First Republic Bank’s Prestige Home Index indicates luxury homes in San Francisco had a strong finish to 2013. But some suggest that California’s high-end housing market is starting to see a slowdown.

Mark Calvey
Senior Reporter- San Francisco Business Times

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The Bay Area’s luxury home market is signaling a slowdown ahead even as prices late last year were still showing year-over-year double-digit increases.

First Republic Bank’s Home Prestige Index released Monday found that luxury home prices in the Bay Area and other key California markets are near records amid tight supplies of homes selling for $1 million and often more.

But it’s the commentary from real estate agents that set off alarms for careful followers of the luxury housing market. The commentary follows recent economic reports pointing to a national housing slowdown, which some blame on the extremely cold weather. The National Association of Realtors said last week that January existing home sales fell more than 5 percent nationally, the worst showing in 18 months. But if bad weather is to blame, some ask why were sales down 7.3 percent in the warm and sunny West?

In discussing First Republic’s latest quarterly figures released Monday, real estate agents in California’s luxury housing market are using telltale language of trouble ahead, with such phrases as “supply is plentiful” and the “market is solid,” while others see “buyer resistance” and “expect the market to level off.”

That type of talk could put a further chill on the housing market and prompt more home owners to put their properties on the market before prices fall.

Real estate agents say that pricing and demand for the limited supply of homes on the market is approaching levels last seen just before the housing market began to crater in 2007.

Earlier this month, Christopher Stafford and Terry Wright, both of Paragon Real Estate Group in San Francisco, sent an email to clients alerting them to “shifts in the San Francisco real estate market.”

“It is far too early in the year to reach definitive conclusions regarding substantive changes in the market, but there are indications of a number of shifts,” the Paragon agents said. “From the hurly burly on the street, the word is that the quantity of offers coming in on new listings is declining. Where a new listing might have attracted 10 or 12 offers last spring, three or four are coming in now; where three or four offers would have arrived, the seller is getting one.”

For those who don’t fully appreciate what the decline in offers mean, the Paragon brokers put it bluntly, “The amount of competition deeply affects home-price increases.”

“And, according to Broker Metrics, for every two listings that accepted offers in December and January, another listing expired or was withdrawn without selling.”

The Paragon agents see plenty of potential buyers checking out online listings and open houses, but more of them are first-time buyers who are “proceeding more cautiously.” Plus that group doesn’t come in with the buying power of home equity built up over the years.

“Though the market remains hot by any reasonable standard, by some statistical measure it is cooling,” the Paragon agents advised clients. “This may reflect a transition or only a lull before the spring sales season begins.”

On Monday Stafford echoed a frequently heard lament in Bay Area real estate circles, “There is no inventory.”

“It seems some of the heat has been taken off the market,” Stafford told me, adding that he views any references to the market “cooling” as overstating the case.

Those hoping that the Bay Area’s luxury housing market gets a big lift this spring might be disappointed as the affluent experience what Marcum’s accountants call “tax shock” as their higher 2013 tax bills must be paid. This segment of the market is also greatly affected by stock market performance, given how much wealth is created in the Bay Area through stock options and initial public offerings. The IPO market also helps set prices paid by acquirers of private companies. The tie between stocks and luxury housing is so strong that one real estate agent, when asked for his outlook on the region’s luxury home market, said, “You’re asking me to predict what the stock market will do.”

The traditionally strong spring housing market may see even more inventory come to market if home owners decide that they’ll get better prices by selling sooner than later.

On Monday, First Republic’s closely watched survey of luxury home values clocked in strong gains from a year ago, but more modest gains from the third quarter, especially when looking at the third quarter’s gain over the second quarter of 2013.

In the Bay Area, luxury home values in last year’s fourth quarter rose 12.4 percent from the fourth quarter of 2012 and 1.8 percent from the third quarter of 2013. That was just below the third quarter’s gain of 1.9 percent from the second quarter of 2013.

In Los Angeles, the fourth quarter’s luxury home values rose 13.7 percent from from a year ago and 1.3 percent from the third quarter. The quarter-over-quarter gain was down sharply from a 6.7 percent gain seen in the third quarter from the second quarter.

In San Diego, luxury home values rose 16.6 percent year-over-year and 1.3 percent from the third quarter of 2013. Again, that represented dramatic slowdown in price gains from the third quarter’s 6 percent increase from the second quarter.

San Francisco-based First Republic Bank produces the quarterly Prestige Home Index with Core-Logic Case-Shiller, a provider of automated property valuation services to the financial services industry. First Republic has tracked luxury homes since the bank’s founding in 1985.

The fourth quarter figures and analysis may provide a snapshot of rising luxury home values as the market was turning down.

“Luxury home prices again posted double-digit gains on a year-over-year basis,” said Katherine August-deWilde, president and chief operating officer of First Republic Bank. (NYSE: FRC) “Market conditions in California’s luxury communities continue to be very strong. Limited inventory, robust demand and low interest rates are driving prices higher.”

In Marin County, higher-priced homes saw gains.

“Going into the end of the year, homes $4 million and above finally picked up,” said Pat Montag of Sotheby’s International Realty in Mill Valley. “Prices are getting close to the peak of the market in 2007. We have very little inventory and that’s constraining the market.”

San Francisco also participated in the strong housing market last year.

“Prices continue to rise because there is so little inventory and so much demand,” said Mary Lou Castellanos of Sotheby’s International in San Francisco. “There are a lot of people who want to buy. The homes that do come to market generate multiple offers and offers over the asking.”

And new tech wealth is spurring luxury home buying on the Peninsula.

“From Palo Alto to Atherton, we are seeing offers 20 percent to 40 percent over the asking price,” said Pat Kalish of Alain Pinel Real Estate in Palo Alto. “It’s tech money as well as foreign buyers. From all indications, prices will keep increasing because the inventory is so low. If you’re a homeowner, this is one of the best times ever to sell.”

Hope springs eternal among those selling real estate.

Southern California also enjoyed a strong market as the stock market clocked in with one of its best years ever in 2013.

“The demand is incredible. It is much stronger than it was in 2006 at the height of the market. Homes that were selling at $10 million in 2005 and 2006 are now $20 million and $25 million. It’s astounding,” said David Mossler of Tele Properties in Beverly Hills.

Further south in Orange County Ron Miller of HOM Sotheby’s in Newport Beach told First Republic Bank that homes at $4 million are selling above year-earlier comps.

“The attractive properties are generating multiple offers,” Miller said. “I see some buyer resistance now and expect the market to level off.”

Even further south in the San Diego area, more signs of a cooling market are evident.

“We’re seeing multiple offers and offers over the asking for properly priced homes up to $3 million,” said Linda Sansone of Willis Allen in Rancho Santa Fe. “From $3 million to $5 million, the market is solid, prices are appreciating and supply is tight. For homes $5 million and above, there is plenty of supply, and prices are rising modestly.”

Sue De Legge of Sue De Legge Associates, also in Rancho Santa Fe, said home-price appreciation was driving the market.

“Rising prices are motivating more sellers to list their homes,” she said. “We expect more inventory to be brought to market in coming months.”

And as a reminder for those who missed Econ 101, rising supply is likely to put downward pressure on prices. One thing is certain: this spring’s home-selling season will be well worth watching.

Mark Calvey covers banking and finance for the San Francisco Business Times.

Article source: http://www.bizjournals.com/sanfrancisco/blog/2014/02/home-prices-san-francisco-real-estate.html?page=all

(Read More: Despite Rising Demand, Some Builders Slow Production)

Listings were down 17 percent in March from a year earlier, according to the association, with several factors affecting inventories. Millions of Americans still owe more on their mortgages than their homes are worth, and that makes it impossible for them to move without incurring major expense.

Others are watching home prices rise and may be waiting to see just how high they go before listing their homes.

Meanwhile, home builders, while trying to ramp up production, are faced with a lack of land, labor and materials. Single-family starts were at a seasonally adjusted annual rate of just 619,000 units, an improvement from the worst of the crash but far below historical norms.

(Read More: Map: Tracking the US Real Estate Recovery)

Regionally, the pending home sales index was unchanged in the Northeast from February, up 0.3 percent in the Midwest, up 2.7 percent in the South and up 1.5 percent in the West.

Existing home sales in March, based on closings, fell just under one percent in March. While higher than a year ago, home sales appear to have leveled off, despite this being the normally busy spring season.

