Saturday, April 14, 2018


Same Old Same Old-------

I've got my standard Italian bean soup cooking away on the stove, and prepared meyer lemon-chinotto marmalade during much of yesterday (back in the '60s and '70s, I made calamondin marmalade regularly with my grandmother; it starts with covering the seeds with water and waiting for hours for the pectin to draw out).   So I'm very much in the "low and slow" frame of mind right now, and that describes the overall Piedmont market in many respects.  

Last quarter, the average Piedmont home sold for $2.304 million (median $2.3M) in 13 days, at 14% over asking.  That converts to an average $841/sf.  The low and slow element is that in 1Q17, the average home sold for $2.318m, in 12 days, at 16% over asking, or $842/sf.   So yet again, prices appear rather flat in contrast to all the hype.  A few more details:  In both quarters, only 14 or 15 homes sold, with about 5 offers on average and the lowest prices were at about $1.3-$1.4 million, and highest prices (remember, these are as reported by the MLS only) were well over $3.5 million.

Within this quarter's data however, there are a few shocking items:  Two properties sold for more than 40% over the asking price, and one smaller home that hasn't closed yet will sell for over $2 million, despite missing the usually essential master bath!  Buyers ignore homes that are completely rebuilt, with high-quality all-new everything, but go for broke when they see the big flat backyard, even if the infrastructure is original and the lot is likely to pose problems for future permits.  There is a hard-to-predict impulsiveness in the market that we realtors rarely see, and I assume is buttressed by tech money.  (And remember, it's the shocking outcomes that we all hear about, not the "now why did that take 3 weeks to sell?" outcomes.)

Looking further afield, our immediate Oakland neighbors (detached homes in Oakland 94610, 11, and 18) saw average sales prices of $1.413 million (compared to $1.387 million a year prior).  This is a significant shift, representing a less-than-2% increase over the course of a year, after several years of double-digit increases.  Particularly expensive homes have a place in the market; in both 1Q18 and 1Q17, the highest price sale was about $3.4 million.  

Turning to all of Berkeley, 70 detached homes sold for an average $1.283 million, up less than 3% from $1.248 million a year ago.  The typical home sold in 14 days, at 18% over the asking, and garnered 5 offers.  Recall that the Ca Assoc of Realtors estimated price hikes of only 1% statewide in 2018.

While across our "inner East Bay" market, the total number of available listings was down about 1/3 during the quarter, total listings in both higher-end Oakland and all of Berkeley were down by only about 10% (and flat in Piedmont).  Interestingly, in both high-end Oakland and Berkeley, the price per square foot was up 1Q18 over 1Q17, about 9%, quite a bit more than the average sale price.  This suggests that smaller homes were capturing more of the price escalation than somewhat larger homes (perhaps because more buyers could afford only somewhat smaller homes, after a few years of jack-rabbit price increases, and 1/2% increases in mortgage interest rates).

Let me know if you think this review suggests that now might be an excellent time to capture the last decade's rapid gains and sell.....

It's Garden Time!

As soon as the soup is done, I'm heading out to Ace Garden to pick up tomatoes, greens, eggplant, and cosmos (the end of last winter's chard is going into the soup at the last minute.....).  But there's so much more to consider!  Natives, vines for the back fence, rugosa roses for the birds out in Inverness, another Andean fuchsia for the hummingbirds....


Here's a little piece outlining how much landscaping improvements add to home value.  I agree that the main goal of outdoor work when putting a home on the market is to ensure that the exterior is attractive enough that it encourages buyers to come in and look inside the house.  

Sometimes we really need a colorful pot or bench to identify the front door (I can't tell you how many visitors out in Inverness end up at the right-side mudroom door rather than the attractive left-front door opening into a roomy entry space--a colorful pot at the front door would draw folks over).  Or to enable the "the lot runs roughly out to that bench" small talk.  Or to encourage folks to go up to a place where a nice Bay view unfolds unexpectedly.

If you're looking for some easy-care or affordable plants where your purchase will benefit the field, know that next Saturday is the East Bay Parks Botanic Garden native plant sale (the sour chinottos came from my client, the Garden's director.....); and this entire coming week is the Ruth  Bancroft Garden's annual succulent sale.

 

Coming Soon--

If you're pining for an extraordinarily private "killer" Bay view in central Piedmont, and can accommodate 2+ bedrooms (and 2.5 baths, in a roomy 2000 sf, with a fabulous big garden), watch this space for my newest listing, coming to market 4/26......

Capturing Gains....

Refer back to my last newsletter for an update on the new tax bill's not-so-great news for Californians with more expensive homes.  (Quick summary--many of us will be able to deduct only half of our local tax bills ($10k max), and maybe 1/3 or 1/4 of our mortgage interest ($10k max) compared to very longstanding tax policy...maybe right-sizing makes even more sense now!)  

Whenever you sell, you typically owe capital gains taxes on the gain between your purchase price and your sale price (after pulling out $500,000 you get to keep tax-free, your purchase costs, sales costs, capital improvements, and so on).  

This typically is a non-issue anywhere other than the Bay area.  But it's often not a huge deal, even in Piedmont:  If you bought for $1 million and your home is now worth $2 million, your exposure might be $2 million sale price-$1 million purchase price-$500,000 capital gains excluded-$120,000 in sales costs and $20,000 in purchase costs and say $50,000 in capital improvements, or $300,000, and the tax might be $100,000.  

Stop and think about that.  You pay $100,000 tax on $1.88 million in cash out the door (assuming you've paid off your mortgage).  No so bad.   (See this IRS pub for more info--I send it to all my sellers, along with their settlement sheets, in late December as a courtesy for tax prep.)


If the loss of tax advantages is weighing on your mind, but your home is big enough that you're concerned about capital gains tax, consider two options (both of which I've personally experienced):

--If you're willing to rent your home for about a year (and have cash to live somewhere else), you can treat your home as both owner-occupied (for purposes of pulling out the $500,000 noted above), and as an investment property (in which case you can defer capital gains taxes into the future as you exchange this property for another investment property, which likely will throw off income for your future).  See this factsheet for more.

--If you're philanthropically inclined, and again have cash to cover living expenses, you can donate your home (or in my case an investment property) to a charity, ignore the capital gains issue entirely, and get a big charitable deduction (unchanged in the tax bill) that can shield significant regular income in the coming few years.  Schwab Charitable, the East Bay Community Foundation, and other donor-advised funds  will sell the property and pop the net proceeds into an account that you (or heirs) can direct to your favorite charities in the coming years. See this factsheet, written by Piedmont's own Barbara Benware for Schwab for more.  And large charities like my alma mater Harvard, will happily take your donation of real estate.

I'm not your lawyer; I'm not your tax advisor; I'm your real estate broker whose job is to help you make great real estate decisions.  But if this makes sense, let's talk!

More later in the month!

As Always--

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