Did you know…?

Check out these informative videos about San Francisco consumer real estate issues! Topics include:

Watch the Videos HERE.

San Francisco’s real estate market is…? What is going on anyway? In casual polling of fellow agents, I hear words like, “random,” “spotty,” “hard to predict,” “complex,” and so on.

At our Zephyr Real Estate  office meeting, agents will announce their sales (address, list price, #offers, and a ball park estimate of sales price). These meetings are a phenomenal way to stay in touch with the broader market trends. Lately, the results seem to confirm these confusing adjectives!

Some houses received many offers in 2 weeks and sell for $50–$150k over the asking price while others get one offer weeks or months into the listing. Typically, these sales are at or slightly under the listing price.

What I find fascinating is that sales are down BUT prices are UP from last year!

Note to home sellers: if you’ve lived in your property at least 3 years, not to worry! If not, it depends on your particular place. Some of you are best off staying put for another few months at least while others could get a tidy profit even now.

Note to home buyers: Buy, buy, buy. Much of SF is on sale for the short-term. Get in and take advantage before the market picks up early next year.

Check our Cleanoffer.com’s Real Estate Market Trends Report. An excerpt is below and click HERE for the down loadable PDF.

Happy analyzing and Trick or Treat!

Credit Crunch Crunches Sales

As expected, the credit crunch had a big impact on sales in September. Sales of single-family, re-sale homes fell 23.6% from the month before, and were off 30.3% year-over-year. Year-to-date, home sales are off 9.3%. We expect sales to be slow this month, then start to recover at the end of the quarter as the credit crunch is alleviated.

The median price for single-family, re-sale homes dropped 4.6%, a year-over-year gain of 6.6%. The average price fell 9.6%, up 0.7% compared to last September.

The median price for condos in San Francisco fell 4.3% to $785,000 from August, up 1.3% compared to last September. The average price for condos lost 3.6% to $816,513, month-over-month. The average price was up 8.6% year-over-year.

San Francisco condo sales fell 26.8% in September, down 10.6% year-over-year. Year-to-date, condo sales are down 0.8%.

All real estate is local. Okay, yes, we are all affected by national and international economics, such as the recent credit crunch. BUT, how we are affected depends on where we live.

California is not equal. San Francisco is not Fresno. Alameda is not Albany. And so on.

Want to know how your City and County faired this year over last. Check out the attached PDF with the Median Home Sales Price July 2007 compared with July 2006.

The results are surprising…

San Francisco City and County: Median Home Price is up 2.90%

Sonoma County: Overall Median Home Price is down 3.61% BUT…

Geyserville is UP 17.24% while Guerneville is DOWN 31.95%.

Of course, take these statistics like all others with a grain of salt. The Median Home Sales Price is only good for an overall picture. To find out how your home has faired you must look even closer…

For example, right now in San Francisco, single family homes in the Sunset continue to fly off of the shelves, while lofts & condos take a little longer to sell.

In general, the San Francisco real estate market is vibrant & healthy, despite what you may have heard. Yet, Fall 2007 brings a vastly different real estate market than in recent years. It’s complicated, somewhat random, and all about the financing.

File Attachment: California Home Sale Price Medians by City July.PDF (225 KB)

Right now, there are a lot of headlines a lot regarding the mortgage meltdown. What’s hype, what’s not?

In general, I stick to my usual soap box of don’t believe everything you read and proceed with rational observance b/c “If it bleeds, it leads.” (In case you are wondering, I welcome you taking my opinions with a grain of salt too! I am educated, aware, and in the trenches though I certainly don’t know it all and am only one person with an opinion.)

What’s happened?

In summary, rates are volatile right now and the qualifying criteria for home buyers has gotten stricter, much stricter, in a very short period of time. This does not affect the majority of borrowers around the US, i.e. those looking to borrow within the “conforming” loan limits ($417,000 and under).

Obviously, with Bay Area home prices, it affects us locally b/c most home buyers are seeking “jumbo” loans.

Plus, all stated income loans have gotten much harder to get. This too affects the San Francisco housing market because so many of us use stated income loans to qualify, especially first-time home buyers.

What does it mean?

First of all, this tightening of credit has been swift and severe. Most of us anticipate loosening in the coming days, weeks, and definitely months as lenders see the opportunity to make deals and jump back in the game.

Second, it means that some of you will have a harder time making home ownership happen right now. And, I do mean right now. Things are changing daily so it’s best to stay calm and stay tuned.

Third, it means that those of you who are able to make home purchases will be able to secure great deals right now. And, again, I mean right now. Things change quickly.

