The San Francisco Peninsula Real Estate Blog

Short Sales and the Economy.

A good indicator of how the economic recovery is proceeding is to keep tabs on the number of short sales that are taking place.  As long as prices are dropping or remaining at depressed levels, you’ll see more short sales as people choose to sell their home for less than what they owe on their mortgage.    In San Mateo County, that rate varies widely between the various cities that comprise the County.

San Mateo County Rates.

Here’s a quick snapshot of the short sale rate of some of the communities on the Peninsula.  The percentage is determined by the number of short sale listings compared to the total number of listings (for single family residences.)

• Daly City:  42.1% (24 short sales out of 57 total listings)
• San Bruno: 33.3% (11 out of 33)
• Belmont: 11.4% (5 out of 34)
• Menlo Park: 10.9% (10 out of 92)
• Redwood City:  10.9% (14 out of 129)
• Foster City: 9.5% (2 out of 21)
• San Carlos:  9.3% (5 out of 54)
• Pacifica: 7.5% (3 out of 40)
• Burlingame: 5.9% (4 out of 68)
• Millbrae: 5.1% (2 out of 39)

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Buy Low, Sell High…

Flipping homes hasn’t been a topic that has been discussed much lately because the practice has all but dried up in recent years. Why?  There are two elements that have to be present simultaneously for a flipper to be successful:

1. Supply of low-priced homes to purchase (buy low.)
2. Strong buying market (sell high.)

In the past few years, one or both of these elements have been missing, and consequently folks who were trying to flip homes often got left holding the bag at the end of the day.   But that’s all starting to change, and the driving force behind it is coming from an unlikely source: the economy.

Auctions

Smart investors and contractors are finding that they can often get an incredible deal on foreclosed homes that are being sold at auction, often at steep discounts.  And if you see the list of homes scheduled to be auctioned in San Mateo County every week, it’s clear there will be an ample supply of homes for flippers to choose from for quite some time.

Not all foreclosed homes are good candidates for flipping.   After all, the normal requirements stiill apply when it comes time to sell the home: Location, condition, and price.   If the home is in a bad location, or if it’s in a dilapidated neighborhood surrounded by other foreclosed properties, it’s going to be a tough sell, regardless of how nice the home looks after it has been refurbished.   But with mortgages failing at record rates in all price ranges, inventory is coming up constantly in the better neighborhoods.

Turn and Burn

Depending on the scope of work to be done, a home bought at auction can be refurbished in as little as a few weeks.   I saw one stunning example recently in Redwood City where the kitchen and bathroom were completely remodeled, new paint applied throughout the house, and the hardwood floors refinished — all in 3 weeks.  The new house was stunning, and re-sold in less than a week with 3 offers.

Where’s the Demand?

As I have written about before, the sub $1M segment is red-hot right in many communities right now.  With the conforming loan limits temporarily extended to $729,950 in most areas,  money is much easier to obtain than it was when the limit was $417,000.   Consequently,  there’s a big supply of buyers already pre-approved in ranges between $500k and $1M, and they’re ready to buy.    And the better the condition of the home, the more buyers will compete for it.

Good for the neighborhood.

The net result for the surrounding neighborhood is often positive when a home is flipped.  Granted, it sucks in this situation for the person whose home was foreclosed.  But when an neglected home is replaced with one that’s in much better condition and will likely sell at a higher price, it’s good for those homes that are nearby.     Improving the appearance and value of a neighborhood is good for everyone.

Keep Your Eyes Open

If you’re looking for a starter home that’s in move-in condition, keep your eyes open because there are deals out there.   I know of several contractors in the mid-peninsula area who are solely focused on flipping homes in this segment right now, and they’re putting some incredible 2 and 3 bedroom homes back on the market in the upcoming months.

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According to this article in the Daily Journal (my favorite local newspaper) it could happen.

Trader Joes moving to the Mall?

According to the article, the location in question is the old Tower/Good Guys building that’s adjacent to the mall and right next to Barnes and Noble.  If this happens, this will be a home-run for Trader Joes.  Great location, big building, and plenty of parking.   The latter two seem to be an ongoing challenge for many TJ stores, especially the one in San Carlos.

Should be interesting.  Love Trader Joes!

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The San Mateo County Tax Assessor’s Office recently announced that it will review the assessed value on nearly 40,000 homes in San Mateo County.   That’s a lot of homes…  Considering the condition of the economy and the recent drop in home values on the Peninsula, this may spell good news to many homeowners in the form of a reduction in their property taxes.   So far, the County has reviewed nearly 9,000 cases and over half qualify for some sort of reduction.

While this will be welcome news for homeowners, the loss in property tax revenue will put a pinch on many Peninsula communities that rely heavily on property tax revenue to run their cities.  The impact is only starting to be fully understood, but clearly those communities that rely more heavily on property tax revenue will take the brunt.

