Thanks H Dickens for this flickr photo. 

I have recently written about how the current volatile market has created many windows of opportunity for buyers and sellers in the real estate markets. Yet, I had not realized how the current market volatility had also created an opportunity for inner family wealth transfer. I just read an article in the Wall Street Journal, titled With Shares Tanking Think About Gifting, which illustrates this situation. When investments are down and the value is less, then there may be an opportunity to transfer these assets to family with the strategy of building wealth once the market recovers. Many wealth advisors are also speculating that congress will reform the gift and estate tax system. When you put all of this together the current volatile market may be an opportunity to pass an estate onto the next generation at a reduced cost.

This year I have had several clients take action to pass property and other assets to their children. There is great opportunity in change if you have a competent team to help you assess the different possibilities and then advise you on the prudent actions to fulfill on your ambitions. 
 

There is no doubt that we are in turbulent financial times. Yet in volatile markets are opportunities. Katie and I are committed to producing a competitive advantage for our clients to achieve their financial and lifestyle goals. We do this by designing effective strategies for our clients, taking into account their specific situation, wherewithal and ambition. With our team of financial, investment, mortgage, insurance and tax advisors, we are able to help our clients take advantage of the unique opportunities made possible by the current real estate market.

We believe the main stream media has overemphasized the threats and tragic stories of owning real estate. This is not a big surprise since the media’s job is to sell news and entertainment. Therefore sensationalism works. But in this approach the media disregards any financial benefit associated with real estate and masks the new opportunities that are now possible for buyers and sellers. For this reason, we thought it would be helpful to share with you some of our recent transactions that demonstrate our ability to create and implement strategic plans that opened major opportunities for our clients.

• Last month one of our clients was able to purchase a million dollar home in San Francisco with a 15% down payment. (If you are wondering, being able to buy at that price range with 15% down in this market is just short of a miracle.) Our client was able to finance the purchase with a 1st mortgage for approximately 75% of the purchase price at an interest rate of 5.5%. For the balance, we were able to get him a home equity line of credit (HELOC) at prime minus 1%! This is a concrete example of the superior help provided by our financial & mortgage provider who was able to accomplish this in a market where the common media is saying mortgage rates are close to 7% and HELOC’s do not exist.

• Other clients of ours recently acquired their dream home a $500,000 home on 5 acres with an apricot orchard. This same home would have sold for close to $800,000 in 2005. We put together a strategy where they could sell their current home or rent it and keep it as an investment. After exploring selling their current residence they decided to rent it instead. This has increased their investment capacity while they have acquired a replacement property at an opportune time when values of real property are artificially low due to the liquidity crisis.

• This month we formulated an uncommon strategy for one of our clients who was looking to move into a larger home to better care for his family. We found that the San Francisco market he currently lived in was not nearly as affected as the market he wanted to move to in Concord. We sold his 1936, 1,450 square foot home in San Francisco for $566 per square foot and helped him buy a brand new 3,856 square foot home in Concord for $272 per square foot. The 2 properties are only about 30 miles from one another, but have a difference in cost of $294 per square foot. This strategy helped our client transition to a new home with a significant profit. Volatility means there is more risk in the marketplace. It also means there is more opportunity. In order to take advantage of these opportunities, we have found that it is necessary to have a powerful team of financial, investment, tax and real estate advisors. We and our network of professionals have demonstrated our ability to help our clients to take advantage of the current market.

We thank all of our clients that have transacted with us in the past and we look forward to helping many of you in the future. Please contact us if you need assistance or if you know of anyone else who may need our services. It would be our pleasure to assist them with the same care as we have provided you.

Following is an excerpt from John Mauldin’s “Thoughts from the Front Line” and a link to the entire piece. It’s lengthy but a great articulation of the current financial situation and proposed government intervention. It is in the form of a letter to Congressman Joe Barton, TX, a top Republican House leader. John Mauldin is a multiple NYT Best Selling author and recognized financial expert. He has been heard on CNBC, Bloomberg and many radio shows across the country. He is the editor of the highly acclaimed, free weekly economic and investment e-letter that goes to over 1 million subscribers each week.

It’s the End of the World As We Know It

Dear Joe,

I understand your reluctance to vote for a bill that 90% of the people who voted for you are against. That is generally not good politics. They don’t understand why taxpayers should spend $700 billion to bail out rich guys on Wall Street who are now in trouble. And if I only got my information from local papers and news sources, I would probably agree. But the media (apart from CNBC) has simply not gotten this story right. It is not just a crisis on Wall Street. Left unchecked, this will morph within a few weeks to a crisis on Main Street. What I want to do is describe the nature of the crisis, how this problem will come home to your district, and what has to be done to avert a true, full-blown depression, where the ultimate cost will be far higher to the taxpayers than $700 billion. And let me say that my mail is not running at 10 to 1 against, but it is really high. I am probably going to make a lot of my regular readers mad, but they need to hear what is really happening on the front lines of the financial world.

MORE

This is an interesting CNBC interview with Warren Buffet. He speaks about the urgency of the 700 billion dollar bail out, politics, Henry Paulson and his recent 5 billion dollar investment in Goldman Sachs.

NPR had an interesting podcast on the current economic crisis and the government bailout. If you want to give it a listen the link is below. It is interesting to note that the crux of the bailout is entangled in an assessment of value. It is coming down to what price will the government, and ultimately all of us taxpaying citizens, will pay for the bad debt that is currently on the balance sheets of those who created it in the first place.

Listen to the NPR podcast here.

Thomas Sowell provides an interesting and often counter-intuitive look at the economic issues facing the country.
Our Government Problem-Solvers
At election time, pols can’t help but “do something” — even if it makes matters worse.

By Thomas Sowell

We don’t look to arsonists to help put out fires but we do look to politicians to help solve financial crises that they played a major role in creating.

How did the government help create the current financial mess? Let me count the ways.

In addition to federal laws that pressure lenders to lend to people they would not otherwise lend to, and in places where they would otherwise not invest, state and local governments have in various parts of the country so severely restricted building as to lead to skyrocketing housing prices, which in turn have led many people to resort to “creative financing” in order to buy these artificially more expensive homes.

Meanwhile, the Federal Reserve System brought interest rates down to such low levels that “creative financing” with interest-only mortgage loans enabled people to buy houses that they could not otherwise afford.

But there is no free lunch. Interest-only loans do not continue indefinitely. After a few years, such mortgage loans typically require the borrower to begin paying back some of the principal, which means that the monthly mortgage payments will begin to rise.

Since everyone knew that the Federal Reserve System’s extremely low interest rates were not going to last forever, much “creative financing” also involved adjustable-rate mortgages, where the interest charged by the lender would rise when interest rates in the economy as a whole rose.

In the housing market, a difference of a couple of percentage points in the interest rate can make a big difference in the monthly mortgage payment.

For someone who buys a house costing half a million dollars — which can be a very small house in many parts of coastal California — the difference between paying 4-percent and 6-percent interest would amount to more than $7,000 a year.

For people who have had to stretch to the limit to buy a house, an increase of $7,000 a year in their mortgage payments can be enough to push them over the edge financially.

In other words, government laws and policies at federal, state, and local levels have had the net effect of putting both borrowers and lenders way out on a limb.

Yet, when that limb began to crack, the first reaction in politics and in the media has been to look to government to solve this problem because — as always — it was called the market’s fault, the lenders’ fault, and everybody’s fault except those politicians who created this dicey situation in the first place.

Markets often get blamed for conveying a reality that was not created by the market.

For example, the fact that “the poor pay more” for what they buy in stores in low-income neighborhoods is often blamed on those who run these stores, rather than on those who create extra costs through crime, vandalism, and riots.

If the store owners were making big profits, the big chain stores would be rushing in to share in the bonanza, instead of avoiding low-income neighborhoods like the plague.

Markets were also blamed for the Great Depression of the 1930s and New Deal politicians were credited with getting us out of it. But increasing numbers of economists and historians have concluded that it was government intervention which prolonged the Great Depression beyond that of other depressions where the government did nothing.

The stock market crash of 1987 was at least as big as the stock market crash in 1929. But, instead of being followed by a Great Depression, the 1987 crash was followed by 20 years of economic growth, with low inflation and low unemployment.

The Reagan administration did nothing in 1987, despite outrage in the media at the government’s failure to live up to its responsibility, as seen in liberal quarters. But nothing was apparently what needed to be done, so that markets could adjust.

The last thing politicians can do in an election year is nothing. So we can look for all sorts of “solutions” by politicians of both parties. Like most political solutions, these are likely to make matters worse.

— Thomas Sowell is a senior fellow at the Hoover Institution.

© 2008 CREATORS SYNDICATE, INC.

Thanks to Todd Derick for this flicker photo.

I just read an article on the Blown Mortgage blog. It had a graph showing new and existing home sales. Of course in this market both are down. In fact, the Blown Mortgage blog is claiming that the volume of existing home sales is down 15% from last year.

First, it is important to note that just because the volume of sales are down, it does not mean that values of homes are dropping. In fact this can be quite the contrary in certain areas. This is the case certain segments of the Berkeley California market where many listings are still transacting with multiple offers. Just a month ago I saw a home get 15 offers and sell at a price way above the average median price for a home of this size and location.

Second, I found it interesting that the existing home sales have begun to diverge from new home sales. In this graph since January of 1994 existing and new home sales tracked each other fairly steadily. Yet, we can see in January of 2008 that the curves are fairly far apart with the number of existing home sales beginning to level off while new home sales volume is still plummeting.

I speculate this is because many developers have stopped projects that were in the pipeline if they could. We have seen this effect in the drop in new home permits as well. We are seeing that the average homeowner in an existing home is still transacting while the investor/speculator is not. This makes sense for many home owners must sell and buy in any market. For instance, life ensues in any market and homeowners are relocated to new jobs all the time.

Does this indicate the bottom of the market? I am not sure, but it does indicate what we can expect from our market without a large volume of speculated dollars being spent to drive up prices. The air was let out of the real estate bubble for more then one reason. The constriction of financial liquidity in the mortgage markets started the deflation. Once the mood was set, the exit of speculators and investors, drove the market down further. Now we are seeing buyers who were over leveraged get caught in the falling values and go into foreclosure. I suspect that when we see the developers begin to return to the market and banks begin to loosen their guidelines, we will see a more robust market again. I also speculate that we should see a return in existing home sales before we see it in new home sales, for the mechanics of the entitlement and permitting processes means that it takes time for developers to ramp back up into production.

Interesting news on he mortgage front in California is that FHA is now offering 3% down on loans up to $729,750. FHA also allows for a 3% credit towards buyers non-reoccurring closing costs. This means that buyers can be 0% down once again. I view this as a drastic loosening of the mortgage guidelines. One blockade down… So, where are those speculators?

I have written several postings in the past about all of the unimaginable things going on with real estate development around the world. Many of my posts have focused on Dubai where whole islands are being literally raised out of the sea.

Recently, I ran into a new concept that is in the process of being designed and building. Each story of the building actually rotates independent of the others. This means that the building is constantly in motion, so that it supplies every view possible to the occupants of each unit. What an interesting idea for a building that actually shifts its shape. It sounds as interesting for the people who view it on the street as it does for its occupants.

The renowned architect David Fisher is the visionary of this project. Of course Dubai is going to be one of the first cities to receive on of these animated projects. Check out the building in motion on the architects web site at: http://www.dynamicarchitecture.net/intro-high-resolution.html

For those of you whose plan is to work until you are 70, here’s a warning about that strategy.

For a Good Retirement, Find Work. Good Luck.

Bill Neugent, an engineer in McLean, Va., is doing his bit to ease the looming generational financial squeeze as the nation’s 75 million baby boomers begin to retire. He’s working longer.

Mr. Neugent, 62, plans to work full time until he is 65 and then part time for the Mitre Corporation, a federal research contractor that encourages older workers to stay on.

There are, it seems, too few such workers and employers. The average retirement age for men now is 63 and for women 62. But the emphatic conclusion of recent research into retirement policy and labor markets is that working another two or three years would have a surprisingly powerful impact on the retirement living standards of millions of boomers and on the economy.

