Q2 2013 Real Estate Update Presented by Alan Wang Realty

A big thank you to all of you that have wished me a happy 10 year anniversary in the business last month.  What drives me in this business is to be able to help my customers attain their real estate goals.  Thank you for your business and constantly referring me to your family, friends and co-workers.

Market Update
 
I continue to see aggressive bidding on homes with the number of offers in the double digits with aggressive over bids.  Buyers are out and about and cash buyers continue to be abundant.  As an example last week, a moderate townhome in Santa Clara drew 15 offers "way over list price" with 4 cash offers and 1 strong loan offer.  It continues to be a Seller's market and Buyers who have the minimum 20% or less down will be unable to compete with cash or Buyers with strong down payments as the extra cash is needed to cover appraisal shortfalls.  I have been advising Buyers to have at least 30% to 40% down payment in order for us to have enough buffer to really overbid and go after homes in this market.  Even if you have the finances, you will also have to be able to go strong way above list price despite what any Comparable Market Analysis would say.  Data is meaningless in this market, it boils down to the Buyer's maximum willingness to pay and my ability to ensure the best terms to come out on top.  Seller's are wising up and starting take advantage of this market, but still there are low inventory levels.  Ask me for your custom strategy that fits your needs.

Mortgage Interest Rates Rose in the Last 2 Weeks

Interest rates shot up 2 weeks ago from 3.65% to over 4% as Bernanke's statement that the Fed may ease off their buy back of bonds has spooked the market and drove rates higher.  This likely was not the intention as the comments were directly towards the equity markets.  Nonetheless, the result will have an effect on the real estate.  My recommendations is for those buying to re-calculate with a rate of between 4% to 4.25% for a 30 year fixed and make sure those monthly payments still work.  Those of you that maybe more risk tolerant, may consider a 7/1 ARM with lower rates but of course carry more risk when they become adjustable.  The projections are that if rates continue to rise, more Buyers may enter the market in the short run due to the fear of missing out on the low rates, adding to an already competitive frenzy in the market.  Taking a big step back, 4% or even 5% are still very low rates compared to the 13% loans in the 80's as an example.

Upcoming Listings

I am pleased to present the following upcoming listings.

1691 Braddock Court in San Jose Listing Next Week

A lovely ground floor Condominium adored by a long time owner on the border of Campbell.  Italian tiled floors in the kitchen and bathrooms, recessed lighting in the kitchen and living room.  Steps away from the BBQ area, pool and spa and just a walk to Ebay's San Jose campus.  Generous 1 Car garage with an additional assigned carport.  Spacious living space with 2 bedrooms, 2 bathrooms at 1,021 square feet.  Price will be in the low $400,000's and won't last long.  This property will list next week and let me know if you want to be on the priority list to view this home.

Berryessa Single Family Home Listing in July

Heavily upgraded Single Family Home in Berryessa that will be on the market in July.  The property boasts hardwood floors, upgraded kitchen cabinets with corian countertops, dual pane windows, recessed lights, tiled entries and bathrooms with elegant mosaic designs.  There is also a bonus section of the home that could be used as more living space.  It is a 4 bedroom, 2 bathroom home with a spacious 1,434 square feet of living space on a 6,000 square foot lot.  Property will be listed in the mid $700,000's.

Buyer Homes

23496 Belaire Court in Los Gatos

Congratulations to my clients that won a lovely Los Gatos property in the mountains with a view of a redwood forest to die for.  An amazing property in a great location.  We were able to beat out a cash buyer on this property!  Specifications on the home are 5 bedrooms, 3 baths, 2,860 square feet on 1 acre of land.  Absolutely lovely!  Looking forward to closing on this next week.


New Home Development in Dublin

A brand new tri-level single family home with a yard, who's market value has increased 14% price increase since we signed the contract!  Property specifications are 4 bedrooms, 3.5 baths at 2,557, great location and great schools.  The bonus room on the third level is just what children need to safely play in an area all their own.  Property has great views, ask me where this is located!

