Are We In A Housing Bubble?

CoreLogic reported that home prices in 33 states are at or within 10 percent of record highs. Home prices increased 6.3 percent year over year and with limited inventories across the country, some economists are starting to worry about localized bubbles. (Source: C.A.R. Market Matters)

Investopedia’s Explanation for Housing Bubble

“Traditionally, housing markets are not as prone to bubbles as other financial markets due to large transaction and carrying costs associated with owning a house. However, a combination of very low interest rates and a loosening of credit underwriting standards can bring borrowers into the market, fueling demand. A rise in interest rates and a tightening of credit standards can lessen demand, causing a housing bubble to burst. Other general economic and demographic trends can also fuel and burst a housing bubble. “

We have definitely seen the increase of home prices in the San Ramon Valley upwards of 10% to 15% annually for the past three years in some areas. Much of the run up in prices is due to limited inventories of homes for sale and low interest rates. There is more demand than supply. Let’s look at the average median prices from 2013 thru the first half of 2015 for San Ramon, Danville, Dublin, Pleasanton, Alamo, Walnut Creek.

Comparison of Median Sales Prices

2013 2014 2015
Alamo $1,305,000 $1,477,500 +12% $1,525,000 +3%
Danville $955,000 1,080,000 +12% $1,140,00 +5%
Dublin $740,000 $830,000 +11% $915,000 +9%
Pleasanton $851,000 $915,000 +  7% $983,500 +7%
San Ramon $845,650 $900,000 + 6% $1,042,494 +14%
Walnut Creek $790,000 $875,000 +10% $928,000 +6%

 

 

Lending standards are still tight unlike the last run up. And most people buying today are not doing so on speculation. Their goal is to own a home. These buyers are not highly leveraged as a good portion are making sizeable down payments or even paying cash. The San Ramon area is very strong and has always been due to schools, location, companies in the area and quality of life.

 

Will we see a slowdown in the market – I believe so. As prices keep going up affordability along with an increase in interest rates will certainly decrease demand but nothing like the bubble burst of 2008.  As more than one person stated…the only time we know for sure if it is a bubble is when it pops.

California is an a 4 year drought and therefore, the State is looking for ways to reduce our water consumption. An estimate by Metrostudy indicates there are about 1.18 million residential pools in California. The State has mandated all citizens reduce our water consumption by 25% of their 2013 usage.  Some cities and whole counties have put a ban on issuing permits to install a pool and refilling existing pools.

According to The California Pool and Spa Association  its in-house study shows that a standard-sized pool uses one-third the amount of water as an irrigated lawn after an initial fill.

Currently in Contra Costa County watering of lawns is limited to two days per week. Households that use 200 or more gallons per day on average will see an increase in their water bill.

To learn more about Contra Costa County mandates – visit  http://www.ccwater.com/drought2015.asp

If the drought continues there won’t be the question – fill the pool or water the lawn. The bigger issue will be how do we run our household with limited water supplies?

 

 

 

 

 

Why Do I Need Title Insurance on My Home?

Common question from buyers – do I have to purchase title insurance when I close on the purchase of my San Ramon home?

Prior to purchasing a home in San Ramon area, a title search is conducted to ensure that there is nothing that could prevent the home from closing. Yet even the most diligent  research may miss something that pops up years later. The purpose of title insurance is to protect you. Generally the only time there is a title search is when a home is refinanced or being sold. Any issues that could cloud the title will prevent the transaction from going forward. Here is a list of items that present a risk:

  • Forged deeds, releases or wills
  • Undisclosed or missing heirs
  • Mistakes in legal documents
  • Claims of creditors against the property
  • Deeds of persons of unsound min
  • Deeds by minors
  • Deeds by persons single but in fact married
  • Deeds by illegal aliens
  • Deeds in lieu of foreclosure
  • Defective acknowledgements
  • Errors in public records
  • Fraud……and the list goes on.

Title insurance is a one time expense and is pennies compared to the cost of a home. If given the choice to purchase title insurance or not – I think the above list makes the case in favor of title insurance.

 

Source: Chicago Title

For those of you who either live in Crow Canyon Country Club or are interested in moving here a 2 bedroom town home recently sold for $1,000,000. This is a new high for Crow Canyon. The highest price during the peak of the market, i.e. 2007 was $795,000 for a 2 bedroom town home.

While the town home  had been expended and was beautifully remodeled.  Another sought after feature was the location on the golf course, great views and end unit.

Due to Crow Canyon’s location, security and that fact that the majority of the homes are one story, this neighborhood has become extremely popular for people who are downsizing.

 

Valuation of My Home on Zillow

This week while I was door knocking I had a home owner ask me “how accurate is the data on Zillow for evaluation my home”.  Here is the official answer from the Zillow website “Nationally, the Zestimate has a median error rate of 8%, which means half of the Zestimates in an area are closer than the error percentage and half are farther off.”

Because Zillow has not seen the homes, the data essentially is based on homes sold in the area that have the same amenities, i.e. bedrooms, baths, square feet.  What I also tell people,  it is a starting point to provide an idea of home prices in the area. Yet if someone wants an accurate home evaluation, the source is either from a professional appraiser or a real estate agent, as both have access to far more data and are physically previewing the property.

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