Like many people in the Bay Area, Shiroza Irshad is no longer in a hurry to buy a home now that the once-sizzling housing market is taking a breather.
"We are taking our time and don't want to rush. I don't want to buy anything now and realize I paid too much," said Irshad, who lives in Newark. "We'll wait and see what the market is going to be like in July and August. We want to see if prices will drop a little bit."
No longer in a hurry? Want to see if the prices drop a bit?
Folks, this is the classic attitude during a vicious cycle. In a virtuous cycle, everything pushes things up. People can't wait to throw money at property, for fear it will be higher tomorror. In a vicious cycle, everything pushes things down, and people hold onto their money like misers, certain that the property they want will go for less tomorrow.
In both cases, they are always right, until they are wrong. But it always takes a fair amount of time for them to be wrong.
SAN FRANCISCO -- Traditional pricing for real estate services is bound to crumble, and flat-fee brokers will likely deliver the deathblow -- at least according to Steven D. Levitt, co-author of "Freakonomics," a book that takes an unconventional approach to economics.
Levitt, who spoke to attendees Thursday at the PCBC builders' conference and trade show at San Francisco's Moscone Center, also said that the real estate brokerage industry is in some ways its own worst enemy, as low barriers to entry lead to proportional surges in agent population during housing market booms.
"It turns out that the median real estate agent is making the same amount of money today that they were 10 years ago, despite the fact that housing prices are up 50 to 60 to 70 percent during that time period nationwide. In the end ... you've got to feel sorry for the real estate agents. Now, instead of selling six houses a year, the typical agent sells two or three houses. My own feeling is that if you were thinking about getting into the real estate business, I wouldn't do it," he said.
Neither would I. Unfortunately, I already did.
That said, the whole percentage pricing structure is, and always has been, ridiculous. You work just as hard, and in most cases, harder, in order to sell a cheap home. So why should you get paid less for your labor than with an expensive home? Moreover, you are at the mercy of the market in setting your salary levels.,
And clients absolutely hate the percentage method of remuneration. As for the low barriers to entry, California actually has some of the highest barriers. You actually have to go to school and pass courses, and then pass a statewide exam. I can't imagine why you'd need to do any more - this isn't brain surgery we're talking about here, folks, but peddling property. You may have to spend some time learning the ropes if you go into really complicated commercial deals, but for the most part, after you've gone through the entire sales process for a couple of homes, you've got it taped.
Finally, the internet has taken away most of the advantages a sales agent once could offer - mainly in the areas of marketing and the MLS. That process will accelerate, and it won't do anything good for the old way of pricing our services.
Face it: Competition has come to property sales. The deflation of various local bubbles will only hasten the process.
In Sterling Heights, homeowner Sarvang Shah has reduced the asking price of his 3,300-square-foot, four-bedroom home three times -- from $485,000 to $435,000. He's seen lots of lookers, but no takers.
"It's quite the bummer," said Shah, who needs to move into a new house he just had built in Rochester Hills. But home sales in Sterling Heights are down 21.2% compared with the first quarter of last year, and house values have dropped 6.4%.
"It's hard to believe that Michigan, a state that had one of the strongest economies in the '90s, has come to this," Shah said. "We thought what most people probably think -- that we'd buy a house, and in five years, we'd make some money back. ...
"We're basically going to break even, based on what we've done to improve it."
People have lousy memories. I can remember living in Denver during the oil collapse of the seventies, when you could pick up brand new 1500 square foot condos for $16,000 in tony neighborhoods. Those same properties are now going for half a million or more. But there is always the possibility they could return to their original prices.
Homeowner Shah is getting off easy if he breaks even. Even in San Francisco, which has more going for it in the way of price supports than just a bubble, some owners will find themselves taking losses.
No matter what they tell you, it is never "different this time." Prices do not ever go up all the time. Govern your approach to property buying accordingly - folks with low interest thirty year fixed mortgages who don't intend to move are ignoring these fluctuations, assuming their payments are reasonable for their incomes. Those with interest-only ARMS, or trick loans with massive short term balloons, are worrying, and rightly so. They'll be even more worried by this time next year.
This is a handy little tool for obtaining a rough approximation of what you might be able to sell your home for. (Notice all the conditional adjectives I used? No guarantees, okay?)
When I entered my own address, the first result was high by about sixty thousand bucks. However, if you click on your own home address link after you get the first approximation, you go to another page where you can click a link for comparable home sales in your neighborhood (what sales agents call "comps.")
This can help you make a much more accurate estimate, especially if you know anything about the houses that did sell. When an agent prices your home, he doesn't use black magic, although it may look that way. He takes two or three - three is better - comparable sales in your neighborhood, the more recent, the more applicable. He then modifies the prices those sales got to reflect the reality of your own home - for instance, if a house with three baths but otherwise very much like yours sold for 200k, and your house has two baths, the agent might subtract $10,000 from the sales price of the first house, and price yours at $190k. He'll do this for all three sales, come up with an average, and hence a final first offering price for your homestead.
