Sunday, January 4, 2015

2014 Year End Real Estate Review

I hope you and your family had a wonderful Christmas and a Happy New Year!  It has been a very dynamic year for real estate and here is my 2014 Year End Real Estate Review.

Alan Wang Realty Group Expansion

In 2014, Alan moved into the top 1% of Keller William Agents in Northern California and Hawaii.  In 2015, Alan will join the Agent Leadership Council at Keller Williams Cupertino and chair the Education Committee to pursue his passion in developing a new generation of Realtors that must innovate in order to serve an ever-evolving customer base.  He will take on a bigger role in education both within the area as well as nationally.

The demand for my services has grown immensely.  In order to consistently provide the highest level of service and results to service your real estate needs, I am adding more talent to support you.  I am pleased to welcome Victoria Bi who has joined the team.  Victoria is a finance veteran and shares my vision in providing the highest level of service and drive towards results for our customers.  I would also like to welcome Joe Chames who leads Transaction Coordination to ensure that the process is smooth and seamless throughout.  There is a technology department in progress and there will be more to report on that front later in the year.  We are also searching for an Administrator.  If you have any candidates do pass them our way!

None of this would have been possible without you keeping me top of mind whenever real estate needs arise for you, your family, friends and colleagues.

Without further adieu here is the 2014 Year End Real Estate Review!

2014 Snapshots by Quarter

We kicked off 2014 coming off of 50% (25% year-over-year) overall price gains in 2012 and 2013.  2014 started off the same as the two previous years, a Sellers market with multiple offers, where Buyers were competing for a small number of homes regardless of location through Q1 and Q2 of this year.

Q3 yielded some interesting dynamics with overall price increases slowing but varying depending on which of the two sub-markets the homes were in.  The first market we will call “Prime Locations” defined as areas with strong schools and/or close proximity to companies for ease of commute.  The second market we will call “Outskirt Locations” which may or may not have some level of schools but are typically further from companies in the Southbay or the San Francisco/Peninsula locations.

Prime Locations

“Prime Locations” continued to see competitive multiple offers and low inventory, although price increases in these areas have been less aggressive.  There has been some opportunity on higher end homes with prices over $2 million that have sat a few weeks longer than usual and not selling with multiple offers as frequently.  This is a high price point for most dual income families, which is likely reducing the amount of Buyers who can afford these homes.  However, due to low inventory, high demand, strong schools and convenience to work, these areas will continue to be strong, but price increases may not be as aggressive as they have been over the last 3 years.

Outskirt Locations

“Outskirt Locations” in the summer months of Q3 and into Q4 there was a slowdown in these locations.  The seasonal summer increase in inventory caused homes to sit from 17 to even over 30 days.  Instead of multiple offers, some owners had to settle for price reductions or take a lower price as no offers were coming in.  In September and October the market hit a 45 day lull, where Buyers were priced out, fatigued or were simply on vacation and no where to be found.   This was a calm and quiet that was concerning.

Wildcards: Interest Rates and the Technology Industry

The holidays are typically a time when Buyers take off for the holidays and activity is generally slow.  Inventory levels typically shrink in this time period, which was the case this year as well.  Oddly Buyers awoke from their slumber and were out and about purchasing homes.  The suspicion is that the recent news from the Federal Reserve about interest rates rising are causing people to head out and try to purchase again.  If history is any indication, low interest rates and initial rate increases are usually followed by a rush of Buyers who wish to capitalize on the lower rates.  We close out the year at about an average price increase of 11%, down from 25% the year before.

The other wildcard is the health of the technology industry.  There are ongoing debates about whether we are in a technology bubble or not.  One thing is for sure; the health of the technology industry has a direct correlation with how the companies and more importantly their stocks are performing.  The majority of customers have a large component of their downpayment tied to stock options and employee stock purchase plans.  As far as next year is concerned there continues to be strong hiring from the top companies in the area as well as a large number of technology startups sprouting in all locations.

2015 Outlook

The Federal Reserve has indicated that they will increase interests rates but likely slowly and steadily.  Quantitative easing has been tapered back.  The US economy is humming along with lower unemployment rates, 5% growth, stock market at all time highs and falling gas prices.  My opinion is that due to the artificially low rates and quantitative easing, this caused the housing market to rebound much faster than it would have in a normal market.  Likely this was by design, but that means that we have recovered ahead of the economy and why prices have gone up so quickly.  While I do not have a crystal ball, I expect the early quarters to have continued low inventory and many Buyers making a dash before rates go up.   “Prime Locations” will hold steady and still field multiple offers.  “Outskirt Locations” will likely have smaller price gains and may have a longer time on the market.  Overall we will still see price increases but likely at a slower rate than the last 3 years in 2015.  It will be interesting to see how much longer this remains a Sellers market and when prices will truly start to level.

As Single Family Home supplies are low and prices high, Buyers who were priced out are increasingly turning towards Townhomes.  $1 million buys you a townhome in “Prime Locations.”  Multiple new homebuilders have inventory coming online in 2015.  However, most likely this won’t be enough to satisfy the demand in the areas where hiring is outpacing the supply of homes coming on the market.

Sellers and Buyers

Sellers should consider selling as soon as possible as price increases are slowing and inventory is low at the moment.  Buyers the slower increases in prices is overall good news as it makes it easier to compete for homes.  Rates will be going up so locking in a lower rate now would be a great idea, but do keep in mind that we are likely approaching the peak for this upturn.  Do reach out to us for your personalized strategy and plan for your unique scenarios.

In Closing

2015 will be another exciting year for real estate.  I remain humbled by the trust and support you have all shown over the last 11 and a half years.  I look forward to continuing being your real estate advocate.  I wish you a wonderful 2015 in all of your endeavors!

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