Rent v. Buy: What’s Better for You Right Now?

As is clear from the above, the long term value of buying versus renting is easy to show. But what about the short term? Well, due to price declines, tax benefits and exceedingly low interest rates, the Rent versus Buy equation – which went badly out of whack during the runaway Sellers’ market – has been coming much more into balance. Here is a sample calculation comparing paying $2600 rent with purchasing a $650,000 home. Since any calculation depends on one’s assumptions regarding inflation, appreciation, interest rates, down payment, term of ownership, and so forth, please feel free to use the calculator referenced to perform your own calculation.
Sample Rent vs. Buy Calculation

Is it time to take “the plunge?”

As you may know, the sharp decline in housing prices has cooincided with an uptick in rental rates all over the country, and particularly in northern California.  Why?  Simple:  homeowners exiting the market due to foreclosure and economic worries are renting rather than buying homes.  However, for many who have always remained on the sidelines, the decline in home prices combined with upward pressure on rents is describing a tipping point and it could be more economical for the first time in a long time to just buy instead of continuing to rent.

Paragon has worked with Residential Pacific Mortgage to create a detailed analysis of a $650k home purchase juxtaposed against renting for $2650 a month.  I believe this sheds a lot of light.  You can take a look at it by clicking here.  As always, I welcome your questions and am happy to sit down and discuss your individual sitaution any time!

Home of the Week: Big, Beautiful Richmond Flats

I am thrilled to announce my newest listing, 774-776 15th Avenue @ Fulton. These truly home-sized flats are worth some serious consideration if you’ve been thinking of making a move. Priced to sell at $799,000 each as TIC interests ($1,598,000 for the whole building), they each feature 3+ bedrooms on two levels and nearly 2000 square feet of living space. With remodeled kitchens and baths, stunning outdoor living spaces and the fabulous location, I could really see getting settled in for a long time. Come see me this weekend on Sunday from 2 to 4, or come enjoy a glass of vino and watch the Sunset from the roofdeck on Thursday evening from 6 to 7! For more info and pictures, visit the site at http://www.774-77615thAvenue.com.

Home of the Week: Castle on the Park

Priced at nearly $10,000,000, this former church is still a bargain 585 per square feet. At 17,000 square feet, this may not be the largest single family home in San Francisco. It nominally has 3 bedrooms and 2.5 bathrooms, but it also has an enormous living room and 4 to 6 car parking.

 

 

 

The home’s most stunning feature, however, is entirely transparent two story circular staircase to the bell tower, which is now enclosed as a view pentroom. When I toured the home we were asked to remove our shoes before climbing the glass staircase and I have to admit the climb down in bare feet was one of my more thrilling Tuesday Tour experiences. This property is looking for just the right owner or a developer to take advantage of it’s R-3 zoning. Could it be you?

Some news from the world of architecture

CITK and friend architect James Dixon has some wonderful new resources on his Web site. 

The first is an article entitled “10 Ideas for Home Improvement in Today’s Economy – What the Smart, Careful Money Stays at Home.”  He discusses why investing in improving your home is a good idea and offers project guidelines and ideas. Click on the picture at right to download the article or click here.

 

 

The 2nd article is part of James’s continuing effort to educate people about San Francisco’s architectural styles.  I’m sure a number of you have heard me enthusing about this cirricumlum over the past couple of years.  I encourage you to read Victorian & Edwardian Residential Architecture in San Francisco because it will enrich your life and help you to make better decisions about home improvements over the years.  Click on the image at right to download the article or click here.

Thanks for the great resources James!  If you want to reach James for help with a project or just to tell him how much you like his articles, he can be reached at archteam@jdarchitect.com.  To visit his Web site, click here.

Pricing, Buying, Selling & Negotiating San Francisco Real Estate

The below is a detailed analysis of current market conditions in San Francisco.  The quick and dirty jist of things is:  lots of properties are sitting on the market at much higher prices than they will eventually sell for.  If you are a buyer, and you see something you like – go for it!  If you are a seller, beware the temptation to “leave room to negotiate.”  It will cost you in time and ultimately in sale price.  Finally, if you are thinking of buying or selling in this complex market, be sure to ask for the help you need.  Please always remember, I am here with a great team of financial, staging and marketing professionals to help you and yours get it done with the best possible outcome.

