https://www.ktvu.com/video/1477492

Just another testimony about how out of whack housing prices are. I would like to thank all of the slum lords and companies buying up “value add” properties. I used to attend Fremont City council and planning commission meetings with the Not In My Back Yard (NIMBY) people complaining about the “rampant” building in the city. In the next breath they would complain that their kids couldn’t afford to live here (in Fremont). So congratulations everyone, we “won?” What did we win by letting homes become commodities instead of places to live and raise families? The market is freezing up and those who want to offload their homes in order to downsize are faced with few if any options. Every small home is a rental so there is no where to step down (retire) to or step into the market for first time buyers. I’m glad a generation could fumble through real estate choices and end up with equity no matter what. But this gave way to the flippers, investors, and international market buying and holding homes. There are just too many players in this game. With the rise of giant apartment buildings and entire neighborhoods of rental family homes the American Dream of home ownership is dead. In the short term investors will reap rewards, stocks will climb, profits will continue. However, very soon, with fewer mortgages, equity lines, maintenance, and home improvement projects to fuel our consumer based economy things will start to get worse. More layoffs and store closings are just the beginning. Then suppliers and manufacturers will cut back and so on.

This will be a very painful economic correction. Regardless of who is president, I give this economic trend three years. By then the majority of projects and housing initiatives will be in effect. It sounds crazy but I predict with the exodus of people from the bay area there will, briefly be an equilibrium in the housing market with buyers, sellers, and renters all able to do what they want to do. This will be short lived and no matter how impossible everyone thinks this is, property values (gasp) will fall. You can witness this now with homes having longer days on market (DOM), translation prices are too high for fewer buyers.

Not my quote, but Joe Cohen thinks so.

https://www.sfgate.com/la/article/costco-housing-apartments-south-la-19541521.php

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Another, are you kidding about the listing price? I think they used the sale of the farm off Walnut and Guardino about 9 years ago which was around $53,100,000* for just under 14 acres. That gives land in Fremont in the roughly downtown area a value of approximately $3,792,857 an acre (this parcel is just over 2) and for the sake of argument to build a comparable home would cost $1,013,200. So, land ($7,585,714) + home ($1,013,200) gives this improved property an already extremely generous $8,598,914 value. I anticipate that someone like Robson Homes could buy the property and build homes around the “historic” (just means old) home giving it an increased value. But based on the likely rejection of development by the NIMBYs of Fremont and its location across from questionably safe train tracks across the street I’m not sure it’s worth the extra $4,900,985.

https://www.zillow.com/homedetails/38555-Overacker-Ave-Fremont-CA-94536/25017384_zpid/

There is also a smaller comparable 0.67-acre, improved property around the corner from the above for $2,748,888 which has already had a price reduction of $140,000.

https://www.zillow.com/homedetails/38860-Cherry-Ln-Fremont-CA-94536/299072064_zpid/

I’m just outlining that these overvalued properties are a sign of problems in the market. Will someone buy these properties, likely to redevelop, of course. Do I think they are paying too much yes. Why is this a problem? Every overpaid lot for redevelopment drives up land value and the density of the proposed housing projects isn’t enough to meet housing needs. The circle of real estate insanity continues.

For the cost to build a comparable home, I went with $400 per square foot. Costs are all over the place but here is one of the links I used to determine building a home. https://www.houzeo.com/blog/how-much-does-it-cost-to-build-a-house-california/

Other links

https://robsonhomes.com/

http://shapeourfremont.com/index.html

*Missing from the title report but this is the link I used for reference: https://www.redfin.com/CA/Fremont/1031-Walnut-Ave-94536/home/903471

In response to this great article on modular homes as an affordable housing option.

Having worked with modular homes, manufactured homes, and mobile homes, I can say they often meet most people’s housing needs. Newer homes are nearly indistinguishable from conventional (stick-built) homes with foundations. As the article says, modular homes are well-insulated. From experience I know some provide several cooling options such as forced air, while not as effective as an air-conditioning unit, it should be sufficient for most climates. For the most part, I wouldn’t recommend moving too many walls around however remodeling is an option and nearly every type of flooring and wall covering option is available. I have toured homes with world-class kitchens and home automation features. I would recommend however going with a contractor who has experience (more than a few projects) in modular/manufactured homes as there are many manufacturers with unique design elements which take experience beyond what a Google search can provide.

The real downside to homes is the land. One is limited to what you can do with the landscaping on the lot and the very common tandem load parking can be a challenge for a multi-car family. Something to note is when an investor buys the community with the intent to significantly increase the rent or potentially sell the property for redevelopment. While sometimes still referred to as “mobile homes” other than their delivery via a tow hitch called the tongue and some axels and wheels, once removed the home is there for its useful life. To move it, while possible is expensive, starting around $30,000, and obviously, wouldn’t be the same once reassembled. Investors know this and to some extent, extort homeowners. If you can, look for a resident-owned park in which you own an ownership share in the community, and it operates much like a homeowner’s association.

The other issue is financing and qualifications. Without a foundation and ownership in the land beneath, these homes fall under what is called a chattel loan (personal property) which typically offer 25-year loans with higher interest rates. There are also relatively few lenders in this space so it’s worth it to find a specialist in this area who can help you identify a good lender. These communities also require residents to have good credit and income requirements. Most are pet friendly with size and breed restrictions on dogs which are in line with virtually any community that allows them. Send me a message and I’ll tell you how the residents of one community get around a non-dog walking policy or if you are in interested in the San Jose, California area I can refer you to a firm that specializes in manufactured homes and communities.

Check out Gary Fleisher here: https://www.modularhomes.com/author/gary/

The WSJ has an odd article about an Aspen Townhome and what it sold for after a renovation.

Sure, in roughly two years and a renovation, the value would likely increase but at double the purchase price? Considering an owner cannot readily alter the exterior, add space, or modify interior walls I fail to see what an “extensive” renovation entails.

This should trigger some kind of audit. Even if your neighbors are famous people you would like to know and the location can teleport you anywhere this property seems wildly overpaid for.

https://www.wsj.com/articles/aspen-townhouse-sells-for-more-than-double-its-last-sale-price-ad171502?mod=e2li

Here’s three articles that I found interesting this month.

Residential Real Estate

Is the housing market unusual?

The residential market seems a bit off to me. I think we won’t really see a drop in the market until this summer with laid off workers running out of severance benefits. The indicators for trouble would be increased interest rates and days on market (DOM) for properties. As the time line stretches out, prices often get lowered and negotiations get more intense.

https://www.sfgate.com/realestate/article/bay-area-housing-market-slumps-in-january-17788878.phphttps://www.sfgate.com/realestate/article/bay-area-housing-market-slumps-in-january-17788878.php

Commercial Real Estate

Return to work?

I was talking with a friend about this, that cities want the return to work as much as employers do. This would help with local business recovery. As it stands now the return to work situation may be hindering some markets recovery.

https://www.bizjournals.com/bizjournals/news/2023/02/24/remote-hybrid-return-office-billions-dollars.html

Commercial properties defaulting?

In commercial real estate, loan defaults for properties such as office and retail should come as no surprise. So far it looks like this is just the beginning but I would caution about anticipating a large default with loans. Unlike residential investors, most commercial investors are other organizations or high net worth individuals with greater resources and professional advising. In addition to that, most properties are secured by leases that the tenants are responsible for. The real tipping point to indicate how bad property defaults will get depends on tenants paying lease cancellation fees or defaulting on their own leases.

https://www.linkedin.com/pulse/cre-distress-droves-real-estate-rundown-therealdeal/

Well it looks like not every neighborhood in San Francisco is destined to be gentrified for the tech elite.

While this is classified as a distribution center it has a mutli-tenant, multi-use configuration. Check out the article on SocketSite. Fyi I have been a fan of this site since I got into commercial real estate years ago.

Article link: https://socketsite.com/archives/2022/03/plans-for-massive-new-distribution-center-closer-to-reality.html

#sanfrancisco #commercialrealestate #socketsite #distribution

This guy Graham isn’t my favorite real estate YouTuber but he encapsulates my concerns about the market over the last few years.

#realestate #market #housing #youtube