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The Palos Verdes Peninsula real estate market is constantly changing. The Monthly Real Estate Review is written to provide you with timely information on the current real estate market. A new article is available each month, so drop by for a fresh look at the real estate market whenever you have the chance! For more information on real estate news, take a look at And for more information on real estate in general check out the INTERNATIONAL REAL ESTATE DIRECTORY.
WHY PRICES HAVE DECREASED 5% ON THE PENINSULAIt’s no secret that home prices in Palos Verdes have gone down along with the rest of the South Bay. While there were a few starter homes selling in P.V. in the $1,000,000 price range a year ago, this year the sales prices have often been $50,000 lower. Although there are several reasons for these price decreases, low afford ability and a shift in confidence levels are a main part of the problem. Low afford ability is a combination of high monthly mortgage payments (due to high sales prices) and high property taxes (also due to high sales prices). Monthly mortgage payments for new buyers for a starter home on the Peninsula can easily be $4,000 to $5,000 per month, or more. Property taxes can be another $1,000 per month, or more. Most buyers don't mind high mortgage and tax payments if a home is appreciating in value at $10,000 - $20,000 per month. This was the case in 2002-2005. However, buyers are very cautious about having monthly payments that high if housing prices are flat, or going down. To summarize, as long as interest rates remain favorable it is unlikely that prices will drop significantly. At some point prices will level out, once consumers reach a point where they feel prices have hit bottom. But we have not yet reached that point.
THE IMPORTANCE OF HOME INSPECTIONSThe standard Purchase Contract used by most California Realtors has many provisions built into it to protect buyers and sellers. One of the most important provisions is the Home Inspection contingency. This part of the contract is good for both buyers and sellers. Buyers like the inspection contingency because it gives them the right to have the entire property inspected by a professional inspecter who really knows about houses and their potential problems. These inspectors usually spend several hours checking dozens of items on the property, and provide a written report for the buyer to keep and review. If the report brings to light repair issues that were not noticed when the purchase contract was originally accepted, the buyer has the right to ask the seller to fix these items. If the seller refuses to correct the requested repairs, the buyer has the right to back out of the sale. Even though the buyer has the right to walk away from a sale if the seller will not correct the requested repair items, most buyers will move forward with the sale. After all, the purchase contract does stipulate that the sale is "AS IS", so repairs presented to the seller are usually perfomed in the spirit of cooperation. So in most sales you will see a second round of negotiation regarding the repair issues, with both parties providing some give and take. The inpection contingency is also good for the seller. Most sellers want to know if their sale is on solid ground as soon as possible so they can move on with their next plan. The inspection contingency usually gives the parties a 14 day time frame to resolve any repair issues. After that the sale is on solid ground and all systems are "go"!
NEGOTIATING TIPSAlthough there are many important aspects of selling a home, the process of negotiating is one area where thousands of dollars can be gained or lost in a very short time. Although most people state that they do not enjoy the negotiations process, the fact that most buyers and sellers end up with a series of counter offers is proof that most people feel that negotiating is worth the effort. When negotiating, a few simple tips can go a long way. 1. Don't act anxious ~ No matter how badly a buyer wants to buy or a seller wants to sell, it's best not to give any hint of this to the other party. Once the other party has wind that it is important for you consumate a sale, they are unlikely to be as flexible with you on the price and terms of the sale. 2. Pace your reductions ~ Every counter offer a buyer or seller sends out has a message between the lines. If you continually counter offer with a price that reflects a $10,000 discount from the previous price, the other party will have no reason to stop the negotiation process. However, if your counter offer price spread gets much smaller each time, this sends a message that you are getting close to your bottom line. 3. Never stop the process ~ In most negotiations that do not end up in a sale, the lack of progress can often be attributed to the fact that one of the parties stopped the negotiatin process. If you can't sign the last counter offer that came to the table, do your best to keep the negotiations alive by sending out some type of reasonable counter offer. Deals only die when the talking stops. When negotiating, it's important to remember the big picture. Getting the property sold at a fair price is usually the main goal for both parties. Grinding the other side for every last dime is usually not worth the risk of blowing the deal. Besides, it's usually nice to meet the other party after the negotiations are completed, and to look them in the eye and wish them good luck. You'll sleep better that way!
