Bob Ravasio's Blog

Marin County Market Report: January 22, 2007

Bob Ravasio (Frank Howard Allen) — Mon, 22 Jan 2007 10:38:46 -0800

Everyone is looking into their crystal balls right now, trying to figure out where the market is going in 2007. Is it going to get worse? Is the bubble popping? Or are we having a “soft landing”, and a return to normalcy?

As usual, the Marin Independent Journal takes it to extremes, with a recent headline screaming about a 5% average price decrease for the month of December.

I’ll put a stake in the ground right now. I’m figuring this year will level off in terms of transactions, minimal if any appreciation, and in general, a balanced market. What leads me to this conclusion?

1. Anecdotal evidence. There’s plenty of activity right now. We have been getting lots of showings on our listings. Well priced homes sell fast - one home in our office went out last week, well priced, and had eight offers, another one had four offers. We work in the largest office in Marin County, so we get a pretty good idea of what the market is like, and there’s plenty of activity here. Don’t kid yourself - there are plenty of buyers out there

2. Interest rates are holding steady. They’ve climbed a bit in the last few weeks, but the 30 year fixed for a jumbo is still around 6.35%. That’s great by historical standards.

3. The numbers. What the IJ did not point out is that relative to last year, the number of closed sales in December - 226 - was nearly the same as a year ago -238, and that’s the way it has been trending. Percent in contract (24% as of January 15) still shows we’re in a slight Buyer’s Market, and that number has barely changed in three months. We’re in a Balanced Market for Homes under $1MM, with 27% in contract.

4. History. Looking back at 40 years of pricing in Marin County real estate, and the pattern is pretty typical. A few years of rapid appreciation are usually followed by several years of no change in appreciation to slight increases. I think we’re right where we were in the early 90’s, which was the beginning of a long period of price stability.

More later from Carol Rodoni, a Bay Area real estate veteran who spoke at our office the other day and had some great insights on the market.

Here’s the numbers:

Total Homes Available: 721

Homes in Contract: 120

Percent in Contract: 24%

Under $1mm In Contract: 27%

$1MM-$2MM In Contract: 20%

$2MM-$3MM In Contract: 18%

Hottest markets are still Larkspur (33% in contract), Greenbrae (44% in contract) and Kentfield (36% in contract). These bases are small, but the trend for homes for sale in these markets have been strong for the past several months.

Days On Market: Stale Fish or Red Herring?

Bob Ravasio (Frank Howard Allen) — Mon, 08 Jan 2007 11:55:05 -0800

One of the ways I can tell how educated a buyer is about home buying is by the questions they ask. One I get a lot at open houses is ” How many days has this been on market?”

Is it a valid measure of anything? Carol Lloyd, in the Chronicle’s “Surreal Estate” column, has a lot to say this week about it, noting that many agents re-list properties under new listing numbers, which changes the days on market to zero. She compares it re-selling "stale fish" and to re-setting the odometer on a car to enhance value. Big disagreement there: setting an odometer back hides information about wear and tear on a car, which is a really big deal. Wear and tear on a house because it was re-listed is negligible.

She makes some excellent points, though. the most important of which is that potential buyers have the right to know, and should know, how long a home has REALLY been on market. Lots of the bubble bloggers have been writing about this for a long time. But stale fish? I think it's a red herring.

It’s a good piece of data - you should absolutely know about it. But it’s not as simple as it seems. Here are the three things that are most critical for you to understand, as I see it.

The history of a property is readily available to any Realtor with access to Marin County MLS data. If the property has been on market five times in the last five years, they can find out - it’s literally as simple as clicking a button. If’ it’s been on five times in the past year, that’s there too. Just ask.
Days on market data is irrelevant without looking at pricing data too. That’s in the history also. Usually, when a home has been on market for a long time, it started at a higher price. As days on market increases, price usually decreases. If it doesn’t, then you’re dealing with one stubborn seller!
Days on market is important, but it changes all of the time - it’s been going up in Marin County for over a year, and it changes dramatically by segment. Look at the average days on market for the market segment you’re interested in, i.e. “Novato homes, $1.1-$1.4 Million”, or “Belvedere-TIburon Homes, $2MM-$3MM”.

Finally, remember this is just one piece of information to look at when buying a home. Without looking at it the context of the comps, all of the other neighborhood information, etc, it's just one more piece of information.

What do you think?

One More Factor That Keeps Marin County Pricing Stable: MALT

Bob Ravasio (Frank Howard Allen) — Tue, 02 Jan 2007 12:21:55 -0800

One of the great things about Marin County, and living here, is the incredible appreciation people have for the land, and the way it has been preserved with parkland and farms. It’s also one of the factors that keep prices high, because that land is not being used for housing. There’s a new story in the Marin Independent Journal about the latest work or the Marin Agricultural Land Trust, or MALT, and their latest project in Tomales.

They are nothing short of remarkable. Using a combination of funding from donations and various government sources, they purchase development rights for farm land in West Marin, and create conservation easements with them. The owner of the farm gets a large lump sum cash payment for his rights, and the knowledge that the property will be preserved as farmland.

The public gets the value of seeing this beautiful, bucolic area preserved with little change. Wildlife benefits by keeping the land open.

It’s a win-win-win. It’s also one more factor that keeps housing prices stable in Marin County. No development means no more supply.

A lot of people find fault with this policy, at a time when affordable housing is a real problem in the Bay Area. I don’t.

I’m all for property rights. I’m also all for affordable housing. My job would be infinitely easier with more affordable inventory to sell.

But one thing that makes California, and Marin County a great place to live is the land. West Marin is a really special place, and needs to be preserved for future generations. I’d much rather see more housing, if necessary, constructed as in-fill along the Highway 101 corridor in Corte Madera, Mill Valley, Greenbrae, Larkspur, and San Rafael than plowing under the dairy farms of West Marin.

Not an easy decision, by any means. But spend a day in driving through Pt. Reyes, Olema, or Nicasio, and see what you think. Better yet ride a bike.

To see how much land has already been preserved by MALT, and to learn more about them, go here.

Why Buy A Condo When You Can Own A Triplex....Or Buying Investment Property, Part I

Bob Ravasio (Frank Howard Allen) — Fri, 29 Dec 2006 18:36:12 -0800

I have a listing for a triplex in Larkspur, priced at $1,175,000. I think it’s a great listing for lots of reasons, not the least of which it is just steps from downtown Larkspur.

A recent change at the property makes it highly desirable from a buyer perspective now. The best and biggest unit, a three bedroom, two bath, 1400 square foot apartment with a big deck overlooking Magnolia Avenue, has just vacated. The owner had it leased through July, but the tenant suddenly left, and the owner decided it was a good idea.

Why? Larkspur continues to be one of the strongest real estate markets in Marin County. This is a community where buying a house is incredibly difficult, and almost never available for less than $800,000. In fact, right now, the cheapest house still available is $999,000, and it’s a contractor’s special with a capital S. Now, buyers have the chance to own property near town, live in it, and have income to pay for the mortgage.

How much on the mortgage? The two units downstairs generate $2700 a month in rent right now, and probably have some upside. At the great interest rates available right now, that easily covers $400,000 a month in mortgage payments, and leaves $250 or so a month to help with property taxes.

That’s money you can basically subtract from the sale price. So now we’re down to $775,000, for 1400 square feet, 3/2, recently remodeled, with a front and back porch. Still sound expensive? If you're not from around here, I'm sure it does. Heck, I sell this everyday and it sounds awful expensive to me!

But take a look at condominiums in the area, such as the ones along South Eliseo in Greenbrae. For about the same price, you get about the same square footage…factor in homeowners dues on a condo (often $300 + a month in this area), and for the same money, you actually own a piece of land, and don’t have to worry about what the homeowner’s association decides to do about the leaking roof.

Which would you rather do? Own a condo for $650-$700,000, or own a larger piece of property, and enjoy the benefits of greater leverage over time?

What do you think?

Next, Part II.

Marin County Market Continues To Firm Up

Bob Ravasio (Frank Howard Allen) — Thu, 28 Dec 2006 18:01:08 -0800

We’re almost at the end of 2006. As noted in previous posts, the market is showing some signs of firming up, partly because we are now measuring against numbers from a year ago that were declining.

Buyer’s or Seller’s Market?

We consider it a Buyer’s Market when percent of homes in contract is below 25%, balanced when it is between 25% and 35%, and a Seller’s Market when it is above 35%.

Surprisingly, in Marin County, we’re in what we now consider a balanced market, as 26% of total homes are in contract.

And it’s not just because sellers are pulling their homes off the market, which is a big contributor to declining inventory. The actual number of homes in contract is 197, which is only slightly off from a year ago, at 207.

The strongest segment in the market, not surprisingly, is in the under $1 MM segment. Over 29% of homes in this bracket are in contract. The number of transactions is almost identical to a year ago - 132 now, vs. 130 last year.

Have we reached bottom yet? That’s the big question every buyer I know wants answered. Remember though that average sale price in Marin County rarely declines, so bottom is relative. It’s not just about price, it’s also about what kind of selection is available.

What If I’m A Buyer?

Interest rates are great. Selection is good. If you find something that fits your criteria, this is an excellent time to take advantage of the market. Bear in mind that Corte Madera and Larkspur are both still very strong markets for housing right now, but in Novato, there is much more inventory available.

What If I’m Selling?

