Thursday, March 20, 2014

Q1 2014 Real Estate Update


2014 started out with a roar and it continues to accelerate with every sale.  In my year end summary I talked about the tale of two markets "Prime Locations" and homes "Outside of Prime Locations."  This year it no longer matters which market you are in, it is the tale of one market, the "Seller's Market."  First off, I had thought that interest rates would rise this year as they had in June of last year from the Fed's tapering activity.  Up until today, rates have in fact dropped slightly, bringing more Buyer's back into the market.  However, fresh off the press our new Fed Chair Janet Yellen spoke yesterday and pointed to possible tapering sooner than the market had expected.  This sent stocks tumbling and it is possible that this may cause another spike in rates, though it is unclear at this juncture whether that will happen or not.  Less stimulus usually means that the rate will be allowed to rise naturally.  On the home front, to date there continues to be multiple offers, obscene price overbids, cash offers and overall heavy competition for a limited set of homes.  This is likely not going to get better in the Bay Area anytime soon due to pending IPO's and a nicely performing stock market.  More Buyer's will have down payments that they didn't previously have.  An interesting trend of late are appraisals missing the mark in the last month.  This could be a sign of overvaluation by Buyers, but it is also possible that the market is moving so quickly that the 30 day lag in closings coupled with low inventory, isn't providing much data.  This is why I always tell my Buyers to carry at least a 30% down payment to buffer for these scenarios.  I do anticipate the spring and summer months to bring in more inventory, but I am not sure that this will be enough to satisfy the demand.  The wildcard here is the interest rates and we will have to wait and see how Q2 unfolds.

Here is a snapshot of rates for new home purchases:
  • Jumbo Rate Snapshot 3/19/2014
    • 7/1 ARM 3.375%
    • 30 year fixed 4.25%
Courtesy of Christopher Yu Wells Fargo

Just Listed 2 Bedroom Condominium in Fremont













Top floor condominium with vaulted ceilings throughout; open floor plan with kitchen, dining and living rooms combined and spacious bedrooms.  Bright property with over sized balcony overlooking greenbelt, updated and move-in ready! Open House this weekend from 1:30PM to 4:30PM.  Let me know if you have you or anyone you know maybe interested in this listing! Listing details located at  37000 Meadowbrook Common, Unit 202, Fremont.

Samples of Market Activity

I like to give my clients a few samples of what I have been running into in the marketplace so you have a pulse on the market.
  • Single Family Home in Newark 40+ offers
  • Single Family Home in Milpitas 17+ offers
  • Single Family Home in Downtown Mountain View sold $230,000 over list, multiple offers
  • Townhome in South San Jose 4 offers, all cash offer won
  • Fremont home misses appraisal by $100,000, but was up against a cash offer
  • Single Family Home in Dublin 10+ offers
  • Single Family Home in San Mateo 8+ Offers sold over $100,000 over asking
Pending and Sold Homes in Q1

Here are some of the transactions that I have been involved in.  These will give you more concrete examples of how various areas are performing.
  • 35208 Noel Place in Fremont - Multiple offers one of the top offers was cash.  My Buyer went strong and won this home even with a loan behind it.  Cash offers often low ball because of their cash positions, a loan offer positioned right can beat out a cash offer.  This requires a Buyer with a strong financial position.
  • New home community in Los Altos under contract! - There was a long wait-list of Buyers, but my clients just made it!  The long line of Buyers is an indication of the demand for homes.
  • 2362 Tulip in San Jose - At times the best opportunities are homes that have potential and require effort to fix up or expand.  This unit has a decent lot, but on paper was only a 2 bedroom 1 bathroom home.  My Buyers are looking to expand this home as there is space inside and out to do so.  At times you have to see the potential of a home to find possible opportunities in this market.  Still had to offer over list price against multiple offers.
  • New Home Development in San Jose - This community started in the recession and as the market rose, they just wanted to finish it up as it had been over 5 years.  So we had opportunities to negotiate a bit here when usually we wouldn't have.  Often opportunities arise when you least expect them.
  • 2423 Fernwood Avenue in San Jose - Home closed this year.  This is another example of a home with the right location and area, but a 3 bedroom 1 bathroom on paper.  There is potential for expansion later which is an opportunity and we had less competition because of this configuration.
  • 11 Buttercup in San Carlos - Another multiple offer home that closed this year.  It is very important to package an offer right.  It made a huge difference in coming out on top on this home.
  • New Home Development in Santa Clara - Closed this year.  A relationship with the Builder was a critical component in this home sale.
  • New Home Development on the Peninsula - At times you have to go into a lottery.  Lotteries are fair and they don't care if you have a large down payment or not.  In our case the 5th time was the charm.
  • New Home Development in San Francisco - San Francisco continues to be red hot as tech recruiting is at an all time high, talent from across the nation continues to flood the Bay Area and they all want to live in the City.  Rents are off the charts as well as home prices.  This market continues to be resilient and unique.  A 2 bedroom 1 bathroom at 753 square feet is renting for $3,400!
  • New Home Development in San Jose (Townhome, Single Family) - Two customers have bought in this early release community.  Ask me about the details!
Note: As a courtesy to your Realtor, please go in with me on your first visit to a new home community, it is a referral system thanks!

Next Steps

Likely 2014 won't be the year that the market settles down unless the rates do something drastic.  If we are lucky we may hit a market in equilibrium, but likely that won't be the case.  Hence, if you are a Buyer and you want or need to buy in this market you must come strong.  Ask me to define a strategy on how to position yourself in the strongest way possible.  For Seller's out there, if you have been thinking about selling, prices have risen on average 25% year over year over the last 2 years.  It is a great time to sell if you have been thinking about it.  You will never catch the peak, the opportunity is available at the present.

I wanted to take a moment to thank all of you for your referrals.  I truly appreciate each and every one of you keeping me top of mind for your real estate needs.

No comments: