| Investor Buyers Circle Back To San Francisco Bay Area Property– | May 29th, 2008 |
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This article comes from SF Gate’s May 9 edition. I bold-faced and italicized some of its most important points: It’s the worst time since the Great Depression to buy real estate, right? Not so, according to some individual investors, who think the market slump has made selected pockets of the Bay Area more desirable than they’ve been in years. “Look at this,” said Dan Shiner of Mill Valley, one such investor who was en route with his agent to visit properties for sale in Santa Rosa last week. “This duplex sold for $599,000 two years ago and now it’s listed for $414,900. That’s why people like me are coming out of the woodwork.” Shiner, who works in finance, said he avoided investing in local real estate for years because prices were so ridiculously high. But the current market has drawn him back in because suddenly he sees relative bargains. Last week he looked at a dozen Sonoma County duplex and triplexes, and had offers accepted on two. “The way prices have come down is absolutely amazing,” he said. “I think it’s a phenomenal opportunity for the small investor to buy their first rental properties.” While many buyers, whether potential residents or investors, are staying on the sidelines, largely from fear that prices will continue to plummet, some private investors think there’s no time like the present to take advantage of a market in freefall. Unlike the “fix and flip” speculators of recent years, these investors are in it for the long haul. They see chances to be cash-flow positive - which had been a pipe dream in the Bay Area without putting down wads of cash - and to build appreciation over many years. Overall, homes sales have plunged to record lows. However, the percentage of investors in the market is edging up, according to DataQuick Information Systems, a real estate information service. “The reason you (have) seen investors coming in, at least in small ways, is that in certain neighborhoods across the Bay Area and across (the) state, you’ve had significant depreciation and it now makes sense for some investors,” said Andrew LePage, a DataQuick analyst. “They’re adding to what little demand exists out there by snapping up foreclosure resales because some of those have bigger discounts. The savvy ones probably realize that few, if any, of us are going to time the bottom correctly.” Credit still tough Jeffrey Lerman, a San Rafael attorney who specializes in real estate investor issues, said many investors are still waiting for a bottom. “We are seeing some contrarian-type investors who are looking for and doing deals in this economy,” he said. “The vast majority are not. They follow the herd.” Those investors who do plunge in are “returning to fundamentals,” running the type of due-diligence equations that seem obvious now but got forgotten in the frenzied years when speculation was king, Lerman said. Advice for investors – Find locations where depreciation rules. David Campbell is bullish on Vallejo. That’s not because he owns a real estate company, Fourth Dimension, there, because most of his business is out of state. Instead, he said, it’s because the town has some neighborhoods where property values are down 50 percent from their peak, while its long-term growth fundamentals - universities, medical center, jobs in heavy and light industry, transit, military training and a planned 200-acre cancer treatment center - remain strong. He thinks the city’s brush with bankruptcy could be a benefit if it negotiates better contracts with its public employees. “A Vallejo three-bedroom, two-bath single-family home can be purchased for $200,000 and will rent for $1,400 a month,” he said. “Vallejo studio condos can be purchased for $75,000 and will rent for $750 a month.” At 20 percent down and an interest rate in the high 6 percent range, those properties would break even or generate modest cash flow, he said. – Don’t count on chichi areas. Amit May, principal with May Properties, a real estate development and investment company in San Francisco, said in an e-mail that deals in the city are few. “We have not seen drastic price reductions,” May wrote. “I still think this is a good time to buy residential property in San Francisco, such as two- to six-unit (buildings), but the problem is that the inventory is so low now, there are not a lot of bargains.” Investors uniformly emphasized that areas with high foreclosure rates have the best bargains. That means Solano County, Richmond, Rodeo, eastern Contra Costa County, parts of San Jose and parts of Oakland. – Consider cash flow. Most investors said they are unwilling to swallow big monthly differences between a property’s expenses and income. Realistically, few single-family homes in the Bay Area will generate significant cash flow, assuming down payments of 20 percent or so. (Obviously, the more cash one puts down, the greater potential for positive cash flow.) Even the pockets that have huge