Coastal Real Estate and Lifestyles

As we head into the peak season for many buyers and sellers, here’s a clear view of a buyers’ market for the San Mateo County coastal communities of Half Moon Bay, El Granada, Moss Beach and Montara.  In addition to the locals watching, out of area agents who have clients wanting a second home near San Francisco, or a beach house in northern California should take notice of this area:

• May 2007 had 4.8 months of inventory (this is our norm)
• January 2008 had 10.4 months of inventory
• May 2008 had 8.8 months of inventory

 Median Sales Prices for Coastside single family homes:

• May 2007 - $955,000 from 19 sales
• January 2008 - $1,050,000 from 9 sales
• May 2008 - $760,000 from 16 sales

Graph showing May 2007 through May 2008: 
Coastside real estate single family homes for sale vs. closed sales by month from May 2007 to May 2008

What I’m seeing firsthand:  Buyers are negotiating or watching for the right property to make their move.  Many buyers are also getting pre-qualifed before viewing properties.  Sellers are beginning to take this market correction seriously, and are doing more to prepare their homes.  For example, instead of just getting the inspection reports done, many sellers are completing the work that was identified in the reports.  Overall,  I’m seeing activity build with lots of consulting going on.

We don’t like to go to the doctor.  Twenty- and thirty-somethings especially don’t.  Of course you’re healthy, fit, invincible, able to scale mountains, right?  We certainly hope so, but a check up now and then establishes that valuable baseline that you may appreciate more later in life…trust me on that one.  Getting a financial baseline before buying your first home is equally important.  For many first time home buyers here, it could take a long time to save the money necessary to purchase a home on your own.  It is just darn expensive to live here in San Mateo County.

This may hurt a little:  get a financial diagnosis from an experienced mortgage professional who can explain your loan options to you.  Forget the ads that tout “Find Your Dream Home”.  You are not in that market!  The most important consideration in a fixer is how it’s built - “bones”, lot size, and location. 

Next, get the treatment plan together with a local Realtor.  Realtors commonly have clients’ needs in mind when they tour new listings every Tuesday.  Sometimes great properties do not last long or are sold before they get onto the MLS.  He/she will ask you questions like…

• Commute considerations - distance, transportation, timing, etc.

• Lifestyle considerations - are you a surfer (ocean, that is), movie watcher, entertainer?  After all, you will need a break from working on the house from time to time!

• Finding the right fixer - how much of your free time can you spend improving your new home?  Every night - one day each weekend - once a month? 

Just as you hope to develop a partnership with your medical/health professional with the goal being your overall well-being, create a partnership with a Realtor with the long term goal being homeownership well-being.  Enjoy your journey toward homeownership health and happiness…and keep climbing mountains, or whatever you do to stay fit.

As new online consumer-oriented real estate sites emerge such as Zillow and Trulia, it is fascinating for me to watch how Realtors and consumers respond to this segment of our industry’s growth.  For years Realtor.com was the primary real estate site that consumers used outside of individual Brokerage sites such as Californiamoves.com.

I’m a fan of transparency, which you already know if you’ve been reading this blog, so I’m excited that consumers have more resources.  However, along with new choices comes some confusion and growing pains.  Here’s a bit of clarification regarding some of Zillow’s data for my corner of the world - the San Mateo County coast including Half Moon Bay and nearby towns.

Zillow just posted Q1 results for 30 Metropolitan Statistical Areas (MSA).  Look at the Quarterly Home Value Reports map to start.  Our San Mateo County Coastside area is included in San Francisco-Oakland-Fremont (called San Francisco Metro area).  For geographic reference, near us is San Jose-Sunnyvale-Santa Clara (called San Jose Metro area).  East Bay and North Bay communities are also included in the Bay Area’s general region.

Find San Francisco, CA on the list of cities on the left.  Zoom in a little and notice the colored icons near Moss Beach, Princeton By the Sea, and Half Moon Bay.  Note:  Montara is not on this map just a mile north of Moss Beach and Princeton By The Sea is also a neighborhood.  Princeton By the Sea is part of El Granada; Seal Cove is part of Moss Beach.

