Last year closed on several positive notes when it came to the housing market, and a number of recently released reports suggest we could be seeing the market stabilizing and even gaining some momentum as we begin the New Year.

Noted housing economist Liz Ann Sonders of Charles Schwab said in a recent report that “we’re seeing a light at the end of the housing tunnel.” The senior vice president and chief investment strategist for the brokerage firm pointed out that the pending-home-sales index surged more than 7% last month to its best level since April 2010.

“At that point, housing was artificially supported by the homebuyer tax credit,” she said in her new economic forecast. “The last time pending sales were at the current level without government support was June 2007.” Adding to the optimism, Sonders said, was the fact that the latest construction spending report was well ahead of expectations with most of the gains in private housing.

Sonders isn’t alone in her estimation that real estate could be bottoming out. In a report released Monday, Clear Capital, a real estate valuations company, predicted that prices in the San Francisco-Oakland-Fremont metropolitan area will remain flat this year versus a 4.7 percent drop in 2011.

The firm said Silicon Valley should see a 1.6 percent increase in home prices, compared with a 2.5 percent drop last year. “This region overall is doing pretty well,” Clear Capital research director Alex Villacorta told the San Jose Mercury News.

Also encouraging was a report out Thursday that California foreclosure notices and actions decreased by 21.7 percent in 2011, although the state still had the nation’s third highest foreclosure rate, according to Irvine-based data firm RealtyTrac.

The positive signals add more evidence that the housing market overall is moving in the right direction as we begin 2012.

Of course, we’ll continue to face headwinds. While foreclosures declined sharply last year, the drop was in part due to legal and regulatory issues that prompted lenders to delay action on delinquent borrowers. That “shadow inventory” of distressed homes could come back on the market this year, although it’s doubtful we’ll return to 2010 levels again.

The jobs picture is improving, although there will be bumps along the road as we saw this week. Weekly unemployment claims spiked last week more than expected after companies let go of thousands of holiday hires.

And while predicting that the real estate market has bottomed, Schwab’s Liz Ann Sonders believes the recovery in housing will be a slow and gradual one, similar to how she sees the recovery in the overall economy playing out.

Nonetheless, the economic and housing news in recent months continues to trend higher and offer reason for encouragement that 2012 will truly be a “Happy New Year.”

Below is a market-by-market report from our local offices: 

