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4 Reasons to Buy BEFORE Winter Hits

13 Oct 2015 Posted by NooshiAdmin in Blog

Winter-Lantern-KCM

It’s that time of year; the seasons are changing and with them bring thoughts of the upcoming holidays, family get-togethers, and planning for a new year. Those who are on the fence about whether now is the right time to buy don’t have to look much farther to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report released recently projects appreciation in home values over the next five years to be between 10.5% (most pessimistic) and 25.5% (most optimistic).

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Although Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have softened recently, most experts predict that they will begin to rise later this year. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will be up almost a full percentage point by the end of next year.

An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You are Paying a Mortgage

As a recent paper from the Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But, what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

Bottom Line

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Source : KCM.com

October 2015 San Francisco Real Estate Report

07 Oct 2015 Posted by NooshiAdmin in Market News, Newsletter

The autumn selling season started with a large surge of new listings right after Labor Day, but it will be another month or so before preliminary statistical data is available on home sales negotiated since then. However, it is clear that the recent volatility in national and international financial markets has not so far caused a severe adjustment to local home prices. While we wait for early autumn sales to close in quantity, we’ll review the market from a variety of angles.

A wide range of other reports pertinent to SF real estate values and trends can be found here: San Francisco Market Reports and San Francisco Neighborhood Values

Short-Term & Long-Term
San Francisco Home Price Appreciation

2011 – 2015, by Quarter
Median-Price_Bar-Chart_Qtr_SFD-Condo-Combined

It’s not unusual for median prices to drop in the 3rd quarter, which happened this year as well. This has less to do with fair market value, than with the fact that the market for higher priced homes slows down much more than that of the general market in summer.

1994 – 2015, by Year
1993-2010_SF_Median_Sales_Prices_Cycle-Labels

Return on Cash Investment
Comparing Buying a Home in San Francisco
to Inflation, Gold, the S&P 500 & Apple Stock

10-15_ROI-on-Cash-Invest_Comp-RE-Gold-Apple-SP500

For the purposes of this analysis, we’ve broken home ownership into 2 aspects, the first being ongoing housing costs – mortgage interest, home insurance, property taxes, maintenance – which after tax deductions could be compared to the cost of renting a similar home. The second aspect, illustrated in the chart above, is the cash investment side of buying a home and the compound annual return on that investment, after closing costs and loan principal repayment are deducted, if one had purchased a median SF house in 1994.

For the San Francisco Median House calculation, we used the 1994 median price ($265,000), with a 20% down payment ($53,000) and paying 1.5% in buy-side closing costs ($3975) for a total cash investment of $56,975. Net proceeds were calculated using the 2015 YTD median sales price ($1,250,000), deducting 6% in sell-side closing costs ($75,000) and the original 80% mortgage balance ($212,000), which equals $963,000. This equals an annual compound return on investment of 14.4% over the 21-year period.

All of us should have put every penny we had into Apple stock in 1994, but barring that, purchasing a home in San Francisco would have been a decent alternative – particularly if you’d bought in Noe Valley or the Mission. Three factors not included in the above analysis further increase the financial benefits of home purchase over the other investments graphed: 1) the $250,000/$500,000 capital gains tax exclusion on the sale of a primary residence (potentially saving up to $75,000 in taxes), 2) the “forced savings” effect of gradually paying off one’s mortgage (if one resists refinancing out growing home equity), which has a substantial wealth-building effect, and 3) over time, the ongoing cost of housing with a fixed rate loan, strategically refinanced when rates go significantly lower, will usually fall well below rental costs that continue to rise with inflation.

With financial assets subject to market cycles, changing the buy or sell dates in this analysis can dramatically affect the return. We picked 1994, because of the availability of MLS median price data going back to then.

 

3rd Quarter Market Snapshot

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and all numbers should be considered approximate. How any median or average statistic applies to a particular home is unknown without a specific comparative market analysis. We are not qualified to render legal or tax advice of any kind. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier.

© 2015 Paragon Real Estate Group
 

Sales Up In (Almost) Every Price Range!

