Thank you from Land Advisors Organization California Division!

LandAdvisorsCA1B2014TotalConsiderationClick on image to enlarge

 

A Premier In-Fill Development Opportunity Featuring 167 Acres in Oakland Trades Hands in a Red-Hot Bay Area Land Market

May 9, 2014 (Irvine, California) – The California Division of the Land Advisors Organization is pleased to announce the closing of Oak Knoll, a premier hillside development opportunity featuring 167 acres in Oakland, California. The asset sale was brokered on behalf of LV Oak Knoll LLC, the Seller, by Terry Ruckle and Steve Reilly of the Land Advisors Organization.

Land Advisors generated 20 offers for the property, evidence of intense competition for Bay Area residential development projects.

The Oak Knoll property is unique in the market due to its ability to provide desperately-needed new single-family homes, significant natural open space, trails and parks, and direct access to Interstate 580 at Mountain Boulevard.  With its in-fill location, the Oak Knoll property is well-positioned to provide a wide range of housing options to the East Bay Area.  Oak Knoll offers one of the rarest residential development opportunities remaining in the Western United States.

For more information about Oak Knoll, please contact Terry Ruckle, Co-Founding Principal and Oak Knoll Marketing Team Lead, at truckle@landadvisors.com or Steve Reilly, Senior Marketing Consultant, at sreilly@landadvisors.com.  For more information about Land Advisors Organization, please visit http://www.landadvisors.com or contact Tom Reimers at (949) 852-8288 ext. 28.

About Land Advisors Organization:

Land Advisors Organization specializes in innovative land brokerage through deep market insight and unparalleled client relationships. With an exclusive focus on land, Land Advisors Organization integrates current comprehensive information, cutting-edge technology and geographically specialized professionals to help our clients identify and capitalize on valuable opportunities in all kinds of economic environments.  The Land Advisors Organization employs a true collaborative brokerage model with offices located throughout Arizona, California, Florida, Idaho, Nevada, New Mexico, Utah and Texas.

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Bay Area – Land Prices Have Gone Through the Roof!

Since the 2011 trough in land prices, the worst markets in the Bay Area have seen a significant increase in lot prices – an average of about 44%. As the available land in the core markets has dwindled, builders have turned to the tertiary markets that were once off the radar. This trend will likely continue in areas such as the Central Valley and Monterey and Sonoma Counties. Although they may be considered unbuildable zones today, they will see a similar lot appreciation over the next few years as builders move farther out of the core to build.

Lot Price Appreciation for a 5,000 SF lot

Oakley 53.33%
Antioch 53.13%
Pittsburg 51.52%
Martinez 51.11%
Brentwood 48.57%
Livermore 46.67%
Mountain View 46.67%
Sunnyvale 46.43%
Hayward 46.15%
San Jose 45.45%
Fremont 40.00%
Hercules 37.14%
Concord 33.93%
Gilroy 33.33%
Dublin 30.00%

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Bay Area: Back to the future—Are condos the new apartments???

I have to admit it…I was dead wrong. I thought (like many others) that condos were going to be dead for a while.  Many people really don’t want to live in a condo but they end up “settling” for them because of the relative affordability closer to job bases. As prices in the Bay Area have resumed their pre-collapse march up at 10+% per year, condos are making resurgence.

Given the resurgence in attached for-sale product in the Bay Area, the “highest and best” use has now probably switched back to condos from apartments.  And it probably won’t be long before we see the reverse of what happened a few years ago where condo sites were re-entitled to apartment deals.  Now we’ll start seeing apartment sites re-entitled to townhomes and condos. If you have one of these sites feel free to give us a call to help evaluate all the options in the fast changing market.  There are many factors to consider in making this kind of decision; our in-fill experts can help you juggle all the factors to position your site for maximum sales proceeds!

http://www.contracostatimes.com/business/ci_22613042/bay-area-condos-tight-supply-has-buyers-scrambling.html

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

California Division: 2012 Year in Review

LAO-CA Infographic 2012 YIR

Source: Tom Reimers, President, (949) 852-8288 x28

Why is the market so hot?!!!!

It always boils down to the fundamentals — Supply and Demand. We know that the Bay Area is always supply constrained and the real estate collapse took many of the higher density projects and put them in a deep freeze, meaning we had even fewer new projects adding to the supply from 2008 ’til today. Now we have a new phenomenon, for all the people that got foreclosed on and were supposedly going to be renters the rest of their lives, it turns out they still want to buy homes and for the many that got foreclosed early in the cycle their time in the penalty box is over.

http://www.insidebayarea.com/business/ci_21865117/foreclosure-victims-buying-homes-again

And as foreclosures in CA and the Bay Area continue their downward trajectory, people waiting for that ‘distressed’ buying opportunity may never see it materialize.

http://www.foreclosureradar.com/foreclosure-report/foreclosure-report-september-2012

Rather than competing with 10-20 other offers as soon as a ‘bank-owned’ home hits the market, buyers are finding the process of buying a new home to be more appealing as builders ramp up community production.

http://www.sfgate.com/realestate/article/Bay-Area-new-home-construction-rebounds-3986773.php#page-1

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

The Bay Area housing market is back on fire… but is it sustainable???

