Sort Sales

Here's our "major disconnect from reality" item of the day.  This morning RIS Media put out a Featured Story letting us know that short sales are now streamlined, efficient and successful.

Short sales aren’t what they used to be. Gone is the long and complex process that often confused and frustrated both buyers and sellers.

Of course the story was written by the National Sales Director, Real Estate Relationships for CitiMortage, Inc.  Share that quote with your favorite real estate agent and stand back for the reaction.

San Francisco Sales on the Increase

The number of single family homes, condos and TICs that sold in San Francisco in both February and March this year is higher than either of the two previous years.

While not back to the levels of 2007, this is a significant improvement and appears to indicate buyers are back in the market.  Some of these sales may be attributed to the soon-to-expire federal tax credit (qualifying properties have to be in contract by the end of April and close by the end of June). 

The same trend shows up in the quarterly totals:

Marin Sales Best 1st Quarter Since 2007

Finally there seems to be some good news for Marin real estate sales.  For the first time in three years, the number of single family homes and condos is up in the first quarter of the year.

While we're still 20% below 2006 and 2007 levels, this year's first quarter sales are well above the last two years.

Nothing to do with real estate

The Vancouver Olympics opening ceremony was so Canadian I'm afraid others may not "get it". But I have to say, although many things make me proud to have been born and raised in Canada, listening to kd lang sing Leonard Cohen's Hallelujah gave me goose bumps.  Unfortunately, the idiots at NBC won't allow bloggers to embed the clip of that performance although you can find it here (apologies in advance for the lead-in commercial and the need to install Silverlight)!  YouTube has her equally fine performance from the 2005 Juno awards:

Zillow (Item 2)

A client sent me a link to a property he saw on Zillow he thought would be worth looking at.  But I couldn't find the address in the MLS.  My first thought was maybe it was a private sale but there was nothing in the tax database for this property.  After a little bit more research it turns out the street name in the Zillow listing is completely wrong -- Zillow says "Kearny" but the property is actually on "Kirkham" -- on the opposite side of the city.  And, it sold almost six months ago while Zillow says it's still active.

I know it seems like I'm picking on Zillow today but this is a potential problem for almost all of the web sites purporting to provide current and accurate listing information.  Virtually all of the listing information comes from the local Multiple Listing Service.  Zillow and others take that information on a periodic basis and load it into their own database, massage it, and then present it to the consumer.  Some sites, like Zillow, allow people who claim to be owners or agents to modify property "facts" and to post for sale listings directly to their site.  As far as I can tell there is very little vetting of such information or the identity of the person posting it.

Another reason why getting information directly from the MLS is your best bet for timeliness and accuracy.  Don't get me wrong -- the MLS is not perfect but it does have strong self-correcting mechanisms from the membership and the association which includes imposing fines on the agent/broker if inaccurate information is allowed to remain.

Zillow and Other "Automatic Valuation" Sites (Item 1)

I've always been skeptical of Zillow's home value estimates.  By now most people interested in real estate understand that, at best, Zillow's mechanism for estimating the value of a particular property results in an approximation.  But I think it's worse than that.  I was researching a property for a client this morning.  It's a 1-br/2-ba basic loft condo in SOMA, bank-owned, priced in the mid $400K range.  Zillow says it's worth $100K more than that.

However, a quick search of the MLS shows three sales in the same building within the last six months for similar units (bd, ba, size) in the mid $400K range.  That should put the estimate for this unit at the very low end of what Zillow calls it's "Value Range" which I think should be renamed "Guesstimate Range".  Even a computer program should be able to figure out that recent comparable sales in the same building should be the primary data to use when estimating value.  And there is no recent sales data that would possibly support a value above $600K.

I know that Zillow and all the other "Automatic Valuation" sites have extensive disclaimers such as: "A Zestimate home valuation is Zillow's estimated market value. It is not an appraisal. Use it as a starting point to determine a home's value."  Zillow's own data says that it estimates the final selling price correctly within 10% less than half the time.  It's estimates on three out of ten properties are off by more than 20% compared to the final selling price. 

The problem is that the "starting point" they refer to more often than not is a long and  tedious explanation from your real estate agent about why the estimate should be ignored.

Ellis Act Evictions "Up"

Channel 5 carried a story on Friday (http://cbs5.com/local/north.beach.evictions.2.1427811.html) that included a quote from Supervisor David Chiu:

"We have had a very marked increase in Ellis Act evictions," said David Chiu, the President of the Board of Supervisors who represents North Beach.

Data published by the San Francisco Rent Board in its annual eviction reports (http://www.sfrb.org/index.aspx?page=9) show an almost unbroken decline in Ellis Act evictions since 2005.

