Sign of the Times

As if we need more signs of the stagnating real estate market in Marin county, the Marin IJ has published two articles recently that bring the point home.

First, as we reported earlier in our latest monthly report a couple of weeks ago, average selling prices continue to fall.

Second, yet another mortgage broker has called it quits. First Security Loan in San Rafael will close up shop -- just the latest in a series of firms to do so. Not only does this highlight how few real estate transactions there are, it also adds to the unemployment rolls and reduces the sources available for home loans. You see the same signs in the halls of previously bustling escrow/title offices and, of course, some real estate brokerage offices -- empty desks, few people, and phones not ringing.

Change to IRS Rules Excluding Capital Gains from Sale of Principle Residence

Included in the Housing and Economic Recovery Act of 2008 passed last October was a new restriction on how much capital gains from the sale of your principle residence you can exclude from income taxes. This change relates to rental properties or second homes that were subsequently converted to your principle residence. Basically, "the exclusion from capital gains recognition will be reduced by the amount of time the property was not used as a principal residence". It does not apply to situations where you rent out the home after you lived in it as your principle residence for two years or more.

Simple example 1 -- Buy a home and live in it for three years, then rent it for two years. You can exclude up to $250,000 ($500,000 for married couples filing jointly) -- no change.

Simple example 2 -- Buy a property and rent it out for three years, then live in it for two years. You can only exclude two fifths of the capital gains.

These rules are complicated and my examples are intended only to alert you to the change -- certainly not as individual tax advice. We always recommend talking to your professional tax advisor for guidance in your specific situation.

Today's Grumble

We work out of two offices in parts of the city that are particularly susceptible to parking tickets.

Our office staff is always warning us when the parking enforcement hawks come zooming down the street. Many of us know the various quirks of individual meters. Nevertheless, let's just say we contribute mightily to the City's revenue stream.

So it's particularly annoying to see this:

And, no, the enforcement officer was not writing tickets. In fact he/she was nowhere to be seen -- I imagine shopping at Trader Joe's or one of the other stores next door.

Spring - 2

Speaking of spring (and finding the silver lining in the gloomy cloud), we've gone through our annual exercise of summarizing what's positive about the current real estate market in San Francisco and Marin counties.

1. It's a Buyer's Market The calendar and the weather indicate spring has arrived and, for the most part San Francisco is a buyer's market for the first time in most people's memory.
2. Prices are Down Prices have moderated in almost all 10 real estate districts in San Francisco and throughout Marin and are expected to remain stable for the next few months.
3. Selection is Outstanding Buyers have not seen this number of available homes for sale, at competitive prices, in the last five years. And the available number of condominiums has never been this high.
4. Interest Rates are Down Loan rates are the lowest they've been in over 30 years.
5. Tax Benefits President Obama's stimulus plan offers new tax incentives for first-time buyers with additional California tax incentives for purchases of newly constructed homes.
6. Full Service Prudential's one-stop shopping helps minimize the work involved in hunting for a home mortgage, insurance and home warranty -- everything you need for a smooth, efficient closing of your escrow.
7. Knowledgeable Agents Our agents keep a constant watch on all segments of the real estate market, tracking the vital, fast changing trends and keeping our buyers informed. As always, we remain committed to getting your lowest and best price possible.
8. Technology Our unique WebTop technology allows us to deliver daily e-mail notifications of new listings throughout the Bay area that meet your specific needs. No need to hunt through multiple web sites.
9. The Extra Mile We want and appreciate your business and are prepared to go the "extra mile" to earn it.
10. Now Is the Time If you're waiting for the market "to hit bottom", we believe that any further delay will mean that you missed it again. As with most markets, by the time you know we've hit bottom, it's already passed.

Spring - 1

Spring has arrived officially, according to the calendar. Of course, the blooming trees have long since lost their flowers and the magnolias are already past their peak. This time of year our garden's pride and glory is usually the old Wisteria vine that adorns the back of the house.

Last year at this time it completely full of blossoms:

This year looks like it will be a bit of a disappointment. A week ago the vines were full of buds but we had quite a strong (but brief) rain storm last Saturday night and it seems to have knocked many of the buds off before they had a chance to bloom.



On the other hand, our orchids have been spectacular for months.

New Flood Insurance Requirements in Marin

Apparently coming as a surprise to many of the property owners directly affect, the Marin IJ has reported on new flood zone maps being issued by FEMA that will result in requiring hundreds of property owners in Marin County to purchase flood insurance for the first time.

As many as 1,300 properties are affected. Here's the breakdown as reported in the IJ:

San Rafael 300
Marin County (unincorporated) 261
Belvedere 200
San Anselmo 177
Corte Madera 150
Ross 80
Tiburon 50
Mill Valley 50
Novato 15
Larkspur 10-13
Sausalito N/A

Even though FEMA has been working on the new maps since before Katrina and most town/city managers were aware of the coming update, some affected residents only found out recently.

Today's Grumble

We rely on carefully drafted forms for all phases of most transactions -- from listing, to offers, counter offers, contract, addenda -- you name it, we have a form. And generally this is a good thing. It keeps us out of trouble and helps us avoid trespassing into lawyer territory.

There are approximately 50 forms specific to San Francisco, and another 200 or so that are used state-wide.

