Thanks Martapiqs for this areal photo.

I am often asked to speculate about the strength of the Bay Area real estate markets. My mantra is that in past down markets properties have transacted and the markets have continued to move inventory. A long term hold approach to real estate is always best assuming you believe in California real estate. There is no doubt that the credit crisis has slowed the markets, but where do we stand next to the rest of the nation?

I often find that the rest of the nation’s news of depreciation is counterintuitive common thinking that becomes false representations of our Bay Area markets.  For instance many buyers in our current market believe that the Bay Area’s home prices have fallen everywhere. This is false! It is my belief that this rhetoric enters the market through the national news, which often sets a tone for all of real estate even though we know that there are individual micro-climates in the Bay Area that have increased in value throughout the current national instability. Evaluating individual neighborhoods can be a block by block assessment in some Bay Area cities! This assessment is critical for buyers looking for value in our current market and trained experts who are transacting regularly in the market can make powerful assessments of these trends for home sellers and buyers.

I just read an interesting new study by Forbes Magazine that speculates about the strongest real estate markets in the nation. I was not surprised to see San Francisco as number 9 on the list with a city wide 2006 appreciation rate of 7.6% and a projected 2008 rate of 2.5%. The article speculates that our areas housing defaults will be a drag on our appreciation rates, but will not destroy our Bay Area real estate markets. It was interesting to note which other cities Forbes has ranked across the United States (Pittsburgh, Dallas, Seattle, San Antonio) as stable real estate markets in 2008.

As Curt has stated moving against the herd can be a powerful way to move. Take a look at average appreciation rates in the Bay Area. Historically when the real estate markets are slow and credit is only available to strong buyers, then for some the market may be ripe for the picking.

 
Thanks Hendo101 for this image of Northern California’s Point Arena Lighthouse

I just read an article posted on MSN about investing in real estate. It was entitled Real Estate Investors’ 10 Big Mistakes. Although the title sounds like another bubble bursting article, it was not. The article spoke about the philosophy of investing in real estate and how individual investors should act when making real estate investments. It made me think, have we begun to turn the corner on the current down real estate cycle?

I believe one of the signs that we have begun to cycle back towards a more robust market will be when buyers realize that there are good deals in the market. As I have posted in just the last couple of weeks, I have experienced many of qualified home buyers are getting good deals. I am seeing that qualified buyers are able to leverage their financial strength and are getting good value for their financial power in this market. This is very different from past markets were anyone who could fog a mirror could get enough financing to write a winning offer and also to financially hang themselves.

Don’t get me wrong, we still have mechanical problems that will continue to be a drag on the real estate markets. The liquidity crisis has drastically consolidated the number of lenders offering loans. This consolidation has a profound effect on controlling the supply, pricing and diversity of loan products available. This limits the number of buyers that are able to get financing. Yet, I have begun to hear lenders say this consolidation has gone too far and that it is cutting too many qualified buyers out of the market that would have access in a normalized market.

This week the Federal Reserve acted to cut the prime interest rate by 50 basis points (1/2%). This is evidence that not just the lending community is thinking things have gone too far. Even if the rate cuts will not directly effect the housing markets fundamentals, it is a signal to the markets that change has begun. The bulls rallied on Wall Street and the Dow Jones Industrial Average adjusted positively on the rate cut news by over 330 points.

So, what does this mean for buyers and sellers? It means they need excellent professional help to advise them in this ever changing market. For sellers the days are gone where a sign in your front yard brought 10 offers and more money than you ever thought possible. For buyers, the reality of getting good financial, mortgage, insurance, and real estate advice is more important than ever. Below is an excerpt from the article that inspired me to write this post. Bankrate spoke with established, full-time real-estate investors and with professionals, such as bankers, to identify the 10 types of traps into which real-estate investors most often fall. Item #3 on the list illustrates that successful real estate investors understand they need good help to make highly effective decisions. Might I add we offer all of our residential and investor clients a team of highly valued professionals that meet all the criteria below.

3. Playing Lone Ranger

A key to success is building the right team of professionals. At the very least, you need good relationships with at least one real-estate agent, an appraiser, a home inspector, a closing attorney (we do not use closing attorney’s in California) and a lender, both for your own deals and to assist with financing for prospective buyers.

In the remodeling and maintenance segment of the business, the team includes a plumber, an electrician, a roofer, a painter, a heating and air-conditioning contractor, a flooring installer, a lawn maintenance service, a cleaning service and an all-around handyman.

You can’t build a business as an investor if you’re spending all your time fixing leaky faucets and putting up ceiling fans.

Thanks Thomas Hawk for this picure of UC Berkelely’s Campus

Last Monday, the University of California at Berkeley received a gift of $113,000,000. The William and Flora Hewlett foundation has given UC Berkeley the largest single gift in the University’s history. The offer was given with the intent to keep UC Berkeley competitive with other private universities around the country.

Up until they received this gift, the public university struggled to compete with private universities that were receiving 20% per annum increases on their endowments. The state governments could just not keep up with the private money that other schools were receiving. The gift from the Hewlett Foundation is a challenge grant that will match other private donations dollar for dollar. This means once the challenge is met UC Berkeley will be infused with a total of $220,000,000 of capital for supporting new faculty positions. To fully understand the impact of this endowment, think about how it will make up a nearly 50% increase to the universities current $468,000,000 faculty chair funding.

So, how will this affect our real estate economy? This money will fund 100 new professors with competitive faculty salaries. It will infuse Berkeley with many long term well paid home buyers. New top tier Bay Area job growth is a good sign for the future of our local real estate economy. Many professors also work on new development projects for companies throughout the Bay Area and they bring new business ideas and development to the Bay Area as a whole.

Thanks Roboppy for this tasty image.

I just finalized a transaction in Campbell, California. The property was put into contract post credit crunch so it is a good estimate of the type of rate you can get on a jumbo loan if you have good credit and a stable job. Through the process of selling this home and working with this buyer, I found something I have not heard often in this market. There is a lot of opportunity floating around in all of this volatility.

The client purchased an approximately $1,200,000 home from a developer. The property was the last home the developer had to sell in this community. In fact, the home was in contract with another buyer and fell out because of financing issues due to the credit crisis. We negotiated with the developer and knocked the price down by over $100,000. We also negotiated that the seller would pay 3 points (approximately $30,000) towards buying down our buyer’s loan interest rate. Negotiations like this did not exist in our previous market. In terms of a buyers ability to negotiate, this is the best market in Campbell I have ever seen!

Well now, you may be asking, “What was the buyer’s rate?” The buyer financed approximately $1,000,000 on a 10 year fixed loan. We used the points (paid for by the seller) to buy the client’s rate down to 6.125%. This experience really made me think. My client’s rate ended up being lower then the average 10 year fixed rates (average rates were around 6.5%-6.75%) before the credit crisis.

This experience has convinced me more than ever that this is a great buyer’s market. Well qualified buyers in this market can negotiate with sellers like never before and still get great rates. It is highly uncommon in the Bay Area real estate market to get both the benefit of negotiation power and a good rate in the same transaction. Undoubtedly, you will continue to hear many news outlets speak of the crisis and how volatile the market is. But, remember the facts in this case study the next time you hear the media speculate about the national or Bay Area real estate markets. I know one thing is for sure, some buyers are using this turmoil to get tremendous deals in this market.

 
Thanks Mrs. Reed for this photo.

I just closed a home for a spectacular deal. The home was as we say in the industry, “real estate owned.” A better name might be bank owned, because the property was owned by a large bank which had acquired the property in a foreclosure.

What really made me think about this transaction was a call from a local appraiser who was looking for comparable properties in the neighborhood and said, “Why did this sell for so cheep!” This call coupled with my knowledge of the current liquidity crisis made me think. Are banks so worried that they are giving properties away for bargain basement prices or was the property just marketed poorly at a bad time in the market?

The property in question is located on Skyline Boulevard in the Oakland hills. It was sold just a year ago for $1,900,000. The lore behind the property is that both of the owners who bought the home in March of 2006 passed away shortly after acquiring the home and the property was soon foreclosed by the bank. At the time of the foreclosure there was $1,700,000 left on the mortgage. Soon after the foreclosure the bank who now owned the home sold it to another larger bank for $1,600,000. My best guess is that they took this $100,000 loss to get the home off of their books quickly. The property was then placed on the market July 17, 2007 priced at $1,574,900. We saw the property 4 days after it hit the market and wrote an offer. My client just closed on the home for $1,520,900. That is a $399,100 difference from the properties sales price of $1,920,000 on March 1, 2006. The banks took an accumulative loss of $179,100 on the deal.
So, why would the banks take such a large loss on a 2 acre 4,000 square foot premier property with Bay to Bay views that was in great condition? Why would they agree to this loss so quickly, just 4 days after placing the home on the market? The most interesting thing is the bank received a full price offer on the property, just days after we got it into contract. So, what made the bank so restless?

I think there is an accumulative effect of 2 different things going on that are making some real estate owned properties a good bargain. One answer is that the mortgage liquidity crunch has scared banks into making rash spur of the moment decisions. Banks do not want homes on their books, especially in a market where they are being highly scrutinized by Wall Street investors. Second, banks are not good at selling property. It is not their business and often banks structure their foreclosure departments in a way that negatively affects the sale of their homes. Basically, they are not good sellers, because they are susceptible to market changes, regulation and their lack of proximity and neighborhood knowledge makes them poor assessors of property values.

In other words banks are structured to deal with money not real property. Thus their selling philosophy has not been refined and is often not powerful. Each bank will handle their foreclosures differently and not all real estate owned homes are good deals… But, I now have proof that some lenders will let homes go for true bargains.

Thanks to pbo31 for the photo

The National Association of Realtors has just adjusted its forecast for the real estate market downward. This comes off of the June 5th news, that Federal Reserve Chairman Ben Bernanke told a group of bankers via satellite, “On average, over coming quarters, we expect the economy to advance at a moderate pace, close to or slightly below the economy’s trend rate of expansion.” This news was contrary to the expected interest rate cuts the markets was expecting this summer, and residential interest rates went up sharply this week.

So, how does this all relate to the Bay Area real estate climate. I would first, recommend you read my past post entitled California Real Estate Data Study Part #2. This will show you that historically interest rate hikes have caused stagnation in our Bay Area markets, but not a tremendous amount of depreciation. Nationally I expect we will continue to see subsidence in the real estate market, but locally I expect this news will have a more moderated effect.

But, the proof is in the pudding, so check out Curbed SF blog’s opinion to see how San Francisco is doing. There article illustrates nicely that our high-end desirable property market still has some legs.

Take a look at some new heat maps released by Altos Research. They show varying amounts of price reductions. Brightest red is 50% price reductions the darkest is 10%. The darker the red the less price reductions and in essence the stronger the market in that zip code. Looks like Alameda and Contra Costa counties most affluent neighborhoods are still very strong for spring sales.

It is interesting to note that it seems as you move away from the heart of affluent neighborhoods, the reductions get worse. This is the pulling in effect of a slowing market. Basically, buyer’s would rather live closer to where they work (which is most likely an urban center like San Francisco). If they can afford to live in Albany then why live in Antioch? As the market slows more inventory becomes available closer to the urban centers and this weakens outlying areas.

As we have noted with many of our clients each home is individual and it is a must that it be evaluated individually for sale. In other words, seeing your property on a heat map is not enough to declare that it is liquid or illiquid.

Maybe the owners of 4355 Harbord Drive would like to call one of these agents for some advice. At least Zillow has increased the properties value by $147,000 since we last wrote about this home back in February. But wait… Our market has been fairly flat since February?

What will they ban next? Maybe the word faultyzestimate?

The S/P Case Shiller home price index numbers were posted on May 29th. Looks like the San Francisco and Bay Area numbers were up. See the graph here.