At current market trends, over the next month:*

• 1400 active house & condo listings will be joined by 600 new listings.
• 1 in 7 or 8 of those listings will accept an offer to purchase.
• 1 in 8 will expire or be withdrawn from the market (didn’t sell).
• 1 in 4 will reduce its asking price.
• 75 active bank-owned (REO) homes will be joined by 45 new REO listings: 1 in 3 will accept offers.
• Of the listings that do accept offers, 1 in 3 or 4 will come back on market because the purchase fell through — typically due to financing difficulties, property condition issues or buyer remorse.

*All numbers are approximate; neither TIC sales nor non-MLS new-development sales are included.

List Price, Offer Price, Sales Price

• Of the house and condo listings that SOLD in the first 2.5 months of 2009:*
• 1 in 4 accepted offers within about 15 days of going on market, i.e. almost immediately. Of these, the houses averaged a sales price of about 1% over asking price, while condos averaged about 4% below asking.
• The supply and demand equation is currently weaker for condos than for houses; the equation for TICs and multi-unit buildings is much weaker still — financing is now very difficult for these properties.
• Those accepting offers after 45 to 75 days on market sold at an average of 3% to 4% below last asking price and 7% to 10% below original list price.
• Those accepting offers after 105 days on market sold, on average, 4% to 5% below last asking price and 14% to 18% below original price.
• No matter how long a home was for sale, it still sold, on average, within 3% to 5% of the last price, even as — with price reductions — the discount off the original price grew much larger as time passed.

* For SF house and condo sales reported to MLS by 3/17/09. City districts with high foreclosure rates, as well as confidential sales and ultra high-end sales were excluded to avoid distorting general market statistics.

What it Means
The vast majority of buyers and buyers’ agents will NOT make an offer until they perceive the property’s asking price to be within 5% of “market value” (i.e. what they’re willing to pay).

1) They don’t want to waste time and emotional energy on a listing they consider significantly overpriced, since they believe coming to an agreement with the seller is unlikely. Or

2) They’re uncomfortable with the possibility of provoking a negative reaction from seller or listing agent.

Generally speaking, ours is not a society comfortable with aggressive negotiating, even though it can reap large rewards. Remember that a negotiation is a conversation between buyer and seller that doesn’t really begin until an offer is made. And until it’s made and the negotiation concludes, no one knows what price and terms might result — so don’t make ironclad assumptions based upon either asking price or initial offer price.

Lessons for Buyers
If you see a home you like, ask yourself: at what price would you be a buyer? Review recent comparable sales and market trends with your agent, and then make an offer — at or under whatever price you’re willing to pay. The first rule of negotiation is, “You never know until you ask.” A few buyers are negotiating discounts of 10% to 25% off list price, because they’re unafraid to make low offers.

Don’t waste time asking the seller or listing agent if they would entertain a low offer — they almost always say no (out of pride and/or a misunderstanding of how negotiations proceed). No one knows how anyone will actually react to an offer until the offer is made.

Ultimately, the home you buy will be a good or great value based upon the price you pay, not the price the seller asks. So focus on the first, instead of the second.

That said, those properties perceived as excellent values are still generating offers — and sometimes, multiple offers — quickly, and a home purchased 20% below asking price is not necessarily a better value than another purchased at full price: it all depends on the property and how it was priced to begin with.

Lessons for Sellers
Never discourage buyers from making offers. Counter-offer unacceptable offers instead of rejecting them outright.

Those 25% of sold homes which accept offers within 2 to 3 weeks of going on market achieve the highest percentage of sales price to list price. To do so in today’s market, your property must stand out as an excellent value: priced, prepared and marketed perfectly.

A listing will never get as much attention as in its first few weeks on market and pricing properly to begin with almost always results in more money than starting out high and reducing later. Most buyers will NOT make offers on homes they consider over-priced — and the longer a home stays on the market, the less value it holds in buyers’ calculations.

If you do need to make a price reduction — and in a changing market, the right listing price can change — do it as soon as possible and make it dramatic enough to recapture attention.

The only definition of fair market value that counts is: “That price a qualified and reasonably knowledgeable buyer will pay to a willing seller after the property has been properly exposed to the market.” To make it more complicated, that price is changing all the time.

Paragon in a Changing Market*

For SF home sales (house, condo, TIC) from October 15th, 2008 — when the 9/15/08 financial meltdown began to show up in sales data — through March 16, 2009, Paragon had the highest average sales-per-agent of any brokerage in the top 10 with at least 20 agents: higher than Sotheby’s, McGuire, Hill & Company, Pacific Union, Coldwell Banker, Zephyr, Vanguard and Alain Pinel. Paragon also had the lowest days-on-market figure of any of those companies. And year-over-year for this period, our market share increased by 38%.

