Setting Expectations, Cash Transactions, Median Prices, and More
I was reading the National Association of Realtors latest market update from two weeks ago, and found some interesting facts.
Investors2 accounted for 22 percent of purchase activity in August, up from 18 percent in July and 21 percent in August 2010. First-time buyers purchased 32 percent of homes in August, unchanged from July; they were 31 percent in August 2010.
All-cash sales accounted for 29 percent of transactions in August, unchanged from July; they were 28 percent in August 2010; investors account for the bulk of cash purchases.
Pretty impressive that nearly a third of all residential transactions completed in the United States in August were all cash. It means that a lot of savvy investors are seeing tremendous value in purchasing real estate and perhaps we're near the bottom.
Contract failures – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price – were reported by 18 percent of NAR members in August, up from 16 percent July and 9 percent in August 2010.
It's so important that buyers work with an agent who understands the market and can help you set realistic expectations. Knowing before you write your offer that your property will appraise based on the recent comps (comparable closed sales) is an important part of doing your due diligence. I sold a home in San Mateo earlier this year and my clients knew that it would be the highest priced sale in the neighborhood for the last six months, and they were okay with that because they also felt it was among the best homes in the whole area. There were two other strong offers on the property that were very close to our offer, which confirmed my clients' belief that the home's value was there (it's always nice to know others will pay the same as you will). The appraisal came in about ten percent lower than the purchase price which meant they could only complete the sale by putting more cash down that they didn't have. And so, my buyers had a choice: ask the sellers for a major concession on price or a major credit towards their closing costs and risk them telling us to take a hike, or opt for a second appraisal and see if the value comes in and make a decision from there. My buyers felt the first appraisal was faulty and only took into consideration the "inferior" and much smaller homes that recently sold in the neighborhood since that's all the data that was there, so when they switched lenders and received the second appraisal back, it came in at the full value and they were able to successfully complete the sale.
The national median existing-home price3 for all housing types was $168,300 in August, which is 5.1 percent below August 2010. Existing-home sales in the West jumped 18.3 percent to an annual pace of 1.23 million in August and are 20.6 percent higher than August 2010. The median price in the West was $189,400, down 13.0 percent from a year ago.
Hard to imagine this when the median price of Burlingame, Hillsborough, and San Mateo real estate is so much higher...there is a high - yet so worthwhile - cost of why so many of us choose to live on the San Francisco peninsula: the weather, quality of life, sophisticated culture, phenomenal restaurants, an abundance of outdoor activities, and a healthy job market.