07 Oct 2015 Posted by NooshiAdmin in Blog

Price-Up-KCM

The National Association of Realtors’ most recent Existing Home Sales Report revealed that home sales were up rather dramatically over last year in five of the six price ranges they measure.

Only those homes priced under $100,000 showed a decline (-7.7%). The decline in this price range points to the lower inventory of distressed properties available for sale and speaks to the strength of the market.

Every other category showed a minimum increase of at least 5.6%, with sales in the $250,000- $500,000 range up 16.9%!

Here is the breakdown:

Sales-Up-KCM

What does that mean to you if you are selling?

Houses are definitely selling. If your house has been on the market for any length of time and has not yet sold, perhaps it is time to sit with your agent and see if it is priced appropriately to compete in today’s market.

Source : KCM.com

#1 Reason to List Your House Today

06 Oct 2015 Posted by NooshiAdmin in Blog

Reason-To-Sell-KCM

If you are debating listing your house for sale this year or even early next year, here is the #1 reason not to wait!

Buyer Demand Continues to Outpace the Supply of Homes For Sale

According to the National Association of REALTORS’ (NAR) Foot Traffic report, there are more buyers out in the market right now than at any other time in the past three years.

The graph below shows the significant increase in foot traffic experienced this year compared to 2014.

Demand-KCM

The latest Existing Home Sales report shows that there is currently a 5.2-month supply of homes for sale. This remains lower than the 6-month supply necessary for a normal market and well below August 2014 numbers.

The chart below details the year-over-year inventory shortages experienced so far in 2015:

Supply-KCM

Bottom Line

Meet with a local real estate professional who can show you the supply conditions in your neighborhood and assist you in gaining access to the buyers who are ready, willing and able to buy today!

Source : KCM.com

Don’t Wait To Buy Your Dream Home

03 Oct 2015 Posted by NooshiAdmin in Blog

Dream-Home-KCM

As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As either a first-time or repeat buyer, you must not be concerned only about price but also about the ‘long term cost’ of the home.

Let us explain.

There are many factors that influence the ‘cost’ of a home. Two of the major ones are the home’s appreciation over time, and the interest rate at which a buyer can borrow the funds necessary to purchase their home. The rate at which these two factors can change is often referred to as “The Cost of Waiting”.

What will happen over the next 12 months?

According to CoreLogic’s latest Home Price Index, prices are expected to rise by 4.7% by this time next year.

Additionally, Freddie Mac’s most recent Economic Commentary & Projections Tablepredicts that the 30-year fixed mortgage rate will appreciate to 4.7% in that same time.

What Does This Mean to a Buyer?

Here is a simple demonstration of what impact these projected changes would have on the mortgage payment of a home selling for approximately $250,000 today:

Cost-of-Waiting

Source : KCM.com

Is it Time to Downsize your Home?

02 Oct 2015 Posted by NooshiAdmin in Blog

Downsizing-KCM

A recent study by Edelman Berland revealed that of homeowners who are contemplating selling their house in the near future 33% plan to scale down. Let’s look at a few reasons why that would make sense to many Americans.

In a recent blog post, Dave Ramsey, the financial guru, discussed the advantages of selling your current house and downsizing into a smaller home that better serves your current needs. Ramsey explains three potential financial advantages to downsizing:

  1. A smaller home means less space, but it also means less time, stress and money spent on upkeep
  2. Let’s assume you save $500 a month on your mortgage payment. In 30 years, you could have an additional $1–1.6 million in the bank to get you through your golden years.
  3. Use the proceeds from selling your current home to pay cash for a smaller one. Just imagine what you could do with no mortgage holding you down! If you can’t pay cash, aim for a 15-year fixed rate mortgage and put at least 10–20% down on your new home. Apply the $500 you saved from downsizing to your new monthly payment. At 3% interest, you could pay off a $200,000 mortgage in less than 10.5 years, saving almost $16,000 in the process.

Realtor.com also addressed downsizing in a recent article. They suggest you ask yourself some questions before deciding if downsizing is right for you and your family. Here are two of their questions followed by their answers (in italics) and some additional information that could help.

