Pot o' Gold

SF housing
Homeowners find much to appreciate. Despite rising interest rates, sales and prices in the Bay Area rocket to new highs. How high? The annual increase in the median home price now tops the region's typical household income.
...
The numbers say it all: Between February and March, the median price for a single-family house jumped $36,000, or 6.3 percent. Over the last 12 months, it soared $106,000, or 21 percent, hitting $605,000 in March.
...
During a tour for real estate agents at a home in San Francisco's Noe Valley early this week, agent John Abbott feared he would exhaust his sheaf of 75 flyers as dozens of buyers' agents trouped through the creaky 1,200-square- foot Victorian listed for $1.25 million.
...
But even those home sellers flush with cash find it difficult to trade up for a new property. Most homes in desirable areas fetch at least a handful of offers; and some, like a three-bedroom home on Winfield Street in Bernal Heights, garner more than two dozen and sell for at least $250,000 above the asking price.
...
DataQuick's research shows the typical monthly mortgage payment that Bay Area buyers committed to in March was $2,566, an all-time high. In spite of an eight-week stretch of rising mortgage rates in February and March, however, sales and prices have remained strong.

Bay Area Flipping:
Brian Brager has bought and sold 13 Bay Area homes over the past 18 months or so, making at least $25,000 each time. A general contractor, he buys ``fixer-uppers'' worth up to about $1 million. He makes repairs and adds upgrades -- new flooring, new kitchens, new paint -- then sells them at a profit within a few months.

He's not alone in ``flipping'' houses. The potentially risky practice has hit a new high in Santa Clara County, according to recent data. As home prices have increased, so has public interest in reaping quick profits from the hot Bay Area real estate market.

Of the 1,882 houses and condos sold in the county in February, 4.5 percent -- about 84 homes -- had been purchased within the previous six months, according to DataQuick Information Systems. That's up from 3 percent in February 2004.
...
Last year he bought a Santa Clara house listed at about $435,000. Because there were other bids, he paid $467,000. He spent about $75,000 for upgrades and repairs -- new driveway, wiring, landscaping, windows, hardwood floors, maple cabinets, marble shower -- and sold it within six months for $640,000. After commissions, property tax and mortgage costs, that left him with a profit of more than $50,000.

There are no guarantees when it comes to flipping, however.

``If the market shifts, some of these people are going to get caught short,'' Rossi said.
...
Rossi said legal problems can occur when a listing agent buys a property from the seller he or she is representing, then flips it without disclosing the intention to do so. The listing agent should have disclosed to the seller that the home was worth more -- or could be worth more with a little cosmetic fixing up, he said.

Rossi said he's seen flipping -- and associated legal problems -- spike in each of the past four decades. In the past, some speculators flipped properties -- often new homes -- by reselling them before escrow had even closed.

Many would-be flippers are restrained by the high prices of Bay Area homes, even fixer uppers. But over the past year, many home builders have added clauses to purchase contracts to forbid the practice.

In addition to flipping houses locally, Bay Area residents have invested heavily in property outside the area, especially in places like Las Vegas, Sacramento suburbs and Phoenix. In the first eight months of 2004, Bay Area buyers purchased more than 13,700 homes outside the region and somewhere in western states. It's not known how many of those properties have already been sold again.