Bernard’s San Ramon Valley Blog

Why You Shouldn’t Believe Everything You Read In The Newspapers

The press continue to spread doom and gloom regarding the housing market, and there is little doubt that in many parts of the country, even many parts of the Bay Area, there is much cause for concern. The problem is that these reports always focus on large areas. It is not very relevant to tell a home owner in San Ramon or Danville how much home prices have eroded in Northern California. Your home is not located in Northern California. It is in a specific city. Sometimes even which part of the city makes a difference.

Real Estate Is Local
This is a phrase that is often quoted by real estate professionals and for very good reason. Take a look at the chart at the foot of the page. This has been generated from accurate data that clearly shows how sale prices of a typical 4 bedroom 1800 to 2500 square foot home have been affected over the past year. By taking just the typical family home into account we get a much more realistic picture than when we consider overall averages. To make it even more meaningful, rather than just look at the whole of the East Bay, or even the San Ramon Valley, I have broken it down by city. The figures make interesting reading. They may even affect your decision to buy or sell now, rather than waiting until later.It is immediately apparent that many of our local markets are very resilient compared to many others.
Certainly parts of our area have suffered more than others. Average prices have fallen by 16% in east San Ramon for example. Most of the volume here is in Windemere and many of the sales are distress sales - homes that have been foreclosed and then sold by the banks at bargain prices. Banks don’t want to own homes!In complete contrast to this are areas like Danville, Pleasanton and the rest of San Ramon, where, although prices have fallen, the decrease over the past 12 months is only 4-5%.
And look at Lamorinda. I have grouped together the towns of Orinda, Moraga and Lafayette because the demographics are similar and in order to have sufficient numbers of sales to provide meaningful results. Over the 12 month period under consideration, Lamorinda values have actually risen. Of course there are far fewer distress sales in this area.
So what can we predict from these figures? We still don’t have enough data to say that we have “passed the bottom”, although it seems likely that we have done so in some locations, most obviously Lamorinda.Danville, Pleasanton and the west side of San Ramon also look to be in good shape, particularly taking the relatively small decline in prices there into consideration. Walnut Creek also looks like it may be stabilizing although it would be nice to have a little more data here.Is It A Good Time To Buy Or Sell Now?
If you are moving within the immediate area, and you are both buying and selling, now is a great time to do so. I would advise finding a buyer for your home first if possible, as then you know exactly how much you can budget for your next home, but there is plenty of choice out there and interest rates are low. If you don’t have a home to sell, it is also a great time to buy. The likelihood of home prices falling further is slim, and even if they do, any gains you make will most likely be taken up with higher interest rates. The Fed has indicated that rate cuts are at an end and there is only one way for rates to go from here.  Also remember that while there is plenty of inventory, sellers are more motivated to accept a lower price for their home. When the supply starts to reduce, you can expect to pay more for your home.

At last I have found the time to make some long overdue changes to my secondary web site, JustSanRamonHomes.com as well as some revisions and updates to my main web site, BernardGibbons.com.

I initially built JustSanRamonHomes.com some years ago, using a very simple HTML editor, Arachnophilia. Lacking a “Template” feature, I used SSI to import the necessary repetitive HTML for a Header and Menu bar. When I switched to using DreamWeaver, which is in my opinion, the best web site development environment around, this caused major headaches due to incompatibity.

Now, all of my web sites can be updated in DreamWeaver. I have also taken out pages that were getting negligible traffic and improved many other pages. Both of these sites now provide the user with a quality experience. I would love to hear your comments:

www.JustSanRamonHomes.com - www.BernardGibbons.com.  

Why Moving Up In A Down Market Makes Sense

This is traditionally the start of the busiest period in the year in real estate sales activity, driven to a large extent by the need for families with children to get them enrolled in new schools  in time for the new school year. For those who are buying or selling due to a job change, or any other case of necessity, the question does not arise but for discretionary buyers or sellers, it is an important consideration. My response may give you some food for thought.The answer to the above question depends on your personal  circumstances. If you are buying up, this is probably the best time imaginable to move house. Here’s why:

Let’s suppose you have a home that was worth $800,000 2 years ago. A move up then to a $1.2m home would have cost you an additional $400,000.