The economic gains, according to a report published this month by the McKinsey Global Institute, a research group, would include increased household savings, higher tax collections and a reduction of the fiscal strain on Social Security and Medicare; together, that would add an estimated $13 trillion to the economy by 2025, or about a year’s total output of goods and services today.

“It’s the only answer, but don’t count on the story turning out that way,” said Alicia H. Munnell, director of the Center for Retirement Research at Boston College and co-author, with Steven A. Sass, of the book “Working Longer: The Solution to the Retirement Income Challenge” (Brookings Institution Press). “It’s going to take a lot of education and changes in policy and attitudes.”

The biggest obstacle, experts say, is that most companies are reluctant to retain or hire older workers. At the top of the corporate ladder, executive recruiters are routinely told not to seek anyone over 50, notes Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania’s Wharton School.

Similar sentiments, Mr. Cappelli said, can be found across the job spectrum. He points to a batch of evidence. In one survey, one-fourth of companies said they were not inclined to hire older workers. In a research experiment a few years ago, thousands of made-up resumes were sent to employers; younger workers who had the same qualifications as older workers were more than 40 percent more likely to be called in for an interview than someone 50 or older. In an industry survey, a majority of technology companies candidly said they would not hire anyone over 40. (more…)

Notable & Quotable
June 19, 2008; Page A15, Wall Street Journal
Arthur Laffer speaking last month to graduates of Mercer University:

Pursuing your dream of prospering will benefit everyone . . . When I graduated from Yale University, we had a serious commencement speaker not like the one you are stuck with today. The commencement speaker was President John F. Kennedy. And the point I’m making today is the same point he made all those years ago. He said, “No American is ever made better off by pulling a fellow American down, and all of us are made better off whenever any one of us is made better off.” He concluded by using the analogy that “a rising tide raises all boats.”

Never forget or be ashamed of the fact that pursuing your own self interest furthers everyone’s interest. Without you, the poor would be poorer.

The press is not saying what it means for people to not have enough money and I think we can count on them never saying this.  The very people who are writing the articles for the major newspapers don’t understand what it means so they are incapable of saying.  Also, that won’t sell newspapers so that’s another reason they won’t tell the unhappy story of what will happen.  Not enough money at retirement means they will not be able to buy the products and services they need.  The drugs they need to stay healthy will be unavailable to them and no one is going to pay the bill for them.
A Few Final Thoughts On Planning For Retirement
By Martha M. Hamilton
Sunday, June 15, 2008; F01

I have spent the past two years focused on a subject that was almost an afterthought for most of my working life — financial planning for retirement. I knew when I started writing this column that the subject was vast and complex, but I had no idea just how complicated it was.

The new retirement landscape requires us to take on a job once handled by professionals. We now play a larger role ourselves ensuring that we will have adequate resources. That means saving and investing, often on our own, and trying to protect against such unknowables as how long we may live and what financial markets will be like in the future.

I’ve learned a lot in the past two years, and since today’s column will be my last for The Washington Post, I would like to emphasize the most important lessons.

· First and foremost, we need to pay more attention to our children’s financial education. It didn’t occur to me to talk to my daughter about money management when she was younger. It may have been because I thought she would pick it up automatically or because her teen years were so complicated that we never had the time. But she did stumble upon at least one principle. In her late 20s she called me, excited to have just learned about the magic of compounding from a friend in New Orleans.

I could have sworn I’d mentioned how compound interest multiplies, though she swears I hadn’t. It may just have been that talking to your kids about money is the same as talking to them about sex and drugs: They assume you have no personal experience, so they pay no attention.

I never did talk to her about the importance of beginning early to save for retirement. This year, though, she opened a Roth IRA with my encouragement. If you can, persuade your kids to start saving in a Roth when they take their first part-time jobs. With a Roth IRA, you pay taxes at the time you put the money into savings and take accumulated earnings out many years later tax-free. Most young people probably will be in a higher tax bracket as years go by, so a Roth is a better choice for them than a savings plan in which you pay taxes down the road.