Unless Chiu is privy to information not yet published by the Rent Board, he seems to be pursuing legislation to limit property owners from adding garages to their property with the hope that it will curtail a growing trend in Ellis Act evictions that isn't supported by the city's own data.

There seems to be a growing trend in city government to propose legislation based on flimsy, anecdotal or non-existent facts and data and this seems to be another example.

Although I'm in the real estate business, I'm not a landlord or a tenant so I have no personal ax to grind.  No one can help but feel sympathy for the tenants mentioned in the story. But this is one of the consequences of city policy that places the burden of providing subsidized rent for low income and disadvantaged residents on the shoulders of individual landlords and building owners.

As reported elsewhere, some of the residents in the building that was the subject of the channel 5 piece have been there for many decades and for the last 30 years (since rent control was originally enacted) have been the beneficiary of below-market rents. The burden of that subsidy for all that time has fallen on the landlord, not the collective citizens of the City of San Francisco.

These burdens can fall particularly hard on a small building owner/landlord. It's one thing for a large landlord with hundreds of units to be able to sustain the cost of a certain number of below market tenants. It's something entirely different if you own a two or three unit building in which case just one long-term tenant is going to impact you disproportionately compared to the large landlord.

It shouldn't be a surprise to anyone that a long-time landlord and property owner might one day want to sell their property and recoup some of that rent subsidy. In fact, this is one of the usual arguments in favor of rent control -- the property owner will eventually make up for it with the increased value of the property.

If our City deems it appropriate public policy that tenants should be spared the vagaries of a free market approach to rents and that they should be permanently guaranteed a place to live at subsidized rents, the City should find a way to spread that burden in an evenhanded way across the entire population.

Signs of a Recovering Market?

The statistics we report from MLS data in San Francisco shows some interesting and hopeful signs that the overall market is beginning to recover. 

The 4th quarter of 2009 showed an increase in the number of properties shown in four of five categories of properties we survey and all five categories are up substantially compared to the 4th quarter last year (yes, I know, the last quarter of 2008 was a horrible time and you would expect the number of sales to be low but since then sales have risen steadily).

Click here to see the entire report in PDF.

Prices are still down -- in most cases average sales prices for 2009 are where they were in 2003/2004.

Click here to see the larger version.

So it seems that like much of the rest of the economy, there are tentative signs of recovery but it's likely to be a long, slow process.  Which is probably a good thing overall when it comes to real estate.

A "Gift" from the MTA?

Despite all the recent hoopla over the proposed plan to extend parking meter hours, we seem to be the beneficiaries of a gift from the SF MTA – meters along our block of Market St. now allow up to two hours of parking. I don’t want to talk about it too loudly because … but at least you can now park on the street without having to run out to feed the meter every 55 minutes.

Waiting Periods for Re-establishing Credit

Here's some information from our mortgage partner, Prospect Mortgage, on waiting times imposed by Fannie Mae for approval of mortgages for people who have had bankruptcies, foreclosures etc.:

FNMA- Waiting Periods for Derogatory tradelines; BK's, Foreclosures, Deed in Lieu, Pre-Foreclosure

• Bankruptcy (Chapter 7 or Chapter 11)

A four-year period is required to re-establish credit, measured from the discharge or dismissal date of the bankruptcy action. Exceptions for Extenuating Circumstances: A two-year period is required to re-establish credit, measured from the discharge or dismissal date of the bankruptcy action.

• Bankruptcy (Chapter 13)

A distinction is made between Chapter 13 bankruptcies that were discharged and those that were dismissed. The time period required to re-establish credit for Chapter 13 bankruptcy actions is measured as follows: This policy recognizes that borrowers have reestablished credit through the successful completion of a Chapter 13 plan and subsequent discharge by requiring only a two-year time period to elapse. A borrower who was unable to complete the Chapter 13 plan and received a dismissal will be held to a four year time period for reestablishing credit. Exceptions for Extenuating Circumstances: No exceptions are permitted to the two-year time period after a Chapter 13 discharge.

• Multiple Bankruptcy Filings

For a borrower with more than one bankruptcy filing within the past seven years, a five-year period is required to re-establish credit, measured from the most recent dismissal or discharge date. Note: The presence of multiple bankruptcies in the borrower’s credit history is evidence of significant derogatory credit and increases the likelihood of future default. Exceptions for Extenuating Circumstances: A three-year time period is required to re-establish credit, measured from the most recent discharge or dismissal date. The most recent bankruptcy filing must have been the result of extenuating circumstances.