Only serious sellers need apply. This is not the time to “test the waters” and get that dream price for your house. There’s a ton of competition in most every neighborhood and price range, buyers are wary, and unless you’re prepared to price it intelligently, then it could be a long wait on the market.

Here’s the numbers, all as of 12/28/06, according to MLS:

Total Marin County Homes Available, 2006: 757

Total Marin County Homes Available, 2005: 686

Percent Change: +9%

Total Homes in Contract, 2006: 197

Total Homes in Contract, 2005: 207

Percent Change: -5%

Under $1MM

Total Homes Available, ‘06: 452

Total Homes Available, ‘05: 361

Percent Change: +25%

Total In Contract, ‘06 132

Total in Contract, ‘05 130

Percent Change: 0%

Filed under: Marin Real Estate — Comments (0)

How To Tell If A Home Is A Candidate For Off Market Sale

Bob Ravasio (Frank Howard Allen) — Thu, 21 Dec 2006 22:12:54 -0800

I've been writing about off market sales this week, since I have been involved in one and it's an interesting experience. By Off Market, I mean no sign, no MLS listings, no ads, no nothing. The agent calls other agents who they know have buyers for this type of property, and asks them to bring them in for selected showings.

These aren't for everyone, by a long shot. But Marin County is a different kind of market, and is a good area for this type of marketing, because the towns and types of housing are so different.

If you're wondering if this is a strategy that could work for your house, there are two really important issues to consider.

1. The home must be in a unique area, or appeal to a very specific, unique target. For example, on the Bay, with a dock, in Belvedere; the lagoon in Belvedere or Larkspur; teardowns in Kent Woodlands. All of these are very specific, and have their own group of buyers. Agents who work those areas know who they are, and can contact them to get a quick turnout of interested buyers. In your specific market , there may be other examples, of homes with special characteristics or in very difficult to find neighborhoods. And that brings us to point number two...

2. The agent must be connected. By that, I mean active, busy, and knowledgeable about what is going in the market. The statistic I keep seeing is that 20% of the agents do 80% of the business. If the agent trying to execute this strategy isn't in that 20%, it has a much lower chance of success. In fact, I would venture it doesn't have much of a chance at success at all.

What About Price?

Does the Seller get hurt because the house is not fully marketed? Executed correctly, I don't think so. If the house is really unique, buyers are there. A smart agent will have comparable sales data laid out that justifies the price. And because the buyers are unique, and have probably been waiting for an opportunity like this, they are probably prepared to pay market rate for the property.

By no means is this a strategy for everyone. But it is clearly an interesting twist on marketing a home at a time when some kind of twist is needed to make a home stand out from the competition.

Why Would Anyone In Their Right Mind Sell Their Home Off Market?

Bob Ravasio (Frank Howard Allen) — Wed, 20 Dec 2006 10:45:24 -0800

Why would anyone sell their house off market, in other words, no sign, no MLS listing, no publicity at all? After all, isn't the number one rule in selling a house getting maximum exposure?

Yes, it is, but there are certain situations where an owner wants to sell their home off-market, and I think it can actually benefit them enormously. I can think of three reasons why an owner of property in Marin County chooses to market their home this way.

1. Privacy.Many people can not stand the thought of countless strangers (not to mention all of the neighbors) walking through their home and looking at all of their belongings. The great benefit of a successful open house is everyone sees it; the downside is most of those people aren't really serious buyers for the home. So by selling their home discretely, through a network of agents that they know have serious clients, they can minimize the number of people coming through their home.

2. Exclusivity. People want what they can't have, plain and simple. I believe it was Charles Revson who said, "Refusal is seductive." I was working an off-market listing last year, and I was amazed at how many people would get excited about the prospect of seeing it. I could run five properties past them with better financials, and they wouldn't bat an eyelash. But the one that was off-market, well everyone had to see that one!

3. Efficiency. Let's face it, selling a home is a huge amount of work for everyone involved. Cleaning and preparing your home for sale, keeping it clean every day in case someone wants to show it, and finding something new to do with the kids every Sunday afternoon while the house is held open gets old fast. In a typical off market sale though, a lot of the circus atmosphere goes away. Ideally, there a few showings where agents bring their clients, and then you get to sell the house.

Next: Is your home a candidate for an off market sale?

Buying A Home Off Market

Bob Ravasio (Frank Howard Allen) — Mon, 18 Dec 2006 10:48:07 -0800

I just got one of my clients into contract on house that never was advertised, never was on MLS, never even had a sign out in front of it. In other words, almost no one knew the house was for sale. How did I know about it?

I knew the agent who represented the seller, and she knew that I had a client who was interested in that specific type of house. We both work at Frank Howard Allen, and there is a lot of emphasis on internal networking and marketing there.