Q3 Outlook and Beyond

I do not foresee the market changing this quarter and expect the same level of Buyer competition through the rest of the year and next year as well.  If you plan to buy a home, plan to go as strong as you can if you want to play in this market.  We are now 16 months into the recovery in the Bay Area and the rest of the nation is really just starting to feel the recovery which you are seeing more in the news.  I am often asked where I feel we are in this cycle.  I do not have a crystal ball, but I am concerned how long these overbids can be sustained.  I would say we are in the early to middle stages of this boom with at least 2 years of continuous upward movement left.  The key factors I am concerned about are the following; possible upward movement of interest rates (which may push some buyers to lower home prices), prices increasing beyond the limits of what a 2 income family can afford, some panic that causes investors and buyers to sell off their assets thereby flooding the market with inventory.  I also see new home builders that were wise to pick up land during the downturn, trying to accelerate their plans to deliver more homes to the market.  There is a long lead time to prepare a parcel and build the homes, but this will provide more supply as well.  My advice would be if you plan to buy, go aggressive and get a home while it's still early in the cycle as you don't want to be stuck buying at the peak.  Each of our situations are different, so do contact me if you'd like a custom plan for your real estate needs.

I wish you and your families a wonderful summer and thank you for always remembering Alan Wang Realty for your real estate needs.

Q1 2013 Real Estate Update

10 Year Anniversary

Next month marks my 10 year anniversary in the business.  As I reflect back at my career and what has happened in the real estate industry in that span, I have worked through 2 booms and 2 downturns.  If I were to name a few key lessons I've learned, I would say first off real estate if treated with the long term perspective in mind, you will generally have an appreciating investment.  However, you also must time your purchases and sales properly in order to maximize your investment at the appropriate times.  For example if you panic and sell in the downturn and in turn panic and buy in an upturn, this strategy most likely won't yield stellar results.  This sounds like common sense, but you would be surprised how many people are unable to capitalize.  Many just follow what's called the "herd mentality."  Real Estate is a hard resilient asset that people always come back to.  The valley is extremely unique because it is supported by our large bay area population, a demographic that values real estate, low supply of livable land and an abundant amount of technology jobs that draw immigrants to the state.  One must have the courage to buy when times are tough and the wisdom to sell when things are good.  Having a long term strategy in place, with an eye for the right market is absolutely key.

Q1 2013 Market Summary

The market has moved into the realm of irrational with multi-offers so aggressive that people are taking to over $100,000 increments in their bidding for a chance to win a home in this market.  My Buyers are extremely frustrated and having a tough time competing against cash buyers (primary home buyers, overseas investors and hedge funds) or buyers with hefty down payments that provide them much headroom for overbidding.  It has been so difficult to deliver this message to my Buyers as I share their dream of home ownership, but without a large sum of cash most simply cannot compete with this level of competition.  Buyers need to be realistic based on their means and evaluate the appropriate strategy that can win in this market.  If not, I have been advising Buyers not to play in this market and wait for a more favorable market.  This market has enough steam for likely another 2 years or more, it is hard to tell.  However, my opinion is that $100,000+ overbids isn't a scalable approach in the long run.

Seller's this is your market so contact me immediately if you would like to sell your home!  The million dollar question is where do I go if I do sell?  This is of course a personalized question so contact me so we can do an analysis of your situation.

Sample of Home Activity

The following are some of the activity that I have encountered in the marketplace.  This will give you a sample of what is going on in the greater market.

- Buyers offered on a San Carlos single family home that sold $300,000 over list price against 22 offers.  An all cash offer is suspected though not confirmed
- Sale pending on a new home development in Dublin.  We came right as the demand uptick caused the builder to increase prices every few days trying to adjust to this new demand.  Congratulations to my Buyers!

- Fremont single family home my clients and I went $50,000 over list and for the first time beat out a cash offer with a strong overall offer!  Congratulations to my Buyers!  First client in history to heed my advice and win on their first offer

- New home development lottery against 11 other Buyers on a particular model.  There were about 150 groups of people out for the lottery for other models
- Buyers offered on a Sunnyvale townhome went for over $120,000 over list price

Conclusion

The market does not seem to be slowing down in the near term.  On the contrary, as predicted Buyers are escalating their behavior in an attempt to beat out of Buyers pushing prices higher and higher.  Cash is king in this market, and I have been advising my clients to have at least 30% to 40% downpayment in order to have room to overbid and buffer for bank appraisals that often come short due to this aggressive market.  Above all things, know yourself and your limits and it maybe wiser to wait this out until the market is more to your advantage.  Seller's you may want to really gauge this market and see if you want to capitalize on this market.