• North Bay – Lack of inventory was the story in 2011, according to our Greenbrae manager. However, several listings are coming back on the market after being on hiatus for Q4, including a number that were put “on hold” and rented a few years back.  Marin overall had a strong close to the year, but that strength slowed mid-December and is just now starting to perk up. Our Southern Marin manager says that the number of units sold in all of Marin per the MLS system increased 7.29% versus 2010 while the average sales price decreased 8.57%.   We are seeing promising activity with offers being written and some even being ratified.  Most offers recently start well below the list price and ultimately have great concessions made on both sides if there is any chance of ratification.  The lower end REOs are getting the most multiple offers, as properties are available in Marin at prices lower than they ever have been in years. The northern Marin market is still quite slow going into the New Year.  The inventory is still low, with 100 active properties, which have been on the market for an average of 141 days.  Both prices and inventory levels are relatively unchanged.  By far the majority of activity has been in lower end properties, which are being targeted by “flippers,” rather than first-time homebuyers.  Condos are averaging an asking price of $249,000, with an average sold price in this time period of $255,400 – a sold percentage of 102.6% over asking!  Homes are selling right now at an average of 92% of asking price. December is ending with increased and great activity, according to our Santa Rosa office.  Phone/floor calls were strong. In Sebastopol, The majority of the sales remain under $400k. Offers were being written on Christmas Eve and New Years Eve, which indicates plenty of demand in the market. The challenge is not enough inventory to satisfy demand.
• San Francisco – The end of year seemed quiet, according to our Lakeside office, but the activity was more than double that in the last days of the prior year. December was a very slow listing month, the Lombard office manager says. You’d think that buyers were on vacation until a well-priced, turn-key home pops up and there’re 11 offers. Hoping for a post-holiday listing surge as inventory remains thin. Still 11th hour lending problems occur on many closings. Our Market Street office reports that the last two weeks of the year seemed to indicate that much of the unsold inventory was finally spoken for.    Properties that sold in the final two weeks were on the market for an average of 85 days, compared to our final quarter of around 36 days.  Inventory diminished significantly toward the end of the year, and buyers saw an opportunity to go out and make deals on unsold property.    We also saw a flurry of ratified contracts with very clean terms and buyers desiring to close by year-end, so perhaps tax benefits fueled a last minute surge as we approached 2012. In the Sunset district, it looks like the buyers did not take time off during the holiday season.  Sales activities did not drop off during this period but remained very strong.  Listing inventory is extremely slow.
• SF Peninsula — Burlingame agents were busy all through the holidays but waiting for some inventory to come to the market. In the Previews high-end market reportedly there will be some great listings coming on in the next 30-60 days. Across the hills in Half Moon Bay, listings came off the market for the holidays but sellers are looking to re-start the marketing mid-January.  Agents were busy the week between Christmas and New Year’s as buyers are sensing it’s a great time to buy. Our Palo Alto manager reports that the local market is seasonally slow after the holidays.  Inventory is very, very low in the local communities – from entry level on up. It has definitely been a holiday market, according to the Redwood City office, with very little activity and low inventory. The San Mateo area market is showing good signs of buyer and sellers interest – more balanced than 2011, the local manager says. Per MLS of the four Hillsborough listings that closed escrow in December only two had a sales price over $2 million and of the four homes with ratified sales in Hillsborough, only one had a list price over that level.  Of the 48 homes ratified in San Mateo, one had a list price above $2 million.  There appears to be pent up demand for higher priced homes not in MLS.
• East Bay – In Castro Valley, sales activity moved higher during the holiday period while inventory remained steady. Fremont also saw an uptick in activity with 41 ratified offers, 12 of which were multiple offers. The overall market in 2011 in Livermore was stable compared to the previous year with 1,081 closed sales versus 1,091 in 2010. But active inventory is significantly lower than a year ago.  Well-priced listings that are in good condition, show well, and in a good location, will receive multiple offers. Our Oakland manager reports that ratified contracts have slowed down throughout the holiday season. Agents are still showing property and are beginning to fill their pipelines with listings and viable buyers for 2012. Inventory is quite low in the Lamorinda area, and the market was quiet lately due to the holidays. And in Walnut Creek, our local manager says that many listings are selling with multiple offers and inventory continues to decrease.  Buyers are out there looking, although there still is a lack of urgency among many.
• Silicon Valley – It was holiday light, according to our Cupertino office, with both sales activity and inventory declining in recent weeks. A similar story was told by our Los Altos manager, who said agents saw very little activity over the holidays with few buyers out looking and fewer listings coming to market. But in Los Gatos, the typical seasonal slow-down was absent.  Agents managed to attend their walk-throughs, sign offs and continue to show and sell properties amidst the hustle and bustle of the holiday season.  While most of the San Jose area saw the usual holiday slowdown, the Willow Glen office reports that things were fairly busy with 20 new sales.  According to our Saratoga office, the local market experienced its typical holiday slowdown. The agents working are the ones that have deals that need to close by 12/31 and those that are determined to plan for 2012.
• South County – It was a very busy end of year in South County. Floor activity was busy, with several “come list my house” type of calls. Typically it is quiet in January, and it is proving to be anything but quiet. Lack of inventory is making it more of a challenge to find buyers a home, so multiple offer situations are very common. We are looking forward to a strong start to 2012. Our Morgan Hill office says optimism prevails as we enter 2012.  Agents seemed poised to take advantage of stronger buyer confidence as interest rates and prices remain relatively low.   New listings are coming on the market and “regular” listings are now outnumbering short and REO listings.  With the new optimism comes opportunity—the fact remains that it is still a buyers’ market and the time has never been better to purchase a home in South County. 
• Santa Cruz – 2011 is turning out to be much like 2010 in the number of home sales in Santa Cruz County.    The closed single-family home sales have tracked about 5% ahead of 2010 all year long until November, when the number fell below the 2010 number by 2%.    In 2011 the average closings per month were 124 units for the entire County.    Currently there is exactly the same number of homes on the market in November of this year vs. last year, about 875 units.  The prices have continued downward with a 24% drop in prices from last year.  This is significant.   In Santa Cruz County the number of bank owned properties and short sales that continue to occur has had a tremendous influence on the continued decline in prices.   Currently the median price in the County is $415,000, which was the median price (looking back) to February of 2000, 11 years ago.

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

Improving Economy Should Help Bay Area

Housing Market Gain Momentum in 2012

The Bay Area housing market is seeing the usual year-end slowdown as buyers, sellers and yes – even agents – turn their attention to the holidays, family and friends, and last minute shopping. There are pockets of activity here and there as focused buyers compete for limited inventory, determined to wrap up transactions before 2011 closes for tax purposes. But for the most part, the year is ending fairly quietly as always.

2011 has been a wild rollercoaster ride for the nation’s housing market, the economy, the financial markets and geopolitical events. Volatility is the new normal, as some Wall Street pundits have observed. Still, through all this, there is reason for hope that the real estate sector could see better days very soon.

Economic indicators here in the U.S., as well as corporate financial reports, continue to point higher. The job market, consumer confidence, and consumer spending all continue to show decent improvement as the year draws to a close. All of these indicators are critical for a healthy housing market.

The labor department reported this week that new jobless claims hit a 3-1/2 year low last week, adding further evidence that the economy may be gaining momentum. Initial claims for state unemployment benefits dropped to a seasonally adjusted 364,000, down 4,000 from the previous report. That was the lowest amount since April 2008. In November, the unemployment rate also dropped to 8.6 percent, a two and a half year low.

Also reported this week, a widely followed measure of consumