Mill Valley CA Real Estate Update

May 20, 2010

Filed under: Mill Valley — dwdupont @ 7:23 am

Mill Valley Real Estate has had a decent 6 months. Activity in the lower market segments really increased, many homes were sold, and families were able to move on with their lives. Like other areas in the area, state & nation many homes were purchased based on assumptions which turned out to be incorrect, and on a financial paradigms that proved faulty:

Example of mistaken assumptions & a broken Paradigm:

  • A lot was purchased with a tear down on it for $995,000 up near the Edgewood area of Mill Valley.
  • At the time everyone said it was a “fantastic deal.”
  • A new 3,250sqft house was built that cost $435/sqft to build during peak market conditions.
  • Additionally the owners spent about $200,000 on hardscape, landscaping and architecture and are into the house for about $2.6m.
  • While it is a beautiful house with a wonderful floor plan for a family, it is of average finish and quality due simply to the cost of materials at the height of the bubble.
  • The family had two incomes, but the husband was transferred back east by his company. He said no, left the company, and started looking for work… but it was slow going.
  • They put the house on the market at $2.7m so after commissions they would be “almost whole” not including any compensation for the endless hours, & marriage and family stress of selecting and designing items.
  • They are now getting offers in the mid $2.2m range.
  • The house will eventually sell near that $2.2 number and after commissions will result in a $400-$500,000 loss…. not to mention all the time and energy wasted with architects, designers and selecting door knobs.

Last year saw a tremendous number of situations very similar to above. Mill Valley average home prices tanked just over -20%. Most of the sales that drove down average prices were in the bottom 2 quartiles of price in Mill Valley– the upper market homes mostly sat and got dusty.

Activity in the upper market however has continued to be sporadic but now there are at least homes selling—the ones priced to sell. All the other homes are priced to “get my money out” — these homes aren’t selling in this market. Sellers are advised to wait 3-5 years to sell higher priced homes as you will have a difficult time getting your money out in this market.

The assumption that someone will eventually come along and buy it doesn’t work in a declining market the way it works in an rising market. In a rising market, the longer you wait the better your chances are regardless of how many days on market. In a declining market the longer you wait for Mr & Mrs. Right, the lower your eventual sales price will be.

While recent data for Mill Valley SFR homes is improving– +8% for the year relative to the last 12 months, this is the kind of bounce you would expect this time of year anyway and so at best we are mildly improving. The likely path moving forward depends on the direction of the stock market as it will lead the employment markets and housing in all price ranges.

One way to hedge price decreases in your home: go short the S&P 500 (this should not be considered as investment advice or financial planning advice). Please speak with your investment advisor and if you don’t have one, please try to find one.

“Jake Schutt at Parallel Advisors (www.paralleladvisors.com) says that first: you should have a financial plan in place and know how you are tracking against your goals. This also puts portfolio gains and losses in meaningful context. Second, a diversified portfolio with the proper allocation will protect you against downturns.”

Recent market data of homes in contract in Mill Valley:

Mill Valley condo prices are seeing a 2% bounce relative to the last preceeding 12 months.

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1 Comment

  1. You make an excellent point, if you cannot get the money you spent out of your home, simply do not sell unless you have to. You don’t actually lose or make any money on your property until you sell – just like stocks.

    Comment by Grant in Nashville — May 21, 2010 @ 9:15 am

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