Each person's situation is different, so please contact me for a personalized strategy for your real estate needs.

Regards,

Alan

2012 Real Estate Year in Review and 2013 Outlook

Happy Lunar New Year!

I wanted to wish you and your family a Happy Lunar New Year and a great 2013!  Here is my 2012 year in review and my outlook for this coming 2013 and beyond.

Market Conditions

2012 was a great year if you were a selling a home and a challenging year if you were buying a home.  Sellers were able to get into contract in less than a week and close within a month.  Cash buyers (overseas investors, investors, real estate funds, flippers and some Buyers from recent IPO's) have been abundant, outbidding and attracting homeowners to the low risk of a cash deal. The reasons for this sudden increase in buyers are the following; in a low interest environment investors are looking for a positive return on investment in hard assets, increased confidence in local and domestic economies, pent up demand from Buyers that held off during the recession and an influx of workers from out of state recruited by local technology companies which drove up rents and forced more Buyers in the market.  The market completely shifted in February of 2012 and accelerated steadily from that point onward.  Here are the variation in winning bids; for single family homes I am seeing overbids take on $100,000 increments and upward, Townhomes $50,000 to $75,000 and Condominiums $25,000 to $50,000 over comparable/list values.  This varies by neighborhood and how a low the list price is set at.  The market is moving so fast the home will not appraise for your winning bid, which will mean you have to have cash to pay the difference.

2013 Outlook

Looking forward to 2013, if you are planning to sell your home, contact me for an analysis to see if your home has recovered from the time you purchased the home.  I expect listings to continue to move quickly as inventory remains at very low levels there is simply more demand than supply can provide.  If you are a home buyer, my advice is that this market is not for the faint of heart and you have to be prepared to overbid over list and comparable prices to win homes and have very strong terms.  I am recommending that Buyers have AT LEAST 30% down and be prepared that 10% will be to cover the difference in the price you pay and the appraisal differences.  You will have to bid on homes against 10 to 20 people on average and will often run into cash buyers.  If you don't have 30% down, we can discuss other possible options, though they are limited.  My outlook for 2013 (barring unforeseen surprises) is that inventory will remain low and multiple buyers will remain continue into 2013.  2013 will be extremely challenging as competition appears to be accelerating beyond the levels I saw in 2012.  What I predict is that Buyers that have learned what it takes to win and are frustrated, they will go extra aggressive to win.  Prices will continue to push upwards.  The only silver lining is that interest rates will hold steady throughout the year.  If you are a first time home buyer this it going to be a tough market to compete in.  I always ask my clients to really consider this market and if you really want to play or sit this one out.

Post-2013 and Beyond

This is an Economics 101 exercise of very low supply creating excessively high demand and thereby increasing prices.  What is different here is that the investors/cash buyers are flooding the market with external cash further restricting supply, which is why you see the prices jumping so heavily as the bidding shifts the demand curve upwards.  They are in effect disrupting our regular supply and demand curves further restricting supply for local buyers.  If inventory levels continue to hold at these levels, this behavior will continue until prices go beyond Buyer's willingness to pay.  Having practiced real estate through 2 busts and 2 rises in the last 10 years, this environment is not sustainable as Buyers cannot sustain bidding from $50,000 to over $100,000 over comparable prices to win homes.  What goes up must come down.  I do not have a crystal ball, but most likely 2013 will continue in this manner but in the years onward this cannot be sustained.

Recent Fiscal Cliff Impact on Real Estate

The Fiscal Cliff was a hot topic last year and the here is the following summary by the California Association of Realtors:

"As you know, the bill includes a provision to extend the Mortgage Forgiveness Debt Relief Act, which will for one more year exempt the taxation of mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale or loan modification (including any principal reduction).  While debt relief has been extended at the federal level, the California exemption expired at the end of 2012, so forgiven mortgage debt is considered taxable state income for now.