As the market becomes more challenging, we’re working harder for our clients and obtaining superior results.
*Per Broker Metrics, for SF home sales reported to MLS as of 3/16/09

The purchase or sale of one’s home is typically one of the largest, most complicated financial transactions of one’s life. The quality of agent working on your behalf — his or her competence, integrity, work ethic and commitment to your interests — can make an enormous difference in the outcome.  In this market where so many companies are shrinking, Paragon continues to grow because of our strategy of hiring only the best agents with the ability to generate business through referrals that are earned based on long-term competetent service to our community.  I am committed to being your real estate advisor for life and sincerely appreciate the continuous support you all provide to my business.

All data from sources deemed reliable but subject to error or omission, and not warranted. 3/25/09

Upcoming Listings

Paragon’s new listings this week certainly run the gamut on price point. There’s something for everyone! As always, feel free to share with your friends and let me know if you’d like a sneak peek!

$2,849,000/ South of Market/1417 15th St. BR/BA: 2/2.5 PKG: 3 Brief Description: Incredible one of a kind 8500 +/- Sq. Ft. Live/work loft with vaulted ceilings, exposed steel , the big cool sliding barn door, fireplace, the works. Free-standing building. Look for the martini/jd grand opening invite!

$1,950,000 / Noe Valley/4110-4112 24th Street BR/BA: 0 PKG: 0 Brief Description: Noe Valley 4 Unit Victorian Commercial building. One tenant other offices are owner occupied

$1,595,000/Marina/ 1756 North Point BR/BA: 3/3 PKG: 1 Brief Description: Beautiful, traditional spacious flat. Very well maintained and updated building with huge manicured garden, Deeded parking and plentiful storage

$1,549,000 /Cole Valley/ 167-69 Downey BR/BA: 167 – 3/2 BR/BA: 169 – 2/1 PKG: 2 Brief Description: two unit building with views, garden, upper unit is two-levels

$1,349,000/Marina/3530 Webster St. BR/BA: 2/2 PKG: 2 Brief Description: Fabulous, large (1560 SF) updated 2-bedroom, 2-bathroom condo with 2 car parking (!!) in a 2-unit building. Great location just off Bay Street.

$1,149,000/ Duboce Triangle/ 23 Beaver (at Noe) BR/BA: 2/1 PKG: 2 Brief Description: SFR w/1br in-law Victorian home in need of updating

$995,000/ Cole Valley/ 955 Clayton #1 BR/BA: 2/ 2.25 PKG: Brief Description: B’ful Arts & Crafts condo, over 1,900 sq. ft.,w/gourmet kit, hardwood flrs & nice views

$990,000/ SOMA / 355 Bryant St. #107 BR/BA: 1/2 PKG: 1 car leased Brief Description: Stunning Brick & Timber Loft with 20 ft ceilings, exposed wood beams, courtyard outlook, & a timeless renovation. Den area converts to a guest bedroom leading to a guest bathroom. Outstanding storage space.

$799,000/Glenpark/145 Swiss BR/BA: /2 PKG: Brief Description: Cute, light filled home on a quiet, tree lined street-just a block to Glen Parl Canyon & 5-6 blks to BART. 4 rms up, additional (unwarranted) rm & ba down. Hdwd flrs, built in bookcases, newer eat in kit. Secluded deck & yard.

$628,000/ Parkside/ 1938 34th Ave BR/BA: /1 PKG: 1 Brief Description: Nicely updated Parkside charmer; junior 5 w/large eat in kitchen, skylights, bonus room/bath down w/out permits, deep lot. (Open Sun 1:30 – 4:30)

$595,000/ Inner Richmond/ 795 8th Ave., #401 (at Fulton) BR/BA: 2/1 PKG: 1 Brief Description: Light filled corner unit across from Golden Gate Park

$545,000 /Financial District / 201 Sansome St. #305 BR/BA: 1/1 PKG: 0 Brief Description: Sophisticated residence in The Royal Insurance Bldg. Fully furnished – contemporary,high end finishes, hdwd throughout. Roof Terrace.