When you’re on the Zillow site, click on the green (the color refers to the amount of appreciation or depreciation) icon near Half Moon Bay to get this:

According to Zillow, the Half Moon Bay change is -5.2%.  The Zindex is $815,000.  Note:  this picture is of a recently sold - 3/11/08 - bank-owned house in the El Granada highlands - MLS # 768007 - for $615,000; not located in Half Moon Bay.  Zindex means median zestimate which is the current median price for a given Metropolitan Statistical Area, I think.

For a Big Picture tool, it’s not too far off…but as one would expect, not entirely accurate either.  They’re statistics - a tool… not the be-all-end-all of our homes’ value.  I’m looking for whether it’s in the ballpark.  Homeruns are only achieved with local expertise.

In my last post comparing Q1 2007 to Q1 2008 for Half Moon Bay see below.  Figures for El Granada, Moss Beach, and Montara are in the actual linked post.

Additional home value statistics are in my 2008 Coastside Report compiled in January 2008:  Coastside Market Report by Marian S. Bennett - January 2008

San Mateo County Coastside - Half Moon Bay, El Granada, Moss Beach, Montara:

ALL Coastside: population approx. 23,000 (based on 2000 census)
Q1 2007 had 183 new listings.
Q1 2008 had 189 new listings.

Q1 2007 completed transactions - 66
Q1 2008 completed transactions - 34

Q1 2007 Median Price Coastside - $778,000
Q1 2008 Median Price Coastside - $748,000
Approx. 4% depreciation overall in the last year.

Half Moon Bay only: population approx. 12,000
Q1 2007 had 50 new listings.
Q1 2008 had 59 new listings.

Q1 2007 completed transactions - 28
Q1 2008 completed transactions - 20

Q1 2007 Median Price in HMB - 928,950
Q1 2008 Median Price in HMB - 972,000
Approx. 4.4% appreciation overall in the last year.

El Granada only: population approx. 6,000
Q1 2007 had 24 new listings.
Q1 2008 had 17 new listings.

Q1 2007 completed transactions - 15
Q1 2008 completed transactions - 6

Q1 2007 Median Price in EG - $785,500
Q1 2008 Median Price in EG - $840,000
Approx. 7% appreciation overall in the last year.

Moss Beach only: population approx. 2,000
Q1 2007 had 10 new listings.
Q1 2008 had 15 new listings.

Q1 2007 completed transactions - 6
Q1 2008 completed transactions - 3

Q1 2007 Median Price in MB - $749,375
Q1 2008 Median Price in MB - $790,000
Approx. 5.4% appreciation overall in the last year.

Montara only: population approx. 3,000
Q1 2007 had 13 new listings.
Q1 2008 had 11 new listings.

Q1 2007 completed transactions - 17
Q1 2008 completed transactions -5

Q1 2007 Median Price in MONT - $830,000
Q1 2008 Median Price in MONT - $740,000
Approx. 11% depreciation overall in the last year.

Half Moon Bay has the largest population of the four towns and is the only incorporated city.  El Granada, Moss Beach, and Montara are unincorporated San Mateo County.  The difference in numbers of listings and completed transactions comparing HMB to the other towns in the same year is relative due the population size differences.  We all know that statistics can be manipulated, and broad based statistics are just that, very general.  I’m sharing the median prices here because that is what the headlines report.

NAR just announced on 5/13/08 ”mixed home price performance continues…”.   Inman News headline on 5/13/08 reports on NAR’s announcement that “median resale prices fall at record rate”.  Here’s the highlights:

• Median price among 149 U.S. metro areas tracked was down 7.7% in Q1 2008 compared to Q1 2007.
• One Hundred of the metro areas had price declines.  Sacramento, CA  topped this list, down 29.2%.
• Forty eight of the metro areas had price increases. Binghamton, NY topped this list, up 11.8%.
• The median price among the 149 areas tracked was $196,300.

When you are about to list your home or purchase a home, your Realtor can provide very specific data pertaining to YOUR neighborhood which will be most useful.

