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Fire Safety

Dear Monica: This year’s Camp and Woolsey fires have convinced me that no community is fire safe.  What can a homeowner do to protect property? Edward W.

Dear Edward:  There are large and small things that can be done to lessen the fire risk.  The main utility company has been shown to have been the cause of several of the worst fires and the California Legislature will be looking at many proposals for regulating them more strictly.

Building codes will also change to lessen fire risk.  Fire safe roofs and building materials will likely be required on all new installations.  Strict rules on defensible space will be enforced.  Utility lines will be put underground where possible.  Propane tanks may also be undergrounded.  Homeowners should be sure that electrical wiring is safe.

Forest management is another key part of any fire prevention plan.  The drought has produced many dead and dying trees that spread the fire quickly when ignited.  Much can be done to reduce this risk.

 

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Rent-Backs Explained  

Dear Monica:  We want to make an offer on a property and the agent has told us that the seller wants a “rent back”.  How would this work?  Meredith G.

Dear Meredith:  Rent-back agreements are very common in today’s transactions.  A rent-back agreement gives the seller the right to stay in the property for some period of time after close of escrow.  Sellers like this because they can be sure the sale is going to close before they have to clear all of their things and commit to their next property, whether it be a purchase or a rental.  Buyers have become used to allowing rent-backs because the market has more or less required that they be flexible on this.

Buyers can offer the sellers a “free rent-back”, i.e., not requiring any money, but keeping only a security deposit.  Or, buyers can charge market rate rent for the period the seller remains in possession.  If a rent-back fits with your needs and timing, sellers love them and offering this may give you a competitive edge when making your offer.

 

October and Real Estate       

Dear Monica: I am looking for a home and am not sure if external influences are having a significant effect on prices.  How much do you think interest rate rises, stock market declines, tax law changes and other factors are going to affect the real estate market?  Kirk D.

Dear Kirk:  The market now is “softer” than it was earlier this year and all of the factors you mentioned probably have an influence on market changes.  It is still an active market though, albeit a bit slower with some price reductions happening.   Many buyers are finding good properties to buy and lots of sales are taking place this month.  The weather is still warm and though the days are getting shorter, they are still long enough to see properties at the end of the day.  Soon this will change.

This is a good time for buyers and you should continue to look the next two months until you find what you want.  The balance has shifted in your favor so take advantage of it while you can. Market fundamentals continue to be good and this should help the market remain stable.

 

The Real Estate Market and the Economy   

Dear Monica: It’s October and the stock market is having one of its periodic swings.  How do you think this will affect the real estate market?  Elaine M.

Dear Elaine:  As is often said, the stock market is not the economy and should not be regarded as such.   Market fluctuations can be normal and healthy especially if the stock market has become somewhat overvalued.   But if it continues to lose value it can be a sign of investors deciding that the future economy is not as strong as it has been, and this would include real estate.

The real estate market was already showing signs of slowing from the pace and prices of last spring.  Interest rates are rising and are likely to rise again later this year.  This affects the real estate market because buyers cannot afford as much as they previously could.  And if stock prices are down considerably, buyers will have smaller portfolios and less to spend.

It will take a longer time to know whether market fluctuations are a sign of a slowing economy or not.  We have been in a rising market for several years and it is normal for cycles to end.  And October is often the time of year when this happens.

Are We Seeing a Market Blip or a Trend?

Dear Monica:  My house is on the market and we expected a good market response and even multiple offers.  However the response has been disappointing and there has only been one offer so far and it wasn’t even full price.  Is this a temporary market change or the start of a correction?  John D.

Dear John:  What you have described is being repeated in many area cities.  It is too soon to tell if this is temporary situation or something more.  Buyers are suffering buyer fatigue and are not as apt to jump on a property as soon as it comes on the market unless it is exceptional.  Also each week there are more properties for them to choose from so they are not in a hurry to buy.

Add to this the recent rises in interest rates, the cap on deductibility of state and local taxes mandated by the tax changes of last December, and other economic factors, and the market pauses to adjust to them.  You may have to either accept a lower offer or take your home off the market until next spring, in hopes the market will be better.

Mandatory Solar Power is Gaining Ground     

Dear Monica: I have often wondered why states like California, with limited rainfall and long periods of sunshine, haven’t required more use of solar power.  The infrastructure for solar power is simpler than building and maintaining the power grid we currently have.  Do you see a trend towards use of solar power growing?  Eric G.

 

Dear Eric:   The mandatory use of solar power in housing got a huge boost recently from the California Building Standards Commission who voted unanimously to require new single family and multi-family buildings up to three stories high to have solar panels beginning in 2020.  This should substantially help the state of California reach its goal of a  carbon-neutral energy status within 30 years.

 

While solar installation will add to the initial cost of building a new residence, the homeowner will enjoy significant savings in energy costs over their span of ownership.  A higher demand for solar should spur production and potentially lower material costs.  California is the first state to require solar but it is expected that more states will follow their lead.

 

Is Real Estate Becoming a Buyer’s Market?  

Dear Monica:  I am looking to buy a home and have noticed a shift.  There are more properties on the market than before and I am seeing some price reductions, which didn’t happen earlier in the year.  What is happening in the real estate market now?   Beverly C.

 

Dear Beverly:  There is a change in the market now from what we saw in the spring.  The peak months for real estate sales and prices this year was March/April.  Things slowed in the summer, which is not unusual, but now that it’s mid-September, we are seeing fewer multiple offers and lower bids.  The rising prices we saw in the spring cannot be sustained and so prices are leveling off and in some cases, diminishing, from what they were a few months ago.

 

Mortgage interest rates have risen to the 4.5% range, which affects what buyers can pay.   Other factors too, such as recent tax law changes, tariffs on imports, and others, have made buyers more concerned about how these changes will affect them.  If you are a buyer, this is a better market for you.  But sellers, who expect the price surges they saw last spring, are disappointed that their properties are not getting bid up as they’d hoped.   It may take time for them to realize that the market has changed.

 

Buyer’s Second Thoughts

Dear Monica: I made a non-contingent offer on a property and to my surprise, the sellers accepted it.  There were multiple offers so I didn’t think I would get it but I did.  Now I am having second thoughts about this property.  What can I do?  Lauren G.

 

Dear Lauren: You are experiencing a very common emotion referred to as “Buyer’s Remorse”.  Sellers too can have this feeling.  It is especially common in our area where the  pace of the real estate market is rapid and buyers can be swept up in the flurry that surrounds the multiple offer process.  When they succeed sometimes they hesitate and wonder if they did the right thing.

 

Know that it is normal to feel this way and once you absorb the reality that you are buying a property, you will likely have no further second thoughts about it.   Relax, take a deep breath, and you should be just fine.  And congratulations on having your offer accepted.

Think Long Term When Buying Real Estate

Dear Monica:  I am in the market to buy a rental property but real estate prices have gone up so much that I am thinking I should wait until the market cools a bit before buying.  What would you advise?  Jonathan C.

 

Dear Jonathan:  We have seen prices rise considerably in many Bay Area communities in the past 5+ years.  But there is still strong demand and companies are building large office spaces up and down the Peninsula.   All of those who work in the buildings want to live as close to them as possible or take public transportation if it works well for their commute.  So here is what I believe and what I tell my clients.  You don’t need to wait to buy, but if you buy,  you should have a long term plan for the property.  Quick turnovers don’t work in this market.  But a buy and hold policy does work, if you hold it at least 5 – 7 years.  Our market will fluctuate from time to time but barring a larger correction this strategy is the best plan.

 

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