drops in price take some careful calculations to make sure the rental demand is there. But small multifamily properties with two or more units do have potential for making money, several investors said, while single-family homes at least might break even. Properties bought under distressed circumstances, such as those sold at the huge foreclosure auctions happening every couple of months, may be sufficiently cheap to bring in income. For those who really want cash flow without significant money down, looking outside the Bay Area might be the best bet. “If you go out to the Central Valley, Modesto and those areas, you can flow cash at 10 percent down,” said Michael Yesk, regional manager and attorney for IPX1031, a company that handles tax-deferred exchanges on investment properties. – Factor in demand for rentals. All the folks losing their homes to foreclosure and all those potential homeowners who decide to wait for the market to hit bottom have to live somewhere, many investors point out. They expect that to increase demand and rates for rental housing - as has already been happening in recent month. Shiner of Mill Valley said he likes properties that already have long-term tenants in place. That rules out foreclosures, however, because banks seem to uniformly evict tenants when they take possession of a foreclosure. – Look at prices versus interest rates. Investors acknowledge that they probably could get some properties cheaper by waiting longer - but then they risk paying higher interest rates, which would wipe out those savings. For instance, a 30-year fixed-rate mortgage for $300,000 at 7 percent is $1,995 per month. If the mortgage amount were 10 percent lower - $270,000 - but the investor is paying 8 percent interest, the monthly payment is almost identical at $1,981. On the other hand, investors who have large cash reserves to plunk down might be better served to wait for even lower prices. – Buy from the bank. A huge percentage of properties for sale in recent months are bank-owned foreclosures. These lenders are the ultimate motivated sellers. Still, bankers are not fools. Anyone making a lowball offer should be prepared with information on very recent comparable sales in the neighborhood to justify the price. Some bank-owned properties are generating bidding wars - admittedly usually for less than the asking- but that gives the banks more of an edge. Bank-owned foreclosures can have maintenance issues. The previous homeowner may have stopped making repairs when money got tight. – Make sure you can afford it. While this may seem obvious, lots of folks didn’t think it through in 2005 and 2006, which is why there are now so many foreclosures. Investors need to be sure they can hold on to property for the long term, probably at least five years. Putting extra oomph into that equation is that investment loans, unlike those on a primary residence, usually are “recourse loans.” That means the bank can come after your personal assets if you renege. And investors should not expect a return to the no-money-down days, which means they already have cash on the line as soon as they buy. Shiner, the Mill Valley man investing in Sonoma, said he has a long-term horizon. “As Warren Buffett says, lethargy bordering on sloth - that’s me,” he said. “The fact that the market is not turning around in the next year isn’t significant. If you wait long enough, the market has always gone up since the days of the caveman.” |
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| New Listings Not Yet On Market | May 29th, 2008 |
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$1,700,000 / Noe Valley/ Updated 3br/1.5 ba Edwardian house on Noe Valley’s most coveted tree-lined blocks. Two south facing decks and great views over Noe. Sneak previews available starting 6/4. First open 6/10. can $1,395,000/ Potrero Hill/ 2 Units / 2+ car parking. Northeast slope. Good block. Unique property presently used as commercial space. Both units are 2br/1ba. Both are sunny, have nice updates, and good original detail. Flexible floor plan includes additional space over garage. $1,195,000/ Eureka Valley/ 2-level Edwardian house with 3br/1ba. Great period detail. New kitchen and bath. Small yard. Garageable. $1,095,000 /Cole Valley / 2br/1ba upper condo flat in lovely Edwardian building. Chef’s kitchen, renovated bath and French Doors off living room leading out to shared backyard. $989,000 / Outer Sunset / Moon Doggie Delight!– massive 5br/3ba house just steps to beach and park. Big space, big remodel done with taste and style. 3br/2ba on main level, legal 2br/1ba with family room down that opens to patio and yard. $875,000 / South Beach / Brick and timber live/work loft with private bedroom and home office. Two baths. Steps to Financial District. Beautiful courtyard building. Has parking. $775,000/ SOMA/ Museum Parc condo with granite/stainless kitchen. 2br/2ba. Great location just steps to Yerba Buena, MOMA and City’s best shopping! $648,000/ Westlake (Daly City)/ Gorgeous, Henry Doelger home with four bedrooms and two baths. Fully detached. 1400 square feet. Bedrooms all on one level. Woodburning fireplace, separate dining area. Pocket Listings: $850,000 / Pacific Heights / Beautifully remodeled 2br/2ba unit at The Sutterfield. Southeast view brings sunshine all day long. |
