YOU’VE GOT TO GO THROUGH “LESS BAD” TO GET TO GOOD   �
July 31, 2009

It seemed everywhere you looked this week, the media was reporting on some sort of positive indicator relating to the real estate market.  For starters, Good Morning America ran a story on Tuesday about the state of the housing market. You can see the interview here: http://abcnews.go.com/video/playerIndex?id=8190034   

Liz Ann Sanders, the Chief Investment Strategist for Charles Schwab, and Mike Santoli, Assoc Editor of Barron’s were interviewed.  Essentially they both indicated there are enough cumulative signs from indicators to say that things are not only “less bad”, but we are starting to see some pockets of improvement in the housing market.  Among the vital signs they said to watch for in calling a recovery are; Index of Leading Economic Indicators, currently up three months in a row; drop in new unemployment claims (the four week average is down 93,000 from the peak, and never before has there been this large of a drop while still being in a recession); and the spread between short term (set by Fed) and long term (driven by the market) interest rates, which is widening. Additionally an opinion was shared that if the Dow stays above 8,000 – this would be a good indicator that we’re on the road to recovery.  This week we danced over the 9,000 mark, closing today at 9,171; making it the best July for the Dow in over 20 years.

Our industry was the first to be hit by the economic downturn and if all continues on this path, we will be the first out.  We probably won’t see housing numbers start to appreciate across the board anytime soon.  What we are seeing right now are signs we typically see at the bottoming-out of a down market.  Speculators and investors are competing with first time home buyers.  Those individuals are going to continue to gobble up the inventory—both REOs and non-bank sellers at the entry price level.  In many metros across the country, there are very low levels of inventory at the low end.  I was on the phone this afternoon with the Coldwell Banker president for Arizona. They were hit hard, and early, with foreclosures.  He told me that today the Phoenix Metro area has under 2 months supply at their entry level, <$250k  – yet a 7 years supply of inventory at their estate home level of $2M+.

Also this week the Standard & Poor’s/Case-Schiller 20-city index was released and in it, home prices in May posted their first monthly increase since the summer of 2006.  Prices rose from April in 13 of the metro areas tracked, notably Cleveland, Dallas, Boston and the Bay Area. The news followed reports showing sales of newly built and existing homes rising in June for the third consecutive month.  New home construction, though still weak, is the best it’s been since the fall.

