If you are a home buyer in todays real estate market on the SF Peninsula – then you already know! Cash buyers have come out in force and it feels like they are scooping up every house on the market.
Below is an article I read in the SF Chronicle. It hit home hard. The Caton Team has been writing offers, sometimes multiple offers for one client on several properties praying one will be accepted. This market is nuts. And before I hear anyone say – you must love it! NO! Realtors do not like this type of market. We are human. We may perform some superhuman stunts from time to time – but we are human. Realtors like stable markets with consistent growth. Not manic markets – with ” one open house and offers are due on Monday” – markets. If I am feeling the rush – I know my clients are – and for them – this is a new experience. For the Caton Team – with over 25 years combined experience, this is just another day on the job.
So as you venture and read this article – I must add my two cents. DO NOT GIVE UP! Giving up and not getting an offer accepted has the same results – not keys to your new home. But dusting yourself off and getting back on the horse to meet your Realtor at lunch to see the next new listing – now that’s tackling this market like a pro! In our experience, buyers who are dedicated to becoming owners will get a house. It may not be the house they dreamt about. It may not have all the bedrooms they wanted or the yard they liked – but you can make all those things happen – once you get your house. Curious what the Caton Team does differently for our clients – come on and and let’s talk! Questions – email me at Info@TheCatonTeam.com
1st-time buyers losing to investors
Many outbid by absentee owners in a rapidly rising market
Hunter Mack and Nyree Bekarian are eager to buy a home for their growing family. They started looking when their son Emmett was a year old. Now he’s 2 1/2, and they have a second child due any day. And they’re still looking.
After seven years of marriage, Carlos and Robin Mariona felt the time was right to buy their own place and looked forward to leveraging his past Navy service with a Veterans Affairs loan. But their search stretched on for months, despite the loan guarantee. While their price ranges and target areas varied, these Bay Area families confronted the same reality once they started house hunting. They were consistently outbid, often by investors who paid all cash. Sometimes, even if they had the highest bid – especially in the case of the Mariona family and their VA loan – they were still rejected in favor of an all-cash offer.
“We’re people who want to commit to a place where we can live and grow together, but it hasn’t been possible,” said Mack, who teaches mechanical engineering at UC Berkeley. “We’re two mid-30s professionals who want to spend over half a million dollars on a home, but we can’t find anything, which is ridiculous. We’ve probably made 10 offers. At this point, with many homes, we’re not making offers anymore because we know we’ll be slaughtered.”
Eager to get their piece of the American dream while interest rates are low, many first-time home buyers instead are finding that they’re priced out of a rapidly rising market where they must compete with deep-pocketed investors.
Absentee home buyers now account for about 27 percent of Bay Area home sales, according to real estate research firm DataQuick. All-cash buyers (who overlap with absentee buyers) represent almost a third of sales. Historically, cash buyers were about 13 percent of sales.
First-time home buyers bought 36 percent of California homes sold in 2012, according to the California Association of Realtors. In 2009 and 2010 they represented 47 percent and 44 percent of the market, respectively. Over the past eight years, first-time buyers averaged 39 percent of the market.
Government-backed Federal Housing Administration loans, which are popular with first-time buyers because they allow for smaller down payments, accounted for 12.3 percent of Bay Area home purchases in March, according to research firm DataQuick. That was down from 20.9 percent in March 2012.
“In recent months the FHA level (in the Bay Area) has been the lowest since summer 2008, reflecting both tougher qualifying standards and the difficulties first-time buyers have competing with investors and other cash buyers,” DataQuick said in a statement.
The strong investor presence brings up questions about the long-term impact on neighborhoods.
“I think it’s a shame that all these properties are going to investors and not to people who actually want to live there and be part of the community,” said Rachel Beth Egenhoefer, who along with Kyle Jennings set out to find a new home before their baby was born. She’s now 5 months old, and they’re still looking. “It’s easy for sellers to take the cash and run, but what about having people who actually care about the neighborhood and want to be there and invest in it?”
Maria Benjamin, executive director of the Community Housing Development Corp. of North Richmond, had similar thoughts. The preponderance of investor buyers, most of whom rent out homes, “creates a lot of absentee landlords and a high turnover in neighborhoods,” she said. “All that causes neighborhood instability.”
Then there’s the impact on the families that spend months looking for a home to buy while staying put – in sometimes less than ideal conditions.
Many prospective buyers “are being forced to just stay where they are renting and make do,” said Jennifer Ames, an agent with Red Oak Realty. “Most of my buyers are young families who have outgrown their spaces. They’re all just hanging in, trying to do the best they can with their circumstances.”
People seeking starter homes do have some things working in their favor. Besides the historically low interest rates, home prices in many areas are still far from their peaks. The Bay Area March median of $436,000, for instance, is about a third lower than the region’s $665,000 peak in summer 2007, DataQuick said.
Still, that window of affordability seems to be closing. The California Association of Realtors on Friday said the state’s “affordability index” (the percentage of home buyers who could afford to purchase a median-priced existing single family home in the state) dropped to 44 percent in the first quarter, down from 56 percent a year earlier.
“Higher home prices put a dent in California’s housing affordability,” the Realtors association said in a statement.
The three couples seeking homes all have solid employment and can afford to spend from about $350,000 to $550,000 – typical prices for starter homes in this region. All are looking in the East Bay, which is more affordable than San Francisco and the Peninsula. Alameda County’s current median is $416,000; Contra Costa County’s is $346,000.
Still, prices continue to rise rapidly in most of the region, making the search more difficult. “The bottom line in the decent neighborhoods keeps getting raised,” said Patrick Leaper, an agent with Red Oak Realty. “Entry-level buyers are looking at prices going up 2 or 3 percent a month sometimes. That’s critical for somebody whose finances are (tight). They end up being priced out of the market or forced to go to areas or neighborhoods that they weren’t interested in before.”
Sometimes expanding the geographic search is what it takes to land a house. That was the case for the Marionas, who started off looking around Albany, where Robin Mariona works for the Department of Parks and Recreation.
“For the amount of money we could spend, in Albany or North Berkeley we would have gotten a smaller place than our rental,” said Carlos Mariona, an IT director for a catering company. “We were at the cusp where everyone was moving a little more north as they got priced out – El Cerrito, then San Pablo, Richmond, El Sobrante. It seemed you had more bang for the buck there.”
After more than six months of house hunting and countless rejected offers, they found a house in the Richmond View area near Wildcat Canyon Park listed at $324,000. They offered $350,000, and Leaper, their agent, negotiated with the seller to accommodate their VA loan’s tight requirements of completing all termite work before the sale closed.
“We’re very happy,” Carlos Mariona said.
Despite rapidly rising prices, more-affordable pockets remain scattered around the Bay Area. For each county, here’s the town with the lowest median price in the first quarter of this year – and how much it’s changed since the same time last year.
|County||City||Median price Q1 2013||YOY change|
|Contra Costa||Bay Point||$153,000||4%|
|San Francisco||Ingleside Heights (S.F.)||$410,250||58%|
|San Mateo||East Palo Alto||$356,000||27%|
|Santa Clara||East Valley (San Jose)||$377,500||28%|
Read more: http://www.sfchronicle.com/realestate/article/1st-time-buyers-losing-to-investors-4512891.php#ixzz2TJ56qE00
I read this article at: http://www.sfchronicle.com/realestate/article/1st-time-buyers-losing-to-investors-4512891.php
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