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$2,195,000 /South Beach / BR/BA: 2/3 PKG: 2 Amazing 3,000 square foot NY style loft just steps to Ball Park. Small boutique building– conversion warehouse. Unique Property! | This American Life Entertains and Explains Mortgage Madness | May 21st, 2008 |
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Ira Glass has produced a downright entertaining piece for NPR’s This American Life about America’s descent through the circles of hell into this mortgage mess. I’ve read and re-read endless explanations about mortgage backed securities, tranches and hedge funds– and still find the how, what, where and why confusing. Through story telling and simple explanations of complicated concepts, | Loan Restrictions Loosen– and better Rates and Terms are Available | May 21st, 2008 |
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Below are some interesting loan products offered by some of the mortgage professionals I work with. If some of these terms seem like Greek to you, here is a brief glossary to get you started: Full Doc, Limited Doc, Stated Income – Full Doc means full documentation. In the past, self-employed people like me could go with ‘limited doc’ and ’stated income’ and not have to produce reams of paper that proved I earned enough money to pay the loan. Generally, the only people who can qualify on full doc have real jobs with pay stubs and 1040’s. Ratio– this is the percentage of income that goes to your loan. Banks study ratios carefully to make sure you’re not stretched too thin. Conforming and Non-Conforming– Conforming loans have been covered in this blog before. It has to do with the loan amount– loans above $720K or so are considered “non-conforming” and have less favorable rates and terms. The “New Loan Amount Limit” refers to the increase in conforming loan amount limits which have gone up from $417,000 to around $720,000. Here are some currently available nifty loan programs. Call me if you want names of lenders who can help you get these kinds of rates and terms–. 1) $1.5 million to 80% LTV, Full Doc. Keep in mind that these were quotes I got today– and in the lending world everything can change in a flash. |
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Remember when Bond prices move higher, home loan rates move lower…and vice versa. Despite some declines in the early part of the week, Bonds were able to rally back last week .
30 year fixed at 6.125% and 0 points to $729,750 with a 720 credit score. Credit scores of at least 680 can obtain a slightly higher interest rates.| Rates Finally Drop For Jumbo Conforming Loan Limits | May 14th, 2008 |
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It’s taken three months, but lenders are finally offering favorable rates for these larger loans. Last week a mortgage broker I work with placed a $700,000 fixed loan at 5.875%. I got a quote from another loan professional at 5.625%. This makes a purchase of a home in San Francisco at our median price of around $750,000 far more affordable. This doesn’t mean these loans are easy to get– you still need to go ‘full-doc’ (meaning you need to have a job that provides 1040s and pay-stubs), and put at least 10% down. You also need good credit scores– some of my sources say a minimum 660 is required. Others say your scores need to be at least 700. Call me if you want to crunch the numbers on a purchase and figure out what you can afford. Getting prequalified and understanding how the numbers work on your monthly payment is a critical first step when shopping for a home. |
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Back in February I added a posting about how | TIC and Investment Property Owners Please Read!!! 98 Is Really Great; 99 Will Make You Whine | May 12th, 2008 |
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I am printing Sharon’s email word-for-word. I avoid the snake pit of politics whenever possible on this blog. But this stuff is important to anyone owning real estate in San Francisco, and anyone considering a purchase here: ****************************** On the June ballot there will be two competing State Propositions dealing with property rights–Proposition 98, and Proposition 99. One of the key differences is the issue of RENT CONTROL. Proposition 98 gives Californians the opportunity to END RENT CONTROL, while the competing Proposition 99 does not. Poison pill: In the event both propositions get a majority vote, Proposition 99 is written with a “poison pill” - if it receives more votes than its rival Proposition 98, )roposition 99 would be come law, and Proposition 98 would not. Therefore I urge you to VOTE YES on Proposition 98 and NO on Proposition 99. Please note an important feature of prop 98 - tenants currently protected under rent control, would continue to be protected. It is ONLY when the tenant voluntarily leaves, or is evicted for just cause, that the unit is relieved of rent control. RENT CONTROL hurts tenants, owners and the city of San Francisco. For an in-depth case against rent control read “The Case for Ending Rent Control” by Peter Byrne in the SFWeekly. Here is a synopsis for Byrne’s argument: Some of the reasons rent control hurts the people it was intended to help (”the law of unintended consequences”): 1. Poor financial planning for the tenant. Example- Ms. Tenant rented an apartment out of college for $700/month. Although her income increased over the years, and she could have purchased a condo for herself, she didn’t 2. High, unaffordable rents: Rent control discourages tenants from moving, effectively removing these units from the market and the number of available rental properties. With low inventory and high demand, rents stay high. 3. Owners reluctant to negotiate on rental price: If an owner knows they will be severely limited to rent increases (the average allowable rent increase over the last 15 years has been 1.68%) they will hold out for a high rent even if it means several months of vacancy. 4. Incentive to reduce the inventory of rental property: Owners choosing to sell rental units as TIC’s because rents are not adequate to pay property expenses. Developers fearing rent control, reluctant to build rental properties, keeping inventory low while demand continues to grow. 5. Owners reluctant and/or unable to afford to keep rent control properties in good repair: The tenants live with thread bare carpets, chipped and pealing paint, broken cabinets. The exteriors of the properties are often dirty, dingy and in general poor repair. 6. Low income, elderly tenants severely disadvantaged: An owner with a vacant unit is going to favor high income young tenants who are likely to move in a couple years than lower income and/or older tenant, because it is Economists predict, and other decontrolled cities have proven, that if San Francisco decontrolled rental units, the price of formerly controlled units would rise, but to a level nowhere near as high as current rents. In effect, it would result in an overall rent reduction. The two propositions are complex and somewhat confusing. If you would like a three page comparison of Prop 98 - “California Property Owners and Farmland Protection Act” and Prop 99 “Homeowners and Private Property Remember, if Prop 98 passes, no tenant will be displaced or have their rent raised in excess of the current rent control maindates. Decontrol takes effect ONLY after the tenant voluntarily leaves, or is evicted for just cause. ********************************* To be honest, I kind of forget sometimes that we have things to vote on in June. My mental bandwidth has pretty much been taken up by the current primaries and upcoming November general election. take up pretty up all of my mental bandwidth. Props 98/99 are important to consider, especially if you are a San Francisco landlord or TIC owner– |
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The following is critical information for landlords and TIC owners. I came to me by email courtesy of Sharone Malone. It interprets (to some degree) the difference between Props 98 and 99, coming on the June ballot.| Featured Neighborhood - North Beach | May 7th, 2008 |
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Up the hill from North Beach, the neighborhood transitions into Telegraph Hill, another neighborhood where single family homes are rare and little sets of flats and small condo buildings are abundant. This is also where you get some of the City’s most dramatic views across the Bay.
A word to the wise exploring North Beach for the first time without a Realtor: avoid driving if possible as street parking is scarce. Instead, try taking one of the three major bus lines (#15, #30 and #45) or two Cable Car lines that pass through the neighborhood. Fodor’s has a good introductory walking tour of North Beach on their website. |
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North Beach is that rare thing — a neighborhood that manages to be a perennial hit with tourists, and also remain beloved by San Franciscans. For those outside the City, it’s best known for its check-clothed restaurants, cafes and Old World delicatessens. It’s also a popular pilgrimage for fans of the Beat movement seeking the old haunts of Kerouac and Ginsberg.
Settled in the 1850s, the area’s first residents were middle-class Americans. Thirty years later, two-thirds were immigrants, mostly from Ireland, Germany, and France. By 1939, more than 60,000 Italians had moved to this square-mile neighborhood, earning it the nickname of Little Italy. The streets were lined with Italian restaurants, shops, and social clubs. I’ve spoken with many old-time San Franciscans who grew up in North Beach and heard wonderful stories about where they lived and how much– or rather how little– the mortgage or rent was!
(Personal aside– Vestiges of the neighborhood’s beatnik era still hung in the air when I moved to the City in the mid-80s. Some of my artsy friends had a flat with cheap rent on Green at Columbus. The Gray Panthers lived upstairs and I sometimes saw Alan Ginsburg at their parties. I think he even crashed on their sofa from time-to-time.)
For residents, North Beach is a traditional neighborhood. It’s rarely more than a few blocks walk to find a grocer, bakery, barber shop, hardware store, church, school or park. What you won’t find are chain stores– as early as the 1980s, the city placed controls on the type and scale of commercial uses to help protect North Beach’s identity. They also put restrictions on building heights and billboards. Today, historic landmarks such as Coit Tower are visible; no skyscrapers block the view. Washington Square, the neighborhood’s central open space, is a place for morning Tai Chi classes, dog walking, sky gazing, and several annual festivals.
From a Realtor’s perspective, North Beach is what I call a ‘high density’ neighborhood. Single family homes are rare, and home shoppers are more apt to zero in on condos on streets like Lombard and Chestnut. One of the largest condo buildings is the Malt House, which faces both Francisco and Chestnut between Powell and Mason. The Malt House is a former (you guessed it) malt house and grainery. It was converted to 180+ condos in the late 90s. Today, a 2br/2ba unit at the Malt House runs rought $850-950K depending on orientation, square footage, floor plan and outlook.
Generally, the units I’ve sold in North Beach have gone to singles buying their first home– (what better place to start?) and people seeking a pied-a-terre. One-bedrooms generally run in the $750-775K range, although we recently had a sale of an itty-bitty one bedroom for just under $600,000. Add on a view and the price goes up dramatically– we currently have a | Year-to-Year Comparison of San Francisco Property Sales at Selected Price Ranges | May 7th, 2008 |
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Here we see that lower priced homes, by far the largest segment of our real estate market by quantity of sales, have been the most negatively affected by market changes: year to year, house and condo sales under $1,000,000 declined by 28% and 40% respectively. Conversely, at the highest end, house and condo sales increased by 34% and 100%, though the actual number of sales is small. (Due to the small number of sales and the huge range in sales prices, changes in median price at the high end are not particularly meaningful.) The middle range declined by 12 – 16% in unit sales, with mixed results in median sales prices. |
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| San Francisco Real Estate Market: Year-to-Year Statistical Overview | May 7th, 2008 |
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Sale Price to List Price (SP/LP) by Days-on-Market, First Quarter 2008
The number of homes for sale has gone up about 20%, and the months-supply-of-inventory has increased by 1 month (3.2 vs. 2.2 months). The median sales price of all homes sold increased by about 3%. Though down from its peak in May 07, San Francisco is the only Bay Area County still showing median price increases year over year. (Some counties have shown declines in excess of 40 %.) City-wide averages and median numbers mask dramatic differences between different SF neighborhoods. Some areas still feature low inventory, high demand, multiple offers and quick sales; others—generally the less affluent—are on the opposite end of the spectrum. |
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Comparing 1st Qtr 08 to 1st Qtr 07, the number of home sold in San Francisco decreased about 27%, with properties below $1,000,000—condos in particular—showing the largest drop. The lower end of the SF housing market—to a large degree fueled by first-time buyers—has been the most affected by market upheaval and new financing conditions. The middle price range, $1,000,000 to $1,999,999, showed a much smaller decrease, while sales of $2,000,000 and above actually increased.| New Listing at the Bellaire Tower at 1101 Green | May 5th, 2008 |
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The Bellaire is a luscious building. The Rococo/Meditarranean architecture makes it seem like a giant wedding cake. Sitting near the crest of Russian Hill, it commands some of the most spectacular views in the City. The unit is a large one-bedroom with formal dining room. There’s a doorman, a spectacular lobby, an elevator big enough for a cocktail party and the mayor lives upstairs. Should the unit not sell early it will be snapped up within days of hitting the market. If you would like to see it before then, please call me at 415-577-0809. |
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We have a new listing coming on at 1101 Green. I listed a unit here last year and sold it almost immediately. This new one has a spectacular northwest view that includes the Golden Gate and Alcatraz. It has been remodeled. Price is $950,000.