Q: What kind of lifestyle do I want after I downsize?

A: “For some folks, it’s a matter of living a simpler life focused on family. Some might want to cross off travel destinations on their bucket lists. Some might want a low-maintenance community with high-end upgrades and social events. Decide what you want to achieve from your move first, and you’ll be able to better narrow down your housing options.”

Comments: Many homeowners are taking the profit from the sale of their current home and splitting it to put down payments on a smaller home in their current location and a vacation/retirement home where they plan to live when they retire.

This allows them to lock in the home price and mortgage interest rate at today’s values. This makes sense financially as both home prices and interest rates are projected to rise.

Q: Have I built up enough equity in my current home to make a profit?

A: “For most homeowners, the answer is yes. This is if they’ve held on to their properties long enough to have positive equity that will be sizable enough to put a large down payment on their next home.”

Comments: A recent study by Fannie Mae revealed that only 37% of Americans believe they have significant equity (> 20%) in their current home. In actually, 69% have greater than 20% equity. That equity could enable you to build a life you have always dreamt about.

Bottom Line

If you are debating downsizing your home and want to evaluate the options you currently have, meet with a real estate professional in your area who can help guide you through the process.

Source : KCM.com

Months Supply of Inventory, Seasonality, and its Relationship to Pricing

24 Sep 2015 Posted by NooshiAdmin in Blog, Market News

We’ve always known that seasonality plays a big role in real estate, but this Months Supply of Inventory (MSI) chart shows:

1) The lower-priced (under $2m) market has the most competitive supply and demand dynamic.

2) How much more seasonality affects the luxury home end of the market. Homes under $2m ebb and flow by season, but the fluctuations are much more dramatic in the luxury home segment.

image001

image002

image003

Autumn SF Home Selling Season Begins Against Backdrop of Market Volatility

05 Sep 2015 Posted by NooshiAdmin in Blog, Newsletter

Real estate markets are essentially determined by the balance – or imbalance, as is often the case – between buyer demand and seller supply of homes to purchase. Underlying that dynamic are economic, political and demographic factors – some local, some not – such as population growth, employment, new home construction, high-tech booms, consumer confidence, interest rates, affordability, IPOs, stock market movements, shenanigans in Congress, and SF ballot proposals, to name a few. Even environmental factors, such as droughts and earthquakes, can jump in and affect the market. These factors are all jostling for effect, ebbing and flowing, sometimes appearing out of nowhere to shake things up, or suddenly shrinking and quickly forgotten.

We are neither blithe optimists, for whom boom times will never end, nor inveterate pessimists, who see bubbles and crashes behind every shrub. For what it’s worth, based on our survey of current economic fundamentals, we don’t expect an imminent crash in the U.S. stock market or in Bay Area real estate values. (This short New Yorker article is excellent on recent market volatility: Drop in the Bucket) However, economies and markets naturally experience fluctuations – short-term ups and downs, times of slowing and flattening – and it’s certainly possible that the balance between buyers and sellers might shift, that the frenzy in our market may subside, and that home prices may plateau or even tick down to some degree. On the other hand, due to the scale of our high-tech boom (another area of exuberantly conflicting predictions) and our deeply inadequate supply of housing, demand may continue to exceed supply, and the pressures of recent years may continue until new-home construction makes a more significant contribution to inventory.

New Listings Coming on Market

Seasonality_New-Listings

September is usually the single month with the greatest number of new listings, and those that hit the market in the 4 to 5 weeks after Labor Day feed the vast majority of autumn sales activity until the market goes into hibernation mode in mid-late November. Preliminary indications are that this may be a very big new-listing month, even for a September. If this is true, and especially if it marks the beginning of a trend of more listings coming on market, that could cool the ferociously competitive, low-inventory, “seller’s market” of recent years. If buyers are more hesitant due to recent financial-market volatility, that would also cool the market. But, in our opinion, neither factor is likely to flip us into a crashing or recessionary market.