It’s amazing how much business gets done on the floor of the office. Agents in the office hear about what is coming up formally at a monthly meeting, and in weekly sales meetings. Informally, smart agents talk to each other all of the time, know who is doing what, and network their way into a lot of sales.

So how often does it happen? More frequently than you think. Our office, in Greenbrae,CA, averages around 15 sales a week. It seems like every couple of weeks, at least one of those is off market, and most of the time, the transaction is between two agents in the office.

In a real estate market like Marin County, where inventory is generally limited and selection narrow, that can be a huge asset for buyers. We think it is one the best reasons to work for a large broker like Frank Howard Allen. In fact, we’re the largest brokerage in Marin, by a long shot.

It’s also one more reason to use a good real estate agent in your search - one who is active, does a lot of business, and has a lot of contacts.

Some will say it’s a disservice to the seller, and more on that tomorrow. But think about it this way: in a market where homes are sitting for days unsold, and people are trying all kinds of stunts to sell them, this seller got the house into contract, at very close to the asking price (higher than the market average), in a matter of days.

I have a couple of clients right now who would LOVE that. Maybe we should pull the homes off market….

Marin Sales Off, Prices Stable. Are Buyers Playing Poker?

Bob Ravasio (Frank Howard Allen) — Fri, 15 Dec 2006 11:49:50 -0800

The Marin IJ just published their monthly real estate article, and not surprisingly, the stats show sales down, but prices stable.

The source is different than mine. I use MLS statistics, the IJ refers to DataQuick, but the stories are similar, I believe. In my summary two weeks ago, I said the market was firming up, and this story is reaffirming that.

The article notes sales volume is off 18%, but that is much better than the 30% declines we were seeing earlier this year. Additionally,average sales price is basically unchanged.

There is also an interview about pricing with a local realtor, Candi Samuels. I share her philosophy about pricing, which is price it right, and then don’t be afraid to wait. My client is doing it with this property in Novato right now.

Time will tell if I’m right or not. But I think it’s like a big game of poker out there right now, only it’s that point in the game where it’s getting late, a couple of players are out, and the stakes are getting bigger. Buyers are looking for signs of weakness. In the housing market, there are so many price reductions that buyers now routinely expect one three weeks after the house goes on market, so no one wants to move too quickly.

Who is bluffing, and who really has the cards?

Or, as was stated so eloquently in Rounders, the terrific film about poker:

“Listen, if you can’t spot the sucker at the table in your first half hour at the table then you ARE the sucker.”

I’ll let you know who the sucker is on this one soon.

California Tenants Get A Break

Bob Ravasio (Frank Howard Allen) — Thu, 14 Dec 2006 16:39:46 -0800

Effective January 1, 2007, owners of residential income property in Marin County (and the entire state of California) will have a new law to contend with. On that date, a new state law goes into effect that requires landlords to give tenants on periodic leases (e.g. month-to-month) who have been tenants for at least a year 60 days notice to terminate.

Current law requires only thirty days notice to terminate a month-to-month tenancy. In cases where any tenant or resident has been residing in the property for less than one year, then thirty days notice is sufficient.

Compared to the city of San Francisco or Berkeley, Marin County landlords have it pretty easy. Both of those cities have rent control, one of the worst laws ever created. This new change in state law makes things a little more difficult for property owners, but won’t significantly change the way they have to operate.

Rent control is a different topic, and one I could write about extensively. In a nutshell though, it’s a classic case of the law of unintended consequences - a law that’s intended to do one thing, and then something else unintended happens.

The intent is good: protect tenants from unreasonable rent increases, and keep housing affordable for people. Unintended consequence: with income effectively capped by rent control, landlords have no incentive to and in many cases can’t afford to properly maintain property. Maintenance gets deferred, property gets run down, and the quality of life for tenants suffer as the housing stock degenerates.

Interest Rates Really ARE Low. No, Really, They Are.

Bob Ravasio (Frank Howard Allen) — Tue, 12 Dec 2006 17:51:49 -0800

We had one of our key lenders ask a great question in the sales meeting the other day.

"Going back to 1971, when was the FIRST time the 30 year fixed rate hit 6.25?"

Guesses were flying everywhere. No one was even close.

The answer? Summer 2002.

That's right. In the 70's, 80's and 90's, the 30 year fixed was always above 6.25%. Always. It did not hit 6.25% until

four years ago.

The next question was "What is the 30 year fixed at today?"

And the answer of course, is 6.25%. That's for a non-conforming loan by the way - conforming loans are at 6.15%.

So when we say that by historical standards, these are great rates, this adds some real perspective to it.

These really are great rates, and that's why people are starting to refinance again. And here in Marin, we're seeing a little glimmer of renewed buyer interest also.