What can we attribute the turnaround in the market too? In simple terms, it’s back to the old supply/demand curve. In the depths of the housing market depression (think back to 2009), many cities were running resale inventories of several hundred homes and typically at least 50% of those homes were in some sort of distressed condition (bank owned, short sale, etc.).

Now, when we look at the market it’s done a complete 180. Inventory levels are down to their lowest levels since the peak of the housing market back in 2005-2006 and the percentage of distressed sales is down significantly from a few years ago. The question everyone should be asking is whether this is sustainable or is the “shadow inventory” of distressed homes about to flood the market and put a damper on things.

In our opinion, given how low the inventory levels are and the strength of most markets, even a doubling in the number of distressed homes on the market will probably not have much of an adverse effect on the market and in some circumstances might actually be helpful. FULL STORY

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Take a quick look at the inventory and sales levels of many of the East Bay Cities and decide for yourself if we’re in the beginning stages of a long term bull market in housing.

Active Listings Distressed Listings Percent Distressed Avg Monthly Sales Rate Months of Supply Based on 2012   Closed Sales
Antioch 101 55 54% 123 0.82
Brentwood 71 24 34% 82 0.87
Castro Valley 71 12 17% 41 1.72
Concord 73 34 47% 99 0.74
Disco Bay 43 8 19% 24 1.76
Dublin 22 9 41% 27 0.81
Fremont 133 10 8% 122 1.09
Hayward 82 30 37% 97 0.85
Livermore 85 16 19% 82 1.04
Oakley 39 17 44% 46 0.85
Pittsburg 34 19 56% 56 0.61
Pleasanton 67 6 9% 57 1.17
San Leandro 50 12 24% 72 0.69
San Ramon 49 12 24% 61 0.81
Union City 30 13 43% 36 0.83
Walnut Creek 57 2 4% 47 1.23

Let’s Make a Deal in the Bay Area – Door #1 or Door #2?

While the land market in the Bay Area has continued to improve and in many primary in-fill areas the market is back within 20% of peak values, the secondary and tertiary markets are still bouncing along the bottom with land values that are typically only 20% of peak values. This seems to be an unsustainable condition. Back in 2003 or 2004 when land prices in the Bay Area were approximately where they are today, land in outlying markets (think the cities of Brentwood and Gilroy, for example) was consistently trading for 2 to 4 times what it is trading for today.

So it seems that the market is at an inflection point, either the 2,000+ units per year that all the public and large private homebuilders combined in Northern California need to produce to cover their fixed costs are going to come in the form of 50 lot and smaller infill developments (Door #1), or the outlying Bay Area land markets are set for a major rebound. Maybe it’s time to see consider what kind of deals you can find behind Door #2.

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Around the Bend in the Bay Area

It feels as though we’ve turned a huge corner in the Bay Area real estate market.

Silicon Valley is producing jobs again at a solid pace (many are anticipating stock option millionaires boosting demand), and the commercial market is rebounding as office space has been absorbed and demand for new space is driving new construction.

Vacancy rates, rent increases and CAP rates for apartments are all at all time highs, spurring tons of new apartment development.

While all these data points are great signs for the recovery, they come with one potential downside—increased construction costs. While we haven’t seen it dramatically impact land values yet, a demand for labor and materials increases, construction costs appear to be headed up for the first time in many years. This could act as a bit of an inhibitor in any large run up in land prices.

Source: Steve Reilly, Marketing Consultant, (925) 791-2194

Bay Area Tertiary Markets Recovering? Maybe…

In the depths of the downturn (say, March 2008), the City of Antioch had over 800 active listings of single family homes on the market.  According to the MLS, only 105 homes sold that month, which translated into an 8-month supply of inventory.  Needless to say those were also the months where we saw double digit price declines year-over-year.

Fast forward to today: In the first two and a half months of 2012, 247 homes sold in Antioch, or approximately 98 sales per month.  The current active inventory according the Contra Costa MLS is 103, meaning a 1.1-month supply of inventory!  While this may not mean that prices are going to rocket up anytime soon in East Contra Costa County, it is definitely a great sign that the market has found a “natural” bottom and might have even overcorrected on the way down.

This same story is being repeated in Brentwood, Oakley, Pittsburg and other tertiary Bay Area markets, which were first to fall off the “cliff” a few years ago.

This work-off of resale inventory is starting to show its affect on new home absorptions.  In 2011 builders in East Contra Costa County were struggling to get to 1 to 2 sales per month on average. In the first few months of 2012, absorptions have been running between 3 and 4 sales per month. If this trend continues we expect more builders to begin venturing back out to the tertiary markets to look for new residential land deals.

Source: Steve Reilly, Senior Marketing Consultant, (925) 368-3128

New Normal: Design Does Matter

Take a look at the recent potential small-lot single family projects in the Bay Area and you might notice an interesting trend… while most people would expect the average sales price for a typical small-lot single family home to track lower as the home is placed on a smaller lot, there is a point at which the home-buying market no longer differentiates between lot sizes.

