Wednesday, July 20, 2016

2Q16 Piedmont Update

The Piedmont Market

The second quarter of 2016 consolidated gains made over the last couple of years in Piedmont. Low inventory and low interest rates kept prices up. About a quarter fewer homes sold this quarter (36 vs. 46 in 2Q15), with prices stable at right about $2.2 million, in the main.

The mix of homes is slightly smaller or more upscale this year compared to last--both factors lead to higher prices per square foot, even though the overall sales prices were relatively constant. While the average last spring was $755/sf, this year the $/sf increased a bit to $790. My sense is that offering prices stayed relatively consistent this year to last, in part to encourage auction-like behavior where that was possible. While sold prices were about the same, they were about 15% over asking this 2Q16 while only 9 or 10% over asking last year. 

 Homes sold in a brisk 12 days on average, and there were very strong sales all along the price spectrum--from the lower end up to the four over-$3 million sales reported to the MLS. Nearly all of our sales were in multiple offers.

Solid news for homeowners does not mean great news for the City, however. Because so many fewer homes were sold this quarter compared to 2Q15, transfer tax revenues are down by nearly 30%, again based on properties reported on the MLS.

Similar consolidating trends describe the surrounding neighborhoods of Oakland-94610, 94611, and 94618. The average single family home sold for roughly $1.2 million both this spring and last, in 14 days, at 18% over the asking price. In close-in Oakland as well as Berkeley, however, the total number of homes sold was very stable year over year, in contrast to the decline in available homes in Piedmont.  That's good news for those thinking about a move to Oakland.  Today's staff meeting included a report that the absorption rate (ratio of homes hitting the market compared to those going into contract) remains super-low in Berkeley, but is appreciably higher (though still a seller's market) in Oakland. And total inventory in the Oakland-Berkeley-Piedmont area is up to the highest level this year as we swing through the July 4th pause.

Berkeley is seeing sizeable price increases this quarter compared to 2Q15--average prices rose from about $1.1 million to about $1.25 million, a 13% jump.  Several of my clients have been in that mixing bowl this spring, and it is not fun. Homes are selling for 25% over asking, on average, in 14 days, at about $720/sf. In fact I've mentioned to several clients that in the $1-1.5 million range, prices are essentially the same in Piedmont and Berkeley right now, given the upward trends there. Across Alameda County, prices were up 9% this May compared to last, per the CA Assoc of Realtors.

We have been hearing about a cooling housing market in San Francisco for a couple of months (see this analysis from my colleague Deborah Lopez at Paragon in the City), and many of us in the business are wondering if some of "our" San Francisco buyers are now able to stay there rather than cross the bridge. And yesterday I even wondered if, in the depths of the Great Recession, families postponed childbearing a bit, just in case, which would lead to a few fewer 5-year olds looking for great kindergartens about now! And a quick Google search confirmed the theory.

Speaking of colleagues, Dawn Thomas down in Silicon Valley reports a similar softening in her market. Across the state, home prices were up 5.1% in April 2016 compared to 4/15, though prices statewide are still well below the peak of May, 2007. The international buyer, who represented up to 10% of total statewide home sales in the past several years, has declined to less than 4% of the market. And as I say regularly, remember that these folks are not just the stereotypical Chinese and Russian buyers, but the UC professor from Latin America, or the high tech worker with UK citizenship.

The California Association of Realtors points to 6 factors contributing to the shortage of inventory in the state:

--Low interest rates on current mortgage (leading owners to "stick" in place)
--Low tax bill in current home (ditto)
--Fear of the capital gains hit in communities like Piedmont (with extra-long "tenure," high initial prices and high appreciation, we are more likely to bust through the $500,000 capital gains exclusion for homeowners)
--Tougher mortgage requirements today
--Slow new-home construction, and
--Perception of few move-to options.

In fact, California homeowners are moving after 10 years now, compared to 5-8 years before the crisis. Think for a moment about the multiplier effect of just one homeowner staying in place for one extra year.

Layering over all of these housing elements is the overall job market. Between 2012 and 2015, the Bay Area saw 235,000 new jobs, but only 30,000 additional housing units built (and many of those are not near where the jobs were created). No wonder our commutes are getting longer! We'll see how long it takes for the market to get to stability--something we really haven't known for 15 years. But meanwhile, give me a call and we can talk about your situation!

Speaking of Giving Me a Call....

I've recently talked to heirs of a client about market dynamics and the sell vs. rent choice, a downtown Piedmont homeowner about various "move down" scenarios and implications, a longtime homeowner about thoughtful renovation choices for now that will make sense whenever she sells, and a local real estate investor about potential returns on several local possibilities. I help people make great real estate decisions, and I get paid when you or friends and family use me to buy or sell a home.

Still haven't gotten around to a Re-Fi?

I have two buyers in contract right now, and both will be getting financing in the 3.6% range. Rates are extraordinarily low, and there is so much re-fi activity that the appraisers are overwhelmed (my big issue this morning). If you haven't refinanced recently, email me for a list of my five most reliable lenders. And if you're only 10 years away from paying off the mortgage, know that lenders can organize a new 10- (or 15-) year loan at today's low rates. No reason to pay 5% or more, just to avoid another 30-year mortgage--put those savings into your pocket, not the bank's!

The Christie's Magazine

For all you shelter magazine readers looking for a free fix--The Outdoor Issuemade me feel like I was at the Post Ranch Inn, in my living room!
Garden Ideas!

A client works for the East Bay Park District's Botanical Garden up near Tilden. If you haven't taken a morning walk up there (no dogs, unfortunately for us), you are missing out. The website says that penstemons and red mimulus (sticky monkey flower) are out in force this month. I'm always blown away by what I see up there.

I've been hard at work these last few weeks on the garden in Inverness--propagating and transplanting from Piedmont to West Marin, and setting aside bearded and Douglas iris bulbs for the Inverness Fair in August.  Let me know if you'd like a few yellow Douglas (PCH) bulbs, or frilly white or simple light purple bearded iris bulbs later in the summer.

And of course, following a 15-year old tradition instigated by Judy Rosenberg, I'm making NYT Plum Tortes for the fair and freezer, with the gargantuan crop of wild plums this year. In fact last weekend we hosted the Spouse's annual old-time string band extravaganza, and dessert was fruit crisp, with rhubarb, plums, blueberries, apples, huckleberries and blackberries from the yard. Luscious with the youngest Son's homemade ice cream!

The Race of Things

See two recent NYT stories here and here that really reinforce the notion that a key driver of longstanding inappropriate police killings of African Americans (only now caught on tape) is the broader role of race in American society. Today's story, based on the Home Mortgage Disclosure Act data I spent much of my previous professional life working on, outlines the continuing role race plays in where we live, even as we approach the 50th anniversary of the Fair Housing Act. 

Did you know that during the depths of the Great Recession, lenders sent out word that they would not lend in certain zip codes (including our neighboring Oakland 94610, 94611, and 94618) without disproportionate downpayments? What impact do you think that had on family wealth, rates of foreclosure, and neighborhood strength?  "You can buy in Piedmont with 20% down, but you need 40% down to move to Montclair or the Glenview."

I can only hope that as we pull apart these issues this summer and really start to talk about race discrimination and its effects on all of us, we'll get to a more real place in this country and will be stronger and more unified for it.  Ann Coulter's comments today, to the CA delegation no less, are not a step in the right direction ("Ann Coulter warns California Republicans the nation could turn into California"-- LA Times).

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