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

• East Bay—Berkeley reports REOs continue to amaze.  One Richmond property received 36 offers and the bank countered six of them, which were all cash.  Appraisals are still a challenge, with appraisers appearing from San Jose, Sacramento and other areas out of the market area.  One appraiser admitted he’d gone to Zillow for numbers. Castro Valley reported that inventory is flying off the shelves.  Several listings have gone into contract within just a few days of listing.  We’ve had a few houses on the books for months that have finally ratified offers and gone into contract.  Fremont reports listing and sales have decreased due to lack of inventory. REO and short sales still moving quickly. Fair market/seller owned listings are even moving faster due to lack of inventory. Buyer competition is fierce on all properties under $500,000.  Livermore reports the total number of active listings in Livermore continues to decline each week and total pendings keep increasing on a weekly basis. The majority of sales are below $500,000, but we are starting to see some activity in the $500,000 – $900,000  the past couple of weeks. Appraisals are still an issue, and the market values determined by individual appraisers are unpredictable and arbitrary at best!  Walnut Creek reports very low inventory in every corner of our market.  Consequently, multiple offers on most listings, especially ones priced below $500,000.  Orinda reports steady sales activity, with the high end homes beginning to move, but at reduced prices.
• Monterey County—The newspapers and TV are now reporting increased sales and even sales prices in some areas and it seems to be spurring on some buyers to finally make a move.  Our Agents are writing more offers these days.  Still buyers are cautious and want to make sure they get a good value.  We had a couple of higher-priced properties close last week, one around $1.5 million and the other around $3 million.
• North Bay—Southern Marin reports heated-up activity at all price points. From the Greenbrae office: “you’d think summer would be much slower but there is still quite a buzz of activity.”  San Rafael reports listing inventory is still low.  The buyers are still flocking to Novato for well priced homes.  Petaluma reports frenzied activity in the $350,000 under range. One property had 48 offers and rumored to go well over asking. Inventory in that price range is snatched up or in multiple offer negotiations directly after listing is posted on MLS. We are starting to see more movement in the $500,000-750,000 range.  Sebastopol reports low end inventory continues to fly off the shelves with multiple offers. Agents are busy writing offers and managing client expectations.  Santa Rosa reports almost all lower priced homes generate multiple offers.  Mid priced homes, if overpriced, will sit without lower offers and many buyers are stuck in shopping mode finding reasons not to pull the trigger.
• Peninsula—Half Moon Bay reports they need more inventory in the $500k to the $800k range as that is what seems to move.  High end over the $1m mark is still very slow.  Menlo Park El Camino reports four offers on a million dollar house.  Buyers continue to migrate to VALUE. Otherwise they stay in the background. Open houses continue to be pretty strong even for mid July and buyers openly talk of waiting for further reductions.  Menlo Park Santa Cruz Avenue reports we had a $5M & $4M sale this week.  All other price ranges are busy for open houses.  Redwood City reports good open house activity, especially on new listings.  Well priced homes in most areas move within one to two weeks (well priced is the key word).  We’re seeing multiple offers on REO/short sales.  Woodside reports very slow here in the country.  The high end is very slow and sellers are slow to realize that reduced prices are the only way to move their properties. This high end will be the last to actually see the lower prices and accept them as they are able to hang on longer.
• San Francisco—The Lombard office reports good news that our $1.4 – $2.2 market in the City has some deals. Four REO listings this week all lasted less than four days with 8, 15, 25, and 30 offers.  On the contrary, the Market Street office reported an unusual week where there were no multiple offers. Good traffic at open houses and offers coming in after price reductions.  The Noriega office reported a slow week for new contracts last week, BUT activity is definitely up.  A lot of offers and counter offers out.  It takes a lot of negotiation to ratify a contract.  The Van Ness office had a phenomenal week reporting it closed $30,000,000+ this week (15 sides) and ratified 16 deals. 
• Santa Cruz County—Market activity seems to be steady.  The agents are definitely feeling more optimistic about the market. Showing activity and open house attendance has been very good;  we have a lot of “out of towners” from Palo Alto – Los Altos area as well as the East Bay looking for beach homes.   Prices have gone up the last three months here and the lower end properties are selling quickly.
• Silicon Valley—The Cupertino office reports the market is active and Agents are working hard, especially for August.  San Jose Willow Glen office reports things have slowed up a bit. Agents are writing a lot of offers that are getting rejected. Also, some of our existing sales are sold at one price and are not getting appraised. Therefore, prices are lower than what they originally sold for.  The San Jose Main office reports a very busy week with sales, mostly $250-500K.  Open houses were extremely busy in all price ranges.  Inventory seems to have flattened out.
• South County—Gilroy reports traditionally, this week is slow due to the Garlic Festival. The past several weeks have been slow due to lack of inventory and vacations for both Agents and clients.  Hollister reports short sale pendings are falling apart and becoming active in a continuous cycle.  Active inventory on $300K and under are decreasing. Great floor activity and open house activity.  Most REO listings have a pre-qualification process in place before submitting offers.  Typical 3 days on the market before submitting offers to the bank giving the property time for multiple offers creating more frustrations for the buyers.  Morgan Hill reports once again, they managed to put 53 properties into contract for the month of July.  Agents are mostly representing buyers—listings are few and far between.   It is refreshing to see that there is increased interest in real estate from the buying public—as open house attendance and floor calls are at a very high level.

 I’ll leave you with two interesting articles from the week. In the first, our Orinda Manager Val Cook-Watkins is quoted on the local market:

• http://www.insidebayarea.com/business/ci_12932118
• http://www.usatoday.com/money/economy/housing/2009-07-28-home-prices_N.htm

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.