Homebuilders selling homes on a 6,000 square foot lot versus a 5,000 square foot lot see a large difference in cost and purchase price, and the same goes for builders selling homes on a 5,000 square foot lot versus a 4,000 square foot lot.  However, right now in the Bay Area, when a builder drops its lot size below 4,000 square feet, the market levels out.  The design on the inside of the house dictates fluctuations in cost and asking price, not the lot size.

For example, during the peak of the homebuilding market in 2006 in San Ramon, floor plans were of less importance to attracting loads of eager home buyers.  But in today’s highly competitive marketplace, any perceived inefficiency in a floor plan can result in a house being passed by.  The current market environment is giving homebuilders the opportunity to create innovative and attractive floor plans on small lots in high density areas that were overlooked in previous market cycles.

Homebuilders looking to reach the ever-prized “qualified home buyer” need to focus on differentiating their new home communities more on the house itself and less on lot size.  Now, more than ever, they need to focus on the “livability” of the product from a floor plan standpoint.  In high density areas like the Bay Area, the way every square foot is used can mean the difference between big margins or big yawns.  All is not lost though; we can help point clients in the direction of new architectural innovations that allow formerly inefficient site and house plans to be reworked into projects that can meet the demands of today’s discriminating new home buyer.

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Are Some East Bay Submarkets Now Overcorrected?

Take this into account… According to Real Facts, the average 3 bed/2 bath apartment in Dublin is currently renting for $2,470 per month.  Compare this to the typical monthly payment based on a $450,000 mortgage at a 4.0% rate; the fully amortized payment is only $2,150 per month. Adding property taxes at 1.1% increases the monthly payment to $2,562. Finally, adding a couple more hundred dollars for homeowners’ association costs and/or insurance brings the total monthly housing cost to approximately $2,760.

While this example of home ownership is a few hundred dollars more than the average Dublin rental, it is also based on pre-tax income. To paint a true picture we need to factor in the tax benefit of ownership. In the case of our example above, the total interest and property tax deduction should be approximately $20,000 per year.  Assuming the potential homebuyer is within the 25% marginal bracket, this deduction is the equivalent of a $5,000 per year tax savings, or approximately $415 per month. Taking this into account the true cost of ownership is only $2,345 per month, which is $125 per month less than the average 3 bed/2 bath rental in Dublin.

While all this may not mean house prices are finished declining or that sales are going to double anytime soon, we can definitely read it as a sign that we have reached a key point in the housing cycle, and that bottom has to be close… if we haven’t already hit it!

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

New Conforming Loan Limits Create Uncertainty in California’s Bay Area

Uncertainty remains high in the Bay Area residential land market following the drop in conforming loan limits to $625,000 from $729,000.

The Bay Area has 72 sub-markets (by Zip Code) where the median home price is now above the new conforming loan limit. What affect this will have on the recovery of the Bay Area housing market is still unknown. Chances are that the compression in loan limits will ultimately correlate to a compression in home prices although not necessarily on a dollar for dollar basis, and the affects could be widely different based on sub-markets.

Currently true “jumbo” loans are priced approximately 100 basis points above “jumbo conforming” loans. Assuming a $626,000 loan and jumbo rate of 5%, a potential home buyer keeping their monthly payment the same will lose approximately $150,000 in buying power.

This phenomenon is most likely to affect the market in the $800,000 – $1 million price point range.  The buyers of these homes would have formerly qualified for a “conforming jumbo” loan if they were putting down at least 20%.  However, they now will need a much larger down payment to stay under the new conforming limits.

At price points above $1 million we would expect there to be a smaller impact, as buyers in that price point have always had to get jumbo loans or put down substantial down payments.

Click the link to see a table outlining the Bay Area sub-markets by zip code with median prices above $625,000: http://www.dqnews.com/Charts/Monthly-Charts/SF-Chronicle-Charts/ZIPSFC.aspx

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Bay Area: Tale of 2 Cities

Really hot and really cold.  That’s the story in the San Francisco Bay Area residential land sub-markets right now. And the temps are only getting more extreme. 

  • Sizzling HOT:  The primary Bay Area sub-markets, the areas within a 20-30 minute commute from the Silicon Valley and San Francisco, are currently driving the homebuilding market.  Property values have come off the ground and new home sales are picking up to relatively healthy levels.  In the Cities of Sunnyvale, Mountain View and Palo Alto, projects across the spectrum are achieving a sales velocity of 1 sale per week which has led land values to climb back to over $3 million per acre.
  • Example deal: Land Advisors recently represented the buyer and the seller in the sale of 19 partially improved lots in Los Gatos, known as Highlands of Los Gatos.
  • Brrrrr COLD:  The Bay Area’s tertiary sub-markets tell a different story.  New home sales are lagging, land values are deteriorating and the market has yet to hit bottom.  Areas with little or no interest from homebuilders or developers include Oakland, Oakley and Pittsburg.
  • A particular area of interest for land buyers is in luxury lots.  With prices off 50% from peak levels, handfuls of buyers are showing up for a chance to buy bulk lot sales emerging from distressed situations in A+ locations.

Source: Steve Reilly, Marketing Consultant, (925) 368-3128