End of Year Marin Market Analysis: A Return to Normal?

Everyone is asking us, “How’s the market? Is it slowing down?”

A careful review of data shows the relatively strong 2018 market to be clearly leveling off. We’ve enjoyed seven years of steady price increases, which we are still seeing, but a bit of a slowdown would not be unexpected at this time.

We do not expect a massive market correction in Marin like the one we experienced in 2008-2010. We expect a return to a normal market. Here’s what we are seeing at the end of 2018:

1.Inventory is up. As of today there are 447 homes for sale in Marin County. That is high for this time of year, and about where we were in the spring, when there were usually less than 500 homes available. It is even more telling that in mid-November, when inventory usually declines, we had over 650 homes available, far more than in the spring.

2. Percentage in contract has fallen for the last few months, but now is up. Only 32% of homes were in contract a month ago, which is considered a “balanced” market. Amazingly, we are now up to 53% in contract – but that can be attributed to the great number of homes that have been withdrawn from the market that had not sold, possibly because of the holiday season, which is typically slow. In the spring, we were typically at 50% of homes in contract, meaning that almost half of the available homes for sale were in contract.
3. Since November 15, 144 homes have either been withdrawn from MLS or allowed to expire. That is a very large number of homes. As a result, percent in contract has actually risen, to 53% in contract from 32% a month ago.
4. Year to date, average sale price is up 5.1%, to $1,456,064. We were looking at nearly double digit increases earlier in the year.

Many signs are pointing to a decided market shift – something that is more “normal”, although we are beginning to wonder if Marin County ever qualifies as normal. But it does feel a little different out there right now, and a lot of market data verifies our thinking. It is also clearly happening on a national basis, as numerous stories show.

Barring an unforeseen national economic calamity, we expect this to be much more gentle than what we saw in 2008- 2010, and really just a return to a normal market. The main reason is that financing of home sales is very different than what we were experiencing in that market.

There were a number of homes purchased in that market with “innovative” financing, ranging from 100% financing, to stated income loans (aka Ninja loans: no income, no job), to my personal favorite,”pick your payment loans”, where the buyer chose to pay based on either 1) the actual loan interest rate, or 2) a 0% interest payment, or 3) “negative amortization”, which was less than the actual payment due and increased the size of the mortgage. Not surprisingly most buyers chose the negative amortization rate, and when forced to sell they ended up doing a short sale.

But that was then.

These days, every transaction we have seen includes at least a 20% down payment, and often more. There is a lot of cash out there, and we see many all cash purchases. In fact, we recently listed and sold 83 Madrone in Larkspur, listed at $949,000. There were eight offers, and seven of them were all cash!

So maybe the government did something right after the last crash, and maybe the banks learned something last time around. But then again, in these tumultuous times, what the future holds is really anybody’s guess. As we begin this year’s holiday season, the real estate market takes its collective annual breather, and the one thing we do know is that those who plan ahead do best. Some things never change.

Buyers Corner: Taking Offers As They Come

This is a great time of year to buy. Its winter in Marin County, and its raining. Days are shorter,  buyers are fewer, and new listings still appear regularly as sometimes circumstances dictate that the house needs to be sold now! Lots of buyers don’t shop for homes in the rain, and properties don’t look as attractive when the skies aren’t blue, the views are gray, and the furnace is running.

Often times listing agents and sellers, in their eagerness to get an offer quickly will put a new listing on and take offers “as they come.” That means the offer date is the listing date, and it creates a great opportunity for a buyer who has been looking and knows what they want. If they see it, and like it, and are pre-approved they can write an offer before there is any competition, and get it accepted before most buyers even know it is available.

Always ask the listing agent when they are taking offers, and be sure to get on autonotify for new listings (call Bob!) so you will get notification of new listings as soon as the other realtors do. We just had some smart and fast moving clients do just that in Larkspur on a very desirable property a few weeks ago, and they are now happily moved in.

US House Acts To Shore Up Flood Insurance Program: Good News For Marin County Homeowners.

The House recently passed legislation renewing and reforming the National Flood Insurance Program.  This is much needed reform, as the current plan was set to expire in a month which would severely hamper real estate sales in much of coastal Marin.

Flood insurance is required by the lender in flood zones, and a surprising amount of  Marin is in a flood zone. Often some of the most desirable neighborhoods “in the flats”, such as Sycamore Park in Mill Valley, Hillview in Larkspur, and Madera Gardens in Corte Madera require flood insurance. It is tricky, as two houses right next to each other can differ, with one in the zone, the other not, depending on the elevation. And even if the house has never flooded, as is often the case, it still requires insurance. And yes, there are incidents where homes do flood, and don’t require insurance, yet other homes never do and require it.