(Read More: Government Mortgage Fix Is Failing)

Article source: http://www.cnbc.com/id/100683911

(Read More: Housing “Stuck” Due to Short Supply)

“We are pricing our homes and limiting the number of lots we’re releasing for sale in some communities to better manage our order volumes relative to our production capacity, and to maximize our profit from those communities,” wrote Meritage CEO Steven J. Hilton in the company’s quarterly earnings release.

Meritage is not the only one, as limited supply of new and existing homes pushes prices higher across the nation. It may seem counterintuitive to stop building in such a scenario, but apparently it is making business sense.

(Read More: Housing Recovery to Face Test as Builders Report)

“Many builders are starting to limit production,” noted Megan McGrath of MKM Partners. “I think raising prices is one part of the equation, but I also think there is the issue of limited labor and finished lots at play.”

With the housing crash so deep and prolonged, the big builders may have been caught off guard by the swiftness of new housing demand. Few predicting the inventory shortfall, and it is still unclear how long that shortfall will last. Builders are in the business of selling homes, but they also need to be in the business of staying in business and delivering to shareholders. If slower production amid rising demand equals higher prices, then that may just be the new normal.

—By CNBC’s Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

Article source: http://www.cnbc.com/id/100673946

The housing market in San Francisco is leading the country in growth with a large demand for housing and a limited supply of inventory. Latest statistics from San Francisco Association of Realtors are showing February year-over-year single-family home inventory dropped by 38 percent while condo inventory dropped 33.3 percent for the same period. In any seller’s market, buyers work hard to be more appealing in making an offer. This begins with an increase in offer price, changes to financing parameters, and occasionally, waiving contingencies in extremely competitive markets, such as San Francisco.

Contingency-free offers bring risks. This is especially true in a city where many of the homes are older. People are not requiring the same inspections, repairs and other safeguards put in place to protect the home buyer. The calculated risk can pay off for some buyers but others, whose financing requires these contingencies, end up losing in the multiple offer situations.

“Cash is still king. More buyers are not only submitting offers well over list price, typically in the 10 -20% range, but the market place is seeing an increase in contingency-free offers,” says Dahle. “This has made the buying environment even more competitive. What are the risks for the buyer with financing versus cash buyer and how does one mitigate those risks? Especially when the offer involves limiting or ditching the safeguards of contingencies? It’s called calculated risk. Each property is different.”

Only the most informed real estate professionals can guide you through the ups and downs of the San Francisco Bay Area real estate market, and Kirk Dahle has been doing just that for buyers and sellers for several years. A relentless advocate for his clients, Kirk is constantly networking with real estate professionals to find the best listings and to bring a property to market. Contact Kirk directly at sfkirk(at)gmail(dot)com or call 415.203.8638.

Read the full story at http://www.prweb.com/releases/2013/4/prweb10586144.htm

Article source: http://www.digitaljournal.com/pr/1165943

Developers are rushing to increase supply of multi-family apartments, as there are now more This even as single-family rentals continue to gain market share. Continued uncertainty in the housing market, tighter mortgage underwriting and weaker consumer wealth has pushed ever more Americans to rent; the foreclosure crisis forced others.

The boom in multi-family is already raising red flags.

“We are incrementally more cautious on the multi-family sub-sector, as we see a rising supply environment in 2014,” note analysts at Cantor Fitzgerald. “Although at this point, data indicate demand remains strong and absorption in check.

(Read More: One Overlooked Fact About the Housing Recovery)

Apartment demand increased “noticeably” in the fourth quarter of 2012, according to Reis Inc. This despite record-low mortgage rates and renewed faith in the housing market. Rents continued to rise, although at a slower pace than the previous quarter. They still managed to hit another all-time high, “propelled by strong demand, limited new supply growth, and a still weak for-sale housing market.”

The single-family housing market is rebounding off its historic lows, but the very limited supply of homes for sale gives cause for concern.

Low inventories are pushing prices higher, faster than expected. All-cash investors are pushing those gains, and in turn pushing out first-time home buyers. While non-investors are slowly moving back into the market, they are not arriving in the necessary numbers, and they are also not finding much to choose from.