On the positive side, Alec (also known as Sarah) inherited Scottish frugality from both sides of her family. Both her dad and I grew up in families that watched spending carefully. My dad was recycling in the 1960s, picking up neighbors’ yard trimmings to put on his compost pile. And my ex-husband’s family would stop the car and pick up produce that bounced off trucks in Texas — something we once did on the Eastern Shore, as well.

Since she is not a big spender, she has avoided a huge trap — the accumulation of crippling credit card debt.

· Second, although workers are increasingly reliant on their own savings, we are not saving enough or investing as wisely as we should. Health-care costs in retirement could be $200,000 to $300,000, or even more. Most of those who are lucky enough to have a retirement savings plan such as a 401(k) have less than half that amount. That doesn’t leave much to live on.

And many workers have no access to an employer-provided retirement savings plan.

Lower-income workers have a higher percentage of their earnings replaced by Social Security, which accounts for 90 percent or more of the earnings of 40 percent of all retirees. The lack of savings is going to hit middle- to upper-middle earners hardest, potentially resulting in a sharply reduced standard of living in retirement.

· Third, in addition to health-care costs, I have learned to fear inflation — and longevity. Inflation is way scarier to me than recessions are, because it virtually never lets up. And it can erode your savings the same way a trickle of water can carve a canyon, given enough years.

Even mild inflation is dangerous. Say you have $100,000. At an inflation rate of only 3 percent a year, it will be worth just a little over $50,000 in 20 years.

I remember the 1970s, when inflation rates rose to more than 14 percent a year. That was pretty scary.

As for longevity, a long life is less of a blessing when you outlive your savings. We all have a tendency to underestimate our longevity, myself included. For most of my life, I expected to live to about 90, based on family history. But now, with my mother going on 95 and with some experts saying you should add about five years to your life expectancy based on family history, I’m guessing I might live to 100.

I am fortunate to have a pension that will provide monthly payments for life, but it is not adjusted for inflation. As a result, I want to delay taking Social Security as long as possible. A large number of workers claim Social Security at age 62, or as early as they possibly can. That results in lower payments for life. I would rather wait and have the cost-of-living adjustment on the biggest base possible.

A growing concern that I have developed in writing this column is for the large number of workers whose savings will be inadequate in retirement. This could occur for any number of reasons: because they did not save enough or did not invest as wisely as professional pension experts, or because they used their savings to survive a break in employment or, unwisely, took the money out in a lump sum when they changed jobs and spent it. Fortunately, lots of smart minds are focused on this problem, coming up with suggestions to either improve retirement savings plans or to replace them.

I thank The Washington Post for giving me this opportunity to write about an extraordinarily important issue, and I thank the readers for their helpful feedback and column suggestions and for contributing to my continuing education. I am not leaving the subject: I will continue writing on retirement issues for the online AARP Bulletin.

Join Martha M. Hamilton and Teresa Ghilarducci, an economist at the New School for Social Research and author of “When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them,” at noon Tuesday for an online chat at washingtonpost.com.

A friend introduced me today to www.pandora.com.

If you like music, this is a great site for finding new music that is in the same genre as what you already like. The site is part of the Music Genome Project. I don’t know what that is but it sounds cool.

We write mostly here about very serious subjects because we take yours and our financial situations very seriously. Here’s something a lot lighter than what we normally serve up. Enjoy!

Boomer 411 has just released a new version of their site. Beyond the nice new color scheme, The new site has some great new features such as a questions and answers section and the ability to increase the font size of the articles for those that like reading larger print.

Many people have asked me why I take such an interest in Boomer 411. I believe that the average Baby Boomer has not saved enough money for their retirement. As I recently state in a posting, The Retirement Drum Beat Gets Louder, the average retirement savings for Baby Boomer’s is less than $50,000. This means that there are many Baby Boomer’s that need help. This fact will affect not only the Boomer’s, but it will have a significant impact on the children of the Boomer’s and the US economy as a whole.

To illustrate why I am interested in the Boomer population I have compiled a series of links to relevant articles about the boomer population. Read below and then let me know how you think the situation of this large demographic will affect the situation of our country as a whole. So, I congratulate and applaud Boomer 411 for doing something to help the Baby Boomer population!