The problem is most evident in Marin during winter rainstorms, or when we  have “king tides.”

The House bill has several important changes. Most importantly, there is $1 Bllion to elevate, buy out or mitigate the riskiest properties. Amazingly, 2 percent of policies account for 25 percent of claim payments, as they repeatedly flood. As a result many homeowners are forced to pay higher rates even though their homes never flood, effectively subsidizing riskier properties.

Additionally, there are provisions that will make it easier for private insurers to step in, which will hopefully make it cheaper for homeowners, and remove some of the risk of buying in a flood zone.

Good news for Marin County, and hopefully we see more and better reforms in the next iteration of the law.

Marin County Market Update: Tight Inventory Will Probably Get Tighter

As we near the holidays, buyers are still actively on the prowl trying to lock in great interest rates. We recently had over 100 people at a Saturday afternoon open house at our new listing at 171 Summit, after being told by many agents it was “too far up the hill.”  Someone forgot to tell the eager buyers fighting for parking.

Inventory is tight, as it has been all year.  There are 575 homes listed for sale in Marin, and 42% of those are already in contract. Under $1,000,000 continues to be a dogfight with 56% of the homes in contract, while in the move up range of $1,000,000 to $2,000,000, 44% are in contract. The luxury segment, above $2,000,000 is softer, with 21% of available homes spoken for.

We expect inventory to continue to decline for the next 45 days, especially now that it has started raining. But expect good homes to continue to get a lot of attention, as there are still plenty of buyers out there waiting for their chance to lock in a Marin home.

Mid Century Modern Masterpiece on Corte Madera’s Christmas Tree Hill – watch the video!

This is not your typical Christmas Tree Hill home! Our newest listing is really something special: 171 Summit Drive, Corte Madera, CA 94925. Check the website here! 

This was the personal residence of Jerry Rubin, the original developer on this part of the Hill, and chosen for its views, light, and large level spaces.

Designed by noted architect Kemper Nomland, every room in this mid-century modern masterpiece is oriented to showcase East Bay sunrises and natural beauty. Held in the family for years, this is the first time it has been for sale on MLS. The current owners have carefully and thoughtfully updated the home, adding a master suite in 2009.

Trails to Mt. Tam and Mill Valley are right outside your door, yet you are just minutes from Meinke Park, the Old Town Square, and its restaurants, like Benissimo, Zinz Wine Bar, or Burmatown.

Christmas Tree Hill was originally settled after the 1906 San Francisco earthquake, and is known for its charming homes, great views, and proximity to open space, town, and freeways.

For a real taste of this home, watch the video here.

Details: 171 Summit Drive, Corte Madera, $1,199,000. 3 bedroom, 2 bathrooms, 1,495 sq ft of living space on a 10,000 + sq ft lot, per tax records. Call Bob for a private showing at 415-378-1414.

 

The Secrets To Buying Off Market, or “Off MLS.”

Houses not sold on MLS have been on the rise this year. Just a month ago,  twice as many have closed off market  in 2017  vs. in 2016 .

While there are certain advantages to buying or selling “off market”, there are also potential issues. Our manager always points out that many of the legal disputes she has seen in real estate happen in off market sales. Sellers sometimes believe they didn’t get enough for their home, and buyers sometimes believe they paid too much.

We almost always recommend putting a listing on MLS. By listing a home through Coldwell Banker, the MLS listing gets fed immediately into over 900 real estate websites, from Zillow to a number of international sites. More exposure means more buyers look at the house, and more buyers looking means more money for the Seller.

Occasionally, there may be situations where it makes sense for the Seller not to put it on MLS. For example, the house may require extensive work to get it ready for market, and it’s late June, the end of the selling season. Rather than doing the work and putting the home on in August, it may make sense to offer it for sale off market in its current condition- but still at the price it would be in August. This works in that the Seller may get their price without investing significant money and time in home prep, and the Buyer gets to purchase in a non-competitive situation.

How do Buyers get connected to off market deals? Through connected agents, who have strong networks of other agents and spheres of influence in the community.  The home never appears on MLS, so the general public never even knows the house is available, let alone get the chance to write an offer on it.