The key is the comps, and some knowledge about how to price the differences.
This tool will give you the comps, which, in my rather obscure San Francisco neighborhood, were, as far as I know, pretty damned accurate.
For all the attention focused of late on illegal immigration, California is by far the favorite destination of legal immigrants to the United States - about 200,000 in 2005 alone. Moreover, although the numbers fluctuate with the economy, the Golden State remains a powerful domestic magnet as well, with about 600,000 people from other states arriving here last year.
And illegal immigration probably doubles that total - at minimum.
Which is why you may see - heck, you will see - "softening" in various pocket markets in the Golden State as economic conditions shift, but you won't see a wholesale collapse in housing prices. At bottom, simply too many people want to live here for that to happen.
This is also why you'll see overall SF Bay Area prices recede a bit, but San Francisco itself wlll continue to steam along. SF has 49 square miles of land, and as the man said, they aren't making any more. Like Manhattan, San Francisco really is special.
SAN FRANCISCO (BCN) - The 2005-2006 San Francisco civil grand jury today offered several recommendations for improving the efficacy of the Downpayment Assistance Loan Program, or DALP, a fund that helps low and moderate-income residents buy homes for the first time.
The DALP was established as a $15 million fund in 1996 through Prop. A. The city makes interest-free down payment assistance loans to homebuyers from the fund. The loans -- plus a percentage of the home's appreciation -- are re-paid to the fund when the home is sold. In this way, the fund is a kind of "evergreen" account because money comes back in and new loans can be distributed, according to the grand jury report.
...The city of San Francisco should sponsor a new ballot measure to increase funding for the DALP, which currently has $3.4 million available for potential borrowers, the grand jury proposed.
...The grand jury report called the price guidelines for homes set in 2004 "unrealistic in the present real estate market.'' For example, the maximum sale price for a studio or one-bedroom property purchased with DALP funds is set at $360,000.
The guidelines for the maximum allowable property prices should be increased by at least 15 percent to allow potential borrowers to take advantage of the DALP funds, the grand jury proposed.
Because of the demand for assistance in buying homes, a waiting list should be established for interested borrowers while DALP funds are temporarily low, the grand jury recommended.
In addition, the grand jury was not able to determine whether the mayor's office of housing has filed an annual report since 2002 with the San Francisco Board of Supervisors on the state of the affordable housing program that was established through Prop. A. Such an annual report was stated as a requirement when the program was established in 1996.
The grand jury recommended that the mayor's office of housing submit the relevant annual reports starting with the 2002-2003 fiscal year.
It has been my experience that a lot of government low-income home-buyer assistance programs like this get passed as "feel-good" measures that make politicians look good, but that not much attention is paid to them afterwards, and their long-term effect is nil. This seems to be a fine example of the process.
The one thing that is always certain: whenever any government body takes another look at these programs, the recommendation is always "More money."
There is another San Francisco, with its soaring homicide rate, a cost of living that is hostile to low- and moderate-income families, a real-estate industry that gives seniors and people with disabilities the boot just to make a buck and a population that is becoming less and less diverse.
Right. It's the real estate industry's fault, not either supply and demand, or the fact that rent controls guarantee high housing prices.
We real estate sales agents (who do you think makes up the "real estate industry?") just hate seniors and people with disabilities, and want them to be homeless.
United States Geological Survey's "Putting Down Roots In Earthquake Country" says there's a 62 percent probability that a quake of magnitude 6.7 or greater will occur in the San Francisco Bay Area region by 2032, where the 1906 quake is only 100 years old.
A major quake now in the San Francisco Bay Area along the San Andreas, Hayward or other major faults would cause $150 billion in property damage (Hurricane Katrina's damage estimates, the greatest from a natural event ever in America, range from $40 to $80 billion), cause the death of 1,800 to 3,400 people, damage 90,000 buildings and displace as many as 250,000 households, according to "When the Big One Strikes Again," a report released at a three-day 100th Anniversary Earthquake Conference held in San Francisco earlier this year.
If you read these two grafs uncritically, you'd think that a 6.7 quake in the SF Bay Area would be an unparalleled disaster far greater than Katrina.
Yet I lived through a more powerful quake in San Francisco - 6.9 to 7.1, depending on who you talk to - just seventeen years ago, in 1989. (My gosh, has it been that long? Yes, it has. Maybe it seems shorter because they're still working on repairing the Bay Bridge and various freeways....)
It wasn't the greatest experience in the world, but, frankly, I've spent longer without power during winter Colorado storms, and been more frightened of natural forces during Indiana tornados. The most persistent memory I have of the event was having to eat all the ice cream in my freezer lest it melt, and sitting in the parking lot of my apartment building to do so, while experiencing Richter 5+ aftershocks as the sun went down. So you keep your SHTF (something hits the fan) bag or box ready to go, and get on with your life. In the end, that's all you can do anyway.
Rent is rising all over the nation, displacing low- and middle-income families. The median monthly rental rate for a two-bedroom apartment in San Francisco is about $1,360.