We’re aware of your concerns this could have on short sales, and that’s why C.A.R. is sponsoring SB 30 (Calderon, D-Montebello).  SB 30 will conform state law to the federal law passed last week.  Upon passage of SB 30, the measure will be effective retroactive to Jan. 1, 2013.

Here are other housing-related provisions included in the federal law:

• The “Pease Limitations” that reduced the value of itemized deductions, including the mortgage interest deduction, are permanently repealed for most taxpayers but will be reinstituted for high income filers.  This provision reduces a taxpayer's itemized deductions by 3 percent of the amount of his or her adjusted gross income (AGI) that exceeds the threshold amount.  Under the new law, the Pease thresholds are $300,000 for married taxpayers filing jointly and $250,000 for single taxpayers (i.e., a married couple with an AGI of $400,000 would be $100,000 over the threshold; the couple’s deductions would be reduced by $3,000 which is 3% of $100,000).  No matter how high a taxpayer's AGI, the Pease reduction cannot exceed 20 percent of the amount of itemized deductions otherwise allowable for the year.  

• The restoration of a tax deduction for mortgage-insurance premiums, including premiums paid to the Federal Housing Administration and private mortgage insurers.  This provision expired at the end of 2011 but has now been retroactively extended for all of 2012 as well as 2013.

• 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

• Capital gains rates will remain at 15 percent for those earning less than $400,000 (individual) and $450,000 (joint).   Gains above those income levels will be taxed at 20 percent.  Gains on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 taxpayers filing jointly."

I do advise that you contact a CPA or lawyer for more details on how these impact your specific financials.

Real Estate Evaluation

Wherever you are with your real estate needs, I am more than happy to sit down and advise on what strategy fits your family needs the most.  It is critical to sit down and come up with a plan and what is realistic and what is not.  Each of you have variable circumstances and you can always count on me to have a realistic advise and strategy that will serve you and your family the best.

Wishing you a happy 2013!

Happy Thanksgiving!

I would like to wish you and your families a Happy Thanksgiving!  Thanksgiving is a time to take a step back from our daily lives and really give thanks for all that we are blessed with in our lives.

There were a couple of Netflix documentaries that really hit home for me in the last month that I wanted to share.

The first was called Small Voices.  For those of you that have children, watching these Cambodian families and children trying to desperately to survive with little hope of getting out of their situation really saddened me.  It really reminds me of how great a life our families have here and the opportunities that are available to us if we just worked hard towards our goals.  Take a moment to remind your kids why they should be thankful for all that they have!

The second documentary was called Happy.  We have been taught at a young age to pursue multiple levels of education as a means to get a good job and when we are in that job we keep trying to climb that corporate ladder.  Many of us pursue wealth, bigger homes and nicer cars.  However, this movie indicated that once your basic needs have been fulfilled, getting more pay doesn't bring more happiness.  Some key factors to happiness identified were being a part of a community of friends/family, giving back as part of a greater good, showing compassion to others and also doing what you love.  Perhaps this Thanksgiving and onward you will find more happiness as well!

Lastly, I just wanted to thank each and every one of you for your trust and referrals over the last 8 years.  Next year will be my 9th year in the business and without your endless support, Alan Wang Realty would not be here today.

I wish you and your families a thankful as well as happy Thanksgiving and rest of 2013!

Q3 2012 Real Estate Update

Q3 2012 Real Estate Update

Welcome to the Q3 2012 Alan Wang Realty Real Estate update.  For those of you that are new to my site, in addition to my Twitter feeds (https://twitter.com/alanwangrealty) which are real time updates, every quarter I put out a quarterly review of how the market is performing, direct activity I am experiencing and also critical reminders.  You will recall in my Q2 Real Estate update that I declared that bidding wars were back.  This has come to a surprise to many, but as I've been calling out in my updates since 2010, our market has been steadily on the incline for the last 2 and a half years and now in the last 2 quarters the market is simply red hot.  Since Q2 the market has held steady with 5 to 15 offers per house.  Make no mistake it's a Seller's market and those of you that have bought homes and have been waiting to sell, contact me so I can run a Comparable Market Analysis to see if it's a good time to sell or not based on when you bought the home.  If you have some equity, we can take advantage of this market and plan for the next steps in parallel.  If you are looking to buy, I've been sitting down with each buyer to educate them on what it takes to win, let me know if you want to sit down and discuss the right strategy.

