Existing Home Sales Rise For Second Straight Month

The National Association of Realtors released its existing home sales report which noted that existing home sales rose for the second straight month in May, signaling low prices and incentives are attracting buyers. 

NAR says existing home sales, including single family homes, condos and coops rose 2.4 percent in May.  It was the first back-to-back monthly gain in existing home sales since September 2005.

NAR chief economist Lawrence Yun had this to say, “Historically low mortgage rates clearly drew buyers into the market, and housing remains very affordable even with a recent uptick in rates.  First time buyers are also being drawn off the sidelines by the $8,000 tax credit which is helping to absorb inventory.” The numbers could be even better if it weren’t for appraisal issues.  While pending sales of existing homes—those with signed contracts but not yet closed—indicate stronger activity, some contracts are falling through from faulty valuations that keep buyers from getting a loan, said Yun.

We’re starting to experience more challenges with low appraisals here in the Bay Area, most often from out-of-area appraisers who have no experience and limited knowledge of local markets. The pendulum could be swinging a little too aggressively in some cases as regulatory controls meet market demand.  You’ll find quite a few references to appraisal issues as you look through our activity for the last two weeks from our branches:

• East Bay—The Berkeley office reported same old story.  REOs are flying off the shelf with 15-24 offers and most are cash.  In our core area, there are still not enough listings.  Sellers are either waiting for some magical return to previous years, or concerned that their appropriately priced house won’t appraise.  Appraisals are the big bug-a-boo now for all parties. Buyers are torn between “shoot the moon” offers and whether their offer price will appraise. Listing Agents and sellers are wary of extravagant offers for the same reason. Short sales are popping up in more affluent neighborhoods.  Our Castro Valley reports the market continues to improve for our local market.  We have an active base of buyers and we continue to support them in the competitive market.  We are continuing to see increased activity in the mid-range markets and we have even sold some of our oldest inventory.  In fact, listings that fall out are quickly back into escrow, since there is no shortage of buyers for us.  Our Livermore office reports in the Tri-Valley Area, active listings in Livermore are decreasing and total pending sales are increasing: active listings in Pleasanton had a small increase while total pending sales decreased; active listings in Dublin decreased and total pending sales remained stable.  The overall market in the Tri-Valley area is improving.  Walnut Creek reports listing inventory is increasing with more REO, short sale and regular listings.  The Walnut Creek mid-priced listings, $500-700K are starting to move.  Sales activity is good.  Multiple offers on most listings under $500K and even some on the higher priced listings.            
• North Bay—San Rafael and Novato are still moving inventory. Relatively in the $500-$750k range.  More REOs expected this summer. $1-$1.3M market strong in Corte Madera, Greenbrae and      Mill Valley. In the past week we have seen an increase in sales activity in Novato with 28 homes and condos going into contract versus San Rafael with only 19. We continue to see buyers driving the prices up in the entry level market with multiple offers. One home listed @ $240k sold well over $300k in Novato this month.  Our Santa Rosa office reports inventory continues to tighten with multiple offers being the rule rather than the exception. Price point is key as over priced listings can still sit with little or no activity.  The Sebastopol office reports almost all REO and short sales are multiple offers.  Lots of lookers at open houses over 30 groups on Father’s Day at a listing in the low $300,000s.  
• Peninsula—Our Burlingame office reports as hard and challenging as all the transactions are these days, there are sales being made and Agents are busy. We have had sales at every price point $200k to $4.5mil. The North County is seeing large numbers of multiple offers 10 to 20 per property, most all sales are REO or short sales. We have had a few appraisal challenges mostly the result of out of area appraisers unfamiliar with the neighborhoods and agents are doing their best to be proactive in meeting the appraiser and providing comps.  Our Menlo Park El Camino office reports open houses were slow but we also had quite a bit less.  Agents feel most buyers still have no “fire to buy” still waiting for the perfect house and the perfect price.  Palo Alto reported everyone seems to be on vacation.  Open houses have been quieter in the Palo Alto area.  There is still good demand for well priced homes.  The Woodside office reports the market feels a little slower.  Open houses were not as active.  Is it the interest rate movement or the summer doldrums?  Inventories are still short on the best properties that buyers are looking for.
• San Francisco—The Lakeside office reported the under $800,000 market is going crazy in San Francisco.  There is a lot of over bidding and then complicated escrows, but a lot of activity.  The Lombard office reported all deals were sol and under asking except with REOs which were all multiple and all over asking.  But some over asking REO deals of late have had appraisal challenges and required adjustments.  Lots of loan problems and delays of late; requires patience and cooperation from all sides.  The Market Street office reported this week was one where buyers were flocking around certain houses driving up the price and garnering multiple offers.  We lost out on a couple where 10 or more offers came in and our Agent wrote $75,000 over.  Fortunately we had a couple of listings that benefited and received multiple offers after the first open house.  The Noriega office reported sales activity is up.  A lot of negotiations going back and forth.  Financing is getting tighter with a lot of loan conditions.  Marketing a listing used to be location, location location.  Now it’s also price, price, price and affordability!                      
• Santa Cruz County—The market is clicking along; we are having one of our better months in quite some time and will probably end up with 60 sides for the month.  In the county, inventory levels are down about 21% from May of 2008, median price is down the same amount to approximately $450,000, while overall unit sales are up 23% reflecting the strong REO market.
• Silicon Valley—The Cupertino Stevens Creek office reported listings have slowed down for our office, but we are strong with sale transactions coming in.  The Los Altos office reported the market is active with low end REO getting multiple offers.  Mid range homes need to be exceptional to draw offers.  The high end continues to be slow.  The Los Gatos office reports our mid-level properties are selling in Los Gatos (finally).  Great energy in the open house arena-lots of buyers feeling that the bottom is passed.  The San Jose Almaden office reported 53% pending in Blossom Valley with inventory shrinking.  Only 96 homes were available in Blossom Valley.  That is down from 200 just one year ago.  Attractively priced homes in Almaden are selling fast.  REOs continue to receive multiple offers.  Our San Jose Main office reported open houses were absolutely crazy the past two weeks. One property in Almaden in the $875,000 range had over 200 visitors on Sunday alone! Most lower priced homes are selling with multiple offers, sometimes as many as 5 to 10 offers on each. Upper end properties are starting to see better activity.
• South County—Gilroy reports a lack of inventory continues to cause a decrease in sales. Most properties are receiving multiple offers. Appraisals are now becoming a challenge due to lack of comparables.  Hollister reports contracts are being presented with multiple offers the norm on most REO listings.  Some listing Agents are not responding in a timely fashion adding to the frustration of the buyers and buyer Agents.  Floor time has picked up with buyers ready to buy.  Seeing other contracts besides the typical CAR or PRDS being used by some REO listing Agents.  Morgan Hill reports Agents are looking for listings.  The inventory is way down and our office inventory of listings (entry-level and moderately priced homes) is also down.  Properties listed over one million dollars, however, continue to languish on the market—but those priced under $600,000 are selling briskly.

One potential challenge that may begin affecting our market is the rise in interest rates.  I recently came across this CNNMoney.com article which offers a good look at interest rates and inflation:  http://money.cnn.com/2009/06/19/news/economy/higher_inflation.fortune/index.htm.  Currently, today’s historic low interest rates are the major driver of the recovery we’ve seen so far. Housing affordability, better than it’s been in California in over a dozen years, is a balancing act of lowered pricing and attractive interest rates.  If higher interest rates take more buyers out of the market, we can expect longer standing inventory and further price declines.

I recently sat down with our partners at Princeton Capital to discuss what strategies the Fed and Treasury may have in store for interest rates as inflation concerns become more real.  Our discussion will be found in your upcoming July edition of Reality Check, which we’ll distribute after the July 4^th weekend.

