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Homeowners Out-Earned Job Holders in 2021

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Home appreciation outpaced income in much of the US.

One of the sharpest and best reads around is from Jay Voorhees @ JVM Lending. Earlier this week he wrote this:

Owning A House Was More Profitable Than Having A Job Last Year

A few weeks ago, I blogged about the reluctance of sellers to list their properties in the face of so much uncertainty.

But – there is another reason sellers are hanging on to their homes according to various macro pundits.

And that reason is massive appreciation.

According to this Motley Fool column, homeowners made more from appreciation last year on average than the average U.S. worker made from his job.

https://www.jvmlending.com/blog/why-higher-rates-could-save-the-housing-market/

According to the Motley Fool post, the average home appreciated by $52,667 in 2021. Meanwhile the average salary in 2021 was $50,000.

Here in Concord, California the average price from December of 2020 to 2021 increased from $754,553 to $884,716 according to the Contra Costa Association of Realtors®. That increase of 17.3% amounts to a $130,000 growth in net worth. This is above the median household income of $92,706 from the U.S. Census Bureau.

This is one of the reasons that owning your own high quality real estate (like a home in Dana Estates) is one of the best investments you can make.

If you are curious about the value of your home, you can use this link to get your home value.

Peter Maclennan
Real Estate Broker | Maclennan Investment Group, Inc.
DRE #01801793
925-385-8798

Will Zillow’s iBuyer Closure Result in a Wave of Bay Area Home Sales?

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Zillow’s iBuyer Program Closes

Zillow Group had a division that would make computer generated offers on a homeowner’s home, with the goal of reselling that home at a profit a little later. On November 2, 2021 Zillow announced the permanent closure of their iBuyer program.

As a result of errors in their algorithmic buying of homes, Zillow is planning to take a loss on the 7,000 homes it now owns.

Zillow said Tuesday in its latest quarterly earnings report that it will write down real estate worth $304 million after buying homes that are now worth less than the company’s current estimates of their future sales prices. The company also expects to recognize an additional $240 million to $265 million in losses on homes it expects to finish purchasing in the fourth quarter.

https://www.cbsnews.com/news/zillow-layoffs-closing-zillow-offers-selling-homes/

iBuyers in the Bay Area?

I had a client ask me a really great question regarding the closure of Zillow Offers their iBuyer program.

My client’s question was, “With Zillow stopping their iBuyer program, are there going to be a lot of properties that come on the market from Zillow?” She had seen an article that said Zillow was going to actually sell them for loss.

It’s a great question. And I told her, I don’t think Zillow will be selling many homes here in the Bay Area Market.
I don’t think Zillow was actually very active in our market. And I found a report from September of 2021. In the report on the major Metro areas where iBuyers, in the United States bought at least 30 properties.

The major iBuyers had a lot of the activity Atlanta, Phoenix, Dallas area. Reading through the list of major metros with significant iBuyer activity, you will notice very few California markets: Riverside, CA , the Los Angeles/Long Beach area, Sacramento, California, & San Diego, California.

But as I mentioned before, the Bay Area is not on this list of major markets where iBuyers purchased more than 30 homes in the second quarter according to these numbers by Zillow.

And also, if you look on the website ibuyer.com, you can see here which market this is, a past grab of something where they’re active. Again, if you go through this, a lot of them are in the Midwest and Sunbelt States. Not a lot here. Los Angeles a little bit. I think they have Riverside, California, Sacramento, and San Diego. But again, the Bay Area is left off this list.

Why were Bay Area homes avoided by iBuyers?

I have a theory with two reasons that iBuyers avoided the Bay Area housing market.

First, the Bay Area entry level home prices are so high compared with other parts of the country.

Second, due to the political challenges of building new homes, the Bay Area has a lot of older homes built after World War II. Many of the homes have been remodeled, expanded, and renovated. While they were often based upon the same models, over the years much of the housing stock has been modified and is unique.

Areas like Arizona, Atlanta, Nevada, & Texas have less restrictive development practices and have experienced large tract home developments in recent years. For computer algorithms to accurately predict the value of a home, the algorithm must compare similar home plans. A computer predicting an accurate value is easier done in newer tract homes where the models are newer and have undergone fewer modifications.

However, it appears that Zillow is having to exit the market because their algorithm didn’t accurately predict housing values.

Don’t Expect a Wave of Cheap Houses

So I would not expect to see a number of homes from Zillow come on the market. So don’t expect to see a bunch of good deals hitting the market because Zillow is shutting down their iBuyer program.

The bottom line is, a full-time licensed real estate agent is going to provide you a more accurate value of your home and a plan to market your property.

If you would like a Professional Equity Assessment Report of your Bay Area Real Estate and how you can utilize the equity, please call Peter Maclennan, Bay Area Real Estate Broker. DRE #01801793

To reach Peter Maclennan please call 925.385.8798 or email at peter@maclennaninvestments.com.

Search for the newest homes for sale in Concord by map (click the map below):

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What is contributing to the shortage in single-family home inventory?

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Have you noticed that homes are in short supply even though we are in the midst of a pandemic? 

JVM Lending published a great blog on the single-family home shortage last week. In the article he named the following as top reasons for low inventory:

  1. Sellers are reluctant to list during the pandemic,
  2. Demand is surging due to low mortgage rates,
  3. New construction in California is woefully lagging,
  4. Shifts in demographics – people are staying in their homes longer.

The Homebuying Gorillas

An additional reason touched on in the article for low inventory is the addition of Wall St. Money to the home purchase market place. Just this week, the largest home owner in America announced that they had raised another $1 Billion (with a B) to buy homes in suburban neighborhoods.

America’s Largest Landlord Adds $1 Billion for Its House Hunt WSJ.com

GlobeSt.com is forecasting that demand for single-family rental market will continue to grow. 

What is the Local Impact?

Doing an address search for the mailing address of Invitation Homes provided approximately 350 homes owned by the company in Contra Costa County.

Tricon American Homes, the second largest home rental company, appears to own over 230 homes in Contra Costa County.

Combined this is nearly 600 homes that we should not expect to sell anytime in the near future as the investment model of these two companies is for long-term cash flow. 

Bottom Line

What’s the conclusion we can draw from this? Housing inventory remains extremely low despite high demand and low interest rates.

Sellers can expect a properly price property to sell quickly.

Buyers should realize that the market is competitive and they should write a very strong offer.

If you are thinking of selling, now is a great time to capture equity and position yourself in cash for the next purchase. I would love to discuss this option with you.

Peter Maclennan
Real Estate Broker
925-385-8798
DRE #01801793

Historic Low Rates… Bad for Homebuyers?

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I enjoy reading smart people and Jay Voorhees at JVM Lending is a smart guy. He writes this:

… Here is my point: efficient markets theory applies to housing too, which means that subsidies in any form will usually drive up the price of housing.

And very low rates fostered by the gov’t policy are a subsidy of sorts, and they will push up the price of housing – again.

In the short run, lower rates are definitely a gift for most borrowers, but over the long run, housing prices usually adjust to reflect the impact of lower rates.

We are seeing a huge surge in demand for housing now, driven by pent up demand from buyers who were on the sidelines b/c of COVID-19 and by demographics overall.

But another reason demand is so strong is low rates, and we are already seeing the results.

July Bidding Wars Jumped 5x From 2019, according to this article from National Mortgage News.

Why Low Rates Are BAD For Homebuyers

Bottom Line

Demand for housing is strong in the East Bay. Some clients are moving out of denser areas and moving to our area for outdoor space, a bigger house, and for better schooling options in a Covid-impacted world.

For Buyers

If you are thinking of buying a home, be prepared to write a strong offer and to face competition. Make sure you have your financing lined up and that you are working with an experienced real estate agent.

For Sellers

With high demand and low rates, buyers are competing for well priced homes. It is a great time to sell your Dana Estates home!

Peter Maclennan
Broker
DRE#: 01801793
925-385-8798

Millennials’ Scary Strategy to Afford Down Payments

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If you take a look at national home values over the last decade, you will not be shocked that few millennials are able to afford down payments in recent years. Yet, homes continue to sell, and first-time homebuyers are scrambling to make down payments by whatever means possible.

Millennials' scary strategy to afford down payments - savings graphic

As Bankrate mortgage analyst Deborah Kearns told MarketWatch.com, “[Millennials are] having to be very creative and diversify the ways that they’re coming up with their down-payment and closing cost money.”

One of these ways, according to a Bankrate housing survey, is dipping into retirement savings–a scary concept to financial advisers. Thirteen percent of millennials say they will use retirement savings to fund down payments, compared with just 8% of Gen Xers and 7% of baby boomers.

It is possible that millennials feel as though they have more time to recover the lost retirement savings after they buy a house, as they are still relatively far from retirement age. And although 13% is far from a majority, it worries financial analysts, who advise keeping retirement savings intact no matter what.

Among those millennials who do not yet own a home, the largest barriers to home ownership include: income too low (52%), cost of living too high (45%), and remaining student loan debt (23%). View the Bankrate survey infogram here.

It’s no surprise homebuyers are struggling to make down payments in high-cost residential areas of California. In Dana Estates alone, the median home price was $615,000 in 2018. See below for the Dana Estates market report for 2018Q1 through 2019Q1.

2018-2019 Dana Estates Housing Market Report

So what should you do if you still want to buy a home? Kearns advises that you leave your retirement savings untouched. Instead, carefully estimate what size mortgage you can afford and then start a savings account specifically for your down payment and closing costs.

And as always, consult a financial adviser before making large shifts in your budget. Even if you can afford it, protect your future by making informed decisions. Buying a house is a big decision, but that alone should not keep you from taking such an important step. Owning a home is possibly the most effective way you can build wealth and root your life in a community.

Having a knowledgeable and experienced real estate broker on your side helps protect your interests and ensure you make the best possible decisions. We are dedicated to keeping on top of the real estate market and keeping you informed of changes. You can rest easily knowing you made a well-informed decision based on experience and insight into the Concord California market.

homes for sale in concord ca
Concord CA Real Estate Map Search

Bidding Wars on the Horizon

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Despite talk of a coming recession, national trends in home inventory and low mortgage rates might be the perfect storm for bidding wars to come.

Bidding Wars Graphic

According to Yahoo! Finance, a coming inventory shortage will mean bidding wars over the available homes.

Despite a spike in May, home sales have been lagging, possibly indicating a market drop in the months ahead. However, home prices remain high due to a slow down in inventory growth. The growth in number of homes available for sale is down from the first quarter of 2019 high of 6% to just under 3% in May.

Mortgage rates alone have not sparked buyers because they continue to decline. Current 30-year fixed mortgage rates are down 3.91%, but still half a point higher than the historic 2012 lows.

“As long as mortgage rates are moving down there’s really no urgency on the part of buyers,” Realtor.com chief economist Danielle Hale told Yahoo! ‘First Trade’ in the video below:

Source: Yahoo! Finance

If mortgage rates level out, buyers will no longer see waiting around as a viable option, especially if there is a shortage of homes on the market. This potential combination could trigger bidding wars and competition among buyers down the road.

The Bottom Line

Hale doesn’t think we will see a dramatic increase in median home prices, only because prices already sit so high in many markets. However, it is possible we will see an increase in starter home prices, as overhead construction costs continue to rise and starter homes generally attract more motivated buyers.

“Be patient,” Hale advises home buyers, “but take advantage of those mortgage rates that are definitely low right now.”

Having a knowledgeable and experienced real estate broker on your side helps protect your interests and ensure you make the best possible decisions. We are dedicated to keeping on top of the real estate market and keeping you informed of changes. You can rest easily knowing you made a well-informed decision based on experience and insight into the Concord California market.

Peter Maclennan is a real estate broker serving Contra Costa County and surrounding areas. To reach Peter, call 925-385-8798 or email at peter@maclennaninvestments.com.

Interested in more #realestatenews? Follow us on Twitter or visit our blog.

What Are the Benefits and Costs of Owning vs. Renting?

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The age-old question that continues to plague homeowners and tenants alike: Is it better to rent or own? Current homeowners say own, but many disagree. A recent Lending Tree survey showed that 67% of current homeowners prefer owning to renting. Fifteen percent of homeowners believe their renting days were easier, while 18% are neutral.

So why aren’t all homeowners happy with owning? Several arguments dominate, but each side has its pros and cons.

