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Summer 2008 Issue
Housing Downturn Hits Home
Although it appeared that pockets of San Francisco were immune to the housing slump surrounding us, this month's sad news penetrated even our most desirable neighborhoods. Every county in the Bay Area saw continued declines in home prices and our fair City succumbed to a market downturn.
Time to close up shop? Hardly. The good stuff is still selling here. Tour bus companies are springing up in the national market to service eager foreclosure hunters (a sign that we may be nearing the bottom). Homes that are under-priced are selling in many areas of San Francisco and we're not experiencing 200-day sales cycles like those in Stockton and other California markets. Relatively speaking, San Francisco property owners are far better off than most.
But the bad news just keeps coming. Gas prices, floods, fires and bank failures dominate the headlines. A 20-year high in statewide foreclosures and fears that our most trusted institutions may require government bailouts have shaken consumer confidence in real estate investments throughout the country. There could be even more trouble ahead, as some 5-year, interest-only loans begin to reset in September. On top of that, loan requirements are tougher than ever (see article below) and that affects everyone doing business at all but the highest levels.
If you're not in a position to buy right now, keep saving your money and hang tight. We've been here before. The market goes up and down and, this too, will change. If you do manage to qualify for a loan, you're in a strong position to negotiate the sale price on a home. Sellers need you more than you need them right now.
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Loans Play Hard to Get
Tried to get a loan lately? I did and was told by my broker that I missed the window of opportunity. The equity line I qualified for in January was no longer available when I was ready to accept it in June.
There aren't many lenders out there now that mortgage companies have consolidated. The few remaining strong lenders are tightening their loan-to-value requirements and inspecting the financial underwear of every potential creditor. Before they loan you money, lenders demand to see every bank statement, every pay stub -- even inspection reports. I'm seeing requests for multiple appraisals and second reviews of comps prior to the close of escrow. Nothing is overlooked and no one escapes scrutiny.
There are no more 21-day escrows. It's 30 days minimum now. And deals without loan contingencies are a thing of the past. If you're buying a multi-unit building or something over $1 million, the screws are even tighter. We may be making history here as banks revert to lending standards like those of 20 years ago.
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My Advice Now on KPIX and HGTV
I was recently featured as a Bay Area real estate investor and expert on KPIX-TV's Sunday morning news show with Sherry Hu. Alongside the president of Zip Realty, I discussed the top tips for home buyers in today's market:
- Shop foreclosures for deals
- Research the seller
- Be open to new areas
- Find the right things wrong, including cosmetic and other improvements you can ask for
Look for me in future segments on KPIX later this fall.
HGTV producers of My House is Worth What also asked me to tape three more episodes of this popular show in Sacramento. The foreclosure and short-sell market there has been brutal. I'm not looking forward to telling these homeowners their houses are worth much less than they think they are.
Check HGTV listings for show times.
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Buying or Selling, It's Time to Get Organized
If you're thinking about selling or you just bought a house, you'll love this service that gets you organized. Mary Tate of LifeMadeEasyServices.com can help you tidy up your worst mess in the office, kitchen or garage - without having a nervous breakdown.
I dreaded organizing my office, filing away old documents and making way for more recent ones. The mere thought of tackling this project kept me from doing it for nearly a year, but Mary made it seem so simple.
Equal parts mother superior and sympathetic friend, Mary arrives with a label maker, boxes and color-coded file folders to help you trash, clip and file your way to sanity. "We help our clients achieve peace of mind, freedom and balance," says Mary. "When we leave, you'll know exactly where everything is and how to stay organized long-term."
That's what I call a service!
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Rental Round-Up
Market conditions depressing home sales are also driving up rents in the City. What used to be $3,000-a-month for an entry level condo has become $4,100 a month. Suddenly, it's cheaper to rent an entire flat than it is to pay a mortgage on a one-bedroom apartment.
Tighter lending guidelines are also keeping more would-be homeowners in rentals. Just last month, one of my clients who is moving to Marin had people lining up out the door to rent her 3-bedroom, 2-bath flat for $5,600 a month. My guess is that many of these folks would be first-time buyers if they could qualify for a loan.
Paragon's rental expert Laura McNabb Gray, confirms that many current renters, who would have qualified to buy a first home before the credit crunch, just don't have 20 per cent (which is a whopping $120K) to put down on a $600K property today. She believes those who have funds are afraid to make a move, "Even people with good credit and a lot of money in the bank are choosing to rent because of continued speculation that the housing market has not yet hit bottom," notes Gray.
Gray says the decline in home sales is really heating up the rental market. "Demand for rentals at the $2,500 level is almost insane. We're seeing bidding wars, posturing at rental open houses and tight-lipped shoppers who wait to discuss their thoughts after leaving a property because they don't want anyone to hear how interested they are."
If you're a recent transplant to San Francisco or you have to move to a new rental apartment for other reasons, your best offense is to give prospective landlords plenty of good reasons to choose you. Gray recommends you come prepared with:
- Your credit report
- Proof of income
- Proof of savings (with your name and address on the statement)
- Letter of reference from your current landlord
- Copy of ID
- Simple, friendly and brief bio about who you are and why you're moving
- A cute little blurb about your pet if you have one (and a picture is always helpful).
For help landing the perfect apartment, call Laura McNabb Gray at 415-738-7075.
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Featured Listing: Edwardian Gem — 771 Elizabeth Street
Rebuilt from the ground up in 2004, this classic Noe Valley gem has the charm, character and street presence of an old Edwardian but is delivered complete with modern-day comforts and conveniences. The top floor of the house features three bedrooms, including a master suite, and a wide-open, main living area that is perfect for entertaining. The large, light-filled kitchen has ample counter and cabinet space as well as a smart island. The kitchen opens to a large dining room which serves as a double parlor with the living room. French doors off the dining room lead to a small deck with stairs down to a deep, grassy back yard.
The lower level is easily accessible from the rest of the house. It features a laundry room, as well as a huge bonus space that's perfect for a home office or separate play area. The spacious fourth bedroom and full bath on this level make an ideal guest suite.
There is abundant closet and storage space on every level and each bedroom is equipped with custom-built closet systems. There is also an alarm and intercom system throughout the house.
Located on one of Noe Valley's best blocks, this home is just steps away from Noe Court park/playground and the conveniences of 24th Street.
List Price: $2,195,000
See: www.NoeValleyEdwardian.com
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