As part of my journey into real estate investment education,  I decided to visit the San Mateo County Courthouse “steps” to watch a trustee sale a few weeks ago.  I have seen a private auction but never this final step in the foreclosure process before the property becomes bank-owned (REO) - the Trustee Sale.  This link shows where the Trustee’s Sale is in the foreclosure process.  More about the link below.

It was surprisingly low key when I got there on a recent early Spring day (sorry Michigan friends!).  Then a few more people showed up for a total of about 10 people.  Most of the people there were seasoned investors.  By seasoned I mean, they are there all the time with their dog-eared list in hand and have mega millions to work with.  I know this because one of the Foreclosure Agents shared some information with me about who buys, how they buy, where the foreclosure market is heading in San Mateo. 

That day 20 properties were up for auction; 5 were postponed and new dates given; and 15 went to the respective banks because nobody bid on them at the minimum auction price.  The sheets were getting updated right then and there.  Sadly, one homeowner was desperately trying to hold onto her home at this eleventh hour; as far as I could tell, her home was not sold to the bank while I was there.  It is my understanding that the lender with the primary lien establishes the minimum auction price.  (My CB training in this starts Monday.)  In other words, none of the investors and bidders there thought the properties were enough of a “deal” to bid at the minimum price.  This is one day’s activity and Trustee’s Sales happen throughout the week depending on the number of properties available.

This experience was totally worth the 90 minutes I decided to allow myself.   There is NOTHING like first-hand education, as reinforced by seasoned investor Jeff Brown, whose blog I follow at BawldGuyTalking.  I also took the time because I wanted to find out what’s really going on in San Mateo County.

Bottom line:  There are foreclosure properties out there, and probably more coming through the remainder of ‘08.  Buying such a property requires research, patience, ready cash…and a bit of a stomach!  Support of your team may be helpful to some and crucial for others (be it contractor, accountant, real estate professional, loan consultant, or parents).

If you’re interested in starting your own online research, I just got this tip from Kevin Boer about foreclosureradar.com.  I’ll be tracking it along with where I currently have an account, Realtytrac, to look for San Mateo County trends.  My Realtytrac research has shown their properties to be pretty out of date so I may try to find another one to use as a comparison to foreclosureradar.  If you know of another good one, make a comment to share with everyone.

Colleague Sam Benson in Contra Costa County updates us on foreclosure property activity there. 

Colleague Pam Buda in Sonoma County told me yesterday that there are over 200 short sale or foreclosure properties just in her office.  Did I hear that right?

5:30 p.m. - Elaine Carlson from the Palos Verdes Peninsula writes an open letter to buyers on this subject if you’re thinking of investing in her area of southern California.

The trends in listing price is broken down by quartile in the above graph to show market segment movement.  The second, third and fourth quartiles are trending similarly - slightly downward with leveling showing within the last month, and the first quartile trending slightly upward.

Pacifica’s inventory overall has come down a bit from the peak of the fourth quarter 2007 following the dramatic lending market meltdown; however inventory is still elevated over a year ago meaning sellers will have an easier time of it if they approach the market very competitively.  This is the overall tone.  Each neighborhood has its own unique plusses or minuses and you’ll want to take those into consideration with your Realtor.

This week’s San Mateo County coastal market activity is picking up; however most offers being presented are not creating jubilant sellers.  Sellers want to sell their homes in this peak selling season and buyers are hoping to get a “bargain” while faced with the uncertainty and confusion about which way the market will shift in the next several months, notes CB-Half Moon Bay’s Office Broker/Manager Robert Ross.  Even when buyers find the right home or property, concern with overpaying is on their minds.  Similarly, sellers are concerned that they’ve set or reduced their list price too low.  Inventory levels show Half Moon Bay in a Buyer’s Market in Feb 2008 with 7 months of inventory.  January 2008 was at 8 months.  As of now…we’re trending toward a balanced market.