Today I was looking for a form that asks tenants to provide their landlord with a statement if they claim to be a member of a protected class. I've used this form in the past but couldn't remember the correct name. Searching for "tenant" or "protected" turned up nothing (the search function of our on-line forms system only searches the title of the form, not the body).

Turns out it's called "Request for Information under Title 39.1(i)(4)". Come on! About as helpful as e-mails with the subject line "hi!"

Marin sales are way down

While some were seeing a glimmer of hope in recent sales on the south side of San Francisco, the numbers coming in from Marin don't seem to be showing any such spark.

While inventories are up as you would expect this time of year, the number of properties sold last month (February) is down compared to January (heading in the wrong direction). Compared to February last year, the number of single family home sales is down more than 30%!
Our full monthly report has just been posted on our web site.

This continues a trend of the past several months (see first graph).

And, the first two and a half months this year has seen the smallest number of sales since before 2001. (see second graph).

On the Rebound?

There was a lot of flurry yesterday about a report broadcast on one of the local TV stations pointing out "Signs Of Real Estate Rebound In San Francisco".

The quote that seemed to catch everyone's attention was: "more San Francisco properties have gone into escrow in the last two weeks than at anytime in the last six months". The more likely interpretation of that particular data is our normal bounce from the lows around the end-of-year holiday period.

But that doesn't diminish what our agents have known for a while now -- areas that were hit early and hard by a wave of foreclosures are now seeing a significant uptick in sales activity. In San Francisco that area is concentrated in the south of 280 neighborhoods. In the wider Bay area, Antioch is a major example.

And the reporter was right in pointing out that a lot of qualified potential buyers have been on the sidelines for months trying to figure out what's going on and waiting for some signs of stability both in the real estate market and the broader economy.

Two of the properties used to illustrate this "rebound" were notably under priced when they were brought on the market and that strategy has a solid record of producing multiple offers in almost any market conditions. Nevertheless, even in the worst real estate market most of us have ever experienced, properties will sell if they are properly priced taking into consideration their condition and location.

Statistics 'r Us

We put together reports each month which we hope are helpful to our clients as they make their decisions about buying and selling homes in San Francisco and Marin. Most of these are prepared in the 2nd week of the month since the data all comes from the multiple listing service and agents aren't always as timely as they should be recording sales and status changes.
There's all kinds of interesting info buried in the numbers. Here are some highlights:

• Overall, sales in February were still down compared to the February last year which, in turn, was down from the year before that.


• Overall, average sales prices in February are down compared to the February last year but up compared to January.


• Sales activity is focused largely in the lower price ranges. In the last two years, sales of homes under $1million have represented approximately 70-75% of all sales. So far this year, sales in that same price range represent over 80% of total transactions.


• There is a huge inventory of condos and TICs compared to the average number being sold each month (for example, 285 active listings of 1 bedroom units as of 3/8/09 compared to an average number of 25 sales each month over the past four months). Similar disparities exist in most of the other common configurations of condos.

The detailed reports are posted on our website: http://www.boldsf.com/ click on "Statistics".

Quote of the Day

Perusing the new listing information on the MLS this morning, I came across the following comment by an experienced agent that is probably shared by a lot of agents, buyers and sellers in this market. He's referring to a single family home listing in the Richmond.

"I took it off the market for the holidays, but then an offer was ratified shortly thereafter. It was on the market for months last year - this market is weird."

Sunshine and Irony

How come, for the first sunny Sunday in what seems weeks, I'm not doing an open house or showing properties?

Here's the view from my living room window today!

Why am I complaining? Let's face it -- properties show better and buyers are in a better mood when it's not pouring rain.

Pocket Listings Out of the Pocket

There's been a lot of whispering among agents, particularly in Marin, about pocket listings (see previous post). Everyone seems to have one.

The sales pitch seems to be two-fold. First, a certain exclusivity -- here's an opportunity that a lot of other people don't know about -- a chance to snag a property you might not otherwise have a chance to get. Second, the agents who have one or more pocket listings are "in the know" and agents who are aware of pocket listings are part of an exclusive club of agents who are somehow better and more knowledgeable than other agents.

But just how effective are pocket listings at achieving the primary goal of selling a property?

A quick look at tax records for the first two months of this year shows 125 properties that changed hands in Marin. Of those, five were intra-family sales. Of the remaining 120, only 8 were not listed on the MLS.

We don't know the actual story behind the 8 but it's reasonable to assume they weren't all pocket listings. For two of these sales, an agent did enter the information into the MLS after the fact for "comp purposes" so we can assume these were pocket listings.

One agent with a pocket listing was very frank about his and his client's reasoning for keeping it off the MLS: they didn't really expect the property to sell in the current market and near the current price but thought they would give it a try. If it didn't sell, they could always put it on the MLS later without the baggage of extra "days on market". The agent mass e-mailed electronic flyers back in November to most agents (so much for it being exclusive) and it apparently attracted some attention from buyers agents. But the property didn't sell and has now been listed on the MLS priced $100K below the pocket listing price.

Draw your own conclusions, but pocket listings don't seem to be an effective way of selling property. They seem more about fluffing up an agent's reputation and a tacit acknowledgement that the property isn't properly priced for the current market and/or that the seller isn't particularly motivated.