Note: While Avram Goldman is no longer with Coldwell Banker, he is a friend and associate at Pacific Union with an excellent handle on San Francisco Real Estate:

Across the Great Divide

He’s back!

Note: While Avram Goldman is no longer with Coldwell Banker, he is a friend and associate at Pacific Union with an excellent handle on San Francisco Real Estate:

Can You See the Bottom Yet?

Note: While Avram Goldman is no longer with Coldwell Banker, he is a friend and associate at Pacific Union with an excellent handle on San Francisco Real Estate:

The best news today was that New Orleans was spared and Gustav is now rated a tropical storm. Although there is damage, it is minimal compared to Katrina.  We can all be grateful for Mother Nature’s reprieve.

With summer rapidly giving way to Fall and the Presidential election around the corner the housing market has gone into a holding pattern. The under million dollar priced houses still dominate the number of sales leading to both a drop in average and median sales price. The perfect example of this trend is in Marin where 33% of the active inventory is in contract in the 0-$750K category while $750-1 million is at 20%, $1-2 million is at 15%, $2-4 million at 18% and above $4 million at 5%.

Buyers continue to frequent open homes like fishermen throwing their lines into different parts of the stream looking for that big one—in this case the super value property.  Open home activity picked up during this report period. Many of the opens had double digit attendance and one in Greenbrae had close to 100 buyers.

We are seeing fewer multiple offers Bay Area wide, although some areas like SF and the Berkeley/Piedmont/North Oakland continue to see a good number of them. However most multiples are under $800,000 range. During this reporting period 70% of the multiples were in this category.

Financing is readily available for conforming loans—those under $729,750.  Jumbo loans, those over that amount, are obtainable, but at higher rates and stricter underwriting requirements.  

Negotiation skills and patience are basic requirements for transactions to come and stay together.  Accurate pricing and pre-listing preparation are a prerequisite for sellers if they want to sell in a reasonable amount of time and for the highest equity returns.

On the positive side homes are still selling. Most of the saleable inventory (properties priced for today’s market) has moved during the summer keeping months supply of inventory declining.  Our open sales this August compared to last were up 16% however the volume of sales was down due to the declining median price.

Another bright note is that the Fall inventory is about to hit the market. The reports are that a new wave of well priced and well staged homes will be coming on the market over the next month.  A number of these listings are in the over million dollar price range.

Next week will be the August recap for the Bay Area.  It should give us a glimpse into what Fall will portend.

- Avram

Note: While Avram Goldman is no longer with Coldwell Banker, he is a friend and associate at Pacific Union with an excellent handle on San Francisco Real Estate:

Quite an end to the summer.  The Olympics wrapped up tonight.  They had it all—pageantry, triumph over adversity, the ecstasy of victory and the agony of defeat.  How proud we can be of our athletes.  From the Olympics to the Presidential election season—the Democratic convention gets underway this week.  This campaign should be a real barnburner. Have a feeling it will be a good ole fashion mudslinging. When was the last time an election was decided on the issues? They keep saying that is what they are addressing, but who are the fooling.  The only part of our economy that will be surging over the next few months are those that are involved in the election. Oh, almost forgot the football season begins too. We already forgot about baseball given our local teams—maybe next season. 

What does this have to do with real estate?  You just don’t see many headlines on the state of the market. We kind of have taken the back seat.  Guess we are getting comfortable with the current market conditions. No earth shattering news other than everyone’s expectation that the government with be taking over Fannie and Freddie. The bright spot the past week is that the Fed is holding rates. Bernanke came out and declared that it appears inflation will ease. That combined with oil prices dropping, calmed the waters and the market rebounded from the early week losses with a couple of positive days.

August is being August. Although we had a slight up tick at the beginning of the month, the winds have died down as we return to the doldrums. Not unexpected, but I looked for a bit more momentum after a solid June and July. If the pattern holds, what it tells me is that the coming fall and the New Year will bring about the same as we experienced at the end of 2007 and so far in 2008. This is not all bad. Inventories have steadied and the lower half of the market has picked up speed. It will take another year for the financial markets to exorcise themselves out of the mess they got themselves into and to bring more liquidity into the market for jumbo loans.

Well priced and attractively shown homes at all price ranges are selling. Currently the REO and short sale market is very active as first-time home buyers and investors are looking for bargains.  I heard something this past week I haven’t heard of in a long time—a property listed under $100,000. At the Rohnert Park/Cotati tour meeting a one bedroom/one bath condo was listed for $95,000.  It now may be less expensive to own than to rent.  Investment opportunities now abound and buyers are becoming aware, as much of the multiple offer activity is focused on the lower end.

There are still plenty of buyers out there. Open home activity in most areas is still brisk.  The heart of the Bay Area, SF and parts of the East Bay, are still seeing 20-50 groups come through open houses. Marin and the North Bay have a few homes in that category but most range between 5-15 groups.

Almost all the multiple offer activity is in SF and East Bay (from Oakland to El Cerrito).  The vast majority of the multiples are in the under million dollar price range.

I believe we will see a pick up in home sale activity after the first week of September as many sellers have been waiting to put their homes on the market for the Fall.  The buyers are ready, as much of the inventory on the market now is that which has been available for several months.  Look for the Fall bump.

- Avram

Note: While Avram Goldman is no longer with Coldwell Banker, he is a friend and associate at Pacific Union with an excellent handle on San Francisco Real Estate:

The state unemployment figures for July were released last week and reaching a  new high water mark of 7.3% (up from 7% in June).  However, three Bay Area counties added jobs—Marin, San Francisco and San Mateo creating 7600 jobs an 0.8% increase.  Every county in the Bay Area was actually under the state average (Santa Clara 4.7%, Marin 5%, San Mateo 5.1%, Napa 5.2%, Sonoma 5.6%, San Francisco 5.8%, Alameda 6.7%, Contra Costa 6.7% and Solano 7.3%).  The Bay Area is in fact, the healthiest region in the state. Just as a frame of reference, the highest unemployment rate hit in the last two down cycles of the early 80’s and 90’s was 9.5%.  The resilient employment market is helping to buffer some of the effects of the present downturn.

One thing we can say about the current real estate market; it is never boring. The beginning of August started out very sluggish and then caught a second wind. Our first two weeks of August 2008 compared to 2007 were up 20% by units. Median and average price have dropped as the majority of sales around the Bay fall under the million dollar mark. 

Our multiple offer activity reflects the strength at both ends of the market. A property listed at $6.45mil in Piedmont received two offers. Another in Fairfax listed at $2.1 mil. (the very high end in that market) had multiple offers. On the other end of the spectrum, a Berkeley 2 bedr. 2ba. home garnered 7 offers and a Montclair home in the Oakland Hills listed at $675K received 3 offers. In San Francisco, a home in Buena Vista Park with incredible views, but needed work at $1.795mil drew 7 offers.  While a Portrero condo listed at $565K had 3 offers.  The percentage of multiple offers has been slowing.  Currently we are averaging about 17% of our total sales, which is still remarkable for the current environment.  It is still those homes that reflect the best values and are staged properly that are attracting the greatest number of potential buyers.

Speaking of buyers, open homes for the month of August are still drawing good crowds. In San Francisco the open homes averaged between 12-75 groups, the Berkeley/Oakland/Piedmont area ranged from 20-65 groups and in Marin the range was 5-25 groups.  Given that August tends to be a slower trafficked month because of vacationing, these numbers indicate that there are still a good quantity of buyers in the market.

Listing activity continues to decrease keeping inventories in check. I believe we will see an up tick in new listings after Labor Day as sellers prepare their homes for the Fall market. There are certainly plenty of buyers for these homes as long as they are priced at current market values and presented at their best.

It will be interesting to see if August will continue to blow a little stronger than normal to keep us out of the typical August doldrums. Who knows, perhaps the Olympics is giving everyone a bit brighter view of the world.

- Avram

Note: While Avram Goldman is no longer with Coldwell Banker, he is a friend and associate at Pacific Union with an excellent handle on San Francisco Real Estate:

July 28-August 3, 2008: There may be a ray of light in the Black Hole. For the last year most stories on real estate have been on declining values, foreclosures, short sales, the mortgage fiasco, and the tanking of the real estate market.  It looked abysmal.  Now we are just beginning to see the articles that are focused on looking for the time when values will have bottomed out. In last Saturday’s N.Y. Times, Catherine Rampell, looked at several different types of measurements used by economists to determine if properties in different markets are under or overvalued. One such formula by Christopher Mayer of the Columbia Business School is based on the cost of owning a home relative to renting, mortgage rates, tax rates, expected inflation and other factors. His findings show homes are still overvalued in Miami (+13%), Phoenix (+13%), Los Angeles( +6%), and Boston (+3%), while in San Diego (-1%), San Francisco (-1%), New York (-5%) and Detroit (-12%) are undervalued. There is much debate about the different methodologies, but many of these formulas are now showing that in some locations we could be at or approaching the bottom. I have attached the article for your review.

Now for a recap of July. The numbers are in and we seem to be following the same pattern as June.  Median and average prices are down from last year with one exception—-SF. San Francisco was actually up 1% in median sales price over last year and flat from last year for average sales price. As noted last month, prices have dropped appreciably due to a combination of factors. First values have declined in those markets where inventories swelled due to the sub-prime and over building. Secondly, prices continue to drop as a result of increased sales activity in the under $500,000 price range. Unit sales in this category YTD were up in every county except SF, which was down 3%. However, only 15% of the total sales in SF are under $500,000, which is the smallest percentage of any county in the Bay Area. Sales in the rest of the counties were up anywhere from 43-90% YTD over last year YTD. In contrast, unit sales over $500,000 were down in every county ranging from a low in of 22% (SF) to a high of 67% (Solano county).

Most of this negative variance was experienced in the first four months of the year. The market has shown a resurgence in closings and homes that went pending during June and July. Five of the nine Bay Area counties were up over last July including Solano (+100%), Contra Costa (+51%), Napa (44%), Sonoma (+13%), and San Mateo (+5%).  Notice the pattern. The top four are all from the counties with the lowest med. and avg. sales prices. Those counties that were off from last year, including Alameda (-3%), SF -5%, Santa Clara (-7%) and Marin     (-7.6%), for the most part represent counties with higher med. and avg. sales prices.

More encouraging is the fact that every county with one exception (SF -4%) was up in listings that went into contract during the month of July over last July. Some counties were dramatically up—Solano (+232%), Contra Costa (+147%), Napa (+93%), Sonoma (+83%), Alameda (+52%), and Santa Clara (+43%). 

With the number of new listings coming on the market slowing and with an  upswing in open sales this July compared to last, months supply of inventory continues to decline. Every county is now under 5 months (this is based on transactions going under contract divided by current active listings at the end of the month).  With one measure as to the health of a market being declining inventory supplies, if these numbers hold through the end of the year, it bodes well for 2009. In fact, in some local markets inventories are below the 3 month mark i.e. Piedmont at 1.6 months, the Lake District in SF at 1.2 months, Kentfield in Marin at 2.3 months, Moraga at 2.6 months and there are no listings available in Oakville in Napa county (o.k.—I know, there aren’t many homes in Oakville).  This affirms that real estate is a local game. Two towns adjacent to each other could be like night and day. Most amazing to me in August of 2007 American Canyon (Napa county) had a 66 month supply of inventory—it was a bastion of properties soon to be in foreclosure or a short sale.  This July the month supply of inventory sits at 3.2 months. What a difference a year makes.

August is like being becalmed in the Atlantic by the Doldrums. August is neither here nor there. A month of vacations and getting kids back to school—remember when school started after Labor Day.  For the most part August is following its normal pattern. It won’t be as strong as June and July. I believe the best we can hope for is that it will be better than last August.

Open homes attendance varies from county to county. The most active open homes are in San Francisco where most single family homes have traffic in the strong double digit range, however condo traffic can be much lighter. In the East Bay, particularly, Berkeley, Piedmont and parts of Oakland are still averaging 25-35 groups or more. Marin and the Wine Country overall average between 6-12 groups with the hottest properties attracting 25-35 groups.

