North Bay realtors reveal the upside of a downturn.
So, homebuyers aren’t on edge, jostling in your driveway like Best Buy zealots coveting the latest Nintendo offering. Is that cause for alarm? Should you be concerned? Nah. So say the ones who really know. From Sausalito to Cloverdale, Calistoga to Sea Ranch, North Bay realtors are quite pleased with today’s housing market. And once you see what they have to say, you’re likely to view some of the doom-and-gloom ruminations that have permeated much of the media in a new light.
If you have a four-bedroom, three-bathroom, completely remodeled home with a flat yard in southern Marin County, young, growing families will jump at the chance to take over your digs right now. If you’re selling luxury property in any number of North Bay communities, your property is hot as well. And even if you have a for-sale sign in front of a modest little tract home, your property will move, too—as long as you price it right and stage it well.
If you’re looking to buy, interest rates are near all-time record lows. And with the most easygoing market we’ve seen in almost a decade, the power is in your hands. You can negotiate. Closing costs? Brokers’ fees? A discount for the sagging fence you’ll need to replace? The classic car in the garage? (OK, the car might be a stretch.) Whatever you want, now’s the ideal time to ask.
The price is right
“The frenzy is over; we’re back in business, working in a realistic market with realistic pricing,” says Ted Horsman, broker/owner of two Re/Max offices, one in Santa Rosa and the other in Windsor. Across the board, his counterparts agree.
“It’s a very conducive market for buyers to get a fair deal. In softer markets where buyers could negotiate better, they had to pay more in interest rates,” says Kathleen Hilken, broker of record and general manager at Frank Howard Allen Realtors, which is headquartered in Novato and has offices throughout the North Bay. “Today they get to negotiate a decent price, and they get phenomenal interest rates. Often, when we’ve had a slowdown in our market, the job market has also been sluggish. Our job market is very strong. Additionally, for investors, we have a very strong rental market with a low vacancy rate.”
According to Petaluma-based Clark Rosen, broker associate with 100-year-old Coldwell Banker, the downturn affecting most of the country has impacted the North Bay, too, but the consequences haven’t been dramatic. “In most price ranges, values have dropped from 7 to 10 percent from their levels of 18 months ago. That’s a significant but not drastic correction—especially considering the years of steep appreciation leading up to 2006,” he says. “There’ve been substantial drops in asking prices that were inflated from the start. What we see lately are potential buyers who’ve been waiting on the sidelines and are now jumping in to buy properties that have dropped enough in price. So it looks like the correction has reached a level that stimulates new activity. Inventories have been shrinking recently in most local markets. That’s another sign the drop is arresting.”
Rosen doesn’t think this means prices will be bouncing back up any time soon. “It’s more likely we’ll be on a plateau for the next few years, probably with a few dips and swings, but the next big upsurge may be four or five years away.”
Todd Bertolone, an owner of Santa Rosa-based Bertolone Realty, which was founded by his father and grandfather in 1958, thinks people who “bought homes in the last two years with little to no money down and are trying to sell now may be a little nervous. But people who bought in the last two years and are planning on staying in their home for a while…those people will be fine.”
Realtors Jeff and ShaSha Schween are aligned with Coldwell Banker in Santa Rosa. They’ve participated in many multiple-offer situations in the past year. “The market we’re in is really quite good; it’s just a different rhythm from what the general population has gotten used to in the last few years,” says Jeff. “We find ourselves certainly working harder to grow our business and sell our listings, but our business model of working by referral has better prospects for growth during times of normalcy and uncertainty.”
“No investment market, whether it be real estate or the stock market, can withstand double-digit appreciation and growth for years, indefinitely,” ShaSha adds. “Statistically speaking, the up years outnumber the down years significantly. Homeownership is a great investment. Speculation or gambling in any investment is always risky and contributes to corrections in those markets.”
Mark McLaughlin, president of Morgan Lane Marin Inc., has offices in Ross and Belvedere and (you guessed it) mentors a team of luxury property specialists—due to the high prices all Marin properties command. He says, on average, Marin County homes priced at more than $1 million have not lost value from 2005 to 2006. “Volume in the market is down approximately 30 to 35 percent, but prices have held,” he says. “The major difference from 2005 to 2006 is little to no appreciation.” He adds that property markets are more sensitive to home pricing than interest rates. “Buyers are hesitating because they don’t have confidence that the current adjustment has stabilized.”
The folly of such thinking, Rosen says, is that “one knows where the bottom of the market is only with hindsight, and then it’s too late. When prices are perceived to be on the rise, the crowd jumps in again, adding more competition and fueling more increases. Even if prices fall further, a slight increase in interest rates could make the cost of ownership greater than at today’s prices.”
Rebecca Celli, a sales associate and realtor with Frank Howard Allen in Petaluma, believes short sales have been a factor in driving prices down, especially in bedroom communities that attract buyers because of affordability and convenience more than ambiance. “This is a new phenomenon that’s happening because of all the creative lending that’s happened in the last eight years or so,” she observes. “Now people are upside down without any equity to pay agents and pay off the loans because they didn’t see any rapid appreciation. That’s why it’s a short sale: The house is worth less than the loan. The short sales are creating drama, but sooner or later we will get back to real life driving real estate: marriage, birth, death, divorce, job transfer, family. Almost all my clients moved for those life reasons, and the rates didn’t have any impact. They don’t ask, ‘Is now a good time?’ They’re moving anyway.”
Ron Wareham, owner of Hurd Real Estate in Santa Rosa, says, “The three Ds drive most real estate sales: death, divorce and debt. And in slower times in particular, that’s what creates most sales, as opposed to people moving up or down or out of the area.” He advises sellers who are really interested in moving their properties to respond with a counteroffer if bids come in below their asking price. “You have to be at or below market to get your home sold, and it has to sparkle,” he adds. “It has to be squeaky clean and have the granite counters and so on—all the nice things people are looking for.” And when it comes to buying, he asks rhetorically, “When’s the best time to plant a tree? Twenty years ago. When’s the next-best time? Today. The same is true of real estate. You might as well buy. If you can afford to do it, you should.”
Fred Ehmann owns Windermere Wine Country Properties, which has offices in Santa Rosa and Healdsburg. He thinks shrinking new-home inventory due to builder cutbacks is helping to absorb the larger inventory of resales on the market. “Sonoma County is one of the most desirable places to live. Clients seek us out and choose to live here,” he notes. “We have a very high second home/vacation home market, which provides for a balance in our marketplace.
“The sad thing is, negative press starts out with a sensational headline only to contradict itself farther into the article. Unfortunately, most people give credibility to the headline and don’t bother with the facts.”
The actual number of home sales hasn’t changed and prices are relatively stable, reports Peter Rodgers, Frank Howard Allen’s director of marketing. “The biggest reason things have slowed down is that there’s more inventory on the market,” he says. ”Buyers can take more time to look for and find what they really want. They don’t feel the pressure to compete in the frenzied way that was common in the past several years. More choice equals more contemplation and naturally takes more time.”
Mike Silvas, president and CEO of Morgan Lane, a boutique brokerage with offices in Napa, Sonoma, Marin and Monterey counties, says the outlook for the North Bay is excellent because “communities are generally small and upscale with desirable lifestyles, schools and environments.” He anticipates interest rates will remain within 1 percent of current rates in the coming year, and that most people will have adapted and the market will level out. However, he advises, “If you don’t need to sell, then don’t.”
Wayne Cook, a realtor with Creative Property Services in Sebastopol, says, “It’s pretty interesting to see, on a daily basis, that we often have as many properties that have gone contingent, pending or sold as we do new properties on the market,” he says. “I think we’re heading toward a balance, if we’re not there now. I like to encourage my clients, who are often long-term county residents, to not get too hung up on the number they’ve been psychologically enjoying as their value. They’re still doing pretty well if their property’s worth what it was in 2004 or 2005.”
