September 30, 2021 Eviction Moratorium Ends!

 When I read about the "bubble", the over pricing of real estate and "pandemic fears", I am reminded of an old Wall Street saying: "The Market Climbs a Wall of Worry".

One thing for certain real estate is far different than the stock market.  No mater when or where, crisis or prosperity value can always be found in real estate.  It is just a matter of learning where to look.  

The legislative end of the Eviction Moratorium will bring property on the market.  OPPORTUNITY! How many homes?  I can't tell you that.  I do know that there are certain statistics that are a telling indicator.

There are approximately 1.7 million home is "Forbearance".  That means 1.7 million home owners have decided they will not pay their mortgage for one reason or another.  That number of 1.7 million is down from over 7 million during the peak of the Pandemic.  Of those 1.7 million who have not paid their mortgage from anywheres from 18 months or less, they are  or should be in a process of negotiation with their lender to restructure the mortgage.  Some will pay off the amount due, some will have a new mortgage with the failed payments incorporated into the new loan.  And, some will find themselves in no better situation than when the pandemic hit.  No job, no future and no unemployment benefits to sufficiently allow them to own a home.  To those how many of them are in the 1.7 million?  

When you begin to ponder that question consider this, there are 600,000 homes for sale in the US.  That is the inventory.  What will happen when another 100,000, 300,000, 500,000 OR 1.7 MILLION come into inventory.  Will prices continue to move up, will they stabilize or will they back off some.  

Next to consider is the rental market.  In California, Policy Link, an Oakland based research group states there are 753,000 families behind in their rent.  They owe a cumulative $2.8. Billion.  Landlords have been suffering.  Government funds still have not be distributed to pay the landlords.  What happens here?  Landlords sell and get rid of the rental property?  Fix and Flippers wanting introductions to sellers and allow a sale without commission, inspection and cash closes. How many come on the market from the Flippers?  Flippers are not long term holders.  They MUST sell!  If they don't the bank takes over and sells the property.

The next phase of potential inventory comes from the Pandemic.  Home owners are fearful of who comes into their home and if the potential buyer is vaccinated and or will they leave the virus in their home.  They are going to iBuyers.  Institutional buyers who will pay all cash no commission and no inspections to "Fix and Flip".  Now we have another source of inventory that are in hands who are not willing to hold and wait.  You and I can look at the soft market and say.  Oh I will hold off, I lived here for 30 years, what is another year or so.  The iBuyer cannot wait.  The Fix and Flipper cannot wait.  They sell to a point they break even.  At least they don't lose money.

BUBBLE WATCH!

I love this phrase and love the commentary around it.  It is the Climbing a Wall of Worry from the stock market.      DOES CALIFORNIA REALLY HAVE A BUBBLE?  Or is it Chicken Little yelling the Sky is Falling?

Jonathan Lansner of the Southern California News Group wrote an interesting and rather enlightening article on the BUBBLE.  He used Goggle Trends to help him analyze data of some 39 states.  The balance where unavailable.

California had the 6th largest "housing bubble".  In the past 12 months. Statewide gain of 20.2% over 12 months, #7 among 39 states from a 6% annual average from 2016-2020.  Now consider the Top Bubbles

District of Columbia is #1.  15.7% gain vs 4.3% average

Idaho #2 with 37.1% gain vs. 11.6% average

Washington #3 with 21.9% gain vs 9.2% average

Oregon #4 with 20.4% vs 6.5% average

Arizona #5 with 23.9% vs 8.1% average

Those are West Coast states

Kansas 16.3% vs 5.2% average

Iowa 11.5% vs 4.1% average

Missouri 16.6% vs 6.1% average

Louisiana 16.6% vs 3.1% average

Pennsylvania 16.4% vs 4.9% average

So are we, you, I and our neighbors and friends going from one over priced situation to another?

Don't let fear and greed dictate common sense.  Sure you or I cannot buy my house for what we paid for it.  That has gone on for generations!

Real Estate is an opportunistic market place.  It is based upon personal needs.  Sure our medical costs are high.  But the service is far better than a town in Kansas or Idaho.   Weather here is alright, far better than the 110 in Phoenix, or the storms of Gulf Coast and Florida.  Yes we are a liberal state, but would you want that or live in Texas where guns are worn and mothers have no choice over their bodies.  

Now let's get back to buying and selling real estate and investing in real estate in California and looking for value building and opportunities.  The grass is always greener on the other side.....until we get there.

