A recent National Association of Realtor survey found that nationally 26% of transactions over the last few months have been closed by all cash buyers. Cash buyers represented 15% of buyers in October of 2008 and only 12% in May of 2009.

The table below shows all of the homes that have closed escrow between May 6th and July 3rd 2010 in Carmel, California. I have deleted the addresses from the table so we can focus on pricing as it relates to Days on Market and percentage of Original Price and List Price. I want to avoid a debate about a specific home and whether it was or wasn’t priced right based on location, square footage, etc.  The market spoke on the pricing of each of these homes.

Most Days On Market

If you look at the table and highlight the five homes with the greatest time on market (Days on Market, DOM) they are as follows: 681 days, 518 days, 454 days, 328 days, 228 days. If you then look at the five homes that sold for the greatest percentage below their original list price they match up with one exception.

Days On Market               Sold Price as Percentage of Original List Price

681                                                                  57%

518                                                                  58%

454                                                                 71%

328                                                                 68%

228                                                                 78%

The anomaly:

77                                                                   77%

Regarding the anomaly: this was a bank owned property that was initially incorrectly priced. The bank began adjusting their list price down within 20 days of going on the market and were continuing to drop it when they received an acceptable offer. [I will discuss how banks price their homes in a future post.]

If you exclude the anomaly, these properties sold for an average of 66% of purchase price in 442 days.

Least Days on Market

Now we will identify the properties with the shortest time on the market and see how they fared in terms of percent of original list price.

Days On Market               Sold Price as Percentage of Original List Price

2                                                                    88%

6                                                                  100%

10                                                                100%

11                                                                  93%

14                                                                  98%

These homes sold for an average of 96% of their original list price. And, they sold in an average of 9 days.

The Danger of Across the Market Averages

The ten homes we just discussed (excluding the anomaly) sold for an average of 81% of their list price after 225 days on the market. This statistic is valuable in tracking the trends in a market but is useless in trying to understand how to price a home and establish a strategy for selling it. It doesn’t have much value for buyers either.

As a seller, would you rather sell your home in 9 days and be in a position to negotiate towards 96 of your asking price, or struggle to find a buyer after a year and two months on the market and secure 66% of your original list price?

So, Why the reference to post office boxes in the title? We don’t have street addresses in Carmel and it turns out that AT&T requires a physical billing address in order to activate the 3G phone. There are thousands of folks right now not able to activate the 3G because of this requirement.

This post is aimed at those frustrated souls who are searching the internet for an answer:

When you enter a Post Office Box in “billing address” for AT&T it will “kick you out” and tell you that PO Boxes are not allowed.

Several of us called our credit card companies and changed our “billing address” to our physical address in hopes of making it work. Still we were kicked off, even though the physical address is correct.

This is what appears to be happening:

1. The credit card fraud system is checking the zipcode you entered against the zipcode for your credit card.

2. AT&T is checking YOUR ADDRESS against the US Postal Service database of addresses.

So. If you live somewhere like Carmel and change your credit card info to your legitimate Physical address thinking that will work, it will but ONLY if your physical address is in the USPS database. My address for example, 3SW Santa Fe and 3rd is a real “physical address” which is what AT&T says they want, but it isn’t in the USPS database so they don’t accept it.

Therefore:

1. Make sure the zipcode you enter in the IPAD screen matches your credit card billing zipcode. AND

2. Make sure the physical address is one that the USPS accepts. You can confirm the existence of an address at http://zip4.usps.com/zip4/welcome.jsp

3. In the case of Carmel-by-the-Sea there are NO USPS addresses in 93921, ALL of the 93921 zip is PO Boxes and therefore not acceptable to AT&T.

4. So, I had to pick an address in the nearby zipcode of 93923, change my billing zip code with AMEX and then enter the 93923 address for AT&T. I will now change it back to the real billing address.

I hope this helps everyone else in the same predicament.

Cheers,

Malone

PS. AT&Ts’ explanation is that they need a physical address so they know what city/state etc to send a portion of the taxes they collect.

While the exact changes that will be coming are still being debated, it is likely that the minimum down payment for FHA loans will increase, the minimum FICO scores for new borrowers will go up, and probably the maximum seller concessions will be reduced from 6 percent to 3 percent.

The minimum FICO score for FHA backed loans was raised from 500 to 580 earlier this year although most lenders actually set their minimums at higher levels usually around 620.

FHA’s move to tighten requirements is partly in response to the continued tightening of guidelines by Fannie Mae and Freddie Mac. Fannie Maie will implement a minimum 620 FICO score along with other tightening requirements next week.

A year ago California accounted for 96% of the top zip codes, this year…less than 50%. Of the California zip codes still on the 500 most expensive zip codes, 83% had median prices that stayed the same or declined.

Pebble Beach

Pebble Beach experienced an 8% decline in median price from the previous year with a ranking of 42 on the most expensive zip codes list. While this number gives a general idea of the health of the Pebble Beach market digging a bit deeper offers more insights.

First, Pebble Beach is a relatively small market, with properties of drastically different size, location (views and proximity to golf courses etc,) and list prices, that the addition or removal of a couple of homes can skew statistics dramatically. Nevertheless, one can see the trends. The graph below compares the last 12 months with the previous 12 months.

Even more dramatic than the recent trends in pricing is the continuing increase in average days on the market for Pebble Beach homes.

If you break down the average days on market, not surprisingly, you see that the higher end homes are taking the longest to sell. The average days on market for the most expensive quartile (the top 25% of homes by price) is just under 300 days. The lowest quartile of Pebble Beach homes (the least expensive) is averaging 220 days on the market.

Percent with a Price Decrease

Pebble Beach, and markets like it, tend to have more sellers that are able to withdraw from the market and “wait for a better day” or hold more firmly to a list price than other markets where seller’s are running out of resources to hold on.  The graph below shows the percentage of homes on the market, at each point in time, that have experienced a price reduction from their initial list price. It is interesting to note that the lowest percentage of price reductions is among the highest priced homes.

Forbes observed in the article,

“Potential buyers increasingly fall into one of two categories: Those who have seen their net worths damaged by the financial crisis and those who realize they could probably get a better deal in a year’s time.”

I concur with their opinion. I also believe, as do they, that the lack of liquidity in the credit market for the high value mortgages that are often needed to buy these homes has had a huge impact. I have clients that are supremely qualified that have gone through loan processes that required hours of document collection and multiple appriasals and reviews. It is clear that lenders would much prefer to make 5 smaller loans than 1 large one.

We need credit to flow again to bridge the gap between ready and willing buyers and sellers.

The Mitchell Group was purchased by Sotheby’s International, a Realogy and NRT brand. NRT is the nation’s largest residential real estate brokerage firm. Realogy (the parent of NRT) owns Coldwell Banker, Century 21, Better Homes and Gardens, ERA, and Sotheby’s as well as a few others.

I was very successful at Sotheby’s, ultimately becoming one of the top 5 Sotheby’s agents on the Monterey Peninsula and in the top 2% of all NRT agents, everywhere. I enjoyed working with my colleagues at Sotheby’s, most of whom like me were former Mitchell Group agents. There are certain upsides to being part of a large organization, but I believe real estate is ultimately a service provided person to person, and that highly personalized service is the key to my success.

When the opportunity came up to join, and help build, an organization that shares my philosophy I took it. I have joined Carmel Realty Company.

Carmel Realty has been selling real estate in Carmel, Pebble Beach and on the Monterey Peninsula since 1913. When the Mitchell family sold the Mitchell Group to Sotheby’s, the family retained ownership of Carmel Realty and focused the Carmel Realty brand on property management. Carmel Realty manages the highest end vacation rental homes on the Peninsula, including more estate homes in Pebble Beach and Scenic Avenue homes in Carmel than any other agency. Carmel Realty places visitors from all over the world in our area’s most prestigious properties.

The owners of Carmel Realty and a group of like minded highly successful agents, including myself, believe our clients deserve highly personalized service from a company that is collaborative. A company that utilizes the best technology, understands the importance of effective marketing in print and on-line, and is able to move quickly and respond to the new market realities.

We are a group of successful and committed agents with a shared vision of quality service that, honestly, our clients deserve and should expect.

Building on that shared vision, Carmel Realty is again a full service Real Estate Brokerage.

If you would like to learn a bit more about Carmel Realty and how we represent our clients, give me a call on my cell phone at 831-601-4740 or send an email to malone@malonehodges.com

Looking Forward

Since January of this year one property in the Preserve has entered escrow, lot 175 (11 Vasquez Trail).

In the same period last year, five parcels and one home sold in the Preserve. My colleagues and I  continue to field inquires from new clients about the Preserve as well as questions from our clients that have been considering the Preserve for some time. We believe that, as with other high end golf and amenities properties, buyers recognize there are value priced properties but are holding off in hopes of selecting the perfect property for their needs, at the near perfect price. In all of these communities, the purchase decision is elective. None of us are lucky enough to have an employer who transfers you to a place as beautiful as the Preserve.

Trading is back in style in the current real estate market. A colleague of mine recently completed a trade of a large lot for a house. Another client considered a trade for a home in Pebble Beach. I have clients who own two homes in Carmel and we have begun a search for a home in Carmel Valley or along the highway 68 corridor. Our intention is to approach selected sellers and offer the possibility of a trade.

While a trade transaction can be complex, it can often be rewarding for both parties. For example, someone downsizing a home might find someone interested in moving into a larger home. Or, as is the case with my clients, two households who are combining into one.

Often one of the parties will take the property they have received in trade, discount it, and offer it for sale. They may opt to do this if the property they are taking in trade is in higher demand, a better location, or has other qualities that will make it easier to sell then the original property they were offering.

Rarely are trades “apples for apples” and often one party or the other will have to bring cash into the transaction. I am sometimes asked if it is possible to insert a loan into a trade deal. The answer is yes, but it is important to work with a mortgage broker that can help explain the deal to the lender.

In this market don’t discount creative thinking. Seller financing, long escrows, and trades are all possible ways to move a property you need to sell or move into the property you would love to own.

By the way, if you happen to own a home in Carmel Valley, Pasadera or Monterra and have dreamed of owning a home in Carmel…..give me a call.

Of course, there are limitations. I also represent properties in Carmel Valley and have several clients that are interested in “horse properties.”

I recently spent six hours with a client and his son touring Carmel Valley and introducing them to properties with horse facilities or vacant land upon which they could build a home, barn, and arena. They are from the Galveston area of Texas and it was important that they left after the six hours with a good feel of the various areas of the Valley and an understanding of relative value depending on property location, size, condition, view, and slope. My goal wasn’t to find them a property but to send them home with enough knowledge so that we can discuss properties over the next six months with a shared vocabulary.

Too often I met people who bought a home in a given area after only a couple of weekends of visiting open houses and now wish they had opted for a home in another Peninsula area. The difference between Carmel, the Carmel Highlands, The Santa Lucia Preserve, Pacific Grove and Pebble Beach is dramatic but not immediately obvious without reflection and research.

All are wonderful places to live but are dramatically different from each other in terms of weather, demographics, lot size, zoning, distance from grocery stores and restaurants and school systems.

Take the time to explore each before narrowing your search.

Last night the Carmel School District held a board meeting at the Carmel River School with  Jay Marden, the principal, presenting performance numbers and goals for the school. There were several excellent presentations.

The board also heard from the district’s administration on their strategy for the unexpected increase in the number of students registered at River school.

As I have said in earlier posts, the school system here is incredible and to some extent a victim of its own success. Along with the beach, the beauty, and quality of life–the schools are big part of why families buy or rent homes in Carmel.

The Issue

The number of students enrolled at River Elementary is approaching a critical number. I covered the issue and options presented at the board meeting in an earlier post, Carmel River School Boundary Issues.

The Several Steps in the Short Term Solution

The administration recommended a series of steps, some already underway, to address the problem in the near term.

• Residence Survey

Conduct a survey to confirm that the students that are enrolled, should be enrolled. This is already underway. As of last night, 92% of River School families have provided the administration with the documents required to prove residency.

As a result, three families have come forward and confirmed that they have moved out of the district and will not be returning in September.

• Establish a Tip line for anonymous reporting of possible residency violations

Four tips have been received and are being investigated.

• Quantify the number of Inter (from other districts) and Intra (from other elementary schools within the district) transfers

There are 17 students at the school from outside the district. There are 6 students from Tularcitos elementary school, some at the request of parents, others at the request of the district.

The highest concentration of these is 6 at one grade level.

• Acknowledge that if the critical number is reached in a given class, some of these non-resident students may loose their place

The administration has structured a prioritization list for the transfer students to determine in what order they would loose their “seat.” It is important to note, and there was some confusion at the meeting, under this solution every child living within the River School footprint maintains their right to attend River School ahead of all of the transfer students. These transfer students are only entitled to attend the school if the number of students in their grade is under the “caps.”

• Establish a strategy for dealing with increased class size.

As class size increases in each grade, the administration proposes to add resources to the class.

For example, in first through third grades for classes with up to 22 students, the lead teacher is supported with 90 minutes of an instructional assistants time in the classroom.  For classes with 23-25 students that time allocation increases to 120 minutes. In the event there are 26 or more students in a class, the administration either creates a combination class (a smaller class of approximately 18 students made up of kids from two grades) or frees up a classroom by instituting AM/PM kindergarten.

Similar guidelines exist for each grade level.

• Modifying kindergarten to release the pressure

There are currently 4 classroom dedicated to Kindergarten. In the event a classroom needs to be “freed up” to address overcrowding the most likely way to do so is to modify the kindergarten schedule so the same number of students are served by 3 (or 2) classrooms versus the current 4.

Option 1) Split the day into AM and PM Kindergarten classes. Unfortunately with AM/PM Kindergarten resources such as Spanish and computers become a problem and the schedule can be a problem for parents. Teachers are not supported of this approach as the teaching day is shorter for each group of kids.

Option 2) Establish staggered day Kindergarten. One half of the class would arrive at 8:30 and depart at 1:50 while the second half would arrive at 9:30 and depart at 3:00pm. This would give the teachers and additional hour a day focused on 1/2 the class at a time.

Conclusion

At the moment there are still spaces available in each grade before the “cap” requiring the Kindergarten change is reached. [In grade 1 there are 13 spaces; grade 2, 5 spaces; grade 3, 8 spaces; grade 4, 19 spaces; and grade 5, 11 spaces.]

Again, as of today we have not reached the point where modified kindergarten or combination classes will be required.

The School board will be reviewing the numbers periodically and at the end of June will structure the classes and allocate the additional resources according to the guidelines. In the event a “cap” is reached they will take the steps necessary to reduce transfer students and consider adopting the options related to Kindergarten and combination classes.

As I learn more, I will post updates here. If you would like to hear from me by email when I post something on the topic, send me an email or give me a call.