If you have a down payment, can document your income, and have good credit, BUY, BUY, BUY. A large bulk of the local San Francisco competition is temporarily gone so you can get into a property for a relative steal at this moment.

I truly expect the situation to correct itself very soon. I also do NOT expect a run down in San Francisco home prices. Right now, there are deals to be had, for sure. This is especially true in the condo market.

BUT, sellers are not giving away their homes for pennies on the dollar. Yet, they may be willing to negotiate on price and even buy down your interest rate to get the deal done.

What to do?

Make sure your mortgage broker and Realtor are savvy and aware of what is going on now. This is not the time to go discount. It is the time to have a team of experts around you!

If you are pre-approved, go back to your mortgage broker and make sure you understand current pricing and whether or not your situation has changed.

If you are selling your home, look into a seller rate buy-down. The cost of the buy-down is soooo much less than any price reduction! Get the sales price you want with this savvy move.

Talk to your Realtor (me or whomever it is) and ask them how they can be creative to get you the property you want at a great deal. Do they know how to negotiate rate buy-downs for you? Do they read the financial papers? Do they know how to protect you while you are in escrow.

Get out there and look at homes. The timing is absolutely excellent for those of you who have the money, credit & income to buy.

Times have changed and we are going back to basics. San Francisco will always be amongst the MOST desirable places to live. A couple weeks or even months of lending distress doesn’t change this so go-ahead and be a “have” rather than a “have not.”

Got a question? Please let me know…

Resources:

Today’s Chronicle Article: Mortgage crunch hits Bay Area hard because of jumbo loans

How cool is this? The casting director of A&E’s Flip this House found MY blog and asked me to help get the word out for a new crew!! Obviously, I was both excited and flattered. Steve Grant wrote, “I think your blog is great, and could possibly be a great way to spread the word about the search for the new cast….”

But enough about me, what do you think of me? (Remember that timeless Bette Midler quote from Beaches?)

Anywho, do you want to be on television? Do you flip houses or want to? Check this out and MAKE SURE TO TELL STEVE YOU SAW THIS ON SFHOTLIST, THE BLOG! PLEASE AND THANK YOU.

Flip This House, A&E’s #1 rated lifestyle show, has been to Charleston, Atlanta, San Antonio, and New Haven. Which city will be next?!!

813 Casting and Departure Films are conducting a nationwide search for the new cast of characters who will be featured on the upcoming season of Flip This House! Will it be your team?

We’re looking for confident, charismatic, motivated and opinionated people who “flip” residential properties for a living. We want real-estate adrenaline junkies who love the high risk, high reward nature of their jobs and who are devoted to doing a great job!

If you would like your team to be featured on the upcoming season of Flip This House, send an email to fth@813casting.com. Include your contact info, bios on you and your team, and some reasons why your team should be the next to be featured on Flip This House! Teams should consist of four or more people.

Schedule an interview with Casting Director Steve Grant. Email fth@813casting.com

Generally speaking, it is wise to begin with owning your own home. So, if you are set on acquiring your real estate empire, start at home…literally. However, after that, it is wise to consider diversifying your portfolio. Smart rental homes are a great investment for the long-term.

Right now, it is a great time to get into the rental market here in San Francisco. Certain areas are booming like the good, ole days with crazy over bids and multiple, non-contingent offers. Yet, other areas that once were hot have cooled down and offer savvy buyers an opportunity. For example, certain lofts, condos, and TICs are lingering just a little longer on the market and the sellers are getting antzy. Many of them have already purchased their new homes and have to get out of the double-mortgage situation. Pressure’s on and you can benefit. The truth is that most of these owners will do quite nicely, even with the slower market. Lofts, condos, and TICs have appreciated greatly over the years so their profits are nothing to cry about. That said, this is a market that is more cyclical than the single family one typical is… Lofts will be hot again so why not buy when it’s actually possible to get a decent $/SF?

This strategy also rings true for those of you who are renting and want to buy your first San Francisco home. Either way, it’s a great time to get into the market.

Bob Bruss wrote this article for Inman News on the benefits of owning rentals. I think his writing is both informative and easy to digest. Take a peek below…

Pros and cons of owning rental houses

A closer look at investment purchases

Friday, July 06, 2007

By Robert J. Bruss
Inman News

What is the best investment you ever made? Common stocks? Bonds? A small business? Your house? Other real estate?

Chances are your most profitable investment has been your personal residence. If you have yet to purchase your own home, today’s “buyer’s market” is an excellent time to do so.

However, if you already own your house, why not take advantage of current market conditions to buy one or more houses as rental investments? Let your tenants buy those houses for you by using their rent payments to pay the mortgage and other expenses.