It is not for everyone. The house may have flaws, sometimes big ones, the Buyer will have to take on. It also requires a Buyer who knows the market, and what they want. When writing an offer and the Buyer knows four other people are writing as well, there is a feedback loop that says “this house is worth it, all of these other people want it.” In an off market deal, they Buyer may be alone, without all of the external cues of going to a crowded open house, seeing the home in perfect condition, or hearing about all of the other interested parties.

We successfully negotiated an off market sale a few months ago for a Buyer in Chapman Park, a very desirable area in Corte Madera. The home had been severely damaged by fire, and the Seller was waiting for the insurance settlement to clear. Once they had the money, the Seller  would then have to go through an extensive renovation and permitting process to make the house habitable again. The Seller was a trustee who lived out of state, so this was not going to be easy.

Further complicating this was that since the house was not habitable, banks would lend on it based only on land value, a fraction of the price, so it would require an all cash buyer.  We knew the listing agent well, had been in contact with her about the home for several months, and as the Seller’s frustration grew, we moved. We were able to put together a deal that worked for everyone, as our client had cash and the expertise to take on the risks of a fire damaged home. In this case, everybody won. The Buyer got a good house in a great location, the Seller got a fair return, and did not have to deal with renovation, permitting, and insurance settlements from the East Coast.

It’s always best when everyone wins!

 

Inspection Overload: Why You Should Get Inspections Up Front If You Are Selling in Marin County

One of the other interesting outcomes of the hot market is inspection overload. It works like this.

The buyer gets into contract, over list price, and is ecstatic. They just beat out a bunch of other buyers. So what do they do? Inspect, inspect, inspect in an effort to find something wrong, and gain concessions back on the price.

We had a listing where the Seller, following our sage advice, had done a home inspection, pest inspection, and had replaced the sewer lateral. The house was very clean, with almost no issues. They had also used the inspectors we recommended, who are well known and respected in Marin.

I was more than a little surprised when the agent who represented the prevailing buyer (there were two offers) advised me they needed an entire day as they had scheduled 1). their own home inspection 2) their own pest inspection 3) a drainage inspection 4) a chimney and fireplace inspection 5) a roof inspection and 6) a structural engineer inspection.

I immediately asked, “Gee, why didn’t you hire a soils engineer?”

That is about, by my reckoning, well over $2000 in inspection fees, for a house that has already been thoroughly checked out. According to the contract, the buyer is allowed to do any inspection they want, if they ask. We always encourage buyers to do inspections if needed, or if the seller has an existing one by a reputable contractor, then we at least do a walk through with him, usually for about $150. But all new ones? On a house clearly in excellent condition? Inspection overload.

So if you are a seller, what do you do?

First, get your own inspections up front, from reputable inspectors. Don’t save $75 and hire the guy no one has heard of from Vallejo. Second, work to get other buyers into backup, if you have multiple offers, so you have leverage if someone starts to press for concessions.

And finally, prepare yourself mentally – you are about to hear the worst possible things about your home in ways you didn’t dream were possible, from trade specialists you didn’t even know existed.

Just remember you are now in a business deal, and you are negotiating. And with good representation, we can preserve your hard won price and get you through to close.

 

Secrets To Competing for a Home In Marin County, Part 2

How to Compete in Marin County

As we said last week, this is a tough place to buy a home, and while “spend more” might seem like the simple answer to get the home you want,  it is isn’t always that simple.

There are several tactics buyers can use at the offer stage that can push the scales in their favor when offers are close in terms of price and terms, but the focus on this entry is on the basics.

1. Get pre-approved for a loan from a recognized Marin lender. This is not a pre-qualification, it is full approval on the loan. While this still involves a loan contingency when writing an offer it removes almost all uncertainty from the approval, as it requires review of all pertinent tax documents, income verification, and credit history. Some lenders are even now promising this will constitute full approval on the loan, allowing buyers to go in without a loan contingency.

2. Get educated. Look at homes, a lot of them. Figure out what is really important to you, and what isn’t. Everyone starts out with a long wish list, but everyone needs to prioritize that list, and that only happens by getting out there and kicking tires. This is critical because when the time comes to pull the trigger and write an offer, you’ll need to jump in with both feet. You may need to spend a little more than you wanted to, or have to shorten contingency time lines, or even accept the seller’s inspections instead of doing your own. Confidence in your choice makes that decision process easier.