If we assume that home prices have fallen 20% in the last 2 years, your $800,000 home is now only worth $640,000. Fortunately for you, that $1.2m home has also dropped in value - to $960,000. So moving up to that same home would cost you only $320,000, saving you $80,000 in extra mortgage costs. Yes it’s true that you have to sell your home for 20% less than you could possibly have sold it for 2 years ago but so what? Those times are gone. You can still move up to the same home you could have then, only now it will cost you less money. Moving up in a down market is a great thing to do.

If you are currently renting, or perhaps a first-time buyer, it could also make a lot of sense to buy now, rather than wait until later.

There is no doubt that there are many potential buyers who are currently sitting on the fence and “waiting for the market to bottom out” in the belief that this is what serves their best interests, but in reality, this is probably not such a great idea.

First of all, how do you know when the market has bottomed out? The answer is, only after we have passed it and prices are on the rise. Most of the economists feel that we either at, or very near to, the bottom any way.

Also bear in mind that interest rates are now amazingly low. The only way they are going from here is up. And let’s face it, the most important number you should be looking at is your monthly mortgage payment. That is a lot more relevant than the price you pay for your home.
If you buy in today’s market, you have the benefit that there are a large number of homes from which to choose, including some bargain priced bank-owned ones. And sellers, in general are very motivated. If you buy after the bottom, when house prices are on the rise, you face increased competition and the possibility of multiple offers.

There is a further tangible benefit you may want to consider regardless of your circumstances. Suppose you wait until prices are rising again, maybe another 4-6 months. Moving house is not generally just an investment like buying stocks and shares. By buying now, you actually get to live in your new home faster and enjoy it. Life is not just about saving every dollar you can. Time is the one commodity you can never have more of!

Regular readers will recall that it is not long since I reviewed this relative newcomer to the upscale dining scene in Danville, and that my review at that time was somewhat mixed. For some time now I was looking for an excuse to return to Forbes Mill. Every restaurant can have an off day and most of the reviews I have read of Forbes Mill, both in Danville and Los Gatos, have been extremely complimentary and so Sylvia and I found ourselves here last Friday evening with hopes of having an exemplary dining experience.I am glad to report that we were not disappointed. Prior to moving in to the dining room, we opted for a drink at the bar before dinner. Forbes Mill has quite a generously sized bar and as I know from previous visits, it is well supported by the after work crowd as well as those like us, enjoying a pre-dinner drink.My initial observation was that the bar appeared rather less crowded than on previous occasions (a sign of the economic times perhaps), and we actually got a couple of seats at the bar fairly quickly but it filled up quickly so perhaps I am over-analyzing.On our previous visit, our major criticism was with the steak that Sylvia had, a prime rib cut. Since the restaurant bases its reputation on steaks, this is a obviously significant. On this occasion, Sylvia ordered the Mixed Grill and I had the New York Strip Steak. We both had fries and I also had a side of creamed spinach.Sylvia’s Mixed Grill comprised Prime Filet Mignon, Australian Lamb Chop and Quail. Sylvia pronounced everything to be cooked to perfection. Forbes Mills’ New York Strip Steaks are center-cut Prime Certified Angus beef. This was very possibly the best New York steak I have ever tasted. I like my steaks medium and this came exactly as anticipated with a pink center and nicely browned on the outside. It was as tender as many filet mignons I have had elsewhere and the flavor was phenomenal.It may be worth noting that you won’t see fries on the dinner menu at Forbes Mill but they were very happy to comply with our request and even their fries are far superior to those found in many restaurants.The dining room was pretty full and with a very lively atmosphere. Booking is definitely recommended. This is probably not the place to come to for a romantic dinner for two, at least not at the weekend.The service, as before, was exemplary and I am pleased to say that I now consider Forbes Mill one of the very best restaurants in the area. See more at their web site: www.ForbesMillRestaurant.com 

JOINT PRESS RELEASE
Received on 2/29/08

Parties Jointly Announce Settlement of SROG’s Lawsuit Against the City of San Ramon, Challenging the City’s Approval of the San Ramon City Center Project

The City of San Ramon, Sunset Development Company, and San Ramon for Open Government (“SROG”) jointly announced the settlement of SROG’s lawsuit against the City, challenging its approval of the San Ramon City Center Project and the accompanying Environmental Impact Report.  The City Center Project, which was unanimously approved by the City Council in December, will feature a new City Hall, library, transit center and police headquarters, along with residential living, office space, retail, and entertainment components.  The settlement agreement will also result in SROG dropping two referendum petitions it has been circulating to challenge development agreement amendments for the Project. 