• Foreclosure

A five-year period is required to re-establish credit, measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower. Additional requirements apply after five ears up to seven years following the completion date: Exceptions for Extenuating Circumstances: A three-year period is required to re-establish credit, measured from the completion date of the foreclosure action. The additional requirements listed above apply after three years and up to seven years following the completion date, except the minimum credit score of 680 is not required. • two years from the discharge date, or • four years from the dismissal date. • The purchase of a principal residence is permitted with a minimum 10% down payment and minimum representative credit score of 680. • The purchase of a second home or investment property is not permitted. • Limited cash-out refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at that time. • Cash-out refinances are not permitted for any occupancy type.

• Deed in Lieu of Foreclosure

A four-year period is required to re-establish credit, measured from the completion date (the date the deed-inlieu was executed). Additional requirements that apply after four years and up to seven years following the completion date: Exceptions for Extenuating Circumstances: A two-year period is required to re-establish credit, measured from the completion date. The additional requirements listed above apply after two years and up to seven years following the completion date.

• Preforeclosure Sale

A two-year period is required to re-establish credit, measured from the completion date. Exceptions for Extenuating Circumstances: None.

Brian Fisher
Northwest Regional Underwriting Manager
818-854-1454 blackberry 818-661-1712 fax

Thanksgiving

It's that time of year when we celebrate and ponder those things for which we are thankful.  To be honest, most of us spend more time eating, drinking, and having good times with friends and family than we do "pondering".

Sometimes it takes a little perspective to make you realize just how thankful we should be.  Read this from a recent editorial in the Toronto Star:

Back in Uganda, President Yoweri Museveni is taking the low road by letting a bill worm its way through parliament that declares war on homosexuals. Sponsored by government MP David Bahati, it would impose the death penalty on HIV-positive gays or lesbians who have sex, consign any other homosexuals to life in prison, and slap three-year jail terms on anyone who fails to report such "crimes."  Stephen Lewis, the Canadian who led UN AIDS efforts in Africa, rightly denounces the bill as "a twisted world of sexual paranoia" and "lunatic." Harper's government yesterday called it "vile and hateful."

Think about what your life would be like if this were the law where you live.

Zillow Accuracy - Buyer and Seller Beware

Prompted by a periodic e-mail we receive from Zillow about the "value" of our house (apparently its value has gone up $50K in 30 days -- really? in this market?), I took at look at Zillow's own statistics for how accurate their value estimates are.

In San Francisco more than 25% of properties that that sold had a selling price that was different than the Zillow estimate by more than 20%. Half of sold properties had Zillow estimates that were at least 10% different than the selling price.

In Marin county it's worse. 40% of properties that sell have Zillow estimates that are off by 20% or more.

Zillow is certainly a popular web site for home owners and would-be home owners who like playing the "I wonder what it's worth?" game and it has an appeal to those of us who are hooked on tracking stock market indexes. But as a serious valuation tool in our market, it's not at all useful. In fact it can actually get in the way of a realistic assessment of the value of a particular home but setting unrealistic expectations.

I find some disturbing parallels between the Zillow process and processes in use these days by mortgage lenders who try to create second appraisal opinions using similar tools. Ask any real estate agent with current experience and I'll bet he/she will be able to regale you with tales of deals gone bad because of a flawed appraisal process.

Tip of the Week

I don't know if this will be exactly a weekly feature but I wanted to share with you various resources we run across from time-to-time that may be useful for you.

Today's tip is a web link:
http://dbiweb.sfgov.org/dbipts/

This link takes you the the San Francisco Department of Building Inspection site where you can see the permit status for a property. You can search by street address or APN number. In addition to showing construction permits, it also shows electrical and plumbing permits (which are not shown on the 3R report) and any building complaints filed against the building/owner. While not a substitute for a formal 3R report, it's an easy way to get an early look at the current permit history of a property. One of the shortcomings of the service is that older building permits are not on line. For example, the 3R report for our current listing on Chenery shows permits starting in 1961; the online system only shows more recent permits.

Cautious Signs

Lord knows I'm not one to be ahead of the bandwagon. I never install 1.0 software and never buy a car in the first year of manufacture. And maybe we're looking a little too hard for signs of improvement in the economy.

So, with those disclaimers out of the way, consider these two items:

• 
  
  The Conference Board Employment Trends Index (ETI)™ saw a small uptick in May. The index now stands at 89.9, increasing 0.2 percent from the revised April figure of 89.7, and down 20 percent from a year ago.
  "While it is too early to say that the ETI has bottomed, the moderation of the last two months is certainly a sign that the decline in job losses is real and signals that the worst is over," said Gad Levanon, Senior Economist at The Conference Board. "However, as the economic recovery over the coming months is likely to be very slow, we still expect the unemployment rate to continue to increase to double digits by the end of this year and into 2010."