A NEW WAY TO HOLD TITLEOwners of real property now have a new chioce in how to hold title to their real estate. Although Community Property has been a common method of holding title for many years now, upon the death of one of the co-owners the title of the property would go by will to decendent's devisees. This did not meet the needs of many homeowners who preferred that the property be transferred soley to the surviving spouse. Finally, after years of listening to complaints about this one flaw in the Community Property title holding, the legistature has passed a law allowing a new and improved version of Community Property. This new version, called Community Property With Right of Survivorship, will be the perfect choice for many homeowners. Up until now, any property owner who wanted to include the Right of Survivorship in a title holding had to utilize the Joint Tenancy method. Joint Tenancy is still a common and preferred method for holding title, but there are other conditions of the Joint Tenancy holding that are less than perfect for many people. Now, the most common ways to hold title include Community Property, Joint Tenancy, Tenancy in Common, Tenancy in Partnership, title by Trust, and the new kid on the block...Community Property with the Right of Survivorship. For further information on the best way to hold title contact your C.P.A. or Financial Planner.
10 STEPS TO A BETTER HOME SALEIn a normal real estate market almost any home will sell. But just getting a home sold is usually not enough. Most homeowners want to maximize their profits by selling for top dollar and they would prefer to enjoy a smooth sale. Working with these 10 suggestions will go a long was towards these goals. 1. PICK AN ACTIVE CYCLE TO SELL ~ The real estate markets go through good periods and bad periods, so choosing an "up" market is the first step. If you have this luxury, plan accordingly. 2. PICK AN ACTIVE SEASON TO SELL ~ In most parts of the country Spring and Summer produce the most home selling activity. Putting your home on the market in early Spring to get a jump on the competiton is usually a good idea. 3. PICK AN ACTIVE AGENT TO LIST WITH ~ Picking a part time agent to orchestrate the sale of largest asset you own is asking for trouble. There are plenty of good agents to choose from who work full time, and know the best way to represent you in all areas of your sale. 4. PRICE THE PROPERTY CORRECTLY ~ It's human nature to think that your home is better than the other homes that have recently sold. So if you must experiment with price, give yourself a time deadline. Then get serious with your price. This is the number one issue that will attract buyers. 5. MAKE YOUR PROPERTY EASY TO SEE ~ Properties for sale that need an appointment to show or that do not have lockboxes are shown the least, that's just the nature of the business. When you want top dollar you want your property to be shown as often as possible. 6. STAGE THE PROPERTY LIKE A MODEL ~ There's an old saying in real estate...they way you live in a property and the way you show a property for sale are two different things. Making your home squeeky clean, bright, and uncluttered will go a long way towards impressing your potential buyers. 7. LOOK STRONGLY AT EVERY OFFER ~ Some sellers may not get excited about an offer that comes in below the asking price. It's important to remember that all of your efforts to date have been to create that offer, and that providing a reasonable counter offer to all offers increases your chances of getting the property sold. 8. AVOID LONG ESCROWS ~ As a general rule the longer an escrow period the more likely a problem will arise. Interest rates go up and down, employment situations change, and buyer's motivations can fluxuate. Without making the buyer feel pressured, try to keep the escrow on the short side if possible. 9. BE PROACTIVE IN ESCROW ~ Sellers have a host of responsibilities once their home has sold. Signing escrow instructions and all escrow related papers, providing disclosure information, obtaining the termite completion, procuring the lender's demand for payoff, and preparing the Grant Deed are just a few of the seller's important responsibilities. 10. LEAVE YOUR HOME IN CLEAN CONDITION FOR THE BUYER ~ Moving from a home usually involves time constraints. Lots to do and little time to do it. But with proper planning you can vacate the house and still have time to clean up and get the property in good shape for the new buyer. A bottle of champagne on the kitchen counter is optional, but a nice touch!
