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 DON’T KNOW WHY I GO TO EXTREMES.” Billy Joel. Last week, Bonds went to the extremes of their trading range, battling tough layers of technical resistance as they attempted to improve. Let’s take a closer look, and understand the news of the week.

There was good news on the inflation front as the Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Expenditure Index (PCE), indicated that inflation remained tame last month. Generally tame inflation is a good sign for Bonds – but there is still concern, as inflation is certainly coming…it’s just a matter of when. See the chart for Personal Consumption Expenditure Index here.

As part of that same report, Personal Income and Spending were both reported inline with expectations. Interestingly enough, consumer spending has now risen three months in a row. However, this needs to be taken with a grain of salt, as this boost comes on the heels of the Government’s “Cash for Clunkers” program, which likely boosted spending statistics. Until the labor market stabilizes, we won’t likely see a meaningful pickup in consumer spending. Speaking of the consumer, the Consumer Sentiment Index was also reported in line with expectations.

There was also more good news on the housing front last week. The Case-Shiller Home Price Index showed home prices rose for the second straight month while New Home Sales surged 9.6% in July from June’s reading, signaling that the housing market is stabilizing. Adding to the positive tone of the report was a drop in inventories, which now stands at a 7.5-month supply from last month’s 8.8 month reading.

Keep in mind that some of the current buyers are adding a bit of what may be an artificial boost to the housing numbers, as they normally would have purchased in 2010 but have moved up their buying decisions to take advantage of tax credits and historically low rates. Let me know if you would like more information on these time-sensitive tax credits.

It’s also important to note that the revised second Quarter Gross Domestic Product Report showed that the economy has now contracted for four consecutive quarters for the first time since the Great Depression. This is another area to watch in the coming months as we gauge the pace of recovery.

Remember, positive economic news typically causes money to flow from Bonds to Stocks, causing Bonds and home loan rates to worsen. However, even with the pressure of more supply from last week’s Treasury auctions, Bonds and home loan rates were able to hold on to some improvements and end the week very slightly better than where they began.

- Foster Weeks

August 26, 2009

SAN FRANCISCO — Luxury home prices in Los Angeles, San Diego and San Francisco decreased in the second quarter of 2009 compared to a year ago, according to the First Republic Prestige Home Index™ by First Republic Bank, a leading provider of private banking and wealth management services.

In the quarter ended June 30, 2009, the Index indicated the following:

• Los Angeles area values declined 12.4% over the past year and 4.3% from the first quarter of 2009. The average luxury home in Los Angeles is now $2.08 million.
• San Diego area values fell 13.3% year over year and 2% from the first quarter of 2009. The average luxury home in San Diego is now $1.75 million.
• San Francisco Bay Area values decreased 13% over the past year and 3.1% from the first quarter of 2009. The average luxury home in San Francisco is now $2.62 million.

“Luxury home values in California’s urban coastal markets fell sharply in the second quarter of 2009 compared to a year ago,” said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. “Many buyers held off on purchases as they waited to see where the market might be headed. However, we also saw an uptick in interest due to improving conditions in the stock market and a realization that luxury values are more attractive now than they have been in many years.”

First Republic Bank produces the Prestige Home Index each quarter with Fisher CSW Inc., a leading provider of automated property valuation services and home price metrics to U.S. financial institutions. Historical results of the Index are accessible at www.firstrepublic.com. The Index has tracked luxury homes since 1985.

Los Angeles Area Values

Values in the Los Angeles area have fallen for the past six quarters on a year-over-year basis. Prices are at approximately the same level as they were in the first quarter of 2005.

Agents said buyers needed to see a clear demonstration of value before making an offer on a home. “The market is confirming a 25% to 30% drop in prices from the highs two years ago,” said Bennett Carr of Sotheby’s International Realty in Beverly Hills. “Although the market is trending down, we are seeing buyers at virtually every price level responding to the opportunity to buy value.”