• The U.S. unemployment rate was the highest in 26 years, but the loss of 345,000 jobs in May, fewer than expected, was seen as a sign that the job market was no longer in free fall.

Sales of Multi-Unit Buildings are Way Down

All aspects of the housing market have been hit hard in one way or another. In San Francisco, an area that hasn't been much talked about are small, multi-unit properties (2-4 units). The average sales price of all 2-4 unit buildings which sold this May is down 30% compared to where it was a year ago. That's more than double the decline in average sales prices for single family homes and condos.

What's worse is the decline in the number of sales. A year ago in May 47 buildings sold. Compare that to just 25 last month. In February this year, no (as in zero, none, nada) 3-unit buildings sold. In March no 4-unit buildings sold. Granted, these months are historically slow but this was no statistical glitch. In the past three months we've averaged only 3 sales of 3-unit buildings. There are 84 on the market! That's more than a 2-year supply!!

The situation is just as bad for 4-unit buildings. There are 40 on the market and we're only averaging 2 or 3 sales a month.

This is not a healthy situation for owners or, ultimately, their tenants.

A large part of the problem is the difficulty in obtaining financing. If you think it's tough to qualify for a single family home or condo mortgage, try arranging for a mortgage on an investment property.

Some Tax Credits Running Out

The $100 million allocated by the state of California to cover $10,000 tax credits for buyers of new construction (never lived in) homes has received applications for more than 80% of the fund total. Applications had been averaging about 600/week but last week more than 1,000 were received. At that rate the $100 million will be exhausted in a couple of weeks.

Since applications can only be submitted after you've closed escrow, if you're not already in contract you're probably out of luck. If you are in contract, do everything you can to close before the well runs dry.

The state provides a web site where you can check the most recent statistics.

As of today, it looks like this:

Fun with Numbers

Even though there are sporadic reports that median home prices inched up slightly in April compared to March, generally median sales prices have been down across the board for some time.

The median sales price is the price point where half the homes sold for more and half sold for less. One of the problems with "median" is that it's often thought to be an indicator of overall value of homes. But in our current market, most of the activity has shifted to lower priced homes. In some parts of the larger Bay area, these sales are dominated by foreclosures.

In Marin county, here's a little graph that shows this change:

This year so far there are almost 20% more properties selling in the below $1million range than was the case in any of the previous four years.

I like to think of "median" as more of an indicator of where the action is. There are better measures of value.

New Listing Coming Soon ...

• A Glen Park beauty that can be used as a single family home (which is how the current owner used it), two TICs (eligible for fast-track condo conversion), or an investment property with two rentable apartments without the new owner having to make any changes.
• One of the prime features that makes this property special is a flat side yard that's big enough to let you indulge your yen for gardening, provide a fun and safe places for the kids play on the newly sodded lawn, relax on the patio, and entertain.
• The top floor has two bedrooms, bath, remodeled kitchen, formal dining room, formal living room, breakfast room arranged around a center atrium. There's a one-car garage for this unit.
• The lower floor has two bedrooms, two baths, and remodeled kitchen open to the living area. This unit has direct access to the side yard.

Search for Open House Listings at the Source

The San Francisco Association of Realtors has created a new web site that provides public access to all listings in the MLS that have open house dates/times scheduled.

You can search by area, price, type of property, number of bedrooms etc.

Bookmark this site for future use!

First-time Home Buyer's Credit Explained

Here's a summary of the tax credit for first-time home buyers passed by congress earlier this year:

Who Qualifies?
First-time home buyers who purchase homes
between January 1, 2009 and December 1, 2009. To qualify as a “first-time
home buyer” the purchaser or his/her spouse may not have owned a residence
during the three years prior to the purchase.
Which Properties Are Eligible?
The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
How Much Will the Credit Be?
The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:
>>The price of the home—the credit is equal to 10% of the purchase price of the home, up to $8,000.
>>The buyer's income—single buyers with incomes up to $75,000 and married couples with incomes up to $150,000—may receive the maximum tax credit.
If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.The credit
decreases for buyers who earn between $75,000 and $95,000 for single buyers and
between $150,000 and $170,000 for home buyers filing jointly. The amount of the
tax credit decreases as his/her income approaches the maximum limit. Home buyers
earning more than the maximum qualifying income—over $95,000 for singles and
over $170,000 for couples are not eligible for the credit.
Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax
credit, if he/she occupies the home for three years or more. However, if the
property is sold during the three-year period, the credit will be recouped on
the sale.

Click here for a document published by the National Association of Realtors® with more details.