Buyers are working to mitigate their short and long term risks by choosing properties carefully and trying to understand the current financial environment, while at the same time remembering why they are home shopping in the first place - realization of long term benefits and lifestyle goals.

Half Moon Bay 1998-2007 Single Family Home SALES graph:

Graph price range $450,000 to $1,150,000.

:

Half Moon Bay 2006-2007 Single Family Home SALES graph: 

Graph price range:  $920,000 to $1,120,000

2007 Median Sales Price - $957,000

3.5% Increase from 2006

2007 Average Sales Price - $1,127,763

6.3% Increase from 2006 

2006 - 121 closed sales

2007 - 97 closed sales

What does this mean moving forward?  As with everything on my site, this is my humble opinion unless quoted by someone else.  I do think you want interpretation of this stuff…

If you have owned your home four years or more, you will have some good equity built up - IF it hasn’t been used for non ROI-type expenses.  Some people have taken that equity and reinvested it to put it to work toward greater net worth.  2007 marked the lowest number of sales in HMB since 1998 (the highest year was 1999 with 196; 2006 had 121 and 2007 had 97 leaving a decrease in number of transactions by 25% from the prior year.  I believe the number of sales will continue to decrease and the market will remain sluggish overall as long liquidity in the lending markets continues to be constrained and the national/regional media continue to make headlines of these issues.  So, if you don’t HAVE to sell, I would wait.  If you do have to sell, you need a consultation with your real estate professional sooner rather than later.

That being said, two points here:  1) there are strong cash buyers out there and should be taken seriously; and 2) there are listed homes that are selling in record time.  These are the homes with location, presence and price.  If you’re in the market, you and your Buyer’s Agent need to be watching.

Here’s a few recent new Half Moon Bay listings that went into contract quickly recently:

400 Medio - 23 days

225 Miramontes - 20 days

730 LeMans - 2 days

(there are others in El Granada, Moss Beach and Montara)

Half Moon Bay Condos will be in a separate post.

Other cities will be posted in separately also.

More local statistics on my site’s Local Stats page.  These stats are best used as leading indicators.

Are you watching for opportunities?  In my opinion, those willing to put in some sweat equity on less than move-in-ready homes could reap rewards if planning to keep the property for at least 5 years.  The new loan options that will ease borrowing for a home purchase in our area may allow some to get into the market that previously thought they could not due to perhaps high prices, less than perfect credit, demand, etc.  This update of the Economic Stimulus Package of 2008, in a nutshell is as follows:

1. The limit was increased for the amount of FHA-backed loans.  The Federal Home Administration offers an insurance product.  FHA loans took a back seat to the subprime loan products of the early 2000’s for borrowers with minimal down payments, partly because the limit was so low and partly because there was an extra fee for the insurance.   FHA loans, up until now, had a low maximum allowable insured limits, severely limiting its usefulness in high priced markets such as ours.  However, this increase to $729,500 is a substantial jump and is available - currently - until 12/31/08.  This is meant to ease the worries of investors by attempting to reduce the risk of loans with government security.  Not all mortgage brokers can offer FHA loans.  Ask your preferred Mortgage Broker if they are approved to do FHA loans.  Our in-house lender, Princeton Capital representative Susan O’Driscoll, can offer them and gave me a list of several key points for those who may consider an FHA backed loan.  A few highlights:

• OK for any buyer, not just first time buyers.

• Princeton can underwrite, draw the documents, and fund the loan.

• FHA does not count 401K loans in debt ratios.

• NOT FICO (credit score) driven.

• FHA loans are assumable to qualified buyers.

• Owner occupied only and moves into the home within 60 days.

• 100% gift allowed for down-payment and closing costs.