Caveat Emptor...Let the Buyer Beware

 Do you realize that not all the States have a FULL DISCLOSURE law in real estate transaction for residential properties?  That's right those documents, sellers are required to complete and provide to buyers and buyers are required to sign and initial, are not a standard in all states.  To those states who do not have the full disclosures the buyer is required to do their own research.  The seller is not required to inform the buyer if there is an issue with the property.  

Take my first real estate transaction when I moved to Hawaii after graduation from college.  The house MLS listing stated "sewer", "yes".  Not all houses in Hawaii and in this case Kailua in Oahu had sewers, but septic systems.  Months after my purchase the toilet backed up.  I called the city and was told I was not connected to the sewers.  The prior owner did not pay for the hook up. How much...WOW, I just borrowed money from my widowed mother to buy this house to supplement my savings.  

I called the agent and complained.  "You never asked if it was connected" was the response.  I took him to Small Claims court and lost.  Caveat Emptor the judge explained.  I was responsible to research before I bought the house.

How many buyers know what to do?  Termites inspection, home inspection, fault lines, flood zones, toxic waste the list goes on.  Did the owner tell you the neighbors were party people until late hours, or the train comes through at 1 in the morning, the dishwasher intermittently stops, the house is not level and needs a new foundation, or the roof leaks.

California created Full Disclosure laws in and around 1986.  For agents it is a pain; as it is for sellers.  For buyers in is a blessing.  

The consequences are severe.  for example a well known agent, at the time, failed to disclose that her client failed to disclose the house was on the San Andreas fault line in Portola Valley.  La Pietra came and the house split in two.  Agent out of business, broker out of business, seller with judgement and buyer made whole.

We are faced every day with Caveat Emptor.  The media is an ongoing sales promotion with articles slanting certain beliefs of the writer and or their employer.  In doing so, before you buy, research. These media promotions do not have a Full Disclosure rule.

When I write this letter or Blog, I look at every commentary that comes before and try to see the application to our markets.

One of the greatest source of my research comes from pricing properties for lenders and insurance companies.  It is called "Broker Price Opinions", or BPO.  From Los Altos Hills to Belmont and Redwood Shores I work on 20 or so pricing a month.  I see trends that are later confirmed by MLS Listings, State and Local Realtor Associations and the Media.  

Cindy, my wife and research assistant, sends me links on a daily basis.  This is one of them. Her comment was this is what you have said in the past.  The BPO work has allowed me to see underneath the market trend while it is developing.  Let me give some insights here

1. Mom & Pop Landlords are under pressure.  They are either liquidating their holdings before the tax change to eliminate 1031 exchanges end, or they are trying to get a larger mortgage to cover their increase costs.  

2.  Buyers are shifting out of once standard select markets to outliers.  Markets that once were not looked at as premium sectors.  As Landlords sold permanent buyers either came in and remodeled or investors bought fixed and flipped.  Menlo Park has seen a decline in average price in past 6 months; were  as, Redwood City has seen an increase.  this week there has been an over abundance ot over bids on Redwood Properties from $1-2 million.

3.  The Black Swan that many are expecting may not really occur; other than, a slow down and over bidding stops and over pricing are met with cuts, cancels or withdrawn or expired listings.  for an example look at Woodside, Atherton, Portola Valley to see the removal from the market.

4.  Sellers are Baby Boomers now wishing the smaller home in communities or downtown walking distance to the shops they normally drove to.  Equity is unleashed and many homes being sold need updating or severe updating.  Those are bought by Gen Z.  Flush with cash from IPO's these buyers want their home and will pay to buy it.  Price is not significant.  BUY, BUY, BUY is their motto.  Portola Valley has been a source of selling on large 1-2 acre parcels with 1950's Ranchers.  Los Altos Hills is another source of sellers.  both of those markets have seen double digit appreciation in the past 6 months.  Among the buyers are the investors, the Fix and Flip crowd.  You see them every day, on your TV, your emails on the radio.  We will buy your house and you pay no commission, as is, no inspections.  Of course there is a discount, to some of the uninformed it sounds good and they sell. 6 months later it is on the market for the Generation Z buyer to move into.

We live in a very fluid market place with many people with different objectives.  There is a transitional change as generations begin to change.  People live longer and they want to enjoy their longer lives.  Medicine keeps on advancing and the longer life's become longer.  Populations shift from locale to locale.  Some out of the area, some out of the state, and some return.  To all those who flocked to Lake Tahoe, are you sure you want to live there?  To the progressive and liberal minded who moved to Texas, are you sure you made the right decision?  Fluidity takes all shapes and forms.  How will the Pandemic phase out?  They all create opportunities and risks....SO Let the Buyer Beware! Caveat Emptor!

On a closing comment here is another flash from my Research Assistant who wants you to know who is eXp Realty