Agent Leah Lail of Coldwell Banker in Beverly Hills said properties need to be in pristine condition. “It is a buyers’ market, and buyers don’t want anything that needs to be fixed up. They want something turnkey, and they can command it. Buyers who put down 40% to 50% are getting the best deals.”

In the Santa Barbara area, luxury values and sales were also down significantly. “In the first and second quarter, the market was poor,” said Jeff Farrell of Coldwell Banker in Montecito. “In August, we started seeing a big increase in sales in our office. In the latter part of the second quarter, we may have seen some stabilization in prices, but I don’t think we’ll see prices going up in the near future. We could have a long bottom.”

San Diego Area Values

Values in the San Diego area have fallen for eight straight quarters on a year-over-year basis. San Diego values are at approximately the same level as they were in the second quarter of 2004.

In North County, certain parts of the luxury market became more active in the second quarter. “The high end above $2.5 million is picking up dramatically,” said Benny Landman of Coldwell Banker in Del Mar. “A lot of people feel we’re at the bottom of this slide. Many think it is a good time to buy and invest again in real estate.”

In Rancho Santa Fe, high inventory was putting downward pressure on prices. “The luxury market is still soft because there are so many homes for sale,” said Polly Rogers of Prudential California Realty in Rancho Santa Fe. “The market over $5 million is soft, but under $3 million it has picked up. The interest is being driven by pent-up demand, low interest rates and the renewed availability of credit. Buyers think the worst is over.”

San Francisco Bay Area Values

Values in the San Francisco Bay Area have fallen for four consecutive quarters on a year-over-year basis. Prices are at about the same level as they were in the fourth quarter of 2004.

Agents said buyers remain focused on finding properties in move-in condition that are priced to sell. “In the spring, buyers were still extremely cautious,” said Laurie Nierenberg of TRI Coldwell Banker in San Francisco. “If they are going to buy, they expect at least a 10% discount from last year, and they would prefer something turnkey. Sellers need to price their properties realistically. It doesn’t matter how much sellers paid for their homes or what they spent on their renovation. Buyers need to see value in today’s market.”

On the Peninsula, prices appear to have stabilized from the first quarter and sales activity has picked up. “Because a floor has been established, many started to buy in the second quarter,” said Monica Corman of Alain Pinel Realtors in Menlo Park. “In the first quarter, buyers thought prices were coming down further. Prices and interest rates are attractive.”

In the Napa Valley Wine Country, buyers and sellers are in a holding pattern. “The luxury market has been flat,” said Barry Berkowitz at St. Helena Real Estate. “Most of the sellers don’t need to sell, and the buyers don’t need to buy. For the remainder of the year, I still see prices flat and sales slow.”

About The First Republic Prestige Home Index

The First Republic Prestige Home Index™ is the first statistical model of its kind customized to measure changes in homes valued at more than $1 million in key California urban markets. Some common features of luxury homes in the Index: 3,000 to 6,000 square feet, three to six bedrooms, and three to six bathrooms. San Francisco Bay Area properties include a cross-section of luxury homes in Alamo, Atherton, Belvedere, Danville, Healdsburg, Hillsborough, Lafayette, Los Altos, Los Gatos, Mill Valley, Moraga, Orinda, Palo Alto, Piedmont, Portola Valley, Ross, St. Helena, San Francisco, Saratoga, Sonoma, Tiburon and Woodside. Properties in Los Angeles represent a cross-section of luxury homes in Arcadia, Beverly Hills, Calabasas, La Cañada Flintridge, Encino, Los Angeles, Malibu, Marina del Rey, North Hollywood, Pacific Palisades, Pasadena, Playa del Rey, Santa Monica, Studio City and the West Los Angeles enclaves of Bel Air, Brentwood and Westwood. San Diego properties represent a cross-section of luxury homes in Carlsbad, Coronado, Del Mar, Encinitas, La Jolla, La Mesa, Poway, Rancho Santa Fe, San Diego and Solana Beach. In producing the Index, Fiserv CSW Inc. draws upon its economic database and years of experience in tracking single-family home values; collects and cross-checks data from multiple sources; achieves a weighted balance of validation elements such as repeat sales, comparable sales, and physical home characteristics; and combines this with First Republic’s extensive local market knowledge.