Links to Baby Boomer Articles:

Ben Stein How Not to Ruin Your Life: Living Hand to Mouth — and Barely Getting By

Are Baby Boomers Financially Prepared for Retirement?

Net Worths and Retirement Savings of Baby Boomers

The Big Squeeze

Baby boomers turning 50 must face hard facts

Seven in Ten Baby Boomers Now Less Confident Their Retirement Savings Will Last

Retiring Baby Boomers’ Home Equity Under Valued

The baby boom generation and aggregate savings - includes article about use of Survey of Consumer Finances to calculate savings rates

Thanks Joshua Davis for this photo

I just read this article in the San Francisco Chronicle called Retirement Money Wories Mount for Workers. I am finding it interesting that the media is finally picking up on the fact that the average American does not save enough money for their retirement needs. The United States Department of Labor did a study on the retirement accounts of Baby Boomer’s back in 2005. As stated in their analysis…

There was at least one retirement account in 57 percent of the households. The average or mean amount in the retirement accounts was $49,944, but the standard deviation was $174,193, suggesting that the dollar amount held in retirement accounts varies widely by individual households. The median amount held in retirement accounts–$2,000–provides another indication of the wide variation in the amounts held by households.

This means that the average Baby Boomer has the ability to generate $1,960 in income per year in a safe 4% investment. I don’t know about you, but I could not live off of $1,960 a year. For an individual to generate annual retirement income of $72,673 (which is the average annual income of the Baby Boomer Population) they would need $1,816,825 in retirement at 4%. This shows that there is a lot of suffering ahead for those Baby Boomer’s that just don’t have enough and don’t have enough time to accumulate it.

I have found that retirement is a long term conversation that many people either avoid (they decide living in the present is more important than thinking about the future) until it is too late or they do not constantly and explicitly hold their retirement concerns when making important decisions that will affect their retirement futures. Either way people end up in the same place with not enough money for retirement and not enough time to do anything about it. Retirement should be an immediate concern that we are explicit about when making large financial decisions. This is because we cannot escape the mechanics of the time value of money any more than we can escape gravity.

This can be a grim subject, which is why I think the media has avoided it for so long. Yet, it can also be an enlightening conversation about how we can plan our futures so that we take care of our retirement concerns. I believe the saying, “Live long and prosper” needs to be updated to, “Plan to live long and prosper!”.

As Doctors Get a Life, Strains Show
Quest for Free Time
Reshapes Medicine;
A Team Approach

JACOB GOLDSTEIN
April 29, 2008; Page A1

U.S. medicine is in the middle of a cultural revolution, as young physicians intent on balancing work and family challenge the assumption that a doctor should be available to treat patients around the clock.

Walter Cheng, 32 years old, is in the profession’s new guard. Upon graduating from the Johns Hopkins School of Medicine in 2004, he bristled at the notion espoused by some senior physicians that a doctor should put medicine above all else. “I thought, ‘I don’t really want to be that kind of doctor.’… My family is as important, if not more important, than my career.”

DOCTORS’ PROGNOSIS

New Generation: Young doctors are pushing to balance work and family life. Changing Medicine: Practices are adapting by creating new, more flexible schedules. For Patients: Doctors may be less exhausted, but also less familiar.

  (more…)

There is a great post on Dilbert’s blog, called Time Management. Below is an excerpt for your enjoyment. It is a great illustration of all the commitments we must address or face the consequences. Enjoy, it sure hit close to home for me.

One time management strategy is to be independently wealthy, freeing up eight hours a day. But that option isn’t available to many. And apparently it isn’t fulfilling because most rich people continue to work full schedules.

Another strategy is to ignore the fact that you are slowly killing yourself by not sleeping and exercising enough. That frees up several hours a day. The only downside is that you get fat and die.

A third path is to work less than you could, live economically, enjoy each day as it comes, and try not to think about living on cat food when you retire.

Which strategy have you picked?

Looks like Zillow has now entered the real estate game market. They recently released a game that is the hot or not of homes. Dueling Digs is a fairly boring game, but worth a look.

I just read an interesting perspective on the currently most asked question of 2008. So, Is now a good time to buy? We have written many different posts stating why it’s an excellent time to buy in the Bay Area. The main reason is that we are seeing negotiating opportunities for our buyer clients while currently we are still seeing historically low rates.

Yet, Dan Green of the Mortgage Reports has an interesting mortgage brokers perspective on why now is a good time to buy. His main reason is that there are drastic changes still taking place in the mortgage markets. Banks are still introducing new guidelines and tightening credit. That from Dan’s perspective the known is always better then the future unknowns.

I also found it interesting that Dan has an article on how the feds drops in interest rates are actually pushing long term interest rates upward. This brings me back to one of my old posts, where I discussed that rates can rise while property values can stagnate. This can squeeze buyers into paying more even though prices have fallen. A Bay Area buyer only has to look at Berkeley to see that many areas values have not fallen through the proverbial floor.

So, as I have stated before… Now is a great time to buy for those that are long term (3-5 year) buyers that are well qualified with good credit and down payments.

Recently, past clients have asked me if this is a good market to sell their homes and move into better homes in better neighborhoods. This is an uncommon thought as compared to the typical national market sentiment that sellers should stay put in the current market turmoil. In working with these clients I have found that this market is a great opportunity for some move up buyers. The general discussion goes like this…

You will be taking less profit on the sale of your home, but you also will be buying for less on the other end. Usually, I am finding that this opportunity is open to clients whose income has risen since they bought their homes, thus they can afford to buy into nicer neighborhoods. Anti-intuitive to the current market mentality, I have found that it may make better sense to make the move now, then it did in the hot market.

2 years ago move up buyers were selling their homes and getting more money then they ever thought possible. Yet, they would also be competing against many others and buying homes at higher prices. This market fed itself with sellers cheering the competition when selling and dreading it when buying. It also usually meant increased capital gains taxes on the sale and increased property taxes on the purchase.

Now, as the market has changed, home owners have been watching as median home prices have fallen off of their record highs. Yet, buying at a cheaper price means that you save on annual reoccurring taxes. As a buyer you now have the ability to negotiate with sellers who are lacking multiple bidders. We are also still seeing historically low interest rates that are still making loans very attractive to buying. Not to mention the Federal Government that is creating incentives for buyers, by lowering prime interest rates and raising conforming rates nation wide.

Here is a recent example. I recently completed 2 transactions for a client who sold their 1.5 million dollar plus home and traded for a more expensive home. On the sale I estimate that they took about $200,000 less then the top of the market price. Yet, on the purchase they bought a home which cost less then the current cost to construct the home (the price per square foot was less then current cost to construct the home). I estimate the savings to be approximately $200,000 on the purchase. They bought into a situation where their new home has a better potential for future appreciation. They bought a home that is 1,000 square feet larger than their previous home, in a better neighborhood for them. Their taxes ended up being approximately $3,000 less per year then if they had purchased at the height of the market. They got a great interest rate on the portion of the home they leveraged. They got less profit on their sale, but gained even more on their purchase.

Just as in the hot market, the trick to moving up now is a financial and real estate team devoted to developing an uncommon strategy to better your situation. I have found that this market is a great opportunity for many move up clients.

Thanks Kerrythis for the car image above.

Click Photo to Enlarge

I recently reviewed some new Bay Area supply and demand graphs we are now following. They are generated from a data mining and graphing software we are now utilizing. One of the interesting graphs it produces gives us a nice look at the supply and demand trends of the many different Bay Area markets. It does a nice job of zooming in on what is happening in localized micro-climates.

At first glance I found it interesting to note the supply and demand trends in Kensington (above). I found it interesting to see that Kensington’s supply of homes (homes on the market) has gone down (year over year), while its demand (or homes sold and under contract) has been keeping pace with the market nicely. It is interesting to see that not all areas are seeing rapidly rising inventory as the media has made it seem. Don’t get me wrong there are buying opportunities in many markets, but as this graph allows me to illustrate, we have also been observing some nice selling opportunities as well.

Currently, the best advice for sellers, is to make sure your real estate professional has a good grip on your markets micro-economic conditions. What are your markets supply and demand trends? What is the data suggesting? You should have the information necessary to make an informed decision on the timing and pricing of your next transaction.