As per the Macro Markets website, here is the definition of the S/P Case Shiller Home Price index:

The S&P/Case-Shiller® Home Price Indices are designed to be a reliable and consistent benchmark of housing prices in the United States. Their purpose is to measure the average change in home prices in a particular geographic market. They are calculated monthly and cover 20 major metropolitan areas (Metropolitan Statistical Areas or MSAs), which are also aggregated to form two composites – one comprising 10 of the metro areas, the other comprising all 20. The indices measure changes in housing market prices given a constant level of quality. Changes in the types and sizes of houses or changes in the physical characteristics of houses are specifically excluded from the calculations to avoid incorrectly affecting the index value.

This uptake in the index has been deemed small, but I would say it does reflect the large amount of positive activity we have been seeing currently in the market.

Thanks Beej Jorgensen for this photo.

People say that the market is sliding? Check out this article in the Marin Independent Journal. The median single family residence in Marin just broke $1,000,000 for the first time in history.

This means that more then half of the inventory that sold was over $1,000,000. Marin is now the first county in California to surpass $1,000,000 detached single family residence median home price. Looks like some counties are on the rise, while others are struggling. Even condos in Marin zoomed upwards with double digit gains, while other counties saw losses.

I believe we are now seeing a true buying opportunity for many different Bay Area neighborhoods. Rates are still historically very low and the general market consensus seems to be changing from downward trending to a more normalized market. In fact, I am sure that many buyers in Marin are being priced out of the market by rising interest rates and rising median home prices.

Most people assume the offer with the highest price wins. In Bay Area real estate nothing could be further from the truth. Why you ask? This is because there are two basic parts to a real estate contract, price and terms. If you win an offer based on terms then you may not have offered the highest price.

Let’s take a quick and simplified look at why the terms of a contract are often more important then the price. Hypothetically let’s say that two contracts are submitted on a single property. Offer #1 is submitted at $1,025,000 with a 3 day inspection contingency and a 3% deposit. Offer #2 is submitted at $1,000,000 with no inspection contingency and a 3% deposit.

An inspection contingency protects a buyer’s deposit and makes the California Association of Realtors Residential Purchase Agreement an option to buy. The seller now has a dilemma. Offer #1 allows for the buyer to drop out of the contract or negotiate price and terms for 3 days with no risk to the buyer’s deposit. Offer #2 is $25,000 less, but if accepted immediately puts the buyer’s deposit at risk. In this situation the seller is confronted with assessing what an inspection contingency is worth.

At this point in the negotiation a Seller has only 3 options. The seller can decline all offers, counter 1 or both of the offers, or accept one of the offers. First, if a seller really does want to sell, then they probably will not decline all offers. Second, all good real estate agents know that you should not counter a buyer’s inspection contingency. It is legally too dangerous to deny a buyer their right to investigate a property (this is one of the reasons why an offer that is submitted with no inspection contingency is powerful). The seller could counter offer #2 up to the $1,025,000 price, but they could also risk alienating this buyer and losing them all together. I have witnessed sellers that have lost great offers by making aggressive counter offers. So we are left with 2 options… Take offer #1 or take offer #2. Ultimately many sellers are willing to take a lesser offer that is more likely to close. For if offer #1 backs out of the contract then offer #2 may be gone and the seller may be faced with no alternatives.

The reality of our hypothetical example above is that the situation is rarely this simple. In the Bay Area there are often many more then just 2 contracts (I just witnessed a property in El Cerrito, California that had 31 offers) on a single home. The example above also simplified the contract to 3 terms. In reality there are many more terms to consider when writing an offer.

Ultimately, finding an exceptional real estate agent and consulting with them on how to approach writing a powerful offer, can save you money. It is always important to make sure your agent is adequately protecting your interests when writing an offer. Please note that this article does not advocate writing offers with out inspection contingencies. It is always important for buyers to have adequate time to perform any and all inspections deemed necessary before purchasing a home. This hypothetical example is solely used to demonstrate that terms are an extremely important part of an offer.

Thank you Casey Serin for this photo.

As our market changes we now have new additions to our real estate vocabulary. Just a year ago the term, “short sale” was not even a word on our terminology radar. So, it is not surprising that many of my clients are now asking, “What are short sales?” Maybe, more importantly can short sales be a buying opportunity?

A short sale is when a property is sold for less then the debt owed on it. It is usually done as an owner’s last resort for liquidating a property before a debt holder begins the foreclosure process. Short sales require the seller to come up with money at close of escrow to cover the difference between the debt owed on the property and the sales price.

So can a short sale be a deal for a buyer? The answer is most short sales are more complex and harder to negotiate than a typical real estate transaction between a buyer and a seller. Often when a sale is short, the seller does not have sufficient funds to come up with the difference. This brings the bank in to the picture. Banks do not like to lose money, and in our current robust market most banks are stiff negotiators. Banks are usually tougher to deal with in a negotiation than an individual seller. This is because they have capital and corporate structure to rely on when negotiating. They have more power than an individual to wait for good offers and withstand low-ball offers. Often if a bank has completed the foreclosure process they will want more money for the home than the owner. This is due to the high cost of the foreclosure process.

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In the Bay Area the word gentrification is often seen as a blessing by some and a curse by others. West Oakland has long been a neighborhood in which redevelopment has been proposed. Yet, even in our recent hot real estate market, West Oakland has still not seen a broad transition. There are many developments that have scraped the boundaries of West Oakland, but none have truly breached its borders to create a sweeping change.

The San Francisco Chronicle has recently written an article on a newly proposed rezoning that would turn many of the industrial neighborhoods underutilized parcels into towering 30-story luxury apartments and condominiums. This seems like a broad change that could have a profound effect on West Oakland’s industrial past.

Many people feel that blurring the zoning laws will create problems for the city and could possibly lessen the number of jobs in Oakland due to pushing light industrial companies out of the area. Opponents to the change include Nancy Nadle the current city council member for the West Oakland district. Residents seem to welcome the proposed development, citing that Emeryville has made similar zoning changes and that this city has seen tremendous community and business development that West Oakland needs.

I think that if the development is done thoughtfully and appropriately then West Oakland and its residents will benefit from the urban renewal. Creating new modern spaces for living and doing business in West Oakland will create new jobs opportunities and increase property values in the area. The trick is getting it right. What do you think about such proposed projects?

There is a new real estate development project gearing up in the city of Berkeley California. A less then 1 acre parcel of land has the potential to be a $40,000,000 project. The project will include 100 condominium units that will be developed atop 12,000 square feet of retail space.

The proposed project is located at the corner of Ashby and San Pablo Avenue. Escrow recently closed on the lot, which is now owned by Rawson, Blum & Leon a San Francisco based development firm. A partner in the project is Memar Properties of Oakland. The project will be designed by KAVA Massih Architects located in Berkeley. This will be an exiting new development to watch, with a proposed ground breaking in the Fall of 2008.

News of the story was noted in the East Bay Business Times, globest.com, and free-press-release-center.info.

The fact is the real estate market will go up… Then it will go down… Then it will go up again… Then it will go down again… Thus I try to stick to the facts when speaking about the real estate markets.

I recently read an article about how hot our market will be in the spring. It came from the San Jose Mercury News Square Foot Blog in an article entitled, California Housing Downturn May Be Mild. I agree that our market will most likely have a robust year, but it is interesting to see that the media just picked up on this. We have been seeing multiple offers on many properties for the last 2 months. For more information about why the media is behind the real estate curve check out, Evidence of the Media Being Behind the Real Estate Curve.

The long story short is that the Bay Area real estate market goes up and down. Go figure? That over the long term real estate in the Bay Area is driven by the lack of supply for the copious amounts of people that want to live and work in California. We also have higher paying jobs then the national average. So, go figure that our prices are also higher then the national average. Here is an interesting fact, that if California’s economy were ranked as a nation then it would be ranked between the 6th and 10th largest nation in the world. So, when the negative news has got you down or the positive news has gotten you jazzed realize that California is truly unique and its real estate climate is unique as well.

The abandoned Oakland Naval hospital (for an interesting photo of the site from 1946 click here) is a very controversial topic these days. It is in the heart of one of Oak Knoll one of Oakland’s most favored neighborhoods and it is the site of one of Oakland’s largest proposed real estate developments. The developer SunCal Cos. of Irvine has set out to build 960 homes on the site.

The controversy is not just the development, but the developer wishes to put $16,000,000 homes atop the prized Oak Knoll ridge. Many neighbors had wished that the ridge line would not  be compromised by the 170 acre project. The project is being designed by well known architect Peter Calthorpe.

The developer has already made some major concessions to the city, including paying $6 million to move and upgrade the Seneca Center, which serves troubled youth, into a new school on the parcel. They will also have up to 72 units of affordable housing, 160 units of senior housing and 50 acres of open space designed in to the project.

The project is moving quickly. The proposal goes to the city planning commission tonight. The homes price’s will range from $700,000 to millions of dollars for mini-mansions over looking the Bay Area. Demolition of the old Naval hospital is expected in late summer or early fall.

The project is expected to bring 1 billion dollars in revenue to the city of Oakland. The city is planning on the project bringing much needed revitalization to East Oakland and to breathe life into the neighborhoods shops and restaurants.

The news was reported in the San Francisco Chronicle. This will be an exciting new project to watch develop.

If you have not already noticed, Zillow was on the cover of Fortune Magazine. Lately, Zillow seems to be the worlds most effective PR machine. There is also a very different article in the Wall Street Journal today that sites Zillow’s inaccuracies. I recently had a run in with an inaccurate Zillow Zestimate that I thought would be fun to share.

Above are two Zestimates I performed using Zillow on February 13, 2007. The two properties are right next door to one another. 4347 Harbord was sold in April of 2004 for $1,152,000. 4355 Harbord was on the Market and recently expired going unsold. I have physically seen the inside of both properties.

First, I can tell you that the Zestimate on 4355 Harbord is inaccurate because there are approximately 172 livable square feet that are not accounted for in the public records and thus they are not accounted for on Zillow’s site. The real square footage of the property is approximately 1,900 square feet. This has long been one of Zillows major problems that they will have to fix in order to make their Zestimates more accurate. Much of the public records in the Bay Area are incorrect. Zillow’s Zestimates rely on this data. While I was visiting the property I also read the disclosures. The house was pretty clean, but don’t ask Zillow about disclosures. Their Zestimates do not take property inspection reports and seller disclosures in to account. The moral of this story is that if you put garbage in to an equation you get inaccurate garbage out. Zillow has attempted to ameliorate this issue, by allowing users to alter their home’s data on their site. Would you trust a seller to accurately post their data? If you do then my 10,000 square foot home just went up for sale!

Second, if the square footage of these two homes is now almost identical, how can there be a $600,000+ difference in the Zestimates. My guess is that Zillow is weighting the more recent sales data of 4347 Harbord that sold for $1,152,000 in 2004. It is important to note that Zillow’s Zestimate is a complicated algorithm. An equation that is not public knowledge might I add. No bank would accept the validity of an appraisal if they could not follow the logic behind the report. Yet, Zillow is feeding the public data that is faulty all the while leaving their evaluation methods shrouded in mystery.

Third, Zillow is claiming that they can address a home like a stock. Check out the thirty day change above. How could one home go up by $110,201 in the last 30 days while the other one goes down by $30,782. For heaven sakes the two properties are right next door to one another. When we value stocks in real time like on Etrade, it is based on actual sales that are occurring every second constantly altering the value of the stock. Since most homes are not even sold from one year to another trying to evaluate price change every thirty days is crazy. Although viewing houses like stocks may be intriguing it is just not accurate. I will be the first to tell you your house is not an ATM and it is not a stock.

I am bringing this to your attention, because I viewed 4355 Harbord. I viewed the property disclosures. Their was nothing dramatic about the disclosures (another important piece of the value equation that Zillow knows nothing about). The property was listed at $930,000 and has now expired going unsold. If you are a seller you may want to visit Zillow’s site before listing your home and while you are at it check out my previous article, Zillow - How Inacurate Data Could Harm Your Homes Value.

