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”…and that sentiment was particularly true last week, as several pieces of news that arrived were far from good.

On Friday, the Labor Department reported that 598,000 jobs were lost in January. This was worse than expectations of 540,000 jobs lost, and is the worst number since December 1974. Overall, about 3.6 Million jobs have been lost since December 2007, with nearly half of them in just the past three months. And you can see this clearly in the chart below, which looks unusual because it’s measuring a negative number, for something that is normally reported as a positive (i.e. the number of jobs created). The rate of unemployment jumped to 7.6%, but the number of part-time workers increased dramatically as well. Many part-time workers would rather be full-time, but are simply taking what they can get. Added up, the number of underutilized workers now represent over 15% of the workforce overall. Let’s hope the Stimulus Plan spurs some job growth.

And with last Monday’s news that the Personal Consumption Expenditure (PCE) index reported its smallest gain in five years, the argument of inflation being a threat to the economy has taken a back seat for now. While that may sound like good news, the bigger topic for the moment is the threat of deflation in the near term. Why is deflation considered worse? Deflation kills the over-all economy, as there is no incentive to spend today when prices look as if they’ll be getting cheaper in the future. This consumer mind-set obviously destroys product sales, and in turn, adds to the already dismal amount of job losses. If deflation takes hold, the fear is that it can lead to a devastating economic cycle.

However, there was some possible good news from last week. There was renewed talk about relaxing the “mark-to-market” accounting rules, which is not only vital to the economy, but also to the mortgage industry as lenders need the ability to lend for the mortgage and housing industry to recover and thrive. “Mark-to-Market” rules led to the failure of many financial institutions that really weren’t in bad shape, but simply made them appear to be over leveraged as they were forced to value their assets against distressed institutions selling assets at steep discounts. It will be important to watch this news story in the weeks ahead.

And when all was said and done, the news of the week wasn’t so horrible for Bonds and home loan rates, as they ended the volatile week only slightly worse than where they began.

HAVE YOU BEEN THINKING OF BUYING A HOME OR REFINANCING YOUR LOAN? CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW TO MAKE SURE YOU AVOID A VERY COSTLY MISTAKE!

Read the entire report here.

- Foster Weeks

We are pleased to announce that we have 5 pairs of tickets to giveaway for “Shopping! The Musical”. Marketing Director, Dan Meagher, saw our newsletter and has generously offered us an opportunity to give 5 lucky friends and associates a chance to see this longest running original musical.

We will provide five ticket certificates (each good for two tickets) for any future Friday 8 PM performance of “Shopping! the Musical.” There is no certificate expiration date and the winner’s may book any future Friday performance of their choice at the Shelton Theater in San Francisco’s Union Square.

What’s the catch? You don’t ahve to buy anything. All we are asking is that you e-mail us ONE person who you think would enjoy receiving our newsletter! Or let them sign up themselves using our link in the left margin  (<– look over there)  and they will be entered to win. That’s it! You will be entered in the drawing which we will be doing on February 20, 2009! Good luck!

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.

The word on the street is that business is picking up… sort of. Most agents feel there is a lot of activity, given what we are being told about the state of the economy and the fate of the stimulus package. Buyers seem to be ready.

Here are the numbers for this week, 2/4/09:

• 2 new listings (both at $1,295,000)
• 4 ratified sales (pending) (average price $709,500, low $499,000, high $900,000)
• 1 closed sales (sold) ($660,000)
• 1 price reduced ($6,000,000)

- Janis Stone

Read what Rick Turley, President of Coldwell Banker, San Francisco/Peninsula says in his latest weekly report:

Earlier this week, the National Association of Realtors reported that in December, existing home sales rose unexpectedly while inventory declined, led by a surge of sales in the West.

The national real estate organization reported, “Existing home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, but are 3.5 percent below the 4.91 million unit pace in December 2007.”