About First Republic Bank

First Republic Bank is a private bank and wealth management company offering personal banking, business banking, trust, brokerage and wealth management services. The Bank specializes in delivering personalized relationship-based service through preferred banking or trust offices in ten major metropolitan areas: San Francisco, Los Angeles, Santa Barbara, Newport Beach, San Diego, Las Vegas, Portland, Seattle, Boston and New York City. First Republic offers wealth management services through First Republic Wealth Advisors and First Republic Investment Management. Brokerage services are provided through First Republic Securities Company, LLC, and trust services are provided through First Republic Trust Company. More information is available on the Bank’s website at www.firstrepublic.com. First Republic is a division of Merrill Lynch Bank & Trust Co., FSB.

Contact:
Greg Berardi
Blue Marlin Partners
(415) 239-7826
Email Greg Berardi

Good News On Wall Street Doesn’t (Necessarily) Mean Higher Housing Prices on Main Street

I had an interesting chat with one of our Agents recently.  She mentioned that many of our sellers in the upper-tier price point are seeing the current strength of the Dow as a sign that their home will probably fetch more in the early part of next year.  Academically speaking, there is a belief that there is a direct correlation between the housing market and the stock market.  But from an analytical standpoint, although the stock market and the housing market correlate well, there is a variable time lag.  The time lag between housing underperformance and stock market performance can vary widely.  The average is 18 months.

Some high-end Sellers may be saying no to potential contracts on their home as they think by waiting another four to six months (thanks to the stock market’s recent gains) they may get more for their home.  Of course every home is unique and each market is very local, but by and large, the higher end of housing probably won’t follow this reasoning.  First, what we know is that in a “normal” market (of which this market is anything but), the average lag time between the two is 18 months (not four to six months).  It’s also important to point out that we probably aren’t out of the woods as it relates to the volatility in the stock market and overall health of our economy.  Many analysts are suggesting that our recovery may be “W” shaped rather than “V” so we could be looking at more challenges ahead.

Focusing less on the stock market and more on the level of supply and demand in the particular market and neighborhood will most likely be more helpful.  In most markets, the upper-tier price point remains relatively soft; in some cases offers can be few and far between, and may be worth a second look.  A few examples:  In San Mateo and Santa Clara counties, there’s currently less than a month and a half’s supply of inventory for homes under $750,000.  For homes over $3M, there is a 13 month’s supply.  In San Francisco, for homes under $1M – there is a 2 months supply of inventory.  For homes over $3M, a 14 months supply.  That’s not to say buyers should be throwing out unrealistic offers and expecting them to be accepted.  The real story here is that across the board we’re seeing very favorable increases in interest and in buyer activity.  Sellers may want to consider taking advantage of that interest…before the typical seasonal slowdown.  Our agents are making great use of Coldwell Banker’s “Market Trends” tools in MyRECafe –drilling down to particular neighborhoods and particular price-points, and having factual discussions regarding inventory and activity levels with Buyers and Sellers.

For those who focus on the stock market daily, it is probably a better indicator for the economy as a whole rather than a predictor of where real estate is headed.  With the DOW closing Thursday at just over 9,300, it doesn’t suggest home values will rise in a direct correlation, but it may mean that the recession is subsiding which would be good news for us all.  Now let’s take a look at this week in real estate:

• East Bay—Castro Valley reports appraisals are shattering a substantial amount of our sales.  Even with properties that have multiple offers, in which the properties are clearly offered for a fair market value, appraisals are coming in as low as 50K below.  We have lost a number of deals due to this appraisal controversy. Otherwise, inventory continues to fly off the shelves.  Buyers are presenting lots of cash offers.  We’ve closed two deals this week alone that were all cash buyers.  Oakland reported open houses are busy, buyers are out there and we’re seeing lots of interest.  More short sale listings are coming on the market and agents think we will see more listings coming on in September when vacation time is over.  Pleasanton reported homes that are priced well are seeing multiple offers, higher end homes are moving slowly.  Walnut Creek reported sales are coming in steadily.  Agents are working with buyers in ALL price ranges even reaching into the Previews range.  Listing inventory is still VERY low.  Orinda office reports vacationing clients may contribute to a slower week.
• Monterey County— We’ve enjoyed four weeks of above average sales each week.  Not only are seeing good activity in the lower end, also there are increasing sales in the higher price ranges.  We had four closings last week from $1.3 million to over $4 million.  And we’ve put seven properties into escrow this week at similar if not better prices.
• North Bay—San Rafael/Novato reported inventory is still low compared to last year at this time.  We are experiencing a slight upswing on REO listings.  Southern Marin reported listings are light right now, but are predicted to increase greatly after Labor Day.  We saw an interesting turn of events in Santa Rosa this week with our Manager  noting well priced properties above $500,000 (the move-up buyer market) are beginning to draw multiple offers. We had one Agent with 5 offers on a $520,000 property with each buyer willing to bring money if it did not appraise.  Sebastopol noted open house activity remains strong while new lists remain weak.  Appraisals remain challenging.
• Peninsula—Burlingame reported the hot price range is under $500,000. These properties are typically short sales and REOs and they are garnering major multiple offers, many times 20 or more. This has resulted in some of our buyers seeking opportunities in the East Bay or further south. Meanwhile, the $800K-1.2M range is lacking in inventory and there is strong demand. Typically we see the inventory drying up at this time of year and then more coming on the market in mid September.  Menlo Park Santa Cruz Avenue reported an Atherton sale with a list price of $11,900,000 and sold by our Menlo Park El Camino office.  Maybe the high end is loosening up! Open house activity was very busy for mid-August.  San Mateo reported the overall mix is balanced with the exception of $2.5mil and up which still lags the market.  Woodside reported four sales at $1.8mil plus–that is very good.
• San Francisco—Noriega reported the low end is on fire and it’s not just from first time buyers. Case in point, one REO, fixer property in the Ocean View district listed at $350k received 40 offers.  One offer was reportedly $150,000 over asking all cash and the individual did NOT get it.  There were 10 all cash offers. It’s very obvious that these all cash offers are not from first time buyers, they are from investors. Maybe the investors are seeing that the market has bottom out and even from them, it’s a good time to buy.  Lombard reported a slower week on traffic, opens, new listings and sales. Quite a number of listings are off the market until after Labor Day.  Lakeside reported it is like August in Europe: the population as well as the economy has taken the month off. Optimistically looking forward to a return. To rituals in September.  Van Ness reported slow but steady.  Large sales are still running at a good pace.
• Santa Cruz County—No information reported.
• Silicon Valley—Cupertino reports the activity is fantastic! Open houses are very well attended and deals are being made.  San Jose Almaden reports there are multiple offers on everything under $400,000 and depending on area up to $600,000.  The high end remains extremely slow.  Agents are getting creative to help them get their offers excepted.  Like paying for moving costs for the sellers.  Open houses can, depending on location, be busy.  Willow Glen reports median price homes are selling nicely. Multiple offers are plaguing some of our clients’ offers though eventually the buyers are successful in purchasing a home.  Saratoga reports short sales and REOs still dominate the market. It seems that lenders are getting a little more serious about approving short sales.
• South County—Hollister reports appraisals are still an issue with some offers leading to asset managers not necessarily taking the highest priced offer.  REO listing agents are having buyers go through lenders of their choice with writing an offer for prequalification status.  Open house activity is increasing.  Buyers are extending their search to the Los Banos area.  Morgan Hill reports we are seeing a slight slowing of the market with fewer sales.  This could be attributed to a “back to school” mentality as well as the approaching Labor Day holiday.  Inventory is down and so perhaps some buyers are taking a “wait and see attitude” as to what will be available in September.

