THE MARKET IS DOWN, BUT SHOULD I INVEST NOW? PART 2

UNDERSTANDING THE MARKET EVALUATIONS.

So, since Part 1 of this blog, a lot has happened.

This property in South San Francisco, sits in a very unique neighborhood that is relative inconsistent in the quality of the homes with several blocks of smaller single story homes with about 1100 square feet, and then more impressive blocks of 2 story homes with 1600+ square feet. After accounting for all the recent activity, I've concluded that it is no less than $710K.

Of course, paying $710K would require a negative cashflow given the strength of the down payment....

Here's what happened to the Activity on the House.

within 10 days of the listing being posted at $599K, there were 8 offers received, pushing the price over $650K in my estimation.

Overall, the winning bid did well. There was some room for equity given the current market, and if they ever wanted to rent, they would be fairly close to breaking even on the rents. Ideally, when the markets come back, the property would once again retain it's value relative to the other homes, and sell well for it's owners.

If you have a property of interest, that you would like me to help analyze, you know who to call

Regional differences

The Northeast region posted price increases for a single-family home. The median existing single-family home price in the Northeast rose 3.2 percent to $280,000 in the first quarter from the same period in 2007. After Binghamton NY, the strongest price increase in the region was in Elmira NY which experienced a 9.6 percent year-over-year increase to a median price of $82,500. Glens Falls NY posted a median price of $163,100, up 7.7 percent from the first quarter of 2007.

In the South, the median existing single-family home price was $164,200 in the first quarter, down 7.5 percent from a year earlier. After Spartanburg, the strongest price increases in the South were three areas in Texas: El Paso, at $134,600, up 8.5 percent from a year ago, followed by the Amarillo area with an 8.2 percent gain to $122,200, and Beaumont-Port Arthur, at $122,900, up 6.1 percent.

The median existing single-family home price in the Midwest declined 7.9 percent to $142,700 in the first quarter from the same period in 2007. After Peoria, the strongest metro price increases in the Midwest were in the Decatur IL area, where the median price of $79,400 was 4.2 percent higher than a year ago, and in Springfield IL at $172,200, also up 4.2 percent. Next was the Wichita KS area, at $112,700, up 4.0 percent from the first quarter of 2007.

In the West, the median existing single-family home price was $296,300 in the first quarter, which is 12.3 percent below a year ago. The West was the region hardest hit by the slowdown in jumbo mortgage loan origination, which is just now starting to improve. Still, some markets in the region boasted price increases. The strongest metro price increase in the West was in the Yakima WA area which recorded a median single-family home price of $148,400, up 9.0 percent from a year ago. Farmington NM single-family home prices rose 6.3 percent from a year ago to a median $190,000. The Salt Lake City area experienced a 3.5 percent increase in median single-family home prices - $225,700 - compared to the first quarter of 2007.

Single-family and condominium/co-op prices

Median first-quarter metro area single-family home prices ranged from a very affordable $65,400 in the Saginaw-Saginaw Township North area of Michigan, to nearly 12 times that amount in the San Jose-Sunnyvale-Santa Clara area of California, where the median price was $780,000. The second most expensive area was San Francisco-Oakland-Fremont, at $701,700, followed by Honolulu at $620,000. The greatest single-family home price increase was in the Binghamton NY area, where the median price of $109,700 rose 11.8 percent from a year ago. Next was Peoria IL at $119,000, up 10.4 percent from the first quarter of 2007, followed by the Spartanburg SC metro where the first-quarter median price increased 10.1 percent to $130,300.

The figures on metro area condominium and cooperative prices - covering changes in 55 metro areas - showed the national median existing-condo price was $216,900 in the first quarter, down 3.0 percent from $223,700 in the first quarter of 2007. Twenty-three metros showed annual increases in the median condo price, 31 areas had price declines and one was unchanged.

