Showing Activity In the Entry Level and Mid-Level Markets Continues to Rise

Now that school is almost out, we’re finding many families are starting to look at homes in anticipation of getting settled prior to next school year.  Showing activity in many markets has increased considerably.

Sellers are getting their homes on the market and, in general, seem to be quite receptive to staging and pricing strategies.  The homes in the entry-level market are moving well if they are in good condition, and if fairly and competitively priced. We are seeing multiple offer situations in most of our first time home buyer markets.  The price point for this activity is of course different by county, and by specific MLS zones, but this week as I visited several Santa Clara County and Marin County offices – I was told about numerous multiple offer situations garnering 10 to 20 offers in the $400,000 to $500,000 range. One property listed at $399,000 (in a mid-$400’s neighborhood, I believe) received over 50 offers.

Though we have seen sporadic new activity in the upper end market, it is still relatively slow for properties over $2M.  The month’s supply of inventory for  high end properties is more than triple that of homes listed under $800,000.  Having said that, we also need to make note of the current momentum we’re starting to see in our offices in the high end.  Just looking at one particular day this week, among many other sales, we closed escrow on homes ranging from $1.7M to $2.7M in Palo Alto, Carmel, and Mill Valley, and a home in Los Altos Hills just shy of $3M.

This week LORE Magazine and the Wall Street Journal released their 2008 Top 400 Realtor list.  You may view it online at http://online.wsj.com/ad/top400-articlecontinued.html.  I’m very proud that we have an impressive number of SF Bay Area Coldwell Banker sales associates who were recognized within this coveted ranking, and for that—along with all of their hard work and dedication, we salute them.

The most notable news this week was The Mortgage Bankers Association’s (MBA) release of is Weekly Mortgage Applications Survey for the week ending May 29, 2009.  The Market Composite Index, a measure of mortgage loan application volume, was 658.7, a decrease of 16.2 percent on a seasonally adjusted basis from 786.0 one week earlier but was 14.4% higher than the same week a year ago.  This increase is due, largely in part to the first time home buyer market which, as we know, has been vastly stimulated by low interest rates, the $8,000 first time home buyer tax credit and increased affordability.  Together these incentives are finally getting buyers in the first time home buyer market off the fence and into the market which is why we are starting to see some price stabilization at this level.

While entry level prices currently seem to be on an upward trajectory, it will take some time to return to the median price levels of our pre-recession market.  A recent study notes that US real estate is now as affordable as it has been in the past 38 years (this of course relates to median homes when compared to median mortgage rates and incomes). The fact is, the peak of unaffordability was in 2006, when an average family in the United States needed to spend 44% of their monthly income toward the purchase of an average single family home.

A couple of other interesting articles of note this week: 

-          RISMedia’s First Time Home Buyers Grabbing Houses and Tax Credit (http://rismedia.com/2009-06-03/first-time-home-buyers-grabbing-houses-and-tax-credit/)

-          Realty Times Multifamily Builder Confidence Up From Record Lows; Interest From Prospective Renters and Buyers Rises (http://realtytimes.com/rtpages/20090603_confidenceup.htm)

-          Realtor.org Pending Home Sales Up For Three Months in a Row (http://www.realtor.org/press_room/news_releases/2009/06/phs_up)