This week I’ll leave you with a few good articles of note:

• Mortgage Applications Increase In Latest MBA Weekly Survey; Mortgage Bankers Association
• Optimism Grips Homeowners: 81% Think Home’s Value Will Increase Or Stay Same In Next 6 Months; RISMedia
• Are New Home Prices, Starts And Sales Rates Nearing Bottom?; RISMedia

Very best, until next week-

Rick

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:

“IF YOU BUILD IT…THEY WILL COME.” And while that line from the movie Field of Dreams may have referred to a baseball field, there are some small signs that it could perhaps refer to the housing market once again before too long.

The housing market continues to show signs of stabilization, and although home prices are not about to spike higher, the decline certainly seems to have subsided. Existing Home Sales came in better than expectations, reaching their highest level in two years, as you can see in the chart. (Click here for the PDF version to see the chart).

And while the inventory of unsold homes remains lofty, it was reported at its best level in a year. In addition, while Housing Starts and Building Permits both came in slightly below expectations, they did rise in July – another sign of stabilization in the housing market. New Home Sales data will come out this Wednesday, so indeed we will soon find out if home buyers are coming out to buy those new built homes. With home loan rates still at exceptionally low levels – it presents a great opportunity to buy. Do let me know if you or one of your friends, family, neighbors or coworkers would benefit from learning more about buying a home in today’s market.

On the wholesale inflation front, the Labor Department reported that the Producer Price Index (PPI) fell more than expected. However, the Core PPI – which strips out volatile food and energy prices – was inline with expectations. In the past year the Overall PPI has dropped by a record -6.8%…this going back to 1947, when data was first collected on PPI. This decrease in wholesale prices is certainly reflective of the recession, but also points to the power of the cost reductions through technology and productivity gains.

Remember, inflation is the arch enemy of Bonds and home loan rates. While it’s good news that inflation is not currently an issue, with an unprecedented amount of government spending, no one really knows what the full impact will be down the road. This will be something to watch for in the weeks and months ahead.

The job market also continues to be something to watch. Initial Jobless Claims were reported at 576,000, which was a bit higher than expected, particularly after a string of better-than-expected reports recently. Claims readings will need to be in the low 400K’s before the Unemployment Rate can stabilize and start to improve…so we have a ways to go.

Although not all the news of the week was necessarily positive, Stocks found ways to take a ride higher, finishing last week on the plus side and at the highest levels so far this year. The Dow surged ahead by 155 points closing at 9,505, the S&P gained 18 points to 1,026 while the Nasdaq rose 31 points ending at 2,020. But Bonds and home loan rates were in turn under pressure, and found it hard to maintain any positive momentum. And with more Treasury auctions scheduled for next week – which have not been overly friendly for Bonds and home loan rates – the pressure could increase. Let me know if you have any questions about your own home loan situation, and how I might be able to help you.

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.

Well, as you can see by our numbers below, we are in the summer “slump”. This usually means that many buyers, sellers and real estate agents are officially on vacation. Even with California kids starting back to school at the end of this week, people seem to be taking time for recreation and “stay”cations, a term coined by our clever media to describe people who have been hit by the recession and are staying home for vacation. Even so, we are seeing steady market activity which will start to pick up again in just a couple of weeks. September, after labor day, is usually the time when things start jumping again. When looking at the numbers below, there are two sales that were out of San Francisco proper, one in East Bay (very low) and one in Nappa (very high).

Here are the numbers for the week of 8/19/09:

• 4 new listings (average price $1,018,250, low $525,000, high $2,100,000)
• 8 ratified sales (pending) (average price $910,667, low $82,000, high $1,825,000, 2 confidential)
• 13 closed sales (average price $1,355,923, low $515,000, high $3,060,000)

- Janis Stone – DRE 00517072

The Association’s all new SFOpenHomes.com website is being launched today.  The rebuilt site offers a plethora of new features that will give REALTORS^® unprecedented capabilities to market property listings to prospective buyers while saving the expense of traditional newspaper advertising.