LOWER INTEREST RATE BENEFITSMost homeowners understand that declining interest rates are good news for the housing market. Lower rates at the Fed level usually mean lower mortgage rates for consumers, which in turn helps homeowners by providing lower monthly payments on their home loan. But does a drop in interest rates really make a significant difference in monthly housing payments? It helps to compare the numbers for a specific loan amount. As an example, if a home sells for $500,000 with a $100,000 down payment (20%) the borrowers new loan is $400,000. At the interest rate of 8.25% which was common 2 years ago the monthly payment was approximately $3,005 for a fixed rate 30 year loan. That same $400,000 at today's lower interest rate of 7% would have a monthly payment of approximately $2,661 per month. For many homeowners and buyers that is a significant difference, and the monthly saving can be put to good use in other areas of the homeowner's budget. The obvious drawback of lower interest rates is the lower returns for people who have money invested in interest rate sensitive instruments. Savings accounts and various money market accounts experience the same interest rate declines as the mortgage market, thereby providing less income. However since most homeowners have a greater interest in lower mortgage payments than in maximizing the yields on their savings accounts, the vast majority of homeowners welcome the news of declining interest rates.
BAY AREA MARKET SOFTENSIn what is probably the first sign that the slowdown in the "dot-com" economy has hurt the real estate market, prices of the upper end homes in the San Francisco area have finally begun to soften. The market that has been hardest hit has been the million dollar plus market, where last year high tech IPO money from various companies was competing for a limited number of luxery homes. Some of these homes are now garnering a price 10% less than they were just one year ago. How much further these prices will soften is anyone's guess. People are now wondering if this slow down in the tech sector will adversly affect the real estate market in southern California. And to some small degree it probably will. There is indeed a pool of multi-million dollar home buyers in our area that have connections to the high tech world. But the percentage is much smaller here than in the Bay area up north. Our million dollar buyers come from a significantly broader base of employement areas. The Palos Verdes upper end market is still pretty stong. We had over 200 sales over one million dollars on the Peninsula last year, and this year is off to another great start. Although nobody expects a record year for 2001, it will be a very good year indeed. And as far as the price reduction for those homes up in the Bay area? Well, they'll probably end up okay when the shake out is over. After having enjoyed 20% to 30% appreciation for severl years in a row, a little softening in the market might not be a bad thing.
PALOS VERDES REAL ESTATE FOR 2001The Palos Verdes Peninsula enjoyed another year of 5% to 8% appreciation in 2000, and the inventory of homes for sale remained very low most of the year. As of January 1, 2001 there were only 188 homes for sale in all price ranges in the Palos Verdes Association of Realtors M.L.S. Of these homes for sale there were only 95 homes for sale under one million dollars. Although there are signs that the U.S. economy will be slowing in 2001, the southern California economy is expected to remain fairly strong. This good economy, combined with lowering interest rates and a low number of homes for sale, should help prices on the Peninsula rise another 5% in 2001. Research by the California Association of Realtors indicates that the number of new construction units planned for 2001 will not meet housing demands, keeping pressure on sales volume and prices into 2002. The Peninsula market will continue to benefit from strong activity in the "move-up" market, buyers selling their homes off the hill and entering the bottom of the Peninsula market in the $500,000 range. Lower interest rates will probably get the market off to an early start, and it should be a busy spring and summer market!
ECONOMIC SLOWDOWN AND REAL ESTATE PRICESTalks of an economic slowdown in the U.S. have become more common in the media over the last 4 weeks, and there are some who think a small recession is possible. A recession, defined as 2 continuous quarters of negative economic growth, would probably not affect all parts of the country equally. California's economy is still very much on a roll, despite a significant shake-out in the technology sectors. But if we learned anything from the last recession back in the early 1990's, it was diversification. And indeed our state's economy, which before was heavily dependent on aerospace and defense, is now sitting on a much broader base of industries. How will a slowing economy affect California housing prices? Certainly Silicon Valley will be hit the hardest, if for no other reason than their lack of diversification. Prices in the San Jose area have already dropped over 10% and chances are good that they have not hit bottom yet. Southern California housing prices, on the other hand, are looking very good for the next 12 to 18 months, and hopefully longer. The California Association of Realtors predicts that housing prices in southern California will increase at a rate equal to (or possibly higher than) the nationwide inflation rate, with should be around 3% for the year 2001. It looks like the days of 10% appreciation for houses might be behind us for a while, which is not necessarily a bad thing. When prices shot up at double-digit rates in the late 1980's many home buyers were forced out of the market and prices eventually dropped. So a sustainable rate of appreciation of 3% to 5% might be a healthy way to enter the new millennium.