$398,000/ Nob Hill/ 1177 California St # 203, BR/BA: 0/1 PKG: 1 Brief Description: Well appointed studio across from Grace Cathedral that is move-in ready at Gramercy Towers. Includes high-end, custom Murphy Bed that serves multiple functions with built-in shelving, this home is ideal for the first time home buyer or a pied-a-terre and has views to Twin Peaks and partially south (Must See). Building is a full amenity property and HOA includes earthquake insurance and most utilities, inquire with agent about details, what value!!!

Pocket Listing:
$TBD / Noe Valley / 228 30th Street BR/BA: 3 / 1 PKG: 2 Brief Description: Spacious home with expansion possibilities down. Great walking and commuting location, near many shops and eateries. Beautiful yard.

$TBD/ SOMA / 300 3rd Street – Museum Park BR/BA: 1/1 PKG: 1 Brief Description: Very delightful one bedroom unit (almost 900SF), remodeled kitchen, wood floors, in-unit laundry, leased parking in the building

$TBD / Corona Heights / 146 Beaver St BR/BA: 1/1 PKG: 1 Brief Description: Meticulously maintained condo in Marina-style building. Remodeled kitchen and bath. Period detail and woodburning fireplace. Huge storage in garage. Downtown views. Approx. 863SF per the condo map.

Upcoming Listings

Here’s what Paragon has on deck – tell a friend!

$9,000,000/Potrero Hill/ Brief Description: 36 Commercial Loft Condominiums over 41 parking spaces. Investment property to lease now and possibly sell as individual lofts down the road. Kitchens and 2nd baths are stemmed in and individual owners can increase value exponentially somewhere down the road. High ceilings, huge windows, brand new construction, price is per unit – averaging 1200 Sq. Ft. each…

$995,000/ South of Market / BR/BA: 1/2 PKG: 1 car/leased Brief Description: Stunning Brick & Timber loft conversion. 20 ft. ceilings, exposed wood beams, courtyard outlook, granite countertops, glass mosaic tile, cherry cabinetry w/built in pantry. Den area converts to a guest bedroom, with folding panel door.

$749,000/ South Beach/ BA: 1 / 1 PKG: 1 Brief Description: Beautiful Brick and Timber Loft 1 block from Embarcadero. Top Floor Corner unit with over 1000+ square feet. Bay Views. This is a unique and great space! Will be listed in April, but can show soon!

$499,000/ Lower Pacific Heights/ BR/BA: 1/1 PKG:1 Brief Description: Contemporary condo, needs some updating – currently tenant-occupied month-to-month. Built in 1986 so not subject to rent control.

Pocket Listings:
$1,950,000/Noe Valley / Brief Description: 4 Unit Victorian commercial building on 24th St. Upper 2 floors are owner occupied. Tenant on ground floor.

$700,000ish /SOMA/ BR/BA: 2/2 PKG: 1 Brief Description: Wide loft, Kitchen and two bath remodel. Very Swanky. Sneak preview and pricing roundtable on Wednesday @ 2:30pm. No clients before weekend. Call to confirm if you are going to preview

$340,000/ TenderNob/BR/BA: 0/1 PKG: 0 Brief Description: Large alcove studio in “The HamiltOn”, a classic, art-deco elevator, door-man bldg. Perfect pied-a-terre; Central location.

Home of the Week – La Casita Bonita

Stefan and I were joined by CITK Dennis MacNeil for an afternoon of tasting Napa Valley wines and conversation at The Vintners’ Collective. The Vintners’ Collective is a single tasting room for sixteen boutique wineries. Every month they have a wine release party ($25 a head) which features one or more of their vintners with nibbles and entertainment. At yesterday’s gathering, the entertainment was Chaplin movies and a special appearance by the Tramp himself. The vintners featured were Gregory Graham, Clark Claudon and Showket.

We tasted a delicious rarely available Rose from Gregory Graham, two sophisticated Cabernets from Clark Claudon, and a Sangiovese, a Super Tuscan and a Cabernet from Showket. In addition, we snuck in the back room for sips of Vinoce’s Cabernet and Proprietary Red, and were treated to liberal samples of Las Bonita’s Zinfandel and Cabernet by the Vintners’ Collective’s owner Garrett Murphy. What a relaxing afternoon!

But what does all this have to do with Real Estate? Well, Garrett mentioned his La Casita Bonita, a fully-equipped two bedroom home located in downtown napa, available for short-term rental. As nice as the home is, I think the best part of the deal is that the Vinters’ Collective will act as your personal concierge for planning the perfect visit.  What better way to try out the wine-country lifestyle than to move in?

