Arlene Baxter

Since August there's been a tangible sense that the market was getting stronger, and not just in the immediate Berkeley area. Buyers who had the financial means to buy decided, finally, to get off the fence. Properties that had been sitting for some time went into contract as a result. We also began to see significantly more all-cash sales, and in higher price ranges. Two of the properties for which I had buyers recently had competition from all-cash buyers at the $1.0 - 1.4M range.

So far this year only one of my buyers has been fortunate enough to get their desired property without competition. For most buyers we're still writing three or four offers before getting into contract, and those are also the number of offers we usually face as competition. Whereas before three offers could take a property more than $100K over list, within the past month we saw cash offers being accepted at or just over list, trumping offers at substantially higher prices, but with greater risk.

Other key features of our East Bay market: inventory has been low all year, about half of "normal." This year in Berkeley, the number of properties sold per month went from a low of 15 in January, to a high of 53 in April. Each sale represents an opportunity for two agents to be involved in a transaction. Through October, there have been a total of 345 sales this year, representing 690 sides, providing roughly one transaction per member of the Berkeley Association of REALTORS®!

We've seen few distressed properties so far, but expect to see more by the middle of next year. Properties stay on the market about a month on average, significantly less time than in other markets.

Here are the numbers for BERKELEY for the month of October, 2009:

Median Sales Price: $695K

Median List Price : $715K

#homes for sale: 157 #homes sold: 36 Avg.Days on market: 24

That's my snapshot of our current diverse market behavior in Berkeley, CA. I'm going to ask Santa for some more houses to list!

Today I heard yet another story that sent chills down my spine! Like the previous story heard about a week ago, this one involved an El Cerrito property that had recently sold. The new owners had taken out permits for some work that they wished to do on their new home. When the job, a small one in this case, was completed, the inspector was very interested in visiting the property. Once there, the inspector asked to see other parts of the home that had not been modified. Long story shorter, the new buyers were fined for all previous work that had been done on the property, some of it dating back decades, forced to redo work that could not be documented to be up to code, and charged penalties as well as current permit fees. They had done no work without permits themselves!

In speaking with colleagues about this case several points become obvious, and chilling:

• Cities are being hit hard by the decline in the economy, and see this as a quick revenue source. One number mentioned was $100K, as the amount the City of El Cerrito has collected so far this calendar year in permit fees for previous work done without permits.
• El Cerrito will not be alone in pursuing unpermitted work as a revenue stream. Alameda has had inspectors cruising open houses and broker tours for some time now.
• This could well be the precurser to requiring a whole-house inspection at point of sale, with an accompanying requirement that all aspects of the home be brought up to current code, regardless of the codes at the time the house was built. San Pablo already has a similar ordinance. I just returned from the NAR conference, where I heard from several agents who had whole-house inspection requirements in their communities.

Can you image what such a requirement would do to real estate in areas, such as Berkeley, Albany, Oakland and Alameda where the vast majority of the inventory was built pre-1940? We believe that we have low inventory currently. Imagine what a wet blanket such a requirement would be on the housing market! Just think what expenses would be required if all home owners were required to make their homes compliant to all codes before selling! I feel a very cold draft down my back!

On Tuesday RE BarCamp San Francisco emerged within the walls of Trulia in SOMA. I was a newby, and I'll certainly be back! Any of you who hesitated to go this year for whatever reason . . . just go next year! What's not to enjoy? Lots of smart, motivated agents as well as others who contribute to our industry: software developers, photographers, stagers. The sessions were short (some felt tooo short, like 15 minutes) and no one was taking attendance. You could move around as a conversation suited your interests. Got super inspired about photo blogging, and thanks to the patient presenters like Brad Carroll who explained several times the advantages of each photo being its own post.

The excitement downstairs was palpable, as we all tried to share ideas, argue, agree, suggest. But so many people who talk for a living doing just that within concrete wall and floors made for a cacophony. After a free and delicious box lunch, I decided to save my ears and headed upstairs for the afternoon sessions. Ahhh, carpeting and small group sessions. Much better! Got great tips on being mindful of how public is your voice on Facebook. Learned some quick tricks for video clips for listings, now that I'm a proud owner of an iPhone 3GS.

The organizers were considerate of not just the technology content, but provided good beer as well (for free, in a free take-home mug!) Even the City cooperated by providing a splendid, balmy evening, perfect for quaffing the brew outside, while some enjoyed the taco truck provisions.

Many thanks to fellow Berkeley agent Andy Kaufmann and his pals for organizing a great event. Hard to believe it only lasted one day! What a great beginning to an action-packed week for technology-loving realtors who, like me, then headed to Inman Connect SF. More on that to come!