Some of the features incorporated into the new site include:

• A new, consumer-focused look and design; 
• One-click open home reports (open homes this weekend and open homes this Sunday)
• New search interfaces (quick search and an intuitive advanced search);
• Easy-to-use flash-based map search which will revolutionize property searches;
• Google map-view reports, in addition to more standard report layouts;
• Search 2-unit buildings separate from 3- to 4-unit buildings;
• Search for REOs, short sales;
• Search for probates;
• Search for green-certified properties; and
• FULL IDX property searches and REALTOR^® member searches, in addition to open home searches.

The Association’s goal is to make SFOpenHomes.com the consumer’s top source for open home information in San Francisco and Daly City.  Promotion of the site is well underway, including a campaign to place a sign rider on each “for sale” sign that Smith Signs installs in San Francisco.  The sign riders are provided at no cost to members, and installation can be arranged by contacting Smith Signs at (415) 648-3400.  Stickers for A-frame signs also are available and can be picked up at the Association’s offices at 301 Grove Street.  Artwork for promoting the site on property statements and member web sites can be found at http://www.sfopenhomes.com/banners.html.   Also planned is a significant print and online marketing campaign, following the launch of the new site.

What Will the Road To Recovery Look Like?

I was driving home from an office meeting this week and listening to NPR.  Health Care and Town Hall meetings have been taking the spotlight lately, with the recession and the more recently upbeat Dow Jones moving down a few stories.  This in itself is somewhat a good sign.  During the drive, an interesting report came on which mentioned that the Federal Reserve, having just finished a two day meeting, was reporting the recession is ending.

When I got home I decided to Google the news and I found this article on the NYTimes.com website:  http://www.nytimes.com/2009/08/13/business/economy/13fed.html?_r=2&partner=rss&emc=rss&src=igw.  The article reports, “Almost exactly two years after it embarked on what was the biggest financial rescue in American history, the Federal Reserve said on Wednesday that the recession is ending and that it would take a step back toward normal policy.”

The article goes on to note “Though the central bank stopped well short of declaring victory, policy makers issue their most upbeat assessment in more than a year by saying that the downturn appears to have hit bottom and that consumer spending, financial markets and inventory building by corporations all continued to stabilize.”

I put a call into colleague Brendon Riordan of Princeton Capital to get his take on what those in the mortgage industry are seeing in relation to the current state of the economy.  Brendon had some comments that I tend to agree with.  He noted that “Many are concerned we’re going to have a ‘W’ shaped recovery versus a ‘V’ shaped recovery.  We don’t want to proclaim the recession is over, only to see the economy struggle for another year.  It’s going to be a long, slow recovery.  One month we may have positive economic news and the next, poor economic news.”

Having said that, here is what we tend to be seeing about the market:

• It does appear that the worst of the recession may be behind us.
• In all likelihood, the Fed is going to keep rates relatively low well into next year by continuing to purchase mortgage backed securities and keep the Federal Funds Rate close to zero.  It is currently at .25%.
• In terms of conforming loan limits, as of right now, the higher conforming loan limits will end at the end of this year.  There is some legislation that is pending to renew the higher loan amount through November 2010 but as of right now, that is pending.  The same holds true for the first-time home buyer tax credit. We need to support this legislation.

Knowing this, what lies ahead?  Well I would say it’s positive to know that the worst may be behind us, but in all likelihood there are still challenges ahead.  There is still much recovery that needs to take place.  A broad-based “U” shaped recovery certainly is preferable over a “W”. Jobs need to continue to stabilize. There needs to be improvement in the secondary mortgage market in order to provide more choices and better pricing for jumbo loans.  Home sellers will need to be realistic about price, and buyers will need to be able to recognize a bargain when they see it and take action. 

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

• East Bay—Berkeley reports, “We are busy, busy, busy.”  Lots of buyers making lots of offers and multiple offers abound.  We received anywhere from 4-17 offers on various listings and competed against 2-15 offers on others from Berkeley to Richmond to El Sobrante to San Pablo. Danville reports we saw a real jump in new pending sales this past week.  More importantly, Blackhawk, which has been so quiet for so long, had nine new pending sales.  And in our office, four new sales this past week were over $1 million dollars!  Oakland reports a sudden sense of urgency among buyers.  We are doing a lot of approvals and submitting applications.  The buyers are out there looking.  Properties in foreclosures are coming into better neighborhoods, same for short sales.  Still it is August and sales have been a little slow the first week.  Seeing some nice listings come on the market.
• Monterey County—August started out where July left off, with lots of Agent activity going on!   Pebble Beach and Carmel are bustling with people as the annual Concours d’Elegance comes to town , bringing it with it lots of people–some deciding they’d like a vacation home here!  Inventory is decreasing, partly due to sales going up and partly due to properties off market, being rented, etc.  Carmel is down to only about 14 months supply (was about 28 months), Pebble Beach is about the same, and Seaside, which has been the REO hot spot, has only 1.3 months’ supply!
• North Bay—Greenbrae reports despite the late summertime, open houses were still well attended and buyers are out looking for bargains.  Many sellers are saying they want to wait until after Labor day to put their home on the market.  Buyers want more choices.  San Rafael reports REO inventory is increasing. We continue to see multiple offers in the entry level.  One home listed in Novato had 16 offers in the first week. It went into contract $50,000 over asking. All cash offers seem to be the winners of most of the bidding wars.  Petaluma reports multiple offers continue to be the norm in the under $300,000 range. We’re starting to see activity in the $500k-700k range with multiple offers on three properties in that price range. Cash continues to be king in the under $300,000 range. One property had 22 offers, the accepted offer was cash and was less than three of the highest offers.
• Peninsula—Burlingame reports the wonderful weekend brought people out of the fog and into the peninsula. We are seeing more multiple offers as inventory is shrinking. The condo market is extremely slow.  Menlo Park Santa Cruz Avenue reported one offer was written and accepted from an open house guest! They do work!  Activity in a wide range of prices. Buyers that seem motivated to buy.  San Mateo reported these market wide stats:  Change 2009 VS 2008 same period – active – Belmont  N.C., Burlingame +23%, Foster City -15%, Hillsborough +41%, Redwood Shores +15%, San Mateo + 12%, PENDING – Belmont +23%, Burlingame +16%, Foster City +24%, Hillsborough +33%, Redwood Shores -125%, San Mateo +29%.  This reflects single family residential only. Higher ends are still a struggle as reflected in Burlingame and Hillsborough.
• San Francisco—Lombard reports a good week for ratified offers in that it wasn’t entry – price level dominant. We had sales in the $1.2 & $3m ranges. Multiple counters, addendums and loan delays are the order of the day.  The Market Street office reported it has slowed a bit as many buyers are taking a couple of weeks off before the end of summer. Listings are being readied for the after Labor Day increase of inventory that we are anticipating. Open house attendance was great in some instances and disappointing in others.
• Santa Cruz County—No major changes.  Inventory is status quo – low end continues to dominate sales.  There is a lot of activity below $800K and many times multiple offers.  With the low inventory we are seeing prices rising again, slowly. There is definitely a more positive outlook for both buyers and sellers.
• Silicon Valley—Cupertino notes that the low-end is as competitive as ever.  San Jose Almaden reports that we’re seeing multiple offers on almost everything under $500K. Inventory remains low.  San Jose Main reports an excellent week for sales, mostly lower end and excellent open house activity.  Listings continue to be hard to get.  Many multiple offers on lower end properties.  Saratoga reports we experienced a slight increase in Previews activity with a few sales in the $2.5 mil to 3 mil range last week.
• South County—Gilroy reports our local market continues to struggle with a lack of inventory in the lower end.  REO listings are down and multiple offers are the norm.  Hollister reports lower priced homes selling rapidly with multiple offers on many.  Morgan Hill reports the real estate industry seems to be getting positive signals, almost on a daily basis, that the housing market is out of “intensive care” and has entered the “recovery room.” Demand remains high, but more importantly, our Agents are reporting that the buying public deems to be much more optimistic about the economy in general and housing in particular. 