Yay! Free Money! Federal and California Tax Credits for Home Purchases

The good news is that there are both Federal and California Tax Credits available for certain qualifying buyers of homes that meet the requirements.  Note that the Federal and California tax credits are very different from each other, and the methods for claiming the credit are likewise very different.

This summary is provided for general information only and does not apply to any individual situation.  All buyers who are interested in qualifying for either or both of these credits are advised to consult with their own tax advisors.

1.  FEDERAL TAX CREDIT (FIRST-TIME BUYERS ONLY)

Amount:  $8,000 if home purchased in 2009, but no more than 10% of the purchase price of the home (half that amount if married filing separately).  $7,500 if purchased before 2009.

Expires:  December 1, 2009

Only First-Time Homebuyers Can Claim the Credit:  In general, buyers can claim the credit if they are a first-time homebuyer. Buyers are considered a first-time homebuyer if:

• They purchased their main home after April 8, 2008, and before December 1, 2009.
• The buyer (and spouse, if married) did not own any other main home during the 3-year period ending on the date of purchase.

Main home. A main home is the one the buyer lives in most of the time. Not limited to new construction.  It can be a house, houseboat, house-trailer, cooperative apartment, condominium, or other type of residence.

The Credit Cannot Be Claimed If:

• The buyer’s modified adjusted gross income is $95,000 or more ($170,000 or more if married filing jointly).
• The buyer is a nonresident alien.
• The home is located outside the United States.
• The buyer acquired their home by gift or inheritance.
• The buyer acquired their home from a related person.

No Repayment of Credit:  There is no repayment of this credit if the home is purchased in 2009.  However, the buyer must repay the credit if the home ceases to be their main home within the 36-month period beginning on the purchase date.  (Note:  For homes purchased before 2009, the tax credit is subject to repayment rules.)

2.  CALIFORNIA TAX CREDIT (NEW CONSTRUCTION PURCHASES ONLY)

Amount:  Up to $10,000.  California allows qualified new home buyers a total tax credit amount equal to either five percent of the purchase price or $10,000, whichever is less.

Note:  Taxpayers must apply the total tax credit in equal amounts over three successive taxable years (maximum of $3,333 per year) beginning with the taxable year (2009 or 2010) in which the new home is purchased.  Special rules apply to married/RDP (Registered Domestic Partners) taxpayers filing separately.

Expires:    March 1, 2010.

All Qualified Buyers Can Claim This Credit, Not Just First-Time Home Buyers:  This tax credit is available for qualified buyerswho on or after March 1, 2009, and before March 1, 2010, purchase a qualified principal residence. The buyer must reside in the new home for a minimum of two years immediately following the purchase date.

Qualified Buyer:  A taxpayer who purchases a Qualified Principal Residence that is purchased to be the principal residence of the taxpayer for a minimum of two years, and that is eligible for the homeowner’s exemption (under California Revenue and Taxation Code Section 218).

Qualified Principal Residence – New Construction:  Any of the following can qualify if it is new construction (that is, it has never been occupied), is the buyer’s principal residence, and is subject to property tax, whether real or personal property:  a single family residence, a condominium, a unit in a cooperative project, a houseboat, a manufactured home, or a mobile home.

First-Come, First-Served (or You Snooze, You Lose):  California has allocated $100,000,000 for this tax credit. Buyers must apply for credit allocation from the Franchise Tax Board (“FTB”). Applications will be reviewed and credit allocations will be made on a first-come, first-served basis. Once $100,000,000 has been allocated, the tax credit will no longer be available.

How to apply:   Within one week (seven calendar days) after the close of escrow:

·         The seller must complete Part I of Form 3528-A, Application for New Home Credit, certifying that the home has never been occupied, and provide a copy to the buyer or escrow person.

·         The buyer will complete Parts II & III of Form 3528-A.

·         The escrow person on behalf of the seller and buyer will fax the completed Form 3528-A to FTB at 916.845.9754, and provide a copy to the buyer.

Fax is the only delivery method that will be accepted by, and considered for credit allocation by, FTB, as the date and time stamp on the fax will determine the order in which credits are allocated.

“Time is of the essence” on this one!  

1.  Remember, when the allocated amount of funds ($100,000,000) has been approved for credit by the FTB, there are no more tax credits available.

2.  Also, Buyers only have one week after close of escrow to apply for the credit.

For more information on the California tax credit (and a running total of the amount of credit left to be allocated) go to:  http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml#def2 or call the Franchise Tax Board at:  888.792.4900 (press 5)