The view from Napa is rosy, according to Philip Grady Smith, broker-associate with Fieldstone Real Estate Group in downtown Napa. “Napa will always be a strong market because of the location. People all over the world want to have a piece of dirt in the Napa Valley,” he says. “And if the government will keep their hands to themselves, the mortgage rates will stay low. It will have a positive effect on real estate.” There’s no need to worry about declining prices,” he adds. “The value is still there; the prices need adjusting. Real estate is still the best investment over time. I know families who have put their entire family through college by refinancing their home. There’s no other asset that can give a person so much leverage in life.”
In addition to the eternal ebbs and flows of inventory, interest rates and home prices, today’s realtors also work in a shifting landscape due to new developments in technology.
Staying current
Reaching into his pocket to pull out his cell phone, Wareham says, “What we consider to be a cell phone is now actually a digital device; they have five, six or more functions,” he says. “My Treo is a phone, but it has a camera, contact manager, calendar and the complete MLS. I can store documents, email, play music and send pictures. It’s a virtual multitasking device, so you can be in touch when you’re not in the office. And if you do any traveling, you take it with you. It’s your office away from the office.”
Beth Robertson, associate broker with Century 21 Classic Properties in Rohnert Park, illustrates this in talking about a couple who, while house hunting, went out of town for a weekend. “The day they left, the perfect home came on the market for them in Healdsburg,” she recalls. “I quickly emailed them 20 or more photos. They looked at them on their phone. I prepared an offer, which they looked at on their laptop, printed at their cabin in the Sierras and faxed back. I scanned the offer and emailed it to the other agency. The offer came back via fax, signed and accepted.
“When they got back two days later, we looked at the house and got both a home and pest inspection delivered to us via email from the inspectors. The inspectors were paid by electronic check. The lender drew the documents electronically and sent them to the title company. Of course, we had received the preliminary title report via email too…. Computers are the heartbeat of the real estate industry today, and the younger agents come with these skills while the rest of us are learning them as we go along.”
Playing smart
Charles Moore, chief executive officer of McGuire Real Estate, which has offices in Mill Valley, San Francisco and Burlingame, says that in this changing real estate market, “companies must focus on two important areas: cash flow and agent education. Although prices seem to remain the same or slightly increase, the number of sales and the total sales volume is down approximately 25 percent in Marin County. We all must scrutinize our expenses appropriately. Fortunately, McGuire is a debt-free company, and we prepared for this adjusting market from the very beginning.”
When Bertolone joined his family business in 1989, he thought work would come easy for him, given his last name. But he was surprised. “Potential clients would congratulate me for getting in the business and wish me luck but would choose rather to work with my more experienced dad,” he recalls. “What I learned was, people kept coming back to work with my dad because they thought of him as a very intelligent, honest, hardworking and fair realtor. I learned that if I wanted to be a successful realtor, these same attributes would be keys to achieving my goals.”
The Schweens estimate it will take newbies about three years to build a steady stream of referrals and income in the real estate business.
Santa Rosa-based realtor Dave Carpenter works with Coldwell Banker and specializes in the luxury market. “We live in one of the greatest places on earth, and regardless of our percent of increase or decrease of appreciation in the short term, there are always going to be market opportunities that will be extremely beneficial if you’re not paralyzed by fear of short-term fluctuations,” he says. “It’s never a good time to become a realtor if you have doubts about your chances for success. A good time to become a realtor is when you’re always ready to learn, work harder than anyone else and decide that you’ll succeed instead of hope you will.”
He reminds people of the 30-year rule: “Every 30 years, add a zero to the value of your real estate. The rule means that if you bought a home today for $500,000, in 30 years it will be worth $5 million. This rule goes back to the 1840s and continues to hold true.”
“Where else can you go skiing at Tahoe and, in a matter of hours, drive to the beach and see the seals and surf?” Horsman asks. “You can go to San Francisco to watch ‘Phantom of the Opera,’ have dinner and go shopping and come home to the peace and tranquility of the North Bay. It’s a kingdom unto itself.”
So, sit tight, sleep deep and enjoy your little plot in paradise.