(Read More: Home Builder Confidence Stalls)

Article source: http://www.cnbc.com/id/100388194

In the nine-county region, 8,579 homes were sold, up 14.2 percent from August 2011, according to DataQuick, a real estate service in San Diego. The median price paid was $410,000, up 10.8 percent from last year. It was the fifth consecutive month in which the median rose significantly compared with a year earlier.

It was the best August sales volume in six years, since before the real estate bubble burst and the credit market collapsed, according to DataQuick.

“The market is gradually moving toward normalcy,” said Andrew LePage, a DataQuick analyst. “It’s a slow, modest recovery that depends heavily on the health of the economy and how lenders manage the remaining distress.”

Tight inventory continues to push up prices, as buyers hoping to lock in record-low interest rates vie for a limited supply of homes for sale.

Akil Murali, 27, a Symantec product manager who has been house-hunting in San Francisco and the Peninsula, exemplifies the challenges faced by many buyers.

“I made quite a number of offers where there was a lot of competition and the properties went well above asking,” he said. “I lost out and never even got an opportunity to make a counteroffer. Recently I made an offer $60,000 above asking, but (lost out to) all-cash buyers who removed all financial contingencies, making them more attractive to the seller.”

‘Things are crazy’

Murali finally has a contract on a two-bedroom home in Foster City, where a previous offer fell through when the buyer didn’t qualify for a mortgage.

“Things are crazy,” said his real estate agent, Regina Puzon, Peninsula team lead agent for Redfin. “Some homes are getting 20 or 30 offers. I have a lot of clients upping their down payments and removing all contingencies to get their offers accepted.”

She and other agents said that many sellers are underpricing their homes to spur bidding wars – a tactic that was prevalent in real estate’s boom days. By contrast, “during the downturn, people were pricing houses for what they thought they would go for,” said Sandy Patel-Hilfery of Pacific Union International in Montclair.

There are also signs that inventory may be increasing, she said. “This week alone there were 50 new, good listings in Berkeley, Piedmont and the nicer parts of Oakland,” she said. “Ordinarily, I would have expected 30 new listings of nicer houses at this time of year. The agents are jazzed because everyone has buyers who are chomping at the bit.”

Homeowners who were sidelined by the downturn may be starting to list their homes for sale as the market recovers. “Sellers are finally catching on to the fact that there are buyers coming out in droves,” Patel-Hilfery said.

Regaining equity

As values slowly rise, some homeowners who were underwater are regaining equity, another reason they may now be willing to sell. Nationwide, 1.3 million homeowners who had been underwater returned to positive equity this year, research firm CoreLogic said this week. In the Bay Area, about 27,000 homeowners returned to positive equity.

The 10.8 percent rise in the Bay Area’s median price in August is in part a reflection of a different mix of homes on the market – more higher-priced homes and fewer bargain-basement foreclosures, LePage said. Sales of homes over $500,000 were up 23 percent versus last year while sales of those under $300,000 were down 6 percent from a year ago.

Bank-owned foreclosures accounted for 14.9 percent of resales in August – down from 25.7 percent a year ago and approaching the historic monthly average of 10 percent. Foreclosure sales peaked at 52 percent of resales in February 2009. Short sales – homes sold for less than the balance due on the mortgage – accounted for 18.9 percent of resales, slightly up from 18.1 percent a year ago.

Fragile equilibrium

The market’s fragile equilibrium could be upset by such factors as a deluge of bank-owned foreclosures or a downturn in the economy, LePage said. But foreclosure activity is clearly slowing, although millions of homeowners nationwide continue to struggle.

Last year, lenders repossessed California homes at an average of almost 14,000 a month, said Sean O’Toole, founder and CEO of ForeclosureRadar.com. Through August of this year, the statewide pace plummeted by one-third, to an average of just under 9,000 foreclosures a month. Mortgage delinquencies also are falling compared with a year ago, according to data from the Mortgage Bankers Association, which implies that foreclosures will continue to decline.

And mortgage interest rates, already hovering near historic lows of 3.55 percent on a 30-year fixed-rate loan, are likely to remain super-affordable, thanks to the Federal Reserve’s plan to buy billions of dollars of mortgage-backed securities announced Thursday.

Bouncing back in a big way

8,579

Bay Area homes sold in August

14.2%

Change from August 2011

$410,000

Median price in August

10.8%

Change from August 2011

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com

Article source: http://www.sfgate.com/realestate/article/Bay-Area-home-sales-prices-up-in-August-3867301.php

“I’m kind of worried – a thousand millionaires are going to be buying houses!” Connie Cao said as she and her family toured a home in a good school district here.

Her husband, Jared Oberhaus, was more optimistic. “Maybe sellers are sitting on their houses now, waiting for Facebook, and they’ll all come on the market at the same time,” he said.

It will be some time before the first Facebook shares are sold to the public, and even longer before Facebook’s employees are able to turn their paper wealth into cash and officially take their places as the newest members of the 1 percent. But the mere anticipation of the event may pour a little kerosene onto what is already a fairly hot local real estate market.

When Ken DeLeon, a Silicon Valley real estate agent, recently sold an 8,000-square-foot house to a Facebook employee, he said, the movers showed up at the client’s old 1,000-square-foot home and asked, “Did you win the lottery?”

Silicon Valley has been good to Mr. DeLeon, a former lawyer, who said he sold $275 million worth of homes last year, and who is finishing up a memoir about overcoming illness, injury and loss that he calls “Why Do Bad Things Happen to Sexy People?”

Even after some of the air went out of the housing bubble in the Bay Area in recent years, prices in the most desirable parts of San Francisco and Silicon Valley stayed buoyant enough to remain out of reach for most people. A report on 2011 housing prices by Coldwell Banker, the real estate company, found that 8 of the nation’s 20 most expensive markets were in Silicon Valley or the Bay Area. Mr. DeLeon said Palo Alto, with its limited supply, had remained remarkably strong – and could hit new peaks this year.

In recent weeks, he said, there have been signs that the market has been heating up more: 10 homes in Palo Alto sold for more than their asking prices last month, some by large amounts. Now, with the long-expected Facebook public offering a step closer to reality, Mr. DeLeon said he expected to see several things happen: some sellers may keep their homes off the market until they judge the time is right, some speculators may snap up old houses to tear down and rebuild, and some buyers may feel pressure to make offers before the deluge hits.

A steady stream of would-be buyers walked through the open house Mr. DeLeon held here on Sunday – a 2,325-square-foot home with a small backyard and an asking price of nearly $1.8 million. They checked out the sunken Japanese-style dining room and the heated concrete floors with leaf inlays. Many got lattes from the barista stationed in the backyard.

Mr. DeLeon said he already had plans to market to Facebook employees. One strategy: he intends to buy ads on Facebook. “It’s amazing how you can target them,” he said.

Article source: http://economictimes.indiatimes.com/news/international-business/facebook-millionaires-might-drive-up-real-estate-prices-in-the-already-expensive-area-of-silicon-valley/articleshow/11818491.cms

The company had initially announced an equity offering 4.5 million shares along with an option of an additional 675,000 shares to cover any over-allotments. However, Kilroy was later forced to increase the offer due to strong investor demand.    

The company raised net proceeds of $221.2 million from the equity offering, which it intends to contribute to its operating partnership Kilroy Realty, L.P. The operating partnership in turn would utilize a portion of the net proceeds to finance the $100 million acquisition of four office buildings in Kirkland, Washington. The remainder of the proceeds would be used to repay debt under the operating partnership’s unsecured revolving credit facility and for potential future acquisitions.

Kilroy owns, develops and manages a diverse portfolio of office, industrial and multi-purpose real estate properties primarily in the coastal regions of Los Angeles, Orange County, San Diego, greater Seattle and the San Francisco Bay Area. At December 31, 2010, the company owned 10.4 million rentable square feet of commercial office space and 3.6 million rentable square feet of industrial space.

Kilroy maintains an active multi-year development program focusing on the economically dynamic locations characterized by strong long-term demand, limited supply, and high barriers to entry. As such, most of the properties of the company are concentrated in the coastal submarkets of Southern California that offer both a vibrant economic backdrop for businesses and a unique quality of life for their employees.

Currently, we have a ‘Neutral’ recommendation and a Zacks #3 Rank on Kilroy that translates into a short-term ‘Hold’ rating. However, we have an ‘Underperform’ recommendation and a Zacks #5 Rank (short-term ‘Strong Sell’) for MPG Office Trust, Inc. (MPG – Snapshot Report), a competitor of Kilroy.

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