Percentage of Listings Accepting Offers

Percent_UC_SFD-Condo_by_Quarter

This chart illustrates the surge in buyer demand from the end of the last recession through the 2012 – 2015 recovery. Having the percentage of listings accepting offers over 50% and sometimes well over 60% in a given quarter – extremely high percentages historically – has applied consistent upward pressure on home prices. Demand usually peaks during the spring and autumn selling seasons, i.e. in the 2nd and 4th quarters.

Additional market indicator analyses can be found here: SF Market Overview Analytics

S&P Case-Shiller Home Price Index

Case-Shiller_from_1990

An updated Case-Shiller Index chart for the 5-county San Francisco Metro Area, outlining the real estate market cycles going back to the 1980’s. (The June Index was released on August 25th.) It is noteworthy that over the past several decades, we’ve never seen a crash or significant “correction” in our real estate market that was not in conjunction with a major, sustained, national economic event. This chart also suggests that SF buyers who purchase homes 1) they can afford in the first place, 2) using fixed-rate mortgages, and 3) for longer-term ownership, usually come out all right, and often fabulously well, despite periodic market declines.

“Renting can make sense as a lifestyle choice or because of income constraints. As a means to building wealth, however, there is no practical substitute for homeownership.”
Homeownership & Wealth Creation, 11/30/14, NYT op-ed article

The Case-Shiller chart above reflects sales in the upper third of Bay Area home sales (i.e. “high-price-tier”) – which applies best to SF homes. Even in the high tier, the city has generally outperformed the Bay Area in home price appreciation. The numbers on the graph refer to a January 2000 price of 100; thus, the number 217 signifies a price 117% above then. It is interesting to note, that as of the June Index report, all three Bay Area home-price tiers – low, mid and high – have readings of 117% appreciation since 2000, which may be a sign of an equilibrium being reached in the market. Our full report: Case-Shiller for SF Bay Area

Bay Area Housing Affordability

Housing-Affordability-Index

The California Association of Realtors recently released its Housing Affordability Index (HAI) for the 2nd quarter of 2015. All Bay Area counties saw declines in their affordability index reading – which measures the percentage of households that can afford to buy the median priced single family dwelling (house) – and San Francisco is now only 2 percentage points above its all-time low of 8%, last reached in Q3 2007.

Very low affordability at a time of very low interest rates is certainly a concern, but housing affordability is a complex subject and there are other factors at play in San Francisco. Our full report, which also charts median home prices, rents, interest rates, inflation-adjusted housing costs and household income by county is here: Bay Area Housing Affordability

Where to Buy at What Price Point

8-15-House-Sales_1m-1499k-by-Neighborhood

We’ve recently updated our report on where one is most likely to find a house or condo in one’s price range. The chart above is 1 of 7 delineating San Francisco neighborhoods with homes from under $1 million to over $5 million: San Francisco Neighborhood Affordability

Median Home Prices and Economic Indicators

A glance at recent movements in San Francisco’s median home sales price, as well as at a few longer-term local and national economic indicators.

Monthly fluctuations – often seasonally related – have been common since
2012, but home prices have consistently climbed higher over the longer term.

Median-Prices_Short-Term

National and San Francisco unemployment trends: Very positive.

Unemployment-Rates_US-SF_since-1990

Over 100,000 new SF jobs – many of them very well paid – have been created since 2009. (The housing supply has increased by less than 15,000 units.)

Employment_SF-by-year

Household debt to GDP and mortgage debt service ratios – huge issues
in the 2007-2008 crash – have significantly declined since then.

Household-Debt-to-GDP-Ratio_US-since-1990

Mortgage-Debt-Ratios_US_since-1990

Sustained movements in the S&P 500 Index largely correlate to SF home-
price trends. Short-term financial-market fluctuations typically have no effect.

8-26-15_SP-Stock-Market

Price to Earnings (PE) Ratios of the S&P 500 Index climbed a bit high
in mid-2015, but not egregiously so compared to historical averages.

SP500_PE-Ratio_since-1986

Our goal is not to convince you of a certain position, but to provide you with what we believe to be reliable data, so that you can make your own informed decisions.

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and all numbers should be considered approximate. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier.

© 2015 Paragon Real Estate Group