SROG had sued the City alleging that the approval violated the California Environmental Quality Act and the City’s 2020 General Plan.  The settlement calls for Sunset and the City to make a number of changes to the project, including: reducing the heights of the project’s tallest buildings to no more than ninety feet (resulting in reducing the office buildings from seven to six stories), reducing the condominium buildings adjoining the Iron Horse Trail to a maximum of seven stories, and taking several steps to reduce the project’s traffic and air quality impacts. 

The project changes also include reducing the project’s total office space and associated parking by almost fifteen percent, expanding the three-year trial free shuttle program to cover both the City Center and the rest of Bishop Ranch, scheduling express shuttle buses to and from BART for both AM and PM commute hours.  In addition, the City and Sunset will support a pedestrian/bicycle-accessible flyover crossing busy Bollinger Canyon Road at the Iron Horse Trail.

The settlement also requires all City Center buildings to be “LEED – Silver” certified – a high level “green building” standard that promotes sustainability and will reduce the project’s environmental footprint.

Along with the project changes, the settlement commits the City to moving forward with enacting a local ordinance requiring that any future buildings outside of City Center in excess of five stories go on the ballot for voter approval.

SROG spokesperson Jim Gibbon stated, “We were concerned that this project, while desirable in some respects, was going to overload city streets, block out regional views, and set a bad precedent for the future.  While the changes that Sunset and the City have agreed to do not fully address all the issues that prompted the lawsuit and the referendum petitions, we think that the changes do make it a much better project.”

Sunset’s President, Alex Mehran, is pleased that the project will move forward on schedule.  “We have always felt we have proposed a project that the citizens of San Ramon want to see happen.  We’re pleased that this settlement will allow the project to move forward on schedule and San Ramon will realize its longstanding goal of having a downtown.”

San Ramon Mayor H. Abram Wilson echoed the City’s satisfaction with the settlement.  “We think this settlement is a win for everyone concerned, especially the people of San Ramon, who will get the City Center they have wanted for so long.”

This is a subject I have covered in the past but one that a number of people have recently raised again which is why I am revisiting it this month.

This is a summary of the Taxpayer Relief Act of 1997 (Section 121) which repealed and replaced the tax deferral provisions contained within Section 1034 of the Internal Revenue Code.

Generally, a Taxpayer can sell real property held and used as his or her primary residence and exclude from gross income up to $250,000 in capital gain taxes if the Taxpayer is single and up to $500,000 in capital gain taxes if the Taxpayer is married and filing a joint income tax return.  The Taxpayer is required to have lived in the real property as his or her primary residence for at least 24 months out of the last 60 months (two out of the last five years). 

Note that the 24 months do not need to be consecutive and there are certain exceptions to the 24 month requirement when a change of employment, health, or some other unforeseen circumstances has occurred.

Section 121 is effective for dispositions of real property held as a primary residence after May 7, 1997.  Taxpayers can complete a 121 exclusion no more than once every two years.

Taxpayers should carefully monitor the amount of “built-up” capital gain in their primary residence and may want to seriously consider selling their primary residence before the capital gain tax liability exceeds the $250,000 or $500,000 limitation.  The Taxpayer’s capital gain tax liability in excess of these exclusion limitations will be taxable.  A sale of the primary residence would preserve the tax free exclusion of the capital gain and would allow the Taxpayer to acquire another primary residence and start all over again.

Special legal, tax and financial planning is needed in circumstances where a Taxpayer already has a significant capital gain tax liability in excess of the $250,000 or $500,000 exclusion limitation.  For example, the primary residence could be converted to rental or investment property and then sold as part of a 1031 exchange after it has been rented for a sufficient amount of time in order to demonstrate the Taxpayer’s intent to hold the property as rental or investment property.  This would allow the Taxpayer to dispose of his or her primary residence, defer all of the capital gain tax liability, and diversify and allocate the capital gain tax liability pro-ratably over a number of rental properties clearing the way for further financial, tax and estate planning opportunities.

The tax liability calculation is not so simple when  divorce or the death of a spouse occurs during the period of home ownership. If you have any doubts about how any capital gains you make will affect your tax liability, you are strongly recommended to discuss the implications with your tax advisor.

This is my first post although I am far from new to Blogging. From this point on, this will be my main Blog and it is effectively replaceing my previous blog hosted by RealTown / Internet Crusade.

My RealTown Blog can be accessed at http://www.realtown.com/bernardg/blog