The Daily Journal interviewed several City Managers to assess the impact of the property tax reductions on their respective communities.  It’s a good summary of how it impacts Burlingame, San Carlos, and other cities.  Here’s the article for your reference:

County and cities brace for tax reductions

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In a move that is becoming commonplace in communities on the Peninsula, the City of Burlingame is considering parcel tax as a way to support its school system.  Burlingame already has a  $104 per year parcel tax in place that supports the Burlingame Elementary School District, but that tax expires in 2011.  And with continuing State budget cuts, the School District will need these funds to avoid dipping too deep into their cash reserves.

Burlingame isn’t the only city who will be asking voters for help this year.  San Carlos will be putting a $78 parcel tax on a special ballot in May, less than a year after a similar Measure was defeated.   Redwood City is looking at taking similar steps as well.

Here’s some additional information on the Burlingame proposal, courtesy of The Daily Journal:

Burlingame Considers Parcel Tax Renewal

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There’s absolutely no doubt that the quality of the public school district is one of the top decision criteria for home buyers as they decide where they will ultimately live.  Parents want the best schools for their kids, and home-buyers want their investment to retain value.  Homes in the more desirable school districts fetch higher prices, almost as if they’re tracking the API scores of their respective schools — the higher the API scores, the higher the home prices.   The converse is true as well.

But should you buy a home solely on which school district it resides in?    As some Burlingame families found out this week, the answer is a resounding NO.   Just because you fall within the stated boundaries of a particular school, it does not mean you are guaranteed to get into that school.    Residents in certain San Carlos school boundaries found this out last year.   Clearly, in the case of Lincoln Elementary School, there were examples of inexplicable miscommunication on behalf the School District.  But at the end of the day, this is of no consolation to those parents who will have to enroll their children in other schools.

What can you do?

If you’re searching for a home, and the school district is of paramount concern to you, the best thing you can do is arm yourself with as much information as possible.   Here are three key things you can do to ensure you’re making the right decision:

1. Interview the School Principal.  Find out what the current enrollment is, and what the trends are (increasing or decreasing?)   What percentage of capacity is the school currently at?   When are they projected to be full?   What plans are there to increase capacity?   Meet with the Principal in person, if possible.
2. Understand the District’s policy on Impaction.   What happens when a school is impacted?   How does the District handle decisions on inter-district transfers?  Does having a sibling in the school give higher priority.   These decisions are almost always made at the District level, so get in touch with the respective district and understand their policy.   Call the superintendent if you need to.
3. How are the adjacent schools? It’s not uncommon on the  Peninsula to have a high-scoring school adjacent to under-achieving ones.   Check out the schools adjacent to the area you are searching in.   If you wouldn’t send your kids to any of those, then you’re taking a much bigger risk by buying into a single district.

The bottom line?  Do your homework.  Every school on the Peninsula has its own website, and every School District has one as well.   The contact information for the Superintendent, Principal, and School Board Members is readily accessible.     Be the one to initiate the contact, ask questions, and make yourself a pain-in-the-rear if need be.    Don’t put yourself in a situation where you will suddenly resent the biggest purchase that you’ll likely ever make.

There’s simply too much at stake….

“Don’t pay  for something that you can get for free…”

That’s essentially the message that’s conveyed in this press release from County Assessor Warren Slocum’s Office.  San Mateo County homeowners have been receiving official looking letters from private companies that are soliciting fees to file a Request for Property Tax Reduction on your behalf.    The details of the scam along with examples of the solicitation letters, are nicely outlined on the San Mateo County Assessor’s website.  I highly recommend that you take a minute to read this link.

No scam would be complete without an ominous “call to action,”  and this one has that as well in the form of an artificial deadline — you must act by a certain date or you will lose the opportunity…..  you get the idea.

The Truth

As I outlined in this blog post about applying for a property tax reduction, there are 3 truths to applying for a reduction in your property taxes.

1. It’s FREE.
2. You deal directly with the County Assessor’s office (no intermediary required.)
3. You can apply for the reduction online or via mail.   It’s really very easy.

Now, this doesn‘t mean that you’re automatically going to get a reduction in your property taxes.   What it does mean is that the process to apply for this reduction is free.

In other words, don’t pay someone to do something that you can yourself for free!

Just ran across a great article in the San Mateo Daily Journal — it’s a brief, but very interesting description of the history of Millbrae.  Enjoy!

History of Millbrae

The San Mateo real estate market was a mixed-bag in November 2008.   The volume of home sales plummeted to the lowest value in years.   Seeing a drop in volume this time of year is not abnormal, but the severity of the drop is.   However, note that similar results were seen in neighboring communities.   If there’s any good news, prices seem to be stabilizing — we’re not seeing double-digit drops in the average and median prices.  Hopefully, this means the bottom is starting to approach.   See the data below.

Summary

Here’s a graphical representation of the monthly unit volume, average sales price, and median sales price.   Note that this is a 3-month rolling average, which is used to normalize spikes and drops in the data.

Price and Volume Trends

Finally, here’s a snapshot of the year-to-date sales volume.   Simply put, the figures speak for themselves.

YTD Sales