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

• East Bay—Berkeley reports we were inundated with multiple offers this week and large turnouts at open houses.  75% of our deals this week saw multiple offers, any number from 2-8 on seller owned and 12-18 on bank owned.  Cash is still king on many deals because of increasing anxiety about appraisals. Castro Valley reports we are still facing an inventory shortage here in our micromarket.  We are seeing cash offers everywhere and one Agent reports that she has been outbid from the last five offers she has written by all cash deals.  The number of multiples in the low range markets has been in the range of 10-60 offers, to give you an idea as to the inventory shortage we are facing here in our micromarket.  Agents are waiting for banks to release more REOs.  One thing is certain, we are definitely a recovering market.  The Danville office reported the activity level is good but we need more inventory.  Lots of buyers are jumping off the fence.  The Fremont office is reporting the market is becoming competitive in the Tri-City area.  The listing inventory is reducing.  The Livermore office reports our pending sales are up in the office and the overall market in the Tri-Valley area remains strong. Multiple offers are still the rage below $500,000.  The Pleasanton office reports homes under $450K are moving very fast with multiple offers.
• Monterey County—Market continues to have lots of activity in the lower price ranges and slower as price range goes up, as only 25 properties in Carmel and Pebble Beach have sold for over $2 million in the first five months of this year, with highest at almost $8 million.  As is typical for end of the month, we had a good week for closings, even though Monday was a holiday, with 14 closed sales ranging in price from an incredibly low $128,000 in Seaside to a lot in Tehama at $1,325,000.
• North Bay—The Petaluma office reports that the frenzy continues as buyers compete for entry level homes that are in the $200-$400k (2 years ago were $500-$600k) across the board these homes have multiple offers and are typically going into escrow over the asking price. One home on the west side of Petaluma had 32 offers and went $80,000 plus over asking. With inventory shrinking and more buyers entering the market we are seeing an upswing in median price in this segment of the market (under $500,000). Is this the bottom in that price range? Looking for more inventory REO or otherwise. The $500-700k market is starting to pick up. Inventory in the million dollar plus market is accumulating fast. Not as many buyers in that market. But there are some circling.    Our San Rafael office reports there has been an increase in multiple offers over the past week in the price point of $300-500k in San Rafael and Novato. We ratified an offer on a home listed in Novato for $2.1mil.  Our Southern Marin office reports quite a week in So. Marin, from a $2,725,000 Mill Valley closing where we represented both ends, to six offers on a $679k Corte Madera listing in our office. For the first 5 months of the year, Mill Valley is 24% down in sold units vs. same period a year ago and 18% down in average sales price, Sausalito is 43% down in units vs same period a year ago, and 15% down in average sales price and Tiburon is 57% down in sold units and 2.4% down in average sales price.                    
• Peninsula—The Agents feel that we may be seeing the bottom in the North County and in the lower price points. The inventory has been greatly reduced in these areas and multiple offers have become the norm.  The $1mil to $2.5 range is still slower and many buyers are concerned with availability of mortgage money. We still are seeing cash buyers however and others with large down payments.     Our Menlo Park El Camino office reports we are still getting multiples on low end and well priced properties.  Some Agents feel that buyers are beginning to realize what great rates are out there and afraid they are going to go away. They want sales contingent on COE not just a sale of their properties. Sellers will take LOWER offers if they feel it has a higher chance of closing. Very cautious clients, very risk-averse.  Our Menlo Park Santa Cruz Avenue office reports one sale in Menlo Park (list price $799k) which sold with four offers and went substantially over list. Good feedback from Agents who held open houses.  Buyers are out in full force.         Palo Alto reports the following year to year comparison: The first three months of this year were slower, as far as closed sales compared with the first three months of last year. Months four and five of last year were actually slower than months four and five this year. Yet, we are one closed escrow             short of last year per the MLS here in Palo Alto. Hopefully optimistic a trend going up.
• San Francisco—The Lombard office reports the lower the price the more offers. As price goes up flawed properties and not price presented well are sitting. A couple of investment property closings this week, and completing the financing was extremely difficult.          The Market Street office reports multiple offers were the order of the day with mostly two offers, but one received three and one received four. Negotiations in most cases are still lengthy. Great traffic at open houses over the weekend and Agents are seeing more private showings.  Buyers are coming back three and four times before writing the offer.
• Santa Cruz—Agents are busy writing offers and June is starting out to be a stronger month than we have had the past few months.  Inventory levels remain low; we are seeing multiple offers on homes that are not bank owned.  Short sales continue to be a big part of the market and the timeframes remain slow and cumbersome for moving through the process in most cases.  We know the pent up buyer demand is there and as rates start to creep up – it may bring more of them to the table ready to write. 
• Silicon Valley—Our Cupertino DeAnza office reported Agents are frustrated dealing with REO/Short Sale listing Agents who don’t return calls or emails. On a positive note, we had a number of sales over $1M and one over $2M.  Our Los Altos office reported buyers are making offers on the lower end homes.  The higher end price tiers are slower in both the condo and single family homes.  The San Jose Almaden office reported inventory is still shrinking and bringing more pressure to bear on our low end market in every area.  I hear of multiple offers in all parts of our county.  From Los Altos to Gilroy, it is not just limited to REO bargains anymore.  The only criteria are that it has to be priced for this year’s market—not previous years.  One traditional sale in Sunnyvale sold for 2% above list in as many days with back up offers in place, high $800,000 price range.  Of those who report to me on open homes, I hear they’re busy.  Time is running out for the first time buyers who are waiting for whatever… prices to drop, interest rates to fall further or more government concessions.  Bottom was two months ago and we need to get that word out!  Our San Jose Main office reports activity continues to be brisk in the lower price range of $250K to $550K with multiple offers on many properties.  Activity in the upper price range is slow. Open houses in all price ranges were very active this past weekend. Increase in interest rates the past week may slow our current busy market.
• South County—The real estate business cycle here in the South County has remained unchanged for the last several months.  Entry level (investment properties) priced between $300,000 and $400,000 are selling with multiple offers.  Upper end homes are still languishing on the market.  Inventory is decreasing and demand remains high.  This  may result in prices (and values) moving upward.

It seems we’ve enjoyed another week in SF Bay Area real estate much like the past several weeks; stabilizing if not increasing prices in the entry level, and a nice up-tick in the mid and higher price points.  The delayed Spring selling season continues – at least for another week.

- Rick Turley

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:

“IT’S A RECESSION WHEN YOUR NEIGHBOR LOSES HIS JOB; IT’S A DEPRESSION WHEN YOU LOSE YOURS.” Harry S. Truman. The big headlines of the week had everything to do with job losses…and some surprising twists within the monthly Jobs Report that arrived on Friday, and caused home loan rates to worsen yet once again. Despite their efforts to improve early in the week, Bonds and rates ended the week .375% to .5% worse than where they began.

Friday’s Jobs Report showed that 345,000 jobs were lost in May, far better than expectations for 520,000 jobs lost. And adding to the positive tone were revisions to the two prior months, showing 82,000 fewer jobs lost than previously reported. So all in all, about 260,000 fewer jobs lost than had been forecast. But let’s take a closer look.

———————–
Chart: Non-Farm Payroll

Despite the positive news in the estimated number of jobs lost, the official Unemployment Rate, which is regarded as a more reliable indication of the employment situation, actually came in higher than expectations, climbing from 8.9% in April to 9.4% in May…and this wouldn’t seem to make sense, given the decline in job losses, so what caused this apparent discrepancy?

The figures come from two separate surveys. The job creations/loss number is mostly derived from the “birth-death ratio” of business creations and those going under, which is subject to enormous and repeated revisions – while on the other hand, the Unemployment Rate is a real survey of about 60,000 households that are asked about their current employment situation, and therefore, is truly a much more reliable number. And even though traders know this, the market tends to respond to the headline number, which points more at a future trend than the Unemployment Rate, which paints a picture of the current situation. Since positive economic news typically is not a friend of Bonds and home loan rates, this report added to the worsening trend both have experienced recently.

And here’s another very interesting note, pertaining to the collection of the US Census numbers, which are vital for state and federal budgets and appropriations, amongst other things. The Census occurs every decade, and as we approach 2010, the government has already begun the temporary hiring of approximately 1.2 Million people. These individuals will be put to work for just a few months, but will count as new jobs created.therefore potentially making the numbers appear a bit better over the short term.

In other news, Personal Spending declined slightly in May, while Personal Income came in better than expectations, thanks in part to the economic stimulus package. Overall, indications are that the economy may be strengthening, but this process will likely be marked by continued market volatility. And this volatility we have seen in the financial markets is partly why the Treasury Department announced that they are scaling back their upcoming auctions, as the massive supply has started to weigh heavily on the Bond market and the US Dollar.