Metro area median existing-condo prices in the first quarter ranged from $106,600 in Wichita to $546,700 in the San Francisco-Oakland-Fremont area. The second most expensive condo market reported was Los Angeles-Long Beach-Santa Ana, at $343,700, followed by the New York-Wayne-White Plains area of New York and New Jersey at $333,800. The strongest condo price increases were in Bismarck ND where the first quarter price of $124,900 rose 36.4 percent from a year earlier. New Orleans-Metairie-Kenner LA was next -- at a median price of $170,500 -- up 15.3 percent. Next was Wichita KS, where the median condo price of $106,600 rose 11.7 percent from the first quarter of 2007.

Because there is a concentration of condos in high-cost metro areas, the national median condo price sometimes is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional area will be included in the condo price report.

One Third of Metro Areas Show Price Gains in the First Quarter of 2008

One out of three the metropolitan areas in the United States showed rising home prices in the first quarter, with only a small number of jumbo loan originations and higher foreclosures resulting in greatly mixed conditions around the country. The latest National Association of REALTORS® quarterly report on metropolitan area home prices* shows that 48 out of 149 metropolitan statistical areas posted higher median existing single-family home prices from a year earlier. One hundred metros recorded price declines, and one show prices unchanged. NAR's metro area home price series dates back to 1979.

NAR also released first quarter statistics on total existing-home sales (single-family and condominium/co-ops) by state. Total state existing-home sales were at a seasonally adjusted annual rate of 4.95 million units in the first quarter, down 0.9 percent from an upwardly revised 5.00 million in the fourth quarter, and were 22.2 percent below a 6.36 million-unit pace in the first quarter of 2007.

A proportionately larger slowdown in home sales from a year ago in high-cost markets is continuing to drag down the aggregate national median price. In the first quarter, the median existing single-family home price was $196,300, down 7.7 percent from the first quarter of 2007 when the median price was $212,600. The national median normally is a typical market price, where half of the homes sold for more and half sold for less.

THE MARKET IS DOWN, BUT SHOULD I INVEST NOW?

Most of you know me as your realtor and mortgage broker, but guess what? I'm an investor too, and I stand in your shoes very often, as different deals come up on the radar screen. At face value, some deals do look very attractive with strong returns - even positive cashflow. But of course, there are just so many things to consider.
I'd like to share with you an analysis of a property that I've contemplated purchasing recently. It's an unlisted Single Family Home in the Upper Peninsula.

The Estimated Rental Income on this property is about $3,000.00/ month.

Purchase Price is expected to be $600,000. With a Down payment of 20%, the 1st Mortgage would be $480,000.00, given market interest rates on a 30 Year Fixed, and including Taxes, and Insurance, the monthly cost would be $3,500/month.

While there is a negative of $500 per month at first, I'd hope to breakeven after 3 years of increasing rents, assuming an average of 5% increase per year; and from then on assuming no other expenses the property would be in the black.

So that takes care of the cashflow problem.

But another major issue is the valuation of the property. This particular property was worth sold for nearly $900K only 2 years ago. WOW! But does that matter in today's market?

Answer is NO. What matters is today's market value, which I estimate at $700K+, and how much it will sell for when I decide to transfer it. What we need to do here is understand the local market!, which I'll address on my next blog. Stay Tuned

Pulse on the Market

For a 1700 Square Foot Single Family home in Burlingame, you'd have to pay $1.3M in Ray Park. And for a 1700 Square Foot Single Family home in Hayward, you can pay as little as $300K. The fact is there is something for everyone, and a possible bargain in most areas. Obviously in Hayward, it's saturdated with short sales, and prices have not been this cheap in a long time. Though the honest truth is - it does take a while to actually close on a short sale house due to the necessity of getting an approval from the lender who is slated to lose a lot of $$$.
In the high-end areas, there are still deals to be had for those homes that have sat on the market for awhile, and offer a good point of entry for the homebuyers.

Hey if you have any questions, drop me a line, I'd be glad to answer them for you!

8th Asian Pacific American Heritage Celebration

Have a deep appreciation of Asian culture? Here is something to check out...

San Mateo is celebrating its 8th Annual Asian Pacific American Heritage on Saturday, May 10th from 10am - 5pm at the San Mateo Central Park Recreational Center (50 East 5th Ave. San Mateo, 94401)! For details and information, simply click on the flyer below...



If you got some free time, please come on out! Cynthia and I will be there and would love to have your company. Hope to see you there!