still bring home much more money than their peers in other cities even after shelling out for inflated housing prices.

new analysis of federal data by the Atlantic CityLab and Arizona State University found that workers in the San Jose metro area bring home real average wages — or the money left over after factoring in costs of living — of $75,288 per year. That compares to $64,321 in Stamford, Connecticut, $60,562 in San Francisco and wages in the $55,000-range in affluent sections of Maryland, North Carolina and Texas.

However, the report notes that the higher wages in expensive areas also magnifies problems for workers making less money, contributing to a trend toward “economically and geographically segregated” areas of the country — another dynamic vividly illustrated in Silicon Valley.

While low-wage service sector businesses don’t generally face intense pressure to compete for top talent, major employers in the Silicon Valley tech industry must shell out to attract and retain workers for a variety of reasons.

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