KEY LOAN LIMITS INCREASEDIn November FNMA and FMAC announced that they would be increasing the loan amount for the real estate loans they buy in the secondary mortgage market. The limits were increased from approximately $250,000 to $275,000, allowing primary lenders an easy way to liquidate the loans they have funded, so they can offer fresh money back in the mortgage market. This is good news for the U.S. housing market in all price sectors. Even though the increased loan limits do not appear to directly affect the Palos Verdes housing market, there is indeed a significant connection. The vast majority of home purchases on the Peninsula involve the sale of a buyer's less expensive home. In some cases 2 or 3 less expensive home sales are tied together in a group of escrows to complete the closing of a Palos Verdes home. This increase in loan limits will definately help keep the lower ends of the market moving, which is crucial in keeping the upper end market moving. Another important element that will evolve from these increased loan limits is the real estate market's general momentum. An active market is a good market, and psycologically the more sales that take place the more likely buyers and sellers will think positively about making a move. Interestingly enough, this "buy up" market often runs full circle, as long-time Peninsula homeowners sometimes decide to cash in on built up equity, and to "downsize" into smaller less expensive homes (usually with a one story floorplan!). As in life, the real estate market often makes a complete cycle.
REAL ESTATE APPRECIATION CYCLESOver the last 100 years real estate has proven to be a good investment in southern California. At the basic level real estate prices have maintained a level of appreciation greater than the national inflation rate. However, because of the spectacular growth of real estate equities in our area, Peninsula property owners usually expect a level of appreciation greater than the inflation rate. And indeed, over the last 25 years, we have had several periods where real estate prices have increased at a very high rate...as much as 20% to 25% per year. Obviously these extremely high rates of appreciation are unsustainable, and are generally unhealthy for the real estate market over the long haul. When prices grow too quickly many buyers are priced out of the market, and soon the basic laws of supply and demand kick in to bring prices back to normal. One of the key elements to successful real estate investing is to be able to recognize the various cycles that the market moves through. As an example, during the late 1980's we were experiencing very high levels of appreciation. Then during the early 1990's we experienced several years of no appreciation and then depreciation. The cycle started all over again in 1995 when the Peninsula real estate market bottomed out, and prices gradually started increasing again. As we enter the year 2001 we have had 3 strong years of appreciation, with no end in sight. How will we fare over the next few years? The local economy is a big factor in our real estate market, and at this time most economic signals are still strong. It looks very likely that we will continue to experience an appreciating real estate market for at least the next 18 months, hopefully longer. Looks like a good time to buy!
CHANGING THE LEGAL OWNER ON A TITLESometimes the owners of a piece of real estate decide to make a change to the title of a property. Some of the common reasons include divorce (taking a spouse off title), estate planning (putting a child on title) and there are many other good reasons to change title on a deed. Although the idea of changing the names on the title might be well founded, the technique in making that change is critical if the outcome is meant to be successful and final. Many people wanting to make a change on the title to a property simlpy draw up and execute a Quit Claim Deed or a new Grand Deed. Once this instrument is recorded it does indeed change the title to the property. However if this is done without the use of title insurance there could be trouble down the road. Even though the recording of a deed does provide public record of the transfer, if that transfer was done without providing a policy of title insurance, the loose ends will need to be addressed at a later date. If the new people on title decide to sell the property in the future, most title companies will not insure the new transfer to a buyer without some additional paperwork. This paperwork usually involves going back to the party who was transferred on or off of the title and getting them to sign and notorize an affidavit, confirming that they were the parties involved in the Quit Claim or Grant Deed transfer. If that person is no longer avaialble (moved, incapacitated or dead) this could very likely cause a problem with the transfer of title to the new buyer. The solution is simple. Whenever the title to a property is changed it is important to involve a title insurance company and an escrow comapny. The title insurance company will charge a standard fee for researching the title based on the value of the property, and the escrow company will charge a basic fee for drawing up the documents and arranging for the recording. In most cases the total cost will be under $2,000. Once this new insured deed has been recorded, the currentl title holders will not have a problem selling the property to a new person. It is important to note that taking someone off title or adding a person to the title does not change the names on any loan(s) which may be against the property.