Our office is kicking butt and taking names. During the summer we are normally on a slow down in sales, but this last week was phenomenal. SFResidence alone closed 4 deals this month and put a couple more into escrow. Things seem to be picking up for the San Francisco market as buyers see opportunity and sellers are becoming more realistic!

Here are the numbers for the week of 7/22/09:

• 2 new listings ($1,699,000 and $4,495,000)
• 20 ratified sales (pending) (average price $1,263,145, low $345,000, high $2,695,000)
• 15 closed sales (average price $1,362,567, low $497,500, high $5,235,000)
• 3 reduced ($1,599,000, $925,000 and $899,000)

- 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:

IT’S THE THOUGHT THAT COUNTS…OR IS IT? As we look back at last week, think about this for starters – the housing industry received some welcome good news, as Existing Home Sales came in better than anticipated, and marking the third straight month that Existing Home Sales have increased. And perhaps even better, the supply of unsold homes on the market dropped from the prior reading of 9.8 months down to 9.4 months – which is the best level seen in over a year. With home loan rates still at low levels and homes priced to sell – this is a great time for potential homebuyers to stop thinking, and go ahead and take some action.

Despite that bright spot of news, last week’s Consumer Sentiment report – which measures consumers’ attitudes and expectations concerning both present and future economic conditions – showed that consumers still think the economy has a ways to go, as the report did come in a bit weaker than anticipated. According to the report last week, Consumer Sentiment came in at 66 for the month of July, down from June’s reading of 70.8. Take a look at the chart below for an interesting historical perspective on this report.

And one of the major reasons for the decline in Consumer Sentiment was ongoing concern over unemployment – and last week, Initial Jobless Claims reportedly rose by 554,000. While this number was high, it was essentially in-line with expectations of 557,000.

The big news that many headlines featured was the number of Continuing Claims, which fell from 6.31 million the prior week to 6.22 million. And although this drop was reported as positive news, we need to remember that a large number of people are still unable to find jobs, but are no longer being counted in Continuing Claims because their unemployment benefits have expired. The bottom line is that it will be hard for the economy to really turn higher with momentum until the labor market starts to turn around.

Stocks had a good week, with the Dow closing above 9,000 on Thursday for the first time since January 6th, as well as finishing the week with its strongest two-week span for blue chips since 2000. Since Stocks moving higher can drain money away from Bonds, the rally in Stocks – combined with the announcement of next week’s Treasury’s auction of $115 Billion in Notes – put selling pressure on Bonds toward the end of the week. Despite some volatile mid-week action, home loan rates closed out the week near the level where they had begun the week.

Read the entire article 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 chugs along, so does the market. We are seeing a lot of steady activity which is a pretty good sign, though prices are not at the level they were several years ago.

Here are the numbers for the week of 7/22/09:

• 2 new listings ($799,000 and $4,995,000)
• 10 ratified sales (pending) (average price $1,671,400, low $529,000, high $6,500,000)
• 10 closed sales (average price $1,889,000, low $485,000, high $9,800,000)
• 1 reduced ($848,000)
• 1 back on market ($589,000)

- Janis Stone – DRE 00517072

Data Quick Releases Its June Figures With Promising Results

DataQuick Information Systems released its June monthly report on the Bay Area Thursday (http://www.dqnews.com/Articles/2009/News/California/Bay-Area/RRBay090716.aspx)  to some interesting month-end figures, including increases in sales and median home prices.  In fact, the company reported; “Home sales in the Bay Area jumped to their highest level in almost three years, the result of improved mortgage availability and a perception among potential buyers that prices have bottomed out.  The median price paid for a home increased month-to-month for the third month in a row.”

Among the highlights of the story:

• A total of 8,644 new and resale houses and condos sold across the nine-county Bay Area in June. 
• That was up 16.1 percent from 7,447 in May and up 20.4 percent from 7,178 in June 2008.
• Home sales have increased on a year-over-year basis the last ten months.
• The median price paid for all new and resale houses and condos sold in the nine-county Bay Area was up 3.1 percent from May, although down 27.4 percent  from June 2008. It was the highest since last October.
• The current median is 47.1 percent below the $665,000 peak reached in June 2007. It hit a low of $290,000 in March this year. About half the downturn appears to be price declines, the other half is the absence of high-end home sales in the statistics, which pulls the median down.

I did several interviews with local reporters on Thursday in response to DataQuick’s numbers and my message was simple:

• While we are still seeing challenges out there, the market continues to show some encouraging signs.
• We’ve seen the low-end of the market doing well for a while, but its starting to cascade to other segments of the market.  We’re starting to see more activity and interest in the move-up market and luxury market.
• There appears to be growing consumer confidence from buyers, perhaps as the stock market has stabilized and real estate is showing improvement.
• Also, buyers in our offices are telling us that they believe that the market overall is starting to recover and they don’t want to miss out on the buyer’s market.

Here are a few links from the stories that my interviews ran in:

• San Francisco Chronicle:  http://www.sfchronicle.us/cgi-bin/article.cgi?f=/c/a/2009/07/16/MNBM18PVCF.DTL
• San Jose Mercury News:  http://www.mercurynews.com/breakingnews/ci_12851400?source=rss&nclick_check=1

Here is a look at the county-by-county stats from DataQuick:

Source: MDA DataQuick Information Systems, www.DQNews.com

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

• East Bay—Castro Valley reported recent research confirmed that 45% of  current pendings are short sales.  Although we knew that short sales were a huge influence on our local market, this confirmation reminds us that short sales are indeed moving the market right now.  Listings are still trickling in.  We are desperate for inventory.  We continue to sell even our aging inventory, and multiple offers are common.  This week we had a deal that was on the market for two days and received at least a dozen offers.  It’s a good time to have a listing right now.  Fremont reported there is currently no lack of buyers in the market.  The listing inventory overall is reducing and making for a competitive market for all properties priced under $600,000.  Livermore reported multiple offers continue at a brisk pace on listings below $500,000 in Livermore and Tracy, with distressed sales, REOs and short sales, dominating the market.  It is not uncommon for an Agent to write 5 to 10 offers for a buyer before getting an acceptance on an offer.
• Monterey County— Lots of activity and energy over the three-day holiday spilled over into the next week for us on the Monterey Peninsula, with lots of offers being written, on REOs, Short Sales and regular sales; and more than usual going into escrow, ranging in price from $200,000 to a sale at approximately $10 million.
• North Bay—Eight homes have sold in Novato in the past week.  Only one sold in San Rafael. New homes coming on to the market have slowed dramatically.  22 homes went contingent, thirteen in Novato.  Southern Marin reported sales seem to be summer seasonally slow this past week.  Listings are picking up.  Santa Rosa reported that the under $300,000 virtually all offers are multiple offers—often with more than 10. One Agent in our office has 24 offers on a property in the mid $200k.  Sebastopol reported all new escrows were below $400k and all had multiple offers. If it is true about the “shadow inventory” we need it now!! School starts next month and buyers want to be settled.
• Peninsula—Half Moon Bay reported we are seeing increased activity on offers/ratified contracts; listings are being taken at sensible list prices. SLOW in the higher end of $1mil and up.  Menlo Park El Camino reports we have lots of folks out of town (where is this recession?) but still some sales. New loan guidelines coming out hourly it seems. Making deals is even harder!  Menlo Park Santa Cruz Avenue reports multiple offers (5) on a Los Altos listing; we were the successful offer without having to go significantly over the asking price. Open houses are surprisingly busy, however, buyers are slow to negotiate a deal.  Woodside reported sales seem to be a little more steady as buyers get more confidence and they really do begin to realize that prices are, indeed, DOWN!! Rates are seductive and buyers are responding—just as many are still sitting back however.
• San Francisco—The Lakeside office reports the market is insatiable at the $700-800k range. Multiple offers and short contract dates with 25% and more down payment seems to be the standard out in the Sunset. The market at $1.8mil to 3mil seems to be stalled a bit right now.  The Market Street office reports sales are steady with plenty of qualified buyers going to open houses and scheduling private showings throughout the week. Buyers who have been on the sidelines for awhile are coming back into the market.  The Van Ness office reports all things considered, we are still doing a reasonable amount of business
• Santa Cruz County—In the Santa Cruz market, units are up 22% over the same time last year.  Prices are down from June of 08 to June of 09 although the median price has gone up the last few months, however, still not reaching the 09 levels.  Lending continues to be the biggest challenge in all price ranges.  There seems to be a lot of last minute lender issues and delays right before escrow closes.  It continues to be extremely important for the agents to adequately manage the Buyers and Sellers expectations from the beginning to the end of the transaction.
• Silicon Valley—Our Cupertino DeAnza office reported we had an excellent week for closings.  The Agents are working hard.  Los Altos reported the market is busy in the lower end and on new listings up to $2.5M.  Open houses are busy on newer listings.  Well priced and staged homes get a lot of attention.  San Jose Almaden reported some REO inventory coming into the market after a 30 day stall.  We’ll have to wait and see if this is the beginning of that “shadow of foreclosures on the horizon” that everyone is saying exists and is coming.  Same story continues…well priced homes in Almaden under $1.3 continue to sell.  Those not well priced continue to sit.  Financing woes have killed a couple deals in the last week (appraisals and last minute conditions).  Inventory continues to remain low.  San Jose Main reported a busy week and active open houses with good traffic in all price ranges. Upper end properties are beginning to show signs of improvement. Lower end properties between $250-550k continue to sell in short time with multiple offers on most.  Saratoga reported short sales and bank owned properties are still dominating the market. We did have three sales over $3 million in the last week which is a slight improvement over past performance. Hopefully, this trend continues.
• South County—Morgan Hill Agents report that activity has slowed somewhat–though demand remains high for entry level homes and supply is very low.  Short Sales and REO sales still dominate the market.  As of July 16, 2/3rds of the homes going into contract were either short sales or REO properties.  Hollister reported a strong REO market with low list prices to feed the multiple offer frenzy.  Cash buyers are strong in the under $300 range.  Open house and floor activity is starting to increase.

As you can see from the recent DataQuick numbers and recent field report, the market has picked up throughout the Bay Area.  It seems buyers are finally starting to get the message that we may have hit bottom and, as buyers take action, we’re slowly but surely working our way into a transitioning market. 

It’s been a challenging ride but what we have to look forward to is exciting.  Prepare. The coming months and into 2010 are going to be interesting!

Rick

Rick Turley
President
Coldwell Banker Residential Brokerage San Francisco Bay Area

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:

INFLATION, ALL WE NEVER WANTED…! Or so the Go-Go’s song “Vacation – All I Ever Wanted” could have been re-written this week, as whispers and glimmers of future inflation as well as some positive economic news roiled the Bond market. Overall, home loan rates worsened by about .25% across the board.

Inflation at both the wholesale and consumer level came in hotter than expected via the Producer Price Index (PPI) and Consumer Price Index (CPI) reports, the latter shown in the chart below. The Consumer Price Index (CPI) rose by more than expected, and was the biggest increase in a year, mostly due to higher gasoline prices.

However, a look back over the past year shows a drop in overall CPI of 1.4%…why is this? It was a year ago that a barrel of oil was $147, and today that barrel stands at $60, up from the $30 range seen earlier this year. But even when stripping out food and energy, the most recent Core CPI rose 0.2%, higher than the 0.1% anticipated – and year-over-year, Core CPI prices were up 1.7% after rising 1.8% in the 12 months ended in May. On the wholesale side, even excluding volatile food and fuel prices, Core PPI rose quite a bit more than anticipated as well. And remember, inflation is bad for Bonds and home loan rates. If this trend continues, it could have a big impact on rates later this year.

Read the entire article 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.

It gets old repeating the same thing over and over every week. The good news is, the news is good! We all know the real estate market is having its challenges and San Francisco is no different. Unlike the market several years ago where multiple offers meant over asking price sales, now they mean just the opposite. Most often multiple offers are close to each other and almost always under the listing price. The challenge is for the listing agent to get the best price he or she can for their client. That’s the importance of having a successful agent with experience.

Here are the numbers for the week of 7/8/09:

• 6 new listings (average price $1,466,147, low $749,000, high $2,700,000)
• 10 ratified sales (pending) (average price $1,250,600, low $250,000, high $2,849,000)
• 11 closed sales (average price $1,290,003, low $225,000, high $5,600,000)
• 3 reduced (average price $1,339,667)

- Janis Stone – DRE 00517072

Realtor.com Survey Tells A Lot About Today’s Housing Market

Earlier this week Realtor.com released a survey discussing some of the key factors which are motivating buyers in today’s market.  It was an interesting read and I thought I’d share the highlights:

“Price declines and low interest rates are motivating millions of home buyers to shop for bargains in the most affordable housing market in 28 years, yet at the same time only one in ten of today’s home owners say they have delayed selling their home due to those same market conditions.”

• “Affordability is clearly driving more than two thirds (65.2%) of potential buyers back into today’s housing market.  Nearly one of five prospective buyers (19.6%) say foreclosure bargains in their communities would motivate them to purchase a home, the most important reason they’re interested in buying in the near future.”
• “An additional 15.5 percent said they’re motivated to buy soon because they think prices are as low as they will go and another 15.5 percent said they were motivated to buy before interest rates rise.  For 14.6 percent of first time home buyers, the Federal $8,000 tax credit is the impetus to purchase a new home in the future.”
• “In the past year, the Housing Affordability Index maintained by the National Association of Realtors has increased 29 percent overall and 19 percent for first-time homebuyers, and is higher now than at any time in the 28 year history of the index.”

“Value is clearly motivating potential home buyers, and today’s new level of affordability is still an under-appreciated reality that needs to be explored,” said REALTOR.com President, Errol Samuelson. “The variety and quality of homes currently within reach of the average American family is much greater than most people realize. Making credit available to responsible borrowers and building consumer confidence in the economy are now key factors in restoring vitality to the nation’s housing market.”

Now, let’s take a look at this week in real estate:  The key takeaways—inventory is low with multiple offers in the lower price ranges, and improved activity in the higher priced markets. 

• East Bay—Berkeley reports the Agents are busy working with buyers. They are writing offers, sometimes five or six after the original “bonding” offer.  Castro Valley reports that there are plenty of backup offers for each deal that falls through, which is helping us to get our inventory sold.  We are seeing a few more listings trickle in, but we are still hungry for fresh inventory.  We do notice that there is a little more featured on brokers tour than in weeks prior, and that is a good sign.  We are actively selling houses but the short sale lender approval process is still frightfully slow.   We are still seeing increased activity in the midrange markets.  Livermore reports the inventory of active listings (all types) continues in its downward slide in all three cities, Livermore, Pleasanton and Dublin, in the Tri-Valley area this past week.  Total pending sales also declined this past week in all three cities, which may have attributed to the extended 4th of July holiday weekend.  Still plenty of buyers are in the market, and listings that are properly priced are selling with multiple offers.  Walnut Creek reports buyers are out in droves looking and making offers.  Almost every listing under $350K (except condos) is getting multiple offers (as many as 10, 20, 30 and even 40+).  One listing in Concord priced under $225,000 had 15 offers and offers were as high as $100,000 over asking.  Agents with FHA buyers are writing multiple offers (one case – 28!) before getting one accepted.  Definitely a shortage of inventory.  Financing seems to be the challenge in almost every transaction.  Either appraisals are too low, guidelines too strict or properties are too distressed for FHA financing.  Also, 27% of buyer controlled closed sales in June were ALL CASH.  Cash is still king.
• Monterey County—Overall the market seems to be continuing at a steady pace, with REOs in Seaside and Marina going relatively quickly and often with multiple offers.  We had one listed at $180,000 that had 15 offers and sold for about $240,000.  Sellers are becoming more realistic in pricing or, if they don’t need to sell, are pulling their homes off the market and renting them.  And buyers are still looking for value and are making offers when they see a property priced right or even a little below current comps.
• North Bay—Greenbrae reports there are great new listings coming on the market so hopefully buyers are seeing properties that appeal to them and are taking advantage of less competition over the summer as well as relatively low interest rates to make them happen.  San Rafael reports activity slowed down dramatically in the past week at open houses due to the holiday. Many buyers are writing more aggressive offers after losing out in the entry level price point in San Rafael.  Petaluma reports buyers are out in force. The properties priced below $500,000 are still receiving multiple offers in the double digits. We are starting to see movement in the next level $500-$800,000. Inventory still is the challenge.  Sebastopol reports every offer on properties under $300,000 is multiple (as many as 16 offers).  The open house activity below $600,000 is very active; above that it slows down. 
• Peninsula—Burlingame reports the holiday weekend saw fewer opens but the ones that were open reported fabulous attendance. One San Mateo listing held open on Saturday the 4th had over 35 groups through and even more on Sunday. Agents were showing property as well. Agents felt that although the opens were generally well attended there wasn’t a lot of motivation present. Buyers are watching jobs, the stock market and economic reports which are not instilling confidence this week. At the same time however we are having our best month of sales for this year. Many of our current buyers have been working with their Agents for some a year or more.  It has taken many of them a long time to decide on the timing of when to buy.  Half Moon Bay reports a slow couple of weeks due to the 4th of July holiday and graduations. Activity under the $800,000 range is active with showings, anything over $1.1m is just sitting.  Redwood City reports low inventory continues.  Not much activity due to the beginning of the summer and the fourth.  Still a lot of first time buyers in the market.  San Mateo reports many multiples on the lower end especially in Daly City, So. San Francisco and San Bruno. Strong market if price is reasonable.
• San Francisco—Lakeside reports the market under $800,000 is very dynamic.  The Lombard office reported a divided market, with about $800,000 the dividing line. $1.6-$2.2 especially slow, a prime buyer’s market. REOs very active with multiple offers, often all cash.  Market Street reported Agents worked really hard just before the holiday putting deals together for excited buyers and anxious sellers. The holiday weekend did not see a lot of open houses but the ones that were held open had good traffic with qualified buyers coming through. One Agent commented that a sentiment with buyers is that they have to move now because they believe it will heat up in September and they want to get into a home before then. One property in district 5 received an over asking all cash offer after the open house and the sellers ratified it quickly.
• Santa Cruz County—June turned out better than many previous months with nearly 60 sales overall.  The Santa Cruz office had 17 sales and the Agents are very busy on that side of town, where well priced properties near UCSC continue to be in high demand.  There is a strong rental market there and the ocean properties are receiving a lot of activity in this area also.  Capitola office closed an ocean front property last week at $5,125,000.  While it was significantly less than the asking price, with a longer market time, it was the 2nd highest sale in the county for the year.
• Silicon Valley—Cupertino DeAnza reports we are seeing 15 to 20 offers on the low-end homes. One listing in Santa Clara (listed @ $550,000) got 17 offers and was bid up to over $600,000. Conversely we are seeing many sellers having to sell NOT “as is” in the less popular (i.e. higher) price ranges.  San Jose Willow Glen reports we have slowed up a bit as far as the sales go but our listings have picked up. Our Agents are busy with buyers that are looking for the perfect house to meet their needs.
• South County—Gilroy reports the 4th of July week was very quiet. Agents representing banks are starting to see new listing assignments and an increase in BPO’s. Hopefully, this is a sign of more REO properties coming on the market. The shortage of entry level homes has caused multiple offer situations on all properties within FHA loan limits.  Hollister reports we have several Agents that have buyers unable to get contracts accepted due to multiple offers or all cash offers on most REO listings.  Communication is lacking on some of these transactions in this market.  Floor calls have decreased due to the holiday weekend.  Morgan Hill reports last month, the Morgan Hill Agents managed to post 52 sales on their office sales board.  There isn’t enough inventory to satisfy buyer demand in the $300,000 to $500,000 price range.  These types of properties are selling quickly with multiple offers.  Appraisals are becoming an issue—and some listing Agents are countering out the appraisal contingency all together.