Owning

Owning real estate–whether for living, working, or leasing–is an investment. And just like any investment, property ownership can be both difficult and incredibly rewarding.

Pros

The Aramco Group lenders make a few great points about the benefits of owning over renting. Some of the major points are as follows:

  • Equity building – as you pay off your principal, you are building a long-term financial investment that you will have if and when you ever want to sell
  • Fixed-rate payments – most mortgages are on fixed interest rates, meaning your payments will not increase year-to-year
  • Control – you have the power to modify and improve your property to suit your needs and the needs of your family
  • Stability – not only does building equity provide you with financial stability, but a house ties you to a specific location, where you can experience the long-term comfort of a neighborhood community

Cons

Owning a home comes with cautions, as the InCharge debt experts list alongside the pros:

  • Maintenance – you are responsible for the upkeep of your home, including routine maintenance and unexpected repairs
  • Cost – between mortgage payments, property taxes, HOA and emergency expenses, the costs can really pile up; most importantly, you must be able to afford a down payment
  • Long-term commitment – once you’re tied to your community–not to mention your mortgage–it can be extremely difficult to suddenly pick up and leave

Renting

For some people, renting is their only option. For others, renting may be more appealing than buying even when they have the means to buy.

Pros

The Fiscal Fizzle finance blog provides some great pointers on the benefits of renting over buying:

  • Flexibility – rental contracts usually come with a 12-month lease, but some are on a month-to-month basis, which gives you maximum flexibility to relocate as soon as you want
  • Cost – renting a home usually means cheaper monthly payments, in addition to having maintenance expenses covered by the landlord
  • Less risk – because renting is not an investment, there is nothing to lose if the market dips or the property depreciates

Cons

InCharge.org highlights key areas in which renting loses out to buying:

  • No equity – the major problem with renting is that you will have no equity to show for it, no matter how long you rent
  • Little control – you are at the mercy of increasing rental rates, contractual restrictions, and your landlord’s plans for the building
  • No tax incentives – unlike mortgages, the IRS does not provide tax exemptions for rental payments

Whichever side of the issue you find yourself on, just remember these few things about home ownership:

  • Not everyone is suited for home ownership
  • Home ownership requires a stable income and smart financing
  • Like any investment, home ownership can return long-term financial gain

Having a knowledgeable and experienced real estate broker on your side helps protect your interests and ensure you make the best possible decisions. We are dedicated to keeping on top of the real estate market and keeping you informed of changes. You can rest easily knowing you made a well-informed decision based on experience and insight into the Concord California market.

What NOT to Do When Buying a House

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Purchasing a home is one of the largest financial decisions that a family can make. Because of the size of the transaction, there are many complicated decisions that surround the purchase of a home, and many myths that inexperienced buyers may be prone to believe. Here are a few common myths and the truth behind them, according to Realtor.com

outdated homebuyer advice

1. Wait until spring

A thorough market analysis shows that the spring and summer seasons are the busiest in volume of house sales. For this reason, many buyers believe they must wait until spring or summer to look for a house so they will have a better chance of finding the best home at the best price.

The reality is that while there are more homes on the market in the spring and summer, there is also more competition for the homes. In other words, the busy season means more sellers AND buyers. Holding fast to the “wait until spring” rule may lead buyers to pass up a perfect fit in the winter or fall months.

Instead, buy when you find the right property that will meet your needs for today — and the next five to 10 years.”

Realtor.com

2. Wait for market prices to drop

Buyers may want to wait for the market to dip before they buy and continue to rent until the market changes. But the truth is that while home prices are high, rent is likely to be high as well, and nothing is saved by waiting to start building equity in a home.

Even when the market dips, buying a home is an incredibly large purchase and buyers must be certain they can afford a down payment, property taxes, and monthly mortgage payments. Rather than waiting for market prices to drop while paying monthly rent, buyers should wait until they find the right house at a price they can afford and then BUY IT.

3. Make a low offer so you have room to negotiate

This one makes sense in most situations. Offer lower than you’re willing to pay so when the seller makes a counter-offer, you’re still within budget.

But when it comes to buying a home, this can be a risky strategy, especially if you like the house. Not only does the seller have other offers from competing (and motivated) buyers, but they may want to close quickly and will not humor an unnecessary counter-offer. Instead, research houses in the area and base your offer on similar homes in the area.

It is important to know the local market in the area you wish to buy. How much are comparable homes selling for? How long do homes usually stay on the market? Be sure to find a real estate professional who can help you answer these and other questions.

Are We About to Enter a Buyers’ Market? | Dana Estates Real Estate

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Are We About to Enter a Buyers’ Market? 

The real estate market in Concord, California is still very active. Reasonable sellers are receiving offers quickly and buyer confidence remains strong. There are multiple price points and types of houses available in Concord, CA.

Particularly around the Dana Estates neighborhood 94519 zip code, homes are in demand. The neighborhood provides convenient access to Highway 4 and to downtown Concord. It is also about equal distance from both the Concord BART station and the North Concord BART station.

Purchasing a home is one of the largest financial decisions that a family can make. Because of the size of the transaction, there are many complicated decisions that surround the purchase of a home.

Today we are going to talk about: Are We About to Enter a Buyers’ Market?

Home sales are below last year’s levels, home values are appreciating at a slower pace, and there are reports showing purchasing demand softening. This has some thinking we may be entering a buyers’ market after sellers have had the upper hand for the past several years. Is this really happening?

The market has definitely softened. However, according to two chief economists in the industry, we are a long way from a market that totally favors the purchaser:

Dr. Svenja Gudell, Zillow Chief Economist:

“These seller challenges don’t indicate we’re suddenly in a buyers’ market – we don’t expect market conditions to shift decidedly in favor of buyers until 2020 or later. But buyers certainly are starting to balk at the rapid rise in prices and home values are starting to grow at a less frenetic pace.”

Danielle Hale, Chief Economist of realtor.com:

“The signs are pointing to a market that’s shifting toward buyers. But, in most places, we’re still a long way from a full reversal.”

In addition, Pulsenomics Inc. recently surveyed over one hundred economists, real estate experts, and investment & market strategists and asked this question:

“When do you expect U.S. housing market conditions to shift decidedly in favor of homebuyers?”

Only 5% said the market has already shifted. Here are the rest of the survey results:

Are We About to Enter a Buyers’ Market? | MyKCM

Bottom Line

The market is beginning to normalize but that doesn’t mean we will quickly shift to a market favoring the buyer. We believe Ivy Zelman, author of the well-respected ‘Z’ Report, best explained the current confusion:

“With the rate of home price appreciation starting to decelerate alongside the uptick in inventory…we expect significant debate about whether this is a bullish or bearish sign.

In our view, the short-term narrative will probably be confusing, but more sustainable growth and affordability will likely be the end result.”

Source… KCM Peter Maclennan Blog

Having a knowledgeable and experienced real estate broker on your side helps protect your interests and ensure you make the best possible decisions. We are dedicated to keeping on top of the real estate market and keeping you informed of changes. You can rest easily knowing you made a well-informed decision based on experience and insight into the Concord California market.

homes for sale in concord ca
Concord CA Real Estate Map Search

Getting Pre-Approved Should Always Be Your First Step

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first steps real estateThe Concord real estate market is still very active, especially Dana Estates real estate. Reasonable sellers are receiving offers quickly and buyer confidence remains strong. There are multiple price points and types of houses available in Concord, CA.

Particularly around the Dana Estates neighborhood 94519 zip code, homes are in demand. The neighborhood provides convenient access to Highway 4 and to downtown Concord. It is also about equal distance from both the Concord BART station and the North Concord BART station.

Purchasing a home is one of the largest financial decisions that a family can make. Because of the size of the transaction, there are many complicated decisions that surround the purchase of a home.

Today we are going to talk about: Getting Pre-Approved Should Always Be Your First Step

In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are in a market that is not as competitive, understanding your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so.

Source… KCM Peter Maclennan Blog

Having a knowledgeable and experienced real estate broker on your side helps protect your interests and insure you make the best possible decisions. We are dedicated to keeping on top of the real estate market and keeping you informed of changes. You can rest easily knowing you made a well-informed decision based on experience and insight into the Concord California market.

To reach us please call 925.385.8798 or email us at peter@maclennaninvestments.com.

Search for the newest real estate listings in Concord, CA by map (click the map below):

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