I recently was on the listing side of two wonderful, "very Berkeley" Arts & Crafts homes in North Berkeley. Neither of them had classic floor plans, but both had tremendous amounts of original wood and exceptional period details, multiple fireplaces, updated kitchens and larger than normal lot sizes. In both cases I was successful in getting our local paper to feature these homes in the Real Estate sections during their marketing period. That special marketing, an individual website for each property with lots of photos, plus my marketing to a specialized group of Arts & Crafts and period home enthusiasts, resulted in huge attendance at my open houses.

One was priced well IMHO, based on the comments I received from agents (though numerous buyers thought it was priced too high). The sellers had followed my advice on price, as well as on presentation. The property was vacant and staged in a manner that fit the home. This home also had spectacular views, both of Mt. Tam and Marin as well as a direct view of SF. We received four offers, and it closed $150K above list price.

The second home was priced a wee bit high, again IMHO. That price was driven by the financial situation of the sellers. They also continued to live in the home, but did pack away many of their possessions. Though I welcomed more than 300 people during two Sunday open homes, that property received two offers, and went just $25K above list. Interestingly, that property closed yesterday at $1.425M, in an ALL CASH sale. Until quite recently it would have been rare indeed to see cash sales at such a high amount. But as jumbo loans become more difficult to acquire, especially in a timely fashion, we've seen more cash sales in Berkeley in the high end.

One obviously cannot determine a trend from just these two examples. But from my experience of living and working in North Berkeley for many years I know that the differences in behavior were somewhat predictable. Now more than ever, buyers are very sensitive to prices that they perceive to be too high, even if by only a small percentage. They also are intolerant now of deferred maintenance or even a lack of updating that they feel is necessary. Two or three years ago buyers were much more forgiving of these aspects. Buyers have read so many stories about it's being a buyers' market, and they want it to be so. In North Berkeley right now, the special properties are still very much in demand, and the inventory of such properties is low. As I write this, there is one new listing at just over $2M, and five listings at $1.2M or higher that have been on the market for at least three weeks. What a great opportunity for brave sellers who are willing to trust their agents and the data, rather than listening to the prevaling news of doom and gloom!

Ask my high-end buyers -- those who plan to spend more than $1.2M on their home purchase -- and they will undoubtedly comment about two problems, both of which have gotten only worse as the year has progressed.

1. Limited inventory. Berkeley's residential inventory has been roughly half of what existed in 2008. In properties listed at $1.2M and above, inventory during the past 12 months is down 12% from the previous 12 months. Interestingly though, median price has changed very little. Median price for the $1.2M and above sector in Berkeley in June 2007 was $1.389M. In June 2008 median price for this sector was $1.35M, with 75 sales in that range during the past 12 months. Median price this June was actually up slightly to $1.4075M, but with only 45 sales in that range during the past year.

Just looking at the numbers however does not fully capture the sense of the market. As a Past President of my Association of Realtors, and an active member of several committees, I have the opportunity to speak with numerous agents each week from different brokerages. Repeatedly I hear agents mention the "really good properties." Those are the ones priced appropriately, marketed actively and presented attractively. If they're also well-located they have the golden combination of factors that is very likely to result in multiple offers. Even now, even with the difficulties we are all facing in this tough economy, the "really good" properties may close significantly over list price.

A listing I had a few months ago received four offers and closed $150K over list. That was lovely for my sellers, but it was not really newsworthy in Berkeley. Yesterday another listing closed just a bit above list, having received two offers. Again, no big deal here, except that it was an all-cash sale. At a selling price of $1.425M, that's a great deal of cash! Which leads to the second problem we're experiencing at the high end. . .

2. Difficulties in securing true jumbo loans. There's no question that qualifying for a loan over $729,750 is more difficult than it was a year ago. Rates on jumbo mortgages historically have been higher than rates on conforming loans. While jumbo loans still are available, they often come with stricker, if not absurd, underwriting requirements. Prior to the credit freeze, borrowers of jumbo mortgages could qualify for loans with a 5 percent down payment, credit scores of 620 and enough money in the bank to cover two months of payments. Now, borrowers typically must have six months' reserves, a 700+ credit score, and a down payment of at least 20 percent. More and more we hear of lenders requiring 25% or even 30%. Any irregularities in a borrower's credit or employment history can lead to delays, and sometimes denial of a loan. And communication with lenders has become frustrating in the extreme as banks become increasingly skittish about their own futures. The situation is a bit better now than it was a few months ago, when it seemed no one wanted to lend the money at all. Now they will, but the hurdles are higher.

Given the difficulties of not just getting loan approval in the jumbo range, but actually funding those loans, an unprecedented number of buyers have chosen to avoid the loan process all together and pay cash.

But there's money out there to be lent. So sellers, if you have one of those "really good" houses, this is actually a great time to sell in Berkeley. There is little competition. I myself have three sets of buyers just waiting for the gracious, spacious homes that would accommodate a family, and perhaps a visiting grand parent. Four bedroom, three bath homes are especially in demand. If any sellers are listening, I'd love to speak with you! Your home will be given a very welcome reception in this market!