Although it remains to be the lower-priced entry level that is driving the bus in all our geographic markets, I think it’s important to note that the current uncertainty in the financial markets is kicking up some activity in our high end properties. Our Greenbrae office reported a closed sale in Tiburon at $7.5M. Our Aptos office closed an oceanfront property in Santa Cruz over $5M.  Both Santa Rosa and Sebastopol offices had several Previews properties going into contract the past two weeks.  The areas noted have had longer standing inventory in the high end – Santa Cruz Co with a 26 MSI over $2M, Sonoma and Marin Counties with a 17 MSI over $2M.  San Francisco is seeing some $3M to $5M activity nearly every week, although sales over $3M are about 30% fewer than this time last year.  The contrast here is a 5 months supply of inventory over $2M.  East Bay offices have seen a recent pick up in higher end sales; Livermore noted there are more high-end pending sales currently than the total number of closed sales at that price point in the last 6 months of 2008.  Sporadic high end activity occurs in San Mateo and Santa Clara counties, where there is an average of 10 MSI for homes listed over $2M.  We are seeing more contingent move-up sales now; where homeowners are taking advantage of softened prices on the move-up property, combined with today’s great interest rates.  It won’t last forever!

Rick

Rick Turley
President
Coldwell Banker Residential Brokerage San Francisco Bay Area

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:

“EVERY DARK CLOUD HAS A SILVER LINING…BUT LIGHTNING KILLS HUNDREDS OF PEOPLE EACH YEAR WHO ARE TRYING TO FIND IT.” Larry Kersten. Now that’s pessimism! Interestingly enough, in recent weeks – Traders have been searching to find a silver lining or at least a glimmer of light in the dark economic reports – trying to find something to be optimistic about. Last week – the economic report calendar was lean but volatile, as Traders sought for morsels of good news amidst the gloom. All in all – home loan rates improved slightly in the early part of the week, but then worsened towards the end of the week.

Remember first that when Stocks move lower, some of that money can move over into the Bond market, helping Bond prices move higher and home loan rates move lower. Last week, Bonds benefitted early on from Stocks trading sluggishly, partially due to other world equity markets being pressured lower under concerns for the overall global economic recovery – but the economic news calendar was thin. However, things really heated up mid-week, as earnings season kicked into gear, big Treasury auctions hit the stage, and an interesting look at the job market arrived via the Initial Jobless Claims numbers.

According to that report, the number of initial unemployment claims last week dropped off by 52,000 to come in at 565,000 new claims, better than expected and the lowest level since January. Initially, Stocks reacted with some euphoria – but then reversed lower. Why? Think about it for a minute. Is the fact that 565,000 people applying for unemployment benefits for the first time, over the course of a holiday shortened week, really such terrific news? It’s like when someone is starving, and manages to find a crust of bread in the trashcan it seems great at first, until the overall reality sets back in. And so seems to go the Trader mindset lately. Starving for any morsel of good news and looking hard for a silver lining amongst the clouds, sometimes news that is really pretty bad – like 565,000 people applying for first time unemployment benefits – is initially overblown with euphoria…that then quickly wears off.

The real story is that continuing unemployment claims – which measures the number of people who still receive jobless aid after their initial week – rose by 12,000. When you add it all up, the number of Americans receiving unemployment benefits total 6.88 million, which is a new record high and more than double what it was this same time last year. The underlying problem is that companies still aren’t hiring, which means the jobless rate will continue to rise. In turn, unemployment will continue to curb consumer spending and, in the big picture, will slow economic recovery.

Read the entire report here.