San Ramon CA Home Prices – Values

Setting Home Prices in San Ramon, California – Value versus Valuation

Buyers & sellers have different points of view when it comes to the price of a home in San Ramon, California. In today’s real estate environment, the questions of price and value are more challenging than ever.

San Ramon Danville California Homes SalesThe world that San Ramon & Danville buyers and sellers have lived in

  • zero down
  • low interest rates
  • house as ATM
  • flip and earn

The home-buying world that existed prior to our suspension of common sense:

  • significant downpayment
  • 3% to 6% annual appreciation
  • use appreciation to improve property
  • take appreciation out on sale of home
The New World Order in Danville & San Ramon Real Estate

The average home value doubled between 1/2000 and 4/2006. From 1998 to 2008 home values increased 155%.

  • Danville San Ramon Home PricesHome values across the nation are down 26% to 30% from their highs
  • Inventory is down to 3 months or less from a high of 12-13 months of inventory
  • Since the peak of 2006, 1/4 of homes are now underwater

The peak of 2006 was not the value of real estate or your home in Danville or San Ramon. That is a bogus number to use, because it did not reflect the true value of the property.

If we go back and look at the 30-year trend of real estate – appreciation averages about 6% nationally when adjusted for inflation – maybe 7% in the San Ramon & Danville. Between 2000 and 2006 we saw real estate double in value in the Bay Area – this could not be a true number. Price appreciation during this period reflected a frentic market being fueled by low interest rates and zero down loans. Market values were being built up without any true value underneath.

San Ramon Danville CAWhen people say, look how far the market has fallen in Danville & San Ramon – they are talking in figures that do not reflect a fall in REAL value.

Where are home values in Danville and San Ramon going to wind up? That depends on the market. If half of the value of the home represent fluff, then prices are probably going to wind up back at 2002 values. When it’s all said and done, homeowners are going to wind up with traditional appreciation of home values in San Ramon & Danville.

The new valuation of the market is a normal market correcting itself from the craziness of a lending market operating with no rational constraints. Depending on the market, we will see home prices settling at 1998 to 2002 price points.

Is the housing market in San Ramon & Danville getting better?

  • What is the Danville or San Ramon housing market?
  • How do we define it?

There is no national housing market. There isn’t a state market or even a county market. Real estate is always local. The housing market is what is happening in your neighborhood or the neighborhood you are looking at buying in – and whether you are buying single family home or condo. In the Danville – San Ramon area, there are probably at least 20 markets.

Homes for Sale San Ramon Danville CATo know what is happening in the local Danville & San Ramon real estate markets, we first have to define the market – location, property type, price point, distressed properties. These are the things buyers and sellers need to look at to understand what is happening with the local market:

  • Are listings increasing or decreasing?
  • What’s happening with days on market? – In a market with little inventory but increasing DOM, this indicates a market with overpriced homes. In markets where inventory is increasing but DOM is decreasing houses are priced right for buyers
  • How have prices done? Listing Price versus Sold Price
  • How much did Danville & San Ramon sellers have to come down?
  • Who’s buying properties? Homeowners or Investors – First time buyers?
  • Who’s the Seller – homeowners or banks?
  • What’s the economic profile of the area – job market, economy, commercial property?
  • What percentage of REOs or short sales are there in Danville and San Ramon?
  • Does the LENDER like the market? If you can’t get to the appraisal, you can’t borrow?
How do I know what the right price is in Danville & San Ramon, CA neighborhoods?

To answer this question, we need to talk about the difference between value and valuation. Buyers look at value one way and sellers look at it from another perspective.

Today, we have a third party involved in the value proposition and that is the banks – and behind the banks is the Federal government because the majority of loans these days involve Fannie Mae, Freedie Mac and FHA.

Sellers, typically, have an unrealistic view of value. Their opinion counts the least because:

  • They pick the market cycle they like
  • They’re emotionally involved in the price
  • They have either an “I Want” figure or an “I Need” figure

These three items have nothing to do with the value of property in Danville or San Ramon. The seller’s desired price usually has little to do with the value of the property.

Buyers used to have total control of the market. They would look at properties, compare values and offer what they were willing to pay. Today, the buyer’s perception of value is – there is no value because of all the foreclosures, short sales and media coverage. So, buyers are low-balling everything because they have a perception that everything is over-valued and that all sellers and banks are desperate to move properties.

buy-meMany buyers still can’t understand why a foreclosure that was listed by the bank for $250,000 sold for $300,000 – after all, it’s a foreclosure market. True, but the foreclosure market is one of the hottest markets the East Bay has seen. It’s not uncommon to hear of 10, 15 or 20 offers coming in on some listings. Some properties have had 60 or more offers within a few days of listing.

Buyers are dealing with investors willing to pay cash. An FHA loan with 3.5% down is not going to carry any weight with the bank with an all cash offer in the mix – much less 10 all cash offers bidding up the price.

In the high end of the market, buyers are turning deaf ears to sellers that think their multimillion dollar properties are immune to current market forces. Special and unique don’t carry much weight in a market where a buyer can go down the street and lease a multimillion dollar home at a value-rate and wait out an obstinate seller.

When a buyer offers a seller $2.8 million for a home listed at $3 million and the offer is rejected, you can bet that in 6 to 12 months, if that house is still on the market, that buyer will be offering $2.65 million, not $2.8. The buyer’s value still has significance, but it is not the key to property values in today’s markets in Danville and San Ramon.

The key to property values in today’s market is valuation.

Valuation is a very strict, realistic, financial analysis of what a property should be worth – and that is what the banks are doing.

Buyers that are willing to pay all cash, can pay whatever they want for a property. Investors that pay cash are looking for the valuation of property to meet their investment criteria – which is usually low value so the property will cash flow positive. The seller’s wants and needs have no impact at all on valuation in Danville and San Ramon.

San Ramon home inspectionWhat does the bank look at when determining home value?
  • Inventory
  • Days on Market
  • What properties have sold for
  • Number of foreclosures and short sales in the area – that area is very narrowly defined

Banks aren’t looking at comps 10 miles away, or 5 miles away, or even 1 mile away these days. They’re looking at your specific neighborhood in Danville or San Ramon and they are applying a specific formula that they have come up with to determine value. The banks and appraisers these days care very little about a home’s updating. They want conservative, strict numbers for what is the valuation of each specific property.

The “Right Price” is going to be different for every local market. The right price in the foreclosure and short sale market depends on – who is the seller? Is the seller the bank? The bank can can set the price where they want, often times it is below current appraised value because they are looking at multiple offers as a way to bid up the price.

Danville housing pricesAll of the the things sellers have been conditioned to understand as important to value – location, updates, schools, etc. – are not key to property values in most current markets. In most markets, including Danville and San Ramon, it’s the numbers that count.

Sellers can be shocked to learn that the appraiser setting the valuation on their house is from 30 or 60 miles away. This is happening everyday in Danville and San Ramon – appraisers are coming over from Daly City or Fairfield and have no clue about the “neighborhood values” in Danville and San Ramon.

It’s hard numbers the bank wants and who controls the appraisal process these days? The banks (Federal government) – surprise!

Valuation is what is determining home prices these days in Danville and San Ramon, California. Sellers can either be “In the Market” or “Out of the Market.” We will discuss what sellers need to know about setting home prices in a post later this week.

Search the MLS for Homes for Sale

Search for Foreclosures in Contra Costa County East

Search for Foreclosures I-680 Corridor

Our FREE Local Market Snap Shot for Danville & San Ramon These are the best sources of data you can get for your local market.

Email John if you would like to know more about buying or selling a home or condo in Danville or San Ramon, California or call (925) 895-2694

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