In the West, existing home sales jumped 13.6 percent to an annual rate of 1.25 million in December and are 31.6 percent higher than a year ago.  However, the median price was $213,100, down 31.5 percent from December 2007.

Here at home, CAR reported this week that home sales increased 84.9 percent in December in California compared with the same period a year ago.  No, that’s not a typo.  84.9 percent.  On the flip side, the median price of an existing home fell 41.5 percent, a continued symbol of buyers taking advantage of the large number of distressed properties currently available.

So why the sudden, so drastic surge in sales?  There are a few reasons:

• A lot of people who were previously priced out of the housing market can finally buy
• With interest rates under 5%, a buyer’s purchasing power is at its best in more than three decades
• After months of increasing or stable inventory, we are finally starting to see the numbers fall
• Increased consumer confidence (of late) based on the new administration
• We’re seeing a lot more investors coming into the market in addition to first time buyers.  Consider the fact that this week alone, one Gilroy Agent represented 10 properties that went into contract.  Almost all were investors and the properties were condos in the under $100,000 price range. 

So is it too early to call it a trend?  Probably.  In all honestly, we still have a lot of distressed properties to move through before we can begin to see prices stabilize.  At least for the foreseeable future, buyers will probably have the edge but with an 84.9 percent increase in sales year over year and inventories on the decline, we’re finally moving in the right direction.  The key to all of this:  buyers are ready to buy when they perceive a good value.  Until then, they wait.

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

• East Bay—Our Castro Valley office reports multiple offers still seem to be the trend for REOs and offers are being accepted over asking.  One Agent reports that her recent offer on an REO property in Hayward was rejected, with the winning bid accepted at approximately 12% over asking.  In an interested trend, especially in Castro Valley which was one of the hardest hit by REOs, Agents are reporting that there seems to be less REO inventory available.  Is it possible this market is going to be one of the first to rise from the REO short fall?  Danville reports almost all of our sales are bank owned.  Open houses are well attended and with the media talking about REOs, buyers are looking for bank owned bargains.  Walnut Creek is feeling the same effects with 90% of its sales being REOs or short sales.  On the contrary, Oakland reports it needs listings.  Great listings in this market are getting multiple offers.  A new Montclair listing on the market (listed at $678,000) had its first open on Sunday and had 200 groups through.  We had requests for 11 disclosure packets.
• Monterey County—While the market on the Monterey Peninsula is a spotty one, Agents are writing lots of offers.  Buyers are being tough and we have put 43 properties into escrow since the first of the year.  An interesting fact, Carmel has had eight properties listed over $2 million go into escrow in January.
• North Bay—Greenbrae reports that sales all over central Marin are weak, though new homes that appear to be priced well are coming on the market.  San Rafael notes that many of the condos listed under $200,000 in San Rafael are seeing multiple offers and are selling over asking.  Petaluma notes that inventory is building in all price ranges, especially in the $600,000 plus range.  We’re seeing multiple offers in the under $500,000 range.  All but one of our open escrows for this week were multiple offers.  Santa Rosa also reports some good news noting that a new Agent helped an REO that is old to the market and had 38 groups through.  A veteran Agent helped a similar property and picked up a cash buyer looking to buy three properties in the next 60 days!
• Peninsula—Burlingame notes that after last weekend’s very busy open houses, buyers seem very enthusiastic.  We are seeing some very attractive properties in the $800,000 range come on the market which should present opportunity to those buyers who have been sitting on the fence.  Half Moon Bay notes that several offers are being negotiated and there were six new properties listed that are neither short sales nor REOs.  One well-priced REO received at least four offers so buyers are ready to buy when they perceive good value.  Palo Alto notes that open house activity has been slow (about 50% of the norm).  There does, however, seem to be a bit of momentum in the entry level properties.
• San Francisco—The Lombard office reports that January deals remain dominated by REOs, mostly under $650,000 but one at $1.6 million.  The primary market challenges:  financing fall-outs and buyer fence-sitting.  Our Noriega office reports that sales exploded last week with 10 ratified offers.  It has been busy on floor and via online inquiries so it appears that sales are following.  City inventory remains at six month lows which is creating bigger demand for available listings.  One example, as shared by our Market Street office is that one client lost out on three properties due to multiple offers.  Our hope is that this is an indication that more offers are starting to be written and accepted.
• Santa Cruz County—We have had two large sales over $3 million close within the last two weeks.  There are still not many sales in the county over the $1 million mark.  It is a combination of lack of buyers and lending issues.  In the regular market, inventory remains about the same although certain areas of the county—like the west side—have seen significant decreases.  Open house attendance is up and there is activity with first time buyers and investors.
• Silicon Valley—Activity definitely seems to be picking up.  Our Los Altos First Street office reports that buyers are attending open houses in good numbers, mostly in the lower price ranges.  Some price adjustments of 10% create offers.   Our San Jose Main office disagrees noting that while open houses are busy with traffic, it isn’t translating into sales.  The office reports that many buyers are still sitting on the fence waiting for prices to drop further.  Lower priced properties (between $250,000-$550,000) seem to be receiving the most activity.
• South County—The Hollister office reports that list prices continue to decline and cash offers are on the rise.  Morgan Hill reports that this week, one Agent put 10 properties into contract.  They were all in the Gilroy area and most were under $100,000 condos.  The Agent represented several investors who mostly offered cash for the properties. 

The bottom line is that while sales are on the rise, we still have many distressed sales that must work their way through the system.  With Wednesday’s controversial passing of the stimulus package (with a near party-line vote), we can only hope that the administration’s plan—in what we know is unchartered territory for our country—is successful.  The administration needs to move fast to stimulate lending (and spending) in order to set the foundation for an economic recovery.

Rick Turley
President
Coldwell Banker SF/Peninsula

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:

“ACTION IS THE REAL MEASURE OF INTELLIGENCE.” Napoleon Hill. Last week was definitely action packed, though only time will tell how intelligent each action was – here are the highlights.

On Wednesday, the Fed announced that it decided to keep the Fed Funds Rate steady at the current 0 – .25% range, the lowest ever. They also indicated that “economic conditions are likely to warrant exceptionally low levels of the Federal Funds Rate for some time” and that “inflation pressures will remain subdued in coming quarters”.

Also last week, the Federal Deposit Insurance Corp (FDIC) announced that it may set up a “bad bank” as a vehicle to buy toxic or illiquid assets from banks. What does a “bad bank” do? No, it doesn’t talk back to you, give you attitude and treat you with disrespect. Lenders and the entire financial sector are struggling with “mark-to-market” accounting issues, and in the absence of a repair of the mark-to-market system, lenders are forced to sell assets in a market where there are few buyers. Hence the bad bank plan, to create an entity that will purchase the assets that no one else will buy, which is yet another very creative way for the government to breathe life back into the financial sector. This action is not finalized, so we’ll keep watching closely to see how it plays out in the days ahead.

In other news, the House of Representatives passed President Obama’s $819B stimulus package, by a vote of 244-188, being split fairly cleanly by party lines. Existing Home Sales did surprisingly come in a bit better than expected, but 4th Quarter Gross Domestic Product (GDP) numbers showed the economy contracted in the 4th quarter, as you can see in the chart below. While the numbers were better than estimates, the economy was still at its slowest pace in 26 years.

Last week was indeed action packed, and Bonds and home loan rates felt the effect, with rates ending the week about .25% worse than where they began.

TAKING ACTION TO MAKE SURE YOUR BUDGET IS IN ORDER IS CERTAINLY AN INTELLIGENT MOVE DURING THESE CHALLENGING ECONOMIC TIMES. CHECK OUT THIS WEEK’S SPECIAL MORTGAGE MARKET VIDEO VIEW FOR FIVE GREAT TIPS!

Read the entire report here.

- Foster Weeks