Purchase Bob Bruss reports online.

WHY BUY RENTAL HOUSES? Realizing that profitable rental houses (and most other real estate investments) are long-term investments for at least five years, consider the advantages of such investments.

Your list of benefits will likely include probable appreciation in market value (although the home sale market is “flat” in many cities today), income tax shelter, maximum leverage to control the property with little cash, tax-free and tax-deferred sales benefits, and pride of ownership.

Yes, there are possible rental-house disadvantages unless you carefully qualify tenants before they move in to ensure they pay the rent on time and won’t “trash” your property. But sound property management techniques minimize this risk and hold repair costs down by providing tenant incentives to avoid damaging your rental houses.

HOW TO GET STARTED BUYING RENTAL HOUSES. The easiest way to acquire a sound, well-located rental house is to buy one as your personal residence.

That might sound unusual. However, the key reason is buying your own home for owner-occupancy is the simplest way to purchase for little or no cash on the most affordable mortgage finance terms.

After owning and living in your home for a few years, perhaps fixing it up to add market value, then you can convert it to a rental house and move on to another house purchased the same way, eventually establishing a portfolio of rental houses.

Or, thanks to the tax magic of Internal Revenue Code 121, after living in the house at least 24 months and then moving out to rent it to tenants, you will have up to 36 months to decide if you want to keep the house as a rental or sell it and claim up to $250,000 (up to $500,000 for a qualified married couple) tax-free principal-residence-sale profits.

THE FORGOTTEN RENTAL-HOUSE TAX-SHELTER BENEFITS. Most prospective rental-house investors realize these properties can provide income tax benefits, but they are often hazy as to the details.

Thanks to the unusual benefits of the depreciation tax deduction for estimated wear, tear and obsolescence, most rental houses show a paper tax loss. The reason is that depreciation is a noncash-expense tax deduction, which requires no actual payment, as is necessary for mortgage payments, property taxes, insurance and repairs.

Current tax law allows depreciation deductions for rental properties over 27.5 years. Commercial properties require a 39-year depreciable useful life.

For example, suppose you buy a $250,000 rental house, allocating $50,000 to the nondepreciable land value. Dividing the $200,000 cost of the structure, each year for 27.5 years you can deduct on Schedule E of your income tax returns about $7,300 without having to pay in cash even $1 for any actual depreciation expense.

The likely resulting tax loss from the rental house, after paying the operating expenses from the rental income, is deductible up to $25,000 annually if your adjusted gross income (AGI) from other sources is less than $100,000. Between $100,000 and $150,000 AGI, the amount of deductible rental-property loss gradually declines.

But any unused rental-property tax loss can be “suspended” and saved for use in future tax years or when the property is eventually sold.

UNLIMITED DEDUCTIONS FOR REALTY PROS. However, “real estate professionals” can claim unlimited property-loss deductions from their other ordinary taxable income. If you spend at least 750 hours per year (about 14 hours per week) on your real estate activities, you may qualify for unlimited Schedule E deductions from your rental houses and other realty investments.

A real estate sales license is not required. Full-time real estate investors, property managers, builders, contractors and leasing agents can qualify. Either spouse is eligible.

For example, suppose a married physician earns $500,000 AGI. Normally, he would not be entitled to any Schedule E tax loss deduction from his rental houses because his AGI exceeds $150,000. However, if his wife manages their properties and she spends more than 750 hours annually supervising those investments, making management decisions, inspecting properties for possible purchase, and supervising sales and exchanges of their properties, they can qualify for unlimited “real estate professional” deductions on their joint income tax returns.

AVOID TAX WHEN SELLING YOUR RENTAL HOUSES. If you quickly buy and sell rental houses or other real estate after fewer than 12 months of ownership (called “flippers”), your capital gains will be taxed at ordinary income tax rates up to 35 percent plus state taxes.

However, if you own the property more than 12 months, then the maximum federal capital gain tax rate is currently only 15 percent, plus state taxes.

But various tax-avoidance methods are available to cut or eliminate these taxes. In addition to the principal-residence-sale tax exemption of Internal Revenue Code 121 (if the house was owner-occupied to meet the statute’s requirements), tax-avoidance consideration should be given to tax-deferred exchanges and installment sales.

Also, remember that any unused annual property-tax losses from rental properties are “suspended” for use in future tax years or when a property is sold. Your tax adviser can provide full details.

Personally, I have sold several rental houses at considerable profits with no tax due because my suspended tax losses sheltered my capital gains from taxation. More information is available in my brand-new special report, “Pros and Cons of Investing in Rental Houses and Condominiums,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant delivery at www.BobBruss.com.