Still the trend of fewer multiple offers continues.  The majority of the multiples are falling in the lower price ranges—most under $750,000.  All have gone at list price or higher. First time buyers are back.

By the next report we should have a better feel for what portends for the month of August.

- Avram

Note: While Avram Goldman is no longer with Coldwell Banker, he is still a friend and associate at Pacific Union with an excellent handle on San Francisco Real Estate:

Ended July with a bang. It was our 2nd best open and closing month since last July. I think we will see that same trend when I do the July Bay Area summary next week. For the second week in a row the Sunday SF Chronicle went sans any financial calamity stories. The best it could muster was another story on the Housing Bill. From the real estate section the main story was on how the internet has become the prime source of marketing homes.  Two other stories, one on how buyers and sellers can negotiate closing costs with title and escrow companies and the other on the on-going trend of hedge funds buying bad loan portfolios from banks and brokerage houses. If this trend continues it shows the media is moving on. It doesn’t mean we won’t see stories on a declining housing market; however the frequency is diminishing rapidly. In other words, we are unwinding the mess that Wall Street and other financial services created with the sub-prime and the coming Alt-A problems.

Fewer and fewer new listings are on coming on the market. This is not uncommon for the month of August. The most active part of the market remains in the under $ 1mil range.   REOs and short sales are still a significant part of the markets in Sonoma, Napa, Solano and parts of Contra Costa and Alameda counties. Every now and then, a higher priced listing will fall in that category of sales as did a $3.25 mil dollar Lafayette home that went into escrow.

We have noticed an increasing number of sales in the higher price ranges in the No. Bay.  Most recently we sold the multi-million dollar Cloudview Estate winery.  It was sold to the Mondavi family.  Believe it or not, there was a back-up offer. There appears to be a premium now on boutique wineries. 

Open house traffic remains steady. The most popular and well priced listings are still attracting good sized crowds as one Oakland Hills listing priced at $1.025 mil. did with 100 groups passing through. Not far behind was a Berkeley listing listed at $599K that had 75 visitors. Across the Bay in SF a Jordan Park 2 bedr. 2.5 ba. home listed at $1.875 mil. entertained 70 groups. The majority of our open homes averaged between 10-20 buyer groups.  This is contrary to the normally slow open house traffic during the month of August.

Multiple offers still are strong in the Berkeley, No. part of Oakland, Piedmont, San Francisco and Lamorinda marketplaces. Our Montclair office had over 40% of their sales involved in multiples.  Most of the multiple offer activity was in the under million dollar price range.

August could be a telltale month as to the direction of the market as we head into the Fall. Last August was the beginning of a strong downturn in the second half of 2007 when the sub-prime fiasco first manifested itself.

Today’s rally in the stock market, the highest single day rise since April 1st, , could be a positive omen. Can’t wait to see gas prices fall under $4.00 a gallon and they will—-given that we are getting close to a Presidential election.

- Avram

Note: While Avram Goldman is no longer with Coldwell Banker, he is still a friend and associate at Pacific Union with an excellent handle on San Francisco Real Estate:

Am I dreaming? Can this be real? I woke up last Sunday morning and perused the SF Chronicle.  To my surprise, not one screaming headline about the housing market in the tank, the economy going down in a blaze or the dollar dropping below the Albanian lek. There was, however, one article on page 6 on the new Housing Bill that is going to the President.  This is the first time in recent memory that we are back to reading about such things as the growing private firefighter business, arrests of tech whizzes or prisons (see Sunday’s paper).  Enough said.

Congress actually did something this week, they actually were able to get the Housing Bill to the President for signature. It has now become law with the President’s signature.  The most significant part of this bill is the government backing of Freddie and Fannie. This action should allow both companies to be able to continue to raise capital with access to the Fed credit line and has given investors a level of confidence that neither of these companies will go under due to their bad loan portfolio.  At this point, it is difficult to determine if this potential bailout will cost taxpayers. What it does do, is allow for continued liquidity for loans in the conforming loan category.  It is called steadying the ship.  However obtaining a loan in today’s environment can be challenging at times, even for those with outstanding credit histories and incomes that can more than cover their mortgage expense. And so it is, we now need the patience of Job to get the job done.

