No one got through last week without wondering where the failure of Lehman Brothers and other iconic financial institutions will personally leave us. The news seemed unrelenting on top of the government takeover of Frannie and Freddie Mac and the controversial taxpayer bailout of AIG. All of us are waiting to see what this week will bring and whether or not that news will improve the country's financial outlook or add to the strain . . .
Like many of you, I have just seen my family's retirement and my boys' college funds take a substantial beating. (Ouch! ) And like you, I have worried about the long-term investment of my own home. On Friday I went to hear Leslie Appleton Young speak at the Oakland Association of Realtors. Ms. Appleton-Young is the chief economist for the California Association of Realtors and had this to say (I'm paraphrasing):
1. The decline of the market began roughly three years ago. Declining cycles in real estate typically last 5-6 years so we are more than half way through.
2. Investment opportunities will be abundant for those seeking to move dollars out of the stock market and into real estate - especially in the Central Valley. (Foreclosure sales are up 42% in the last three months!)
3. Foreign investors will be drawn to California's housing market - especially cities in and around San Francisco (that's us) due to the strength of their currency.
4. More entry-level Buyers will enter the market due to increased affordability.
5. The sooner the bad debts are removed from the books, the faster liquidity should be made available and the faster the economy will experience a recovery. ("Hitting bottom quickly allows us to bounce back more quickly.")
6. REAL ESTATE MARKETS ARE LOCAL! HEADLINES ARE NATIONAL. PAY ATTENTION TO YOUR LOCAL MARKET!
(And that's good news for those of us here in Oakland, Piedmont, Rockridge, Montclair and Berkeley. Locally, we remain relatively strong!)
Is there a silver lining? Yes! Historically, responsible home ownership has proven a very sound financial choice and Ms. Appleton-Young expects it to remain so.
The key word here is "responsible." In hindsight, mistakes were made and many people bought homes who were not qualified. Lured by the promise of cheap money, anticipated appreciation and the desire to own a piece of the "American Dream," banks, mortgage brokers, Wall Street and dare I say it - some Realtors - all contributed to the idea that everyone could (and should) own a home. Together, it created a "house of cards" that, sooner or later, was bound to collapse. And so it has.
Let's hope the steps taken last week and in the next few, help calm the markets and reestablish trust. In the meantime, if you have been waiting to purchase a home, you are in luck! There is real value to be found in this more affordable housing market!
Are you selling? Let's look at this practically. While you may have missed the top of the market, it is important to remember that markets are RELATIVE! You will also be buying your next home at a discounted rate.
Do we have a marketplace? Absolutely! The "fixer" on Highland Avenue received double-digit offers yesterday!
Now, what can I do for you?
Following up on last week's Perspective about "declining values" and how they potentially translate into lower property taxes, one sharp Reader had this to add to the discussion. Listen up - this is good information. (Thanks Dennis for keeping me on my toes!)
Thoroughly enjoy your Piedmont Perspective on the surrounding area. Today's article on the possibility of the value of ones home going down is for the most part a worry of almost everyone that made the plunge in buying a house at the top of the market. In the recent past, there have been articles on having ones house reappraised to the lower value to save on taxes. It has been my experience that if and when the house is reappraised, many counties send out a notification to the lender of the new appraisal. This notification will have no effect on the first mortgage but in many cases, will freeze the amount outstanding on the second! If the unused portion of the second was set aside for a remodel or upgrade of some sort, one is out of luck.
Not all counties do the notification, but many do so.
Dennis J. Duffy
A Very Nice Mortgage Company, Inc.
Thank you Dennis - you really are "a very nice mortgage company!"
Nothing good ever comes from opening the mail anymore. (All the fun invites show up on email!) Last week I made the mistake of opening a letter from the County of Alameda Assessor's Office (that already sounds ominous) and choked on the "increased property assessment" of my home. You guessed it, per the county assessor, my home's value has gone UP (who knew?) - and so have my property taxes!