2. Fannie Mae and Freddie Mac loans (known as “conforming loans” with a limit of $417K) now have a temporary increased limit of $729,000 in San Mateo County, including other California counties.  Other County limits may be different.  Up until now, borrowers were looking at getting a First and a Second (Seconds meaning Jumbo loans) to get into homes here unless they were move-up buyers with a lot of equity for a large down payment.  This article from Forbes sums it up and gives figures on which markets will be “…the biggest real estate winners”…

“It also reduces consumer interest rates. Loans above Fannie and Freddie’s limit are known as “jumbo” loans, and because they aren’t backed by the government, these riskier loans carry higher interest rates. Under the limit increase in the stimulus package, loans that are recategorized from jumbos to conforming loans (54% in San Jose, 44% in San Francisco, 17% in New York) will carry lower interest rates. For potential buyers, this makes home buying more affordable…”

As an aside, I have to say that I couldn’t help but think about the Forbes article Title using the word “winners” in it.  Where there are winners, there are also losers.  We know who the losers are and this reality saddens me.  Those who left insufficient funds in their property-bank, or those who took a risk with one of the negative amortization or other ill-fitting loans - didn’t project the loan’s affordability as it adjusted and now find that they can’t afford those monthly payments -are feeling loss right now.

For more detail and to discuss our situation and options, call your preferred mortgage consultant or Susan O’Driscoll (see her link in my blogroll under Mortgage) to see if you are able to move forward with your home purchase plans.  This program, in combination with a good inventory (remember, inventory is higher than last year as shown in an earlier post) for buyers that we haven’t seen in a long time will create a perfect storm for some who choose to make the call to their preferred lending, real estate, and financial consultants.

Local agents were brought up to speed on the California Land Title Association(CLTA) owner’s coverage and how beneficial it can be, particularly for Coastside homeowners.  Invited speaker, Old Republic’s Chief Title Officer, Steve Johnson, is a 30 year veteran of San Mateo County title issues.

With so many details to pay attention to at the closing, buyers may not notice that one of the items they are paying for at settlement is a one-time fee for Owner’s Title Insurance.  This coverage protects the owner’s title to the property.  You might think, why do I need it if I can see the public record?  Because not everything related to the title of a particular property may be recorded.

Back in 1998, apparently with very little fanfare, homeowner’s title insurance coverage was expanded to include previously excluded issues, including unrecorded encumbrances.  A few examples:

• Someone else has an easement on the land.

• Someone else claims to have rights affecting your title arising out of fraud, duress, incompetence or incapacity.

• You are forced to remove or remedy your existing structures - possibly not boundary walls or fences - because any portion was built without obtaining a building permit from the proper government office.

• You are forced to remove or remedy your existing structures or any part of them, because they violate an existing zoning law or zoning regulation.

• You cannot use the land because use as a single-family residence violates existing zoning law or zoning regulation.

• Your title is unmarketable…allowing someone to refuse to perform a contract to purchase, lease it, or make a mortgage loan on it.

• The map attached to the policy does not show the correct location of the land according to the public records.

The list goes on… These items are from a sheet provided by Old Republic Title called “29 Covered Risks for Homeowners”.

When you buy or sell property in our area, the Listing Agent typically opens a “pre-sale escrow” which includes ordering the Preliminary Title Report.  That Report is included in the Seller Disclosure Package.  The prospective buyer can then review what this Title Report shows, we call it the “Prelim”.  This report includes items that have been recorded with the County Recorder’s Office.  Your Realtor will review this report and order items in the report that may be prudent to review further, called “Exceptions”.

Fortunately the claim rate in San Mateo County is below the national claim rate average of approximately 4%.  While this type of coverage is good for all homeowners, Coastsiders who own property in areas such as Montara, south of Half Moon Bay, Sunshine Valley area, and other rural areas, will be glad for this blanket of coverage.  Country properties can have fuzzier histories than clean-cut subdivisions.

To find out who your carrier is and what is covered and excluded, review your Closing Documents or ask your Realtor get you the name and contact information of your Title Insurance carrier.  To check out different carriers and their prices, check out this cool online tool called CLTA TitleWizard.

By the way, Old Republic Half Moon Bay is moving to a smaller location at 785-H Main Street, Half Moon Bay, to be staffed part-time/as-needed.  Phone number 650-726-9095 will remain the same as will the contact information of your escrow officer.  Call them for further information on this change.  Thanks to Angela Burnett for arranging for Steve’s visit.