The bill provides banks with the option of having borrowers who have fallen behind refinance FHA or proceed to foreclosure.  This comes however with cost. The government is charging a large fee for banks to take this alternative option.This is voluntary on the banks part. It is a way for lenders to recoup a good portion of the loan principle and avoid perhaps deeper losses if they end up owning the homes and gives the homeowners a chance to avoid foreclosure and the loss of their home.  It is still unknown how popular this program will be. The intent is to prevent more homes from hitting the market and make it possible for families to keep their homes.

One of the little published facts in this bill has been that Congress has finally fixed FIRPTA. We, as realtors, will not have to provide the FIRPTA social security numbers to the buyers. It will be directly handled by the escrow companies. C.A.R should be sending out something soon on the new changes.

The local real estate market keeps plodding along. Given our company’s current pace, July open transactions could be our 3rd or 4th best month since last July. What we have observed is that average sales price is dipping.  As noted in previous reports the greatest growth in units this year over last has been in the under $500,000 price range.

I think there are several reasons: 1) Values among the lower price ranges have been most impacted over the last two years, which has increased the number of buyers who can now afford to buy a home. The values are such that both owner-occupied buyers and investors see an opportunity.  2) Those properties in foreclosure and short sales are now selling as banks want them off their books—last year many of these properties just sat on the market, bloating inventories. 3) Money is more readily available in the conforming loan categories and the loan limit on conforming loans has been raised.  4) Fewer listings in the higher price ranges are coming onto the market.  Those selling in those price ranges tend to have more flexibility when they choose to enter the market. Their motivation is more discretionary.

Open house activity continues to be strong for summertime.  I feel that this reflects the building buyer demand. However, buyers are still cautious and feel in the driver’s seat. We are still experiencing double digit visits and, in some cases over the 100 buyer mark as seen at a Crocker Highlands listing in Oakland priced at just below a million garnered 6 offers.  A TIC listing in Noe Valley (SF) had 140 groups through the 3 units that were available.

We are still seeing a smaller number of multiple offers, although they still represent close to 20% of our transactions. Most are concentrated in San Francisco and parts of the East Bay. The bulk of these transactions are occurring under the million dollar price range.

I believe we will continue to see good activity in the lower price ranges through the summer. If historical trends continue, there should be a rise in activity during the Fall.

- Avram

Note: While Avram Goldman is no longer with Coldwell Banker, he is still a friend and associate at Pacific Union with an excellent handle on San Francisco Real Estate:

Just those lazy hazy days of summer. While the stock market is gyrating up and down. The housing market is doing the lazy river cruise—-summer vacations, weddings and bar-b-ques.  It has slowed some since June, but not appreciably. At our current pace, July could be the fourth best month since last July. 

We have seen the volume of multiple offers slow. Only 14% of our total transactions had more than one offer.  The most number of offers peaked at four and in some cases the winning offer was under full listing price.  

Open homes, particularly in San Francisco and parts of the East Bay (Berkeley, Piedmont and parts of Oakland) are still attracting good-sized crowds. A Berkeley listing priced at $800K had a 140 buyers through its open house. A few other notable open homes were a Piedmont Ave. (Oakland) listing priced at $635K had 110 visitors; two Crocker Highlands (Oakland) homes one listed at $975K and the other at $1.195mil attracted 80 and 55 groups respectively; a Noe Valley (SF) home listed at $1.298mil. had 120 buyers and a Bernal Hts. (SF) home priced at $749K had 55 visitors. Buyers are very active in these markets. Homes that have been on the market for sometime are seeing limited traffic, except when there is a significant price reduction. The majority of open homes are attracting between 10-20 buyers. Overall positive for a summer market.

Well priced and eye-catching listings are attracting the most attention. A home in Yountville priced just under $ 1 mil. sold in 3 days. These well priced and presented listings sell quickly in spite of all the headlines.  Sellers who garner offers soon after listing should heed the old saying “a bird in the hand is worth two in the bush”. One seller in the Montclair area of Oakland received an offer during the first week on the market at 1% below asking price. They declined it thinking other offers would follow. Not so in this case. The buyer has gone away and the home has now been on the market for six weeks.