My personal opinion is that if a company puts an exact price on a home that is so exact as to be quoted to the dollar (ie. the Zestimate on 4355 Harbord of $811,255) then they are influencing the market to believe that the stated price is the exact price. Even if they post a range of values below. If a company estimates a 30 day trend, they make themselves look like an exert who has been tracking value over time. Even if their original estimate is completely inaccurate. Don’t get me wrong, Zillow is interesting and it is good for estimating general price data. I recently used Zillow’s heat maps to help a client who was moving out of the area and needed a general sense of neighborhood pricing in a city out side of California. It is good at generalities, just don’t rely on it for specifics.

I often find myself telling clients that the Bay Area is full of individualized real estate micro-climates. With buyers I am always hoping for bloated inventory and
inefficiencies in different local markets that can be used to minimize their cost and maximize future property values. With sellers I am always looking for periods of slim inventory and positive market conditions to maximize their sales price and current value. Some of my clients are selling in one area and buying in another which makes their predicament all the more complicated.

There have been many times I have read articles and looked at data that makes our markets seem similar and flat. The reality is that the Bay Area is an amalgamation of complex micro-climates and that the job of a Realtor is easier said then done. Altos Research shows this trend in their real-time median price data graphs shown above. This is a great visual representation of how 6 different Bay Area cities median price data can look. It is also a great representation of what a Realtor must navigate in order to serve their client’s best interests. These 6 cities are only several miles apart in terms of geographic location, but they are worlds apart in terms of market micro-climates.

It is evident that the media is behind the investment curve. I studied this latent effect in a college business course, when I reviewed a study that looked at all of the top tier money magazines (for example Money, Forbes, BusinessWeek, ect…). The study assumed that an individual bought in to all of the magazines combined hot stock picks. The study found that following this strategy would net you a worse than -200% return. Yuck! The interesting conclusion we came to was that by the time the information had been printed in the magazine, it was common knowledge. That the information contained in the article was useless, because it was common to everyone, and the market had already adjusted for the news.

So how does this relate to real estate? Every day we are bombarded with news information about our local real estate markets. For the past 8 months I was bombarded with information about how the real estate markets were slowing down. Being that I am a constant practitioner of selling real estate (through transacting I constantly have my finger on the markets pulse), I can say that by the time the media started talking about a slowdown, it had already happened. Behind the curve once again. This is important, because many times when I first meet with real estate buyers and sellers, I find they are relying or are influenced by what the media has to say. A generally bad decision unless you want to be behind the curve.

Above is a graph from a company called Altos Research. Altos Research provides real time real estate data to customers (Stay tuned, I am currently writing a posting that will use Altos Research’s data to show how individualized neighborhood real estate markets are very different from each other). On their home page they show the above graph, which I thought is an excellent illustration of the news media being behind the real estate slowdown curve.

How do you estimate the market? How do you get your market news? Let us know what interesting uncommon information you rely on.

The University’s ambition to build a 125 million dollar new stadium has hit a snag. Over the last year I have witnessed numerous postings about saving Berkeley’s oak trees from the wrath of UC Berkeley’s new stadium bulldozers. It appears the trees, neighbors, and city officials may have won a major victory.

On January 29th Bloomberg.com posted that the Alameda County Superior Court Judge Barbara Miller issued a preliminary injunction barring the University from removing the trees. Barbara Miller cited that the removal of the trees would cause, “irreparable harm.” It currently looks like the city of Berkeley and the environmental groups will likely succeed in blocking the universities construction. You can see more about the cities position on this conflict at the city of Berkeley’s web site.

The New York Times and Monterey County Herald also noted that the project was challenged not only on the basis of the oak trees, but also based on the Hayward fault that would bisect the proposed project. The University maintains that the project is seismically safe and that the new stadium is a big improvement over the current structure. It will be interesting to see if the University will continue the fight for this site, or if this injunction will force them to identify another location.