PRE-QUALIFIED VERSUS PRE-APPROVEDIn a good market or a bad market, most sellers want to know if a potential buyer has the ability to obtain financing as soon as possible. The qualifying element of the buyer in a home purchase is so important that it is addressed several times in the standard C.A.R. Residential Purchase Contract. Most buyers understand the importance of being able to obtain a loan, and many take the time to set the wheels in motion before making an offer on a property. Although more buyers each year are sitting down with a lender before they purchase a home, most of these efforts are geared towards obtaining a letter of 'pre-qualification' from the lender. This is a good step in the right direction, but going the extra mile to become 'pre-approved' can place the buyer in an even stronger negotiating position with a seller. Most sellers know that a pre-qualified buyer has taken some steps to show their ability to obtain financing, but the level of commitment from the lender providing the "pre-qual" letter is very low. Pre-qualification shows that a lender has reviewed the buyers basic qualifying information such as credit, income and debt ratios, and the source of the down payment, but no loan commitment is involved. However, a buyer who has obtained a 'pre-approval' has actually taken the time to have his or her loan package fully processed, and is generally ready to close an escrow in a relatively short amount of time with few worries. Once pre-approved most lender will only need copies of the escrow instructions and an appraisal before they are ready to draw up the buyer's loan documents and close the escrow. The real estate industry has come a long way from the days when a seller would just cross his fingers and hope that the buyer could obtain a loan. Most purchase offers presented buy buyers today are now accompanied by a pre-qualification letter. And becoming 'pre-approved' is gaining acceptance in most areas of the U.S. including the South Bay. In some cases being pre-qualified or pre-approved can make the difference of either getting or loosing the desired property.
SELLING VACANT HOUSESI am often asked if it is better to market a property occupied or vacant. Houses sell both ways, but there are advantages and disadvantages each way. If an occupied home is very well decorated and uncluttered then showing it furnished to a prospective buyer can help the buyer 'see' how the home can look furnished. However, showing an occupied home with dated furniture and with excessive personal belongings tends to distract a buyer and work against the goal of getting a buyer emotionally excited about the home. The same home, if vacant and squeeky clean, can allow the buyer to picture the home with his or her own personal belongings. The other issue regarding occupied versus unoccupied houses is the issue of access. One of the main goals of a good listing agent is to allow as many prospective buyers into the house as possible. However occupied homes generally require some degree of advanced communication with the owner before showing. This can thin out some of the showing activity. Vacant houses, on the other hand, are usually able to be shown anytime, even at the last minute, with no concerns about calling first or making an appointment. This usually allows for a larger number of showings to potential buyers. To summarize, if an occupied home shows like a model and can be easily accessed then there is no harm in selling the property in this manner. If the home is much less than perfectly decorated or squeeky clean, or is difficult for agent and buyers to access then selling it vacant might help get a better price.
PRICE - PRICE - PRICEMost people have heard the one liner that the most important element in real estate is "location, location, location". And that is certainly an important element when buying a home. But when it comes time to sell a property, that phrase takes a back seat to an equally important element ..."price, price, price". Even homes located in the best locations will not sell if they are over-priced. And, unfortunately, over-pricing a home for sale is human nature. Almost everyone thinks their home is worth more than the open market will actually bare. The key element in pricing a home on the Peninsula is to price it no more than 3% to 5% higher than the comparable sales value. Sellers who price their home any higher than that risk a loss of traffic from good buyers who would have paid fair market value if it was priced right. Statistics show that a home placed on the market receives the vast majority of traffic from agents and potential buyers during the first 30 days. During the second month of marketing the number of interested parties drops off considerably, and that initial pool of buyers has now moved on to the next set of new listings. In a good real estate market most homes on the Peninsula will sell within 90 days with proper marketing. If a home has not sold after 3 months it might be time to look at the 3 most important element of real estate..."price, price, price"!
PURCHASE CONTRACT AND ARBITRATIONThe California Association of Realtor's Residential Purchase Contract has offered an Arbitration clause for several years now. Buyers and sellers have the option of including Arbitration in a sale by initialling this paragraph in the purchase contract, or to disclude it from the sale by leaving it blank. There are valid concerns on both sides of this very important issue. The basic idea behind the Arbitration clause in a purchase contract is to help minimize the cost and time involved in resolving any dispute that might arise between a buyer and a seller during the course of a home sale. Although most people like the idea of resolving a dispute in a fast and inexpensive fashion, there are those who feel that agreeing to "binding" arbitration up front can limit the legal rights that one might need later on. Not initialing the Arbitration clause in the original purchase contract (and subsequent escrow instructions) does not mean that a buyer and seller cannot agree to Arbitration at a later date if a dispute arises. And indeed most buyers and sellers would agree that Arbitration would probably be a good first step (after an initial Mediation process) towards resolving a dispute. A problem can arise when a buyer and seller cannot agree on the Arbitration clause up front, during the initial stages of contract negotiations. At this early stage neither party fully understands to what degree they may require legal council above and beyond Arbitration. It is indeed possible that an arbitrator could rule in favor of Party "A" when party "B" might have prevailed if the dispute went to court. Because of the shorter time frame on Arbitration the legal issues of pre-trial discovery, court evidence rules, existing case law, jury trial and appeal are not always available as in a court case. To summarize, the concept of Arbitration is generally accepted as a good first step to resolve a purchase contract dispute. But agreeing to it in advance may not allow for additonal recourse at a later date.
THE VALUE OF A VIEWThe Palos Verdes Peninsula offers some pretty spectacular views, as do many of the homes on the Hill. These views range from peaceful pastoral views and open vistas to unobstructed panoramas from Malibu to Long Beach. When view lots were sold by the various Peninsula developers over the course of the last 70 years, view properties received a premium. Today, with the Peninsula almost completely built out, view properties still receive a higher price. How much is a view worth? It depends. A $500,000 home in Palos Verdes with a small view of the evening lights might be worth an extra $25,000. On the other end of the spectrum a $5,000,000 property with an unobstructed panoramic 'Queen's Necklace' view might garner an extra $500,000 for the view. The value of a view is usually relative to the value of the property. Some buyers on the Peninsula are specifically looking for homes with a view, while other buyers refuse to pay for a view and would prefer getting more 'home' for their dollar. Every buyer is different and brings to the table a unique set of priorities. A common ground available in Palos Verdes is the 'partial view'. This might be a view from just a few rooms in a home or maybe from some of the bedrooms upstairs. These partial vies are very enjoyable to the owners but can be difficult to place a value on. These partial views can often make the difference as to whether or not a buyer will make an offer on a property for sale. To summarize, some buyers will pay significantly more for a home with a view, while others would prefer to spend that same money on a new kitchen or more square footage.
REAL ESTATE COMMISSIONSAs required by law, real estate commissions are negotiable. Even though a Broker and a seller can agree to any commission rate, competition in the market has established a range of commissions which are common on the Palos Verdes Peninsula. Most commissions for homes in Palos Verdes run between 5% and 6% of the sales price. With some multi-million dollar properties the commission is sometimes lower. This total commission is usually split between the listing Broker (the office representing the seller) and the selling Broker (the office representing the buyer). The commission is usually split again between the Broker and the agent who represents the client. Since one of the purposes of a real estate commission is to provide an incentive to show a property for sale, it is important for the commission to be competitive with the commissions of other properties for sale. If most of the homes in a specific area are offering a 2.5% commission to a selling agent another home offering 2% may or may not receive the same amount of attention. During slow real estate markets some sellers have been successful offering a commission higher than the competition to encourage a higher level of activity. As with many real estate issues, choosing a commission is more involved than it may initially appear. Since the vast majority of real estate sales on the Peninsula involve more than one agent, a well thought out commission agreemment is an important part of any marketing and compensation plan.
SELL BEFORE BUYINGWhen a family decides to make a move to another house, the transition usually involves the selling of an existing residence. This often raises the issue of whether to sell the existing home first and then buy the replacment home, or to buy the replacement home and then sell the previous residence. Although there are always exceptions, the rule of thumb in most situations is to sell first and then buy. This method does put a bit of pressure on a homeseller, but it is usually the most practical approach. One of the reasons that selling first is the best choice is financial. Most people need to receive the equity in their residence to use as a down payment for the new home. Without having another source of funds available for a down payment, getting the existing residence sold at a specific price is an important step in the home buying process. Another issue is qualifying for a new home loan. Even if a buyer has the cash avaialble for the down payment, most lenders will look at the existing home as a financial liability. Unless the home can be rented for 125% of the existing carrying costs, this obligation will put a dent in the ability to qualify for the new home. Yet another good reason to sell before buying is that a homeseller is in a much stronger position to negotiate a good price on the home they are buying when their home is in escrow and they are able to close on the new home quickly. Without the sale of the existing property the buyer is forced to make a 'contingent' offer on the new home. And since contingent offers are usually given tepid consideration in a strong real estate market, this is a very weak position to be in when trying to obtain a good price on the new home. When considering making a move, an intelligent approach is to get all of the ducks lined up prior to placing the existing residence on the market. Learning about neighborhoods and prices for the new home, and getting prequalified or preapproved for the new home loan are important steps at this early stage. Then, once the existing home sells and goes into escrow, the process of buying the next home can move forward quickly and efficiently.