When will the market rebound? That is the million dollar question.  A recent article in CNNMoney.com by Amanda Gengler explored this topic. Amanda asked a number of experts as to what are the signs of a rebounding market.

To quote a recent article from CNN Money, the indicators were:  1) positive job growth 2) a shrinking housing stock  3) shrinking number of days on the market 4) prices falling at a slower pace 4) a shrinking ratio of housing prices to rents 5) a rising housing affordability index (an increasing number of buyers that can afford to buy a home).  At this point our market has 3 of the 5 mentioned—our housing stock has declined significantly since the beginning of the year—the affordability index has been increasing since the end of last year—and finally the pace of falling home prices has been diminishing.  When the other two factors kick in we will be headed for the rebound that Amanda discusses. One final note, it was pointed out that real estate is a local game. According to the National Assn. of Realtors median prices for existing single family homes was actually higher than a year ago in a third of the country’s metro areas. The same variations exist here in our own market. One size does not fit all.

- Avram

Note: While Avram Goldman is no longer with Coldwell Banker, he is still a friend and associate at Pacific Union with an excellent handle on San Francisco Real Estate:

As expected the July 4th week was a bit slower.  I am surprised it didn’t come to a screeching halt given all the cheery news from the stock market and the cloud over the financial markets. However buyers still enjoyed going to open homes. Believe it or not a 2 bedroom 1 bath home in Piedmont listed for $875,000 attracted over 200 people. In spite of the holiday weekend many open homes had good traffic. The number of buyers averaged 8-30 groups, with most in double digits.

Multiple offers slowed, but still 20% of our transactions were involved in multiples. All of these coming from the San Francisco and East Bay markets. The majority of multiple offer transactions went over full asking price. The bulk of sales fell under the million dollar price range. This follows the trend in the first half of the year.

There is a great deal of uncertainty in the secondary market which is creating a volatile environment for mortgages. Hopefully with the Treasury now standing behind Fannie Mae and Freddie Mac some stability will return to the markets. The good news for me is that there are a good number of buyers out there with steel in their veins. I am sensing that those in the housing market today, whether buying to live in a home or investors, are feeling that buying property is making better economic sense now than the stock market. I think this is the only reason that the housing market still has a pulse. 

I think investors are coming back in the market as home prices have dropped and the rental market has become tighter. Rents have been increasing as the demand for available rental housing has increased.  Also with dropping prices housing affordability has increased greatly in spite of rising interest rates.

What the market needs now is a spot of “What if”.  The media keeps focusing on the negative—high oil prices—falling stock prices—increasing interest rates—failing banks—the litany goes on.  What this does is creates a perception that we are “going to hell in a hand basket”.  Yes, the economy is not in good shape, but it is also not atrocious.  We still have 94% of the working population employed. Consumer spending is still at reasonable levels. Plus you had to wait three hours to purchase a new I-Phone. 

O.K.—let’s play the “What if “game. What if consumers thought the bottom of the real estate market was right now. What if consumers felt that the worst of the banking fiasco was behind us.  What if the public realized that things will not be robust, but will bump along through 2009 with the economy picking up steam at the end of 2009.  What kind of impact would that have on the economy?

I think the headlines and the pundits have a great deal of influence on how we think—whether it is real or not.  It is rocky out there, but not fatal. I remember in past stressful economic times it was difficult to remain level headed, but that is exactly what is needed now.  We are constantly sorting for the negative. How about let’s look at a few of the positives. Interest rates are still at historic lows, the vast majority of people are employed. We will need to be more conscience of our spending habits, but it is not the end of the world. We have far too many voices saying “the sky is falling”.  The sky is not falling , we are just going through some storms. One of my manager’s said it best with a quote from Maya Angelou “I’ve learned that no matter what happens or how bad it seems today, life does go on, and it will be better tomorrow”.  Let’s focus on the “What if”.

 - Avram