Root Cause of the Bidding Wars

Many people ask me what has been the cause of these bidding wars.  At a high level, the Bay Area has always had a density problem; a large population, lack of space to build housing for a population that values purchasing real estate for their jobs, investment, schools and beautiful weather.  However over the last few years interest rates have been at historical lows.

There have been some key factors that have jump started growth this year.  Due to an influx of hiring from outside states, this has increased demand for a complacent group of home renters (many were potential home buyers) that have been enjoying lower rents over the last couple of years.  As these 1 to 2 year leases come due, landlords are raising rents to market prices to meet the ever increasing demand for the low supply of rentals available.  These renters run the calculation of rent verses buying and many make the decision to start putting their money towards a home at least they can take advantage of some write offs and try to earn appreciation in the process.  These renters have flooded the market and have joined regular home buyers creating additional competition.  There is also the human factor, many Buyers in the market creates confidence and home buying goes viral!

Macroeconomic Environment

Real Estate in major cities in the rest of the United States are also showing finally showing lower inventory levels and a flurry of activity.  It goes to show how unique the valley is in that we are 2.5 years ahead of the rest of the nation due to the strong local technology micro economy that continues to lead innovation and attract investment and pursuit of talent.  Recall that interest rates have been at historic lows.  The Federal reserve has stated their plan to keep interest rates low and will not want to make any drastic changes especially for the election year or even in the near term.  The Fed has upped it's game with Quantitative Easing 3, where it is planning to purchase additional agency mortgage backed securities about $40B per month which will push long term rates down even lower.  If you haven't refinanced, it maybe time to take a look at how much lower rates can go.  Again this is more of a reaction to the entire United States market and the Bay Area can only benefit from this since most the valley is generally employed and can take advantage of the low rates.

New Buyer Real Estate Introduction Guide

Exclusively for my clients, I have compiled a Buyer Real Estate Introduction Guide fresh off the press.  Let me know if you or someone with Real Estate needs would like a copy!

Property Taxes Due on November 1

Property Taxes are due on November 1, 2012 but late after December 10, 2012.  What that means is that you have until December 10th to pay this bill.  (Do give a few days for the mail)

To check the status of your tax status go to the county website http://payments.scctax.org/payment/jsp/currentSecured.jsp.

The first installment is due and payable on November 1. However, you have until December 10 to make your payment.  (Always give yourself a few days, the county is not flexible on late payments).

County Websites
- Santa Clara County - http://payments.scctax.org/payment/jsp/currentSecured.jsp
- San Mateo County - http://www.sanmateocountytaxcollector.org/index.html
- Alameda County - http://www.acgov.org/propertytax/

Homes Sold to My Buyers - Details located at http://alanwangrealty.com/MyListings

- 1070 Norfolk West San Jose Condominium with Cupertino homes against 11 Buyers
- 528 Vincent in Mountain View, won against 4 other bidders in court, probate sale
- 371 Imperial in Daly City sold against 5 other Buyers
- New Home Development first release lottery of against 17 other buyers and Buyers win
- San Jose brand new Townhome sold to my Buyer with 8 other Buyers present for the lottery
- 826 Tulane in Mountain View with Los Altos schools sold against 5 offers
- Over $150,000 of upgrades model home sold to my Buyers for $614,000, community is complete in Santa Clara

Other Examples of Competitive Homes

- Single Family home in Sunnyvale against 3 offers, Buyers won
- Sunnyvale Single Family home lost against 12 offers, 1 offer was all cash $105,000 over list price
- Fremont Condominium 6 offers, all cash won this, Buyers did not bid due to competition
- Townhome Mountain View lost against 4 offers

Conclusion

It is a challenging market and you will need an experienced Realtor that knows how to represent you and win in this market.  On the selling side, let me evaluate your home and see if it makes sense or not to sell.  Whether you or your friends and family are looking to buy or sell property, I thank you for always referring Alan Wang Realty!

Regards,

Alan