THE VALUE OF OPEN HOUSESThe idea of holding an 'open house' to expose a property for sale has been around for a long time. Because they have been a part of the real estate world for so long, some people are under the impression that open houses are an important element in the marketing of a home for sale. Although there may be some value to open houses today, they are not nearly as important now as they were years ago. In the past, before the implementation of computerized Multiple Listings Systems and the Internet, open houses were an effective tool to get the word out on a home for sale. Open houses helped expose properties to agents and potential buyers that may not have known about the listing any other way. Today, significant advances in the M.L.S. and the Internet allow agents and potential buyers to find out all of the details about homes for sale almost as soon as they come on the market. And with the advent of virtual tours, buyers can now see the inside of a home for sale from the comfort of their own home. Consequently, the value of open houses has diminished significantly over the last few year. If this is the case, then why do we still see open houses on the Peninsula? There are several reasons. First, out of habit, many agents and sellers still feel open houses are an important element in the marketing of a home. Second, many agents enjoy holding open houses as a tool for meeting new potential clients. And third, yes it does occassionally still happen, some properties actually sell from the exposure of an open house. The percentage is very small, and it is very likely that the buyer who found a home via an open house would have found it a few days or weeks later via the M.L.S. or the Internet, but is still occassionally happens. The important thing to remember is that there are many tools a Realtor can use to expose a property for sale, and that the use of an open house is an increasingly smaller piece of that exposure pie.
REAL ESTATE AND WALL STREETThe stock market has experienced impressive gains over the last several years, and there is no end in sight. Since statistics show that 10 to 20 percent of Californians use stock market wealth to invest in real estate, this strong stock market has helped the nation's real estate market in two significant ways. Most importantly the solid growth in the Dow has provided a sense of confidence in the American people. People feel better about buying property if the general trend in the economy is positive. Another advantage is the increased equities garnered by many stockholders. Many investors have used a portion of these stock gains to help buy real estate. This trend is likely to continue throughout 2000, but what would happen to real estate if the stock market experienced a significant decrease in 2000? The same two factors that have helped real estate during the past several years would work against us in a declining stock market. Decreases in the stock market could shake buyer's confidence levels, causing some buyers to wait until a clearer picture was available. Secondly, any loss in stock equities could diminish a buyer's financial abilty to buy real estate. Like the last stock market drop, California would not be as affected as New York. However, since a higher percentge of Califorians now own stock compared to 10 years ago, the impact could be significant. All this is not meant to suggest that we are indeed heading into a declining stock market. But it sure helps to maintain a broader perspective on the issue, as it's effects are not limited to just Wall Street.
THE VALUE OF HOME IMPROVEMENTSImproving a home is a common way to increase the enjoyment of a property, and to increase it's value. However, investing too much money in a home improvement can be counter-productive. An improvement that costs $50,000 to build is only a good investment if the homeowner can recapture a large percentage of that cost at the time of sale. Unfortunately, most home improvements do not create a dollar-for-dollar increase in a property's value. With that fact in mind, its a good idea to spend money on home improvments that create as much value as possible for each dollar spent. A survey of home improvements 'costs versus value' was recently published in REALTOR MAGAZINE. The percentage that each home improvement dollar recouped in added home value was very interesting. * BATHROOM ADDITION - 87%
These survey figures were for the Los Angles area, and there were geographic differences in cost/value throughout the United States. This information does not take into consideration one of the most important values of a home improvement - the actual use and enjoyment of the improvement by the homeowner. Still, it's a good idea to keep costs in check if adding value to the property is part of the reason for the remodel.