Rick

Rick Turley
President
Coldwell Banker Residential Brokerage San Francisco Bay Area

SFResidence is part of the TRI Coldwell Banker office at 1699 Van Ness in San Francisco which is one of the premier offices in the City and has the market share numbers to prove it. We have some of the top agents selling real estate in the San Francisco Bay Area. As a result, our office posts some impressive numbers.

This week showed continued improvement in the housing market for San Francisco. Surprisingly even though listings were down, our office ratified 16 deals meaning if we weren’t selling it, then we were representing the buyers. That’s good news since this is officially a buyers’ market and deals can be made.

Here are the numbers for the week of 6/17/09:

• 2 new listings ($419,000 and $959,000)
• 16 ratified sales (pending) (average price $1,679,814, low $389,000, high $6,750,000, 1 confidential)
• 11 closed sales (average price $1,115,545, low $499,000, high $1,950,000, 1 confidential)
• 6 reduced (average price $2,765,500, low $499,000, high $5,500,000)

- Janis Stone
DRE 00517072

Foster Weeks publishes a weekly mortgage report which is updated every Monday morning. How is this affecting the San Francisco real estate market? Read our weekly and monthly market reports. Here’s what Mr. Weeks says about last week’s activity:

They say no news is good news. But perhaps the more important question this week is will the Fed’s news from their latest Federal Open Market Committee Meeting be good news for rates and the economy? Here’s what you need to know.

Last week, the Fed released their Interest Rate and Policy Statement after their latest regularly-scheduled meeting of the Federal Open Market Committee. While there was speculation ahead of time that the Fed may decide to buy more longer-term Treasuries, which could jumpstart the cycle needed to eventually bring home loan rates down, the Fed did not make any changes to the Fed Funds Rate or their Bond purchase program. The one change from the prior meeting’s statement was that the Fed now does not see deflation as a risk. While this is good news, it also means that there could be a real threat of inflation down the road. And remember, inflation is bad for Bonds and home loan rates, so this could have a big impact on rates in the longer term!

There was good news in the Personal Income Report as personal income rose in June by its biggest gain in over a year. The increase in income led to higher consumer spending and savings in June. Spending rose for the first time in three months, while the savings rate climbed to its highest level since December 1993 as the chart shows…

Read the entire report here.

SFResidence is part of the TRI Coldwell Banker office at 1699 Van Ness in San Francisco which is one of the premier offices in the City and has the market share numbers to prove it. We have some of the top agents selling real estate in the San Francisco Bay Area. As a result, our office posts some impressive numbers.

As summer arrives, we are seeing our market level off. Although this week new listings were not the story, our office continues to put deals in escrow which is why we are the number one office in San Francisco. If something is sold in the City, there is usually a TRI Agent involved, whether it is representing the buyer or the seller.

Here are the numbers for the week of 6/17/09:

• 2 new listings ($435,000 and $1,188,000)
• 11 ratified sales (pending) (average price $798,709, low $225,000, high $2,565000)
• 10 closed sales (average price $1,817,650, low $280,000, high $5,074,500)
• 1 reduced ($1,495,000)

- Janis Stone

There is no report from Rick Turley this week.

- Janis Stone

SFResidence is part of the TRI Coldwell Banker office at 1699 Van Ness in San Francisco which is one of the premier offices in the City and has the market share numbers to prove it. We have some of the top agents selling real estate in the San Francisco Bay Area. As a result, our office posts some impressive numbers.

We had an emergency last week that made it impossible to post the numbers for the previous week. But as you can see our office had a good activity. The real story is the high number of price reduced listings. This would indicate the market is still in a bit of turmoil in that sellers still haven’t grasped the reality of the situation.