While rising values in our current economy should be cause for celebration (whoo hoo!) it seems inherently contradictory to current market indicators to raise taxes in what lending institutions have now deemed "a declining marketplace." (Have you tried to apply for an equity line recently?)
Like many of you, I bought and sold at the height of the market and like many of you, have experienced some depreciation in that number since. Not to worry, I plan on staying in my current home for a long time. (I know that real estate is a long-term investment and that eventually, my home is going to recoup any decline in anticipated appreciation - and then some!) Moreover, I believe the market has already hit bottom AND I expect the market to rebound in the very near future! Still, what to do about my impending "increased assessment?"
Or put another way - What is the value of a home in a declining marketplace?
That depends. For many of you needing to sell right away - your home has NOT depreciated in value (really!). You have remodeled and updated appropriately, your home is in "turn-key" condition and your expectations are realistic. While you may have lost some "anticipated appreciation," you haven't lost any "real value" (this is an important distinction.)
Lucky you - your home is in high demand!
For others, your home unfortunately, may now be worth less than you paid for it just a few years ago or less than you anticipate in a sale. You may need to sit tight and wait out the market (historically, time is on your side) or take a loss now and realize the greater gain on the "up leg" as one seller did who bought in San Francisco (her new Nob Hill residence has much greater appreciation potential than her previous East Bay home would have ever provided). For her, it made sense (and cents) to cut her short-term losses and potentially realize a greater return down the road. Define your goal and work in the market you are currently in!
There are real advantages of "buying up" in a "soft market" where favorable pricing and negotiable terms now rule the day - bigger house, better location and higher appreciation when the market kicks back in! The hard part of the equation is that you may need to sell your current residence at a "discounted value."
Remember, markets are relative. Sell high and you are likely to buy high. Sell low and you are likely to buy low. (Having done both, I vote for the latter.) In the meantime, I have appealed the tax increase. In the case of property taxes, "declining values" may merit a significant decrease in one's annual taxes that may well be worth pursuing.
Oh, and I have vowed to stop opening the mail . . .
Ahhhh! (That's the sound of me rested and revived!) I hope you had a wonderful and restorative Labor Day as well. Now that the last of the summer holidays are behind us and the turkey sightings are upon us (Have you seen the big male strutting his stuff on LaSalle?) we have officially entered the "fall season" in Real Estate terms. (Your calendar will record it as September 21, but we're talking real estate time here!) What does that mean for you? Expect a flurry of new listings to hit the market before the Thanksgiving holidays.
Let's begin with my new listing at 6217 Westwood Way in Montclair - open this Sunday from 1-4:30. Light, bright and airy, this sleek and sophisticated mid-century modern offers an open floor plan featuring 4bdrms/2.5 bths, inviting family room with adjacent courtyard patio, floor to ceiling windows, updated kitchen and bathrooms, magical front garden entry with level lawn and large fenced back yard. Close to the village and Montclair schools! Price: $789,000. www.6217westwood.com
"It sounds perfect, but I'm looking in Berkeley. " Look no further than Matt Heafey's newest listing at 1033 Middlefield Road. This 3bdrm/2.5bth Park Hills mid-century features an open living room with fireplace, dining room with canyon views, eat-in kitchen with cool checkered floor and downstairs bonus/game/exercise room with half bath. It also offers an inviting front garden with level lawn and two-car garage. Price: $749,000. Open Sunday 2-4:30. www.grubbco.com Tricia Swift's 2bdrm/1bth listing at 102 Oakmont Avenue is a "little gem" and it is also currently the most affordable home in Piedmont! Now that the tenants have moved out and new staging has moved in, this nifty home is worth revisiting and reconsidering! Price: $745,000. Open this Sunday 2-4:30! www.grubbco.com
Julie Gardner, has been writing The Perspective for 12 years and has published more than 500 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.