THE FALL / WINTER HOUSING MARKETFor a variety of reasons, quite a few homeowners choose to sell their homes during the fall and winter months. I am often asked if this is a futile time to place a property on the market, since the 'prime' selling season of spring and summer has come and gone. The truth is, especially in the Los Angeles-South Bay area, these slower months are not nearly as slow for real estate as many people think. Yes, there is usually a bit of a slowdown over the Holidays, mostly because people just have too much going on to be able to dedicate sufficient time and energy towards the cause of buying or selling a home. But aside from the holiday periods, the real estate market keeps pretty busy in our area almost all year long. There are several factors that keep our real estate market active into fall and winter. Unlike many parts of the country where weather is a big issue during these months, our weather does very little to impede the buying and selling of homes. In addiiton to our good weather, our way of life here is busier than many other parts of the country, and tradition usually takes a back seat to business and housing needs. A positive factor in the fall / winter real estate market is the lack of competiton. Since many homeowners choose to place their properties on the market in spring and summer, there are far less homes to compete with once October rolls around. A given pool of home buyers competing for a smaller number of homes for sale usually helps keep prices up. To summarize, selling a home in the fall and winter months is not nearly the problem that some homeowners think it is. There are even a few advantages that can make selling durng this time of the year a winning proposition.
WILL THE INTERNET ELIMINATE THE NEED FOR REALTORS?Computers have played an increasingly important role for the real estate professional over the last several years, so it is reasonable to wonder just how new technology will impact the industry in the years ahead. For over a decade Realtors have utilized computers to access information on properties for sale. This information has now left the exclusive domain of real estate agents, and is now available to the general public via the World Wide Web. With the ongoing evolution of technology and the Internet, some people wonder if we are headed for a "Realtor-free" industry, where buyers and sellers consumate home sales without the use of an agent. Although new technologies will undoubtedly help make the home buying - selling process more efficient, it is unlikey that Realtors will be left in the cyber-dust. Even though buyers are now able to access information on properties for sale from the comfort of their own home, the roll of the Realtor is still pivotal in most real estate transactions. Brokers will most likely spend less time shuffling potential buyers from house to house in an effort to assist them in becoming familiar with the general inventory. Many buyers will go through that portion of the learning curve on their own. However, buyers and sellers both will still need the services of an experienced Broker to help them with viewing qualified properties, determining property values, negotiating purchase contracts, and providing all of the services necessary throughout the course of an escrow. To summarize, the roll of the Realtor will evolve from the time consuming, labor intensive job of providing basic information and services to the more professional role of organizing, processing, and fullfilling the client's needs in the most efficient manner available. If this is the future of real estate, count me in!
SPRING PENINSULA REAL ESTATE OUTLOOK |
The Peninsula real estate market was very busy. The foreclosure sales and anxious sellers of just a few years ago were replaced last year by multiple offers and appreciating prices. Homeowner equity lost during the recession has been largely regained and prospects look good for continued price increases in 1999. Prices this year should fare well, although it would be unrealistic to expect another year of 10% price appreciation. However, with the local and national economy strong, prices will probably increase at a level equal to or slightly greater than the national inflation rate. Price increases of approximately 5% would be good news for both buyers and sellers. Interest rates have been a large contributor to the rebounding real estate market and those in the know do not expect any big changes in rates. Home loan rates ranging from 7% to 8% should be common throughout the year. The sources of money for home mortgages has become quite diverse over the last few years, so any fluctuation in rates will probably be minor. Homes may take a little longer to sell, but that is not expected to be a problem. Properties that sold in weeks, days, or even hours in 1998 could take a month or two to end up in escrow this year. This pace is much more comfortable for all parties concerned and is a welcome relief from the "frenzied" market we experienced during the summer of last year. Traditionally, many home buyers and sellers look at the spring and summer seasons to make a move and that was certainly the case last year. Once summer is gone the real estate market tends to lose some of it's steam and pressure on prices can ease. This seasonal market pace is likely to take place again this year. All in all, 1999 is shaping up to be another excellent year for real estate throughout California and on the Palos Verdes Peninsula. As long as the U.S. and California economies maintain their strength and interest rates stay low, we should experience another great year in the housing industry. If you have any real estate questions, please feel free to contact me. It would be a pleasure to be of service to you! |