Here are the numbers for the week of 6/17/09:

• 5 new listings (average price $974,800, low $525,000, high $2,100,000)
• 16 ratified sales (pending) (average price $1,016,063, low $280,000, high $6,750,000)
• 8 closed sales (average price $1,941,844, low $595,000, high $5,074,750)
• 6 reduced (average price $2,468,500, low $779,000, high $5,150,000)

- Janis Stone

Attached are the 1st quarter results for the First Republic Prestige Home Index, released today. The release and graphs for San Francisco, Los Angeles and San Diego markets are also posted at www.firstrepublic.com.

Thank you,

Linda Farris
Director of Marketing
(415) 296-3702

San Francisco statistics may be seen here.

Foster Weeks publishes a weekly mortgage report which is updated every Monday morning. How is this affecting the San Francisco real estate market? Read our weekly and monthly market reports. Here’s what Mr. Weeks says about last week’s activity:

“THE WORLD IS BUT A PERPETUAL SEE-SAW.” Michel de Montaigne. And that sentiment was especially true in the world of Stocks and Bonds last week, as money see-sawed back and forth between the two markets, halting the improvement that Bonds and home loan rates mustered up in the first part of the week.

Bonds and home loan rates began the week looking good - and remembering that inflation is bad news for both Bonds and rates, they were helped along by good news on the inflation front. Inflation at the wholesale or producer level remained tame in May, and at a consumer level, inflation readings came in lower than expected, with a year-over-year reading at its lowest level since 1950. These are good signs that inflation hasn’t become an issue yet. However, inflation will be a concern down the road, due to the massive stimulus being injected into the economy. It is said that rates are like a boat floating atop the sea of inflation…as inflation rises, so will home loan rates. If you or someone you know should be acting on today’s still low home loan rates, please get in touch soon.

Also helping Bonds rally in the early part of last week was the fact that the New York State manufacturing index came in weaker than estimates, indicating that the US economy is still very weak. And since bad economic news often causes money to flow from Stocks into Bonds, this piece of news helped Bonds start the week on an improving trend.

However, Bonds and home loan rates reversed course midweek and worsened, as money see-sawed back over to Stocks. They were also pressured to worsen by the enormous amount of Bond supply hitting the markets - as too much supply of anything will naturally cause the price to move lower…and in this case, has caused home loan rates to move higher. As you can see in the chart below, Bonds have worsened when additional supply has been announced, causing home loan rates to climb.

Read the entire report here.

Reinvigorating the Housing Market

This week Realogy (Coldwell Banker Residential Brokerage’s parent company) President Richard Smith met with legislators regarding the need for policy initiatives concerning the real estate industry and the economy as a whole.  Specifically, the Business Roundtable (an association of chief executive officers of leading U.S. corporations)— of which Richard is the chair—issued a set of recommendations for the White House and Congress that are aimed at jump starting the housing market in order to stimulate a broader economic recovery.

The Business Roundtable’s recommendations are as follows:

·         Keep mortgage interest rates at historically low levels (below 5 percent) for at least one year;

·         Expand the current First-Time Homebuyer Tax Credit incentive from the lesser of 10 percent of the purchase price of the home or $8,000 to a higher limit of either 10 percent or $15,000 for all homebuyers, remove the income restrictions and include all primary residence purchases for one full year;

·         Conduct a thorough review of current foreclosure mitigation and loan-modification programs in light of rising loan-modification re-default rates;

·         Make permanent the current temporary conforming loan limits; and

·         Continue to review and strengthen government efforts already underway to review and refine mortgage lending practices.

We believe targeted, demand-side solutions—such as the ones Business Roundtable is recommending—will provide a critical next step for a housing recovery that will help create jobs and boost the economy as a whole. To obtain a copy of the Business Roundtable press release and its Housing Working Group’s detailed recommendations, click here. To read an article that appeared in today’s online edition of The Wall Street Journal containing an interview about the Business Roundtable’s recommendations and why they are crucial to jumpstarting the housing market, click here.  We will communicate with you as any legislative opportunities occur for you to contact members of Congress and voice your support—but for now, just know that we appreciate your support and are proud to be part of this initiative.