In terms of marketing activity, in general, and with exception of the entry level, most homes are on the market longer with discerning buyers waiting for the optimal home at the optimal price.  A well-priced, well-presented home can still fetch multiple offers, but it’s got to look appealing to the savvy buyers who are doing their homework.  There is no sense in overpricing a listing – a buyer won’t even give a home the time of day if they sense the seller is being unrealistic. 

At the same time, there seems to be no better time to snatch up bargains in the Bay Area at all price points.  In the higher end, we’ve seen cases of five to 10 percent list price reductions in properties that haven’t moved, and a final and acceptable offer coming in a little below that.  That’s not to say buyers should throw out ridiculous numbers.  Certain parts of the Bay Area, after all, have still held their value better than most of the entire country.  Sellers who don’t have to sell can hold firm, but there are others who cannot.  So, while it may take longer to get the buyer and seller to agree to terms, transactions are happening, and with open minds on both sides, we are beginning to see more positive movement for all.

Until next week,

Rick

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:

There’s no time like the present, so the famous saying goes. And that’s certainly true when it comes to the good inflation news we saw last week. But, remember, things with inflation could change in the future as the economy continues to try to climb out of the recession…which could have a negative impact on Bonds and home loan rates. Here’s what you need to know.

The Consumer Price Index (CPI) for July was unchanged, and, as you can see in the chart below (view on the PDF version of this newsletter), the year-over-year CPI fell 2.1%, the largest 12-month decline since 1950.

There was also good news on inflation last week from the Labor Department. Worker Productivity came in better than expected, rising at its fastest pace in 6 years, as companies cut costs and try to maximize output from their current workforce. This efficiency helps curb inflation, which is good for Bonds and home loan rates.

So how does this news tie in with the economy overall? For one thing, consider last week’s Retail Sales Report, which showed that Retail Sales dropped in July by 0.1%, well below the 0.8% gain that was expected. This report negated the better than expected Wal-Mart second quarter earnings report and signals that consumers are still saving more than spending.

Although low consumer spending may seem like a bad thing, it is actually not such bad news in terms of inflation because of a little known (and rarely discussed) but critical facet of the economy called the velocity of money.

The velocity of money concept is simple. It goes like this: when you buy a pair of shoes, the owner of the shoe store takes that profit and buys a big screen TV, then the TV store owner buys something else, etc. The same dollar passes through the economy over and over again, triggering growth, jobs and, ultimately, inflation. The latest Retail Sales Report tells us that the velocity of money effect has been stagnant…that shoe store owner is not running out to buy a big screen TV with the profits. Once consumer spending begins to increase and the velocity of money increases, inflation is likely to follow. This will be something to look for as the economy continues to stabilize.

Something else to look for is the approaching end of the Fed’s Bond purchase program. Home loan rates have stayed historically low since the program began in January. So, this is another variable that could push Bonds down and home loan rates up in the future.

Bonds and rates did manage to end last week better than where they began, but there was a great deal of volatility along the way. Give me a call if you want to look at your situation and see if now is the time for you to act.

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.

This week looks a lot like the last couple of weeks, sales-wise. But the weather! We are having extremely warm weather for this time of year when we are usually socked in with fog. Even the Giants won a game against the Dodgers in extra innings with a walk-off home run?

Here are the numbers for the week of 8/12/09:

• 5 new listings (average price $1,691,500, low $439,500, high $3,900,000)
• 16 ratified sales (pending) (average price $936,813, low $469,000, high $2,849,000)
• 13 closed sales (average price $1,173,091, low $260,000, high $5,500,000. 2 confidential)

- Janis Stone – DRE 00517072