All the twists and turns we are seeing make it more important than ever to follow the advice of a knowledgeable mortgage professional who stays tuned in, and can offer good advice as to smart moves to take right now. Let me know if you or someone you know has any questions about your personal situation.

WANT TO PREVENT LOSING YOUR MIND FROM “SCHEDULE-OVERWHELM” THIS SUMMER? CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW FOR A GREAT TOOL THAT CAN HELP YOU KEEP TRACK OF EVERYTHING YOU HAVE PLANNED…AND BEST YET, IT’S FREE.

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.

Things are heating up. As summer approaches, new listings are starting to show up. Properties that have been sitting for 60 days are finally getting offers. Our June market report for May shows average prices are inching upward and it probably won’t be long before buyers start to get in gear and we start seeing multiple offer situations being common again. If you are a buyer sitting on the fence… don’t wait too long to make that offer!

Here are the numbers for the week of 6/3/09:

• 3 new listings (average price $832,667, low $499,000, high $1,150,000)
• 15 ratified sales (pending) (average price $1,467,000, low $439,000, high $5,950,000)
• 16 closed sales (average price $1,270,500, low $435,000, high $4,200,000)
• 1 reduced at $2,150,000

- Janis Stone

Memorial Day is Over…but will it be a typical Summer Real Estate Season?

Memorial Day is behind us and the traditionally moderate summer selling season has begun. Some of our offices are saying that it’s feeling more like a late Spring season right now.  Activity is fairly brisk – it goes without saying that the entry level is hot – short on listing inventory and high on Buyer demand, but there is also good activity to report in the mid-to- high end in most communities.

This week NAR announced that existing home sales rose in April with strong buyer activity, as expected, in the lower price ranges.  Nationally, existing home sales increased 2.9% to a seasonally adjusted annual rate of 4.68 million units in April from a downwardly revised pace of 4.55 million units in March, but were 3.5 percent below that 4.85 million-unit level in April 2008.

While most of the sales are taking place in lower price ranges, we are seeing increased activity in the mid-priced markets.  This is a domino effect; a turnaround begins with the lower price range homes and once that sector of the market is stabilized, we begin to see changes in the mid and upper price ranges.  The upper end, while most recently seeing increased activity, still is considered a Buyer’s market. This seems to be fairly consistent in major Metros on both coasts.

Across most of our local MLS’s, there is approximately an average of 14+ month’s supply of homes over $2 million. This is about twice the inventory for the same period last year.  Just the opposite has occurred in the <$800k market.  Estimating the average month’s supply of homes across several MLS’s in this price range, we are seeing about 3 months or less – which is half of what we had this time last year – and is considered to be a Seller’s market.  If you look at the same months where inventory has shrunk in the entry level – you’ll see stabilizing prices, and in some areas, increasing home values.  And of course the higher end has seen declining median price as inventory has been building.  This appears to be the perfect opportunity for the move up Buyer – they have a fairly captive audience for selling, and are coming from a better position to negotiate on the buying side.

It’s also important to note that investors reacted to concerns about the mounting size of our national debt this week.  The yield on the 10 year T-bill increased mid-week as stocks took a hit, and interest rates for mortgages were affected by a ½ to full one percent increase.  Since purchasing power decreases with a rise in interest rates, some Buyers will have an increased sense of urgency to get a signed contract on their new home.

You’ll find links to some interesting real estate stories from this week below: 

• http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/05/28/financial/f070602D30.DTL&hw=real+estate&sn=002&sc=842
• http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/05/28/financial/f110028D09.DTL&hw=real+estate&sn=003&sc=766
• http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/28/BUJT17S3B2.DTL&hw=real+estate&sn=008&sc=607
• http://sanjose.bizjournals.com/sanjose/stories/2009/05/25/daily47.html

Now, here’s a look at our week in real estate:

• East Bay—Berkeley reports five of our last seven deals had multiple offers, from two or three on each to up to 12 on a wide range of asking prices.  Among the lower end and REO market, the highest cash offer gets the property.  One Richmond REO listing of ours received six cash offers. Castro Valley reports many Agents are saying we are back to the 2003 market.  Multiple offers, frenzy of activity, houses going pending within a few days of listing. Some agents feel as though we are on the incline at this point, that we have turned the corner and the “bottom of the market is now behind us.”  Danville reports Agents are getting frustrated.  They are running into lots of multiple offers and having trouble getting buyers into contract.  This is going on in price ranges up to about $600,000. One property in San Ramon priced at $613,000 got 30 offers this past week.  Meanwhile the high end continues to slumber.  Livermore reports the Tri Valley Market continues to improve each week as active listings in all three cities, Livermore, Pleasanton and Dublin declined and total pending sales in all three cities increased this past week.  Orinda reports strong sales market this week with buyers ready to make offers.
• Monterey County—Activity in lower price ranges continues on at a very active pace, but not the higher luxury-home price range, where we the inventory is mounting up.  The last three weeks have been slow in closings for us; however, we’ve opened 52 new escrows in that time, which is a very positive sign for us.
• North Bay—Greenbrae reports more deals going into contract, but also a bit of an increase in deals falling through. Negotiations are critical to keeping deals together.  San Rafael reports a home listed in the low $700s in San Rafael went into escrow after less than a week on the market with a back up offer in place! Open houses are busy with plenty of buyers at all price points.  The Petaluma office was involved in 19 multiple offer situations. Although our inventory is shrinking and multiple offers continue.  The multiple offers are two and three in numbers and only one in double digits. Agents are working with multiple buyers. Interesting enough, six of the multiple offers were on properties with days on the market of 50,75,90,130,400+. Properties in the $500,000 range and up are starting to see activity.  Sebastopol reports few lookers at higher priced inventory. As the lower priced homes sell with the dearth of low priced inventory we have seen a real slowdown.               
• Peninsula—Half Moon Bay reports a slower week with the long weekend. Listings inventory is picking up. 168 active SFR listings on the coast with only 24 pending sales; we need some serious price adjustments.  Menlo Park Santa Cruz reports many Agents took advantage of the Memorial Day holiday and took time off.  We were feeling some energy in the market w/some sales activity last week. Hopefully the holiday didn’t dampen the momentum.  Palo Alto reports if priced well in the Palo Alto marketplace, from downtown to S. Palo Alto, we are experiencing an unusual amount of multiple offers. Almost every property priced well will have multiple offers and prices that exceed the list price from $800k to $3M.  Open houses are double and triple what they have normally been-even over the holiday weekend. A lot of optimism in the Palo Alto marketplace. The volume is still low but the activity intense.  San Mateo reports inventory six months ago in Daly City was over 300, today its is about 60. San Bruno & So. SF are experiencing the same. We might be building a solid base as many properties are selling in those areas with multiple offers that are not short sales or foreclosures. 
• San Francisco—The Lakeside office reports there seems to be a huge backlog at the banks. Many conforming rate FHA loans are being drawn out way past the estimated close of escrow date. Every deal is complicated by the new lending practices that are being implemented.  The Lombard office reported the market is picking up steam. Multiple offers are on the heels of healthy price reductions or aggressively priced fresh listings. Most activity is under $1m. Still numerous escrows problems—mostly related to financing. The Van Ness office reports some very exciting news in the upper end arena..  In fact, we closed 13 deals for over $15,000,000.  There is about the same activity for +million and -million. Strong activity continues.  Our Noriega office reports we had a busy week as far as pending sales is concerned.  But we really need more listings in the entry level.                                  
• Santa Cruz—Still no word on any new REO business.  This is a mystery.  South county inventory is depleted and buyers are now competing on most of the lower end properties.  Overall the market seems to be picking up and we are seeing multiple offers on some well priced properties under $800K, especially close to the beach.  There are more positive indicators in the news, consumer confidence is up and this is lending to a more favorable real estate climate overall.
• Silicon Valley—San Jose Almaden reports low end continues to drive the market.  Buyers are frustrated at losing out in multiple offer situations.  Some homes going 25-30% over list price.  San Jose Main reports inventory continues to drop as homes in the mid to low price range sell fairly quick, many with multiple offers. Low interest rates and signs that the mid range properties and below have bottomed out are fueling sales. Slower than average open house traffic this past weekend probably due to the 3 day holiday.  San Jose Willow Glen reports we are busy and multiple offers are starting again.  Buyers are apparently feeling more secure about the market. Good energy in the office as well.  Saratoga reports we had two sales over $3 million turned in last week.  Hopefully, this is a sign of an improving Previews price point.
• South County—Our Gilroy office reports local inventory continues to shrink. As of today there are 146 active single family homes.  23 are bank owned, 42 are short sales and 81 have an equity position. Of the 81 there are only 9 homes listed under 500k and 40 over 1mil.  Hollister reports multiple offers still a norm on most REO listings.  Office activity is quiet this weekend due to the holiday.  Open house activity is increasing.  Short sale listings have increased.  The Morgan Hill office reports the South County market remains interesting in that demand is strong for entry level homes.  Great prices, coupled with tax incentives and attractive mortgage rates have stimulated this segment of the market.  More importantly, Agents are reporting that optimism has replaced pessimism on the part of the buying public.  

Historically speaking the week of Memorial Day quiets things down in the housing sector but this year it was a bit different.  Thanks to the $8,000 first time home buyer credit, low interest rates and increased affordability, buyers in the first time home buyer market are out in droves and really are snatching up properties.  It seems they have been pushing activity into the mid and higher price ranges as well.  If it is truly a late Spring flurry this year, we could be in for a very busy Summer.

- Rick Turley

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:

“I’M FREE…FREE FALLIN’.” Tom Petty. And a free fall indeed was the case last Wednesday, as Bonds had their worst one-day performance since last October, losing an astounding 206bp. So what caused this free fall…and what helped Bonds and home loan rates rally back and improve later in the week? Here’s what you need to know.

The main culprit for Wednesday’s sell off was supply. The Treasury auctions and the increased number of refinance transactions closing have added hundreds of Billions of dollars of new Bond supply to the market. Economics 101 tells us that anytime supply vastly exceeds demand, prices will move lower, and that’s exactly what we saw last week…and as Bond prices move lower, home loan rates move higher. And the trend isn’t likely to end anytime soon, as the Treasury will have to continue to pump out major supply of Bonds, in order to pay for the massive government stimulus plans…and the Fed buying plan simply won’t be enough to balance out supply and demand – it’s like trying to sop up a flood with a sponge. Bottom line – rates are likely on the rise, but still near historic lows. Let’s talk and make sure you have taken necessary actions for your own financial situation.

Yet the news wasn’t all doom and gloom – as both the Dow and S&P 500 have seen three months of positive gains for the first time in over a year! And the National Association for Business Economics (NABE) said that the end of the recession is in sight, noting that, “While the overall tone remains soft, there are emerging signs that the economy is stabilizing.” The Commerce Department’s report that Gross Domestic Product for the first quarter fell at an annual rate of 5.7% was better than initial estimates, also indicating that the recession may be slowing down and turning more moderate. Important reminder: An improvement in the economy will likely push rates higher over time, which is why it’s important to take action during this opportunity of low rates.

In other news, Initial Jobless Claims were better than expectations, but a higher revision to the prior week’s reading offset the slightly positive headline number. Durable Goods Orders in April also came in a bit better than expectations. On the housing front, while New Home Sales were just under estimates, Existing Home Sales came in higher than expectations. These reports didn’t impact the markets a great deal last week, as the impact from all the extra supply was the real mover and shaker.

Bonds were able to regain some ground Thursday and Friday after their steep free fall on Wednesday, but even with the improvement, home loan rates ended the week .25% to .375% worse than where they began.

READY TO CLEAN OUT SOME OLD CLUTTER AND GAIN SOME EXTRA CASH? IF YOU’VE BEEN THINKING ABOUT HOLDING A YARD SALE THIS SUMMER, CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW FOR GREAT TIPS THAT WILL HELP YOUR SALE SOAR TO SUCCESS.

Read the entire report here.