In other news this week, RealtyTrac released its foreclosure findings with positive news that foreclosure filings dipped 6% in May compared with April.  But the news wasn’t all positive as the number is still 18% above this time last year.  In California, the picture continues to be a bit more bleak.  We are ranked No. 2 out of 50 states in foreclosure filings with 92,249 total filings or one in every 144 households.  While the last two months showed a decline with a 4.5% drop from April 2009 to May 2009, the year-over-year number is still a 22.8% increase.  For a complete look at the USA Today story that ran on the figures, click here:  http://www.usatoday.com/money/economy/housing/2009-06-10-may-home-foreclosures_N.htm#chart. 

While none of us are happy to hear about more homes in the foreclosure process, our local markets are telling us that there is sufficient demand for bank-owned properties – most are still receiving multiple offers when they hit the market.

Now let’s take a look at this week in real estate:

• East Bay—The Berkeley office reports 40% of our sales this past week had multiple offers. One REO received 22 offers, all cash.  Our higher end is also busy.  In the $800,000 to $1 million range, we have seven active Berkeley listings and only one month supply;  the $1-1.5 million price range has 18 active listings and a 3.6 mo. supply and the $1.5-2million range has 9 properties and a 9 month supply.  Castro Valley reports the market continues to deliver multiples and bid wars in the low range markets.  Inventory is much needed and there is no shortage of backup offers if a deal falls out.  Fremont reports resale activity is picking up.  REOs and short sales are still experiencing multiple offers due to low market prices and reduced inventory.  Livermore reports two of the three open houses this past weekend were very active with over 25 groups visiting each open house.  Inventory of active homes and total pending sales of existing homes in the Tri-Valley area remained stable this past week.  Multiple offers continue on homes listed below $500,000!  Two REO listings in the office had more than 20 offers on each property.  Walnut Creek reports we are experiencing an increase number of sales falling through for various reasons and also at various stages of escrow.  The most common reason being “low appraisals”.  Seven our our REO properties were recently sold to buyers paying “All Cash.”  Even though these listings located got multiple offers, often at higher than the “asking price,” the Seller’s “banks” held out for the “All Cash” offer.  These properties were located in Pleasant Hill, Concord, Antioch and Vallejo.
• Monterey—No information reported.
• North Bay—Our Greenbrae office reported San Rafael and Novato market are hot, hot, hot!  San Anselmo, Corte Madera and Greenbrae are also doing well with 30% + in contract. Novato at 46% in contract. Just had multiples on a $1.2mil house in Greenbrae.  Appraisals are slowing down a bit plus price adjusting downwards accordingly or the deals fall through.  Our San Rafael office is reporting homes priced at market value in Novato and San Rafael are moving quickly.  One home listed at $720k in Novato had an accepted offer in less than ten days. Many homes between $300-500k are seeing multiple offers which is driving the prices up.  The Santa Rosa office reports there are more real buyers out there than new sellers right now. Inventory is getting tighter below $500,000 and in selected geographical areas above the $500,000.         
• Peninsula—The Burlingame office reports it seems that there are protracted negotiations on every deal and buyers asking for further seller concessions after they are in contract. We have started to see a few appraisal problems which mostly seem to be the result of out of area appraisers. That being said there is more activity and sales and listings are increasing.  Half Moon Bay reports the coast slowed down considerably this past week-either buyers are attending school graduations or watching the interest rats in hopes of them coming down.  The Menlo Park El Camino office reports that things are feeling busier.  Higher price ranges selling and some real competitiveness among buyers. Loans are still very evasive for many buyers—well-qualified or not.  The Palo Alto Downtown office reports the market has been slow again these last 10 days. Although, the Midtown office seems to be busier with the entry level market. The entry level in Mountain View, Santa Clara and Cupertino seems to be relatively strong compared to the months past. The Palo Alto market has slowed down as far as number of sales and the high-end is again quiet.  The San Mateo office reports the lower end of the market is hot, with multiple offers. Middle market to $800,000 is also very active. $1mil and up beginning to show life. Loans are still a problem.                            