3. Get agressive representation. Find a good local agent to help, and one who isn’t just trying to sell you a house. A local agent can help immeasurably by providing information about the pecularities of Marin – school districts, commute times and modes (car? bus? ferry? bike?), climates, and communities, just for starters. They can also size up a house quickly, and help you understand the pluses and minuses of the home- is it in the flats? On a hillside? What’s a flood zone? Honest information and opinion from a seasoned professional will help immensely.

Here’s a good test: do they tell you what’s wrong with a house? Ever? Or is it just a chorus of “yes!”. Good agents are interested in building relationships and know their credibility depends on guiding clients to a decision they will be happy with.

4. Tighten the offer to give it every edge it can. Work with your lender to shorten all time frames as much as you can, from close date to contingency removal. Line up inspectors and find out how fast they can do the work, and tighten the inspection contingency accordingly. If they are reputable, do walk throughs with the Seller’s inspectors, they’ll often do it very quickly for you. Write a letter to the seller, explaining why your offer is so important to you. Visit the open house, introduce yourself to the listing agent, and let them know how much you like the house- they will be influential in helping the Seller decide who to work with.

That, as I said, are the basics. There are additional tactics we use with our clients as we get close to making an offer and as we go through the process to increase our success rate, but we can discuss those if we ever work together!

First Time Home Buyers: Secrets to Competing for a Home in Marin County

I love working with first time home buyers. Lots of experienced agents run in the other direction as fast as they can when working with someone who doesn’t know what a title company is or why they need one, but I have always enjoyed it. Many of the rewards of helping a young family achieve their goal and buy their first home are intangible, although of course we do get paid (by the Seller, not the Buyer!)

In fact, I was recently honored to have an article published about some of my clients in the Marin Independent Journal, and talked them about why it is so difficult. Where to start?

1. Prices are high. Average sale price in the County YTD is $1,312,279. And the sale price is 6% higher than the list price – so that means on average, homes sell for 6% over list price. Gulp. That includes condos, by the way.
2. Inventory is low. As I said in the article, it seems like it is always low. There are 627 homes for sale in the entire County, and only 348 of those are under $1,500,000. And 188 of those homes are already in contract. That is not a lot to choose from, for sure.
3. Multiple variables make selection difficult. School districts, commute times, neighborhoods, weather, communities, all need to be evaluated in selecting the right area, and they are all different. It’s not easy. For example, in the middle of summer its not uncommon for it to be 55 degrees, cold and foggy at Muir Beach, or even Tam Valley. Meanwhile, in Chapman Park in Corte Madera it might be 80 degrees and sunny, the Dominican in San Rafael could be 90, and in Novato it could be pushing 100.  Commutes are all over the map: Car? Bus? Ferry? Bicycle?
4. Homes are old. We don’t have a lot of new construction so homes tend to be older, and that means understanding the condition of the home and how it has been maintained takes on added importance.

So why buy here at all? Just because everyone else wants to? Hardly. The towns are small, the weather is spectacular, schools are excellent, commutes relatively short, and most importantly 82% of the County is preserved as open space, park land, or agricultural land. If you like the outdoors, and solitude, you can find it in Marin, just minutes from  San Francisco.

So how to compete in this difficult environment and get a home? That will be the subject of our next entry!

In The Buyers Corner: Should I Rent Or Buy?

One of the thorniest issues for a potential home buyer to answer is “When should I stop renting and buy a house?” Much of that answer is driven by lifestyle, and life stage. Marriage, children, and the search for school districts are some of the big motivators for home purchasing.

Sometimes though it is also a question of allocation of financial resources. And in some cases, in some markets, in some times, it may make more sense to rent than buy because it is cheaper. That is rarely the case in Marin County, as the restricted supply of homes here means long term, appreciation in home values will almost always trump a temporarily lower cost to rent.

A great resource to show this is the New York Times Rent vs. Buy calculator. It allows you to input 21 different variables, from the price of the home to the cost of home insurance, on a very easy to use interface, and constantly updates the “magic number”, or the price at which it makes sense to rent. We ran a couple of different scenarios, and the answer was always “buy”. For example, we input the numbers of a home we recently valued for a client at $1,650,000; the number it was better to rent at was $5,432 per month. The home was rented two weeks ago at $7000 per month.

It has been that way for the last several years, although there are signs that the rental market is softening in Marin County.  But constant appreciation in value, which has been the norm for the last 60 years in almost every single year, means that buying usually makes more sense.

So as difficult as it may be, if you want to live in Marin, it still makes sense to buy instead of rent, if you can afford it.