• San Francisco—The Lombard office reports a slow week, but this week’s ratified deals were almost a reflection of the YTD.  Three REO sales with multiple offers (up to 10), all over asking. A $1.5m home with multiple counters but with immediate loan problems. And a $2.6m investment deal whose terms were all dictated.  The Market Street office reported Agents are writing offers but find they are running in to more competition than in the past few weeks. We are all at the edge of our seats with respect to financing until the deal is closed.  Many last minute conditions coming up, not unmanageable but frustrating for our clients. Open house activity is still steady across the city and many unattached clients are looking to make the right connection with an Agent.  Our Noriega office reported demand of affordable SFH is high, inventory is low. Buyer’s Agents are writing offers left and right, but most are competing in multiple offer situations. Activity is high; a lot of deals are falling apart over financing.  The Van Ness office reports activity is excellent with 18 deals closed this week alone.                                                                
• Santa Cruz County—Inventory levels continue to lag - south county Watsonville REO inventory is nearly gone, very few homes left and those new properties are receiving multiple offers.  Short sales continue to be a big part of our market and our Agents are doing their best keeping these moving forward - and we have been relatively successful thanks to the short sale packages which they are using.  Open house activity for the most part has been active.
• Silicon Valley—Our Cupertino De Anza office reports we had 11 offers on a small SFR in Blossom Valley. It got bid nicely up. A Sunnyvale home with three offers went pending $20,000 under the list price. Agents are starting to see more attractive terms on some of their offers, even if the prices are not going sky high.  Our Cupertino De Anza office reports multiple offers continue to dominate the lower to mid ranged priced homes in our area. We continue to see more buyers come off the fences for the $1.2m to $1.5m range and actively pursuing the homes with quality offers at or just above the asking price.  The Los Altos office reports the market is active in most price ranges except for the higher end.  We did have one $5M sale that was not on the MLS and is scheduled to close by the end of the month.  The San Jose Willow Glen office reports buyers are out there but they may be waiting for prices to drop because it is a buyer’s market. Things have slowed up a bit and probably due to graduations.  The Saratoga office reports the office has been buzzing with sales especially over the last two weeks. We finished the month with a fantastic 107 buyer sides. Our over $2 mil market is still very slow.
• South County—Gilroy reports the lack of inventory continues to hinder our market. Agents and buyers are frustrated in submitting offers on properties where there are multiple offers in the double digits. Banks need to release more properties in order to keep up with the current demand.  The Morgan Hill office reports the dynamics of the market are interesting, but frustrating for buyers and for Agents alike.  It seems that only a short time ago, buyers were not buying and yet it was a true buyer’s market.  During these past several months, however, buyers are making offers on anything that is priced right and shows well.  Multiple offers are the norm.  One Agent in the Morgan Hill office made 23 offers for one young couple but were beat out 22 times by higher bids.  They have just gone into contract this week on their starter home.  Inventory is way down, demand is way up; there just aren’t enough moderately priced homes to bring the market into balance.

 For a quick look at the Bay Area market for properties over $1,000,000 –here’s what I am seeing:

Monterey and Santa Cruz counties took a month over month decrease in number of sales and a slight decrease in median price. East Bay counties remain fairly flat in number of sales, and in price.  San Mateo and Santa Clara counties took a big jump in May; number of sales up 32% over April, and median price highest since April of 2008.  Similarly, in San Francisco, median price jumped 27% over prior month to $1,750,000 and highest number of sales since last September.   Marin and Sonoma counties had their third monthly increase in number of million+ dollar sales, and a slight increase in median price.  The prevailing commentary you’ll hear in any areas that are experiencing increased high-end activity is very careful selection of listing price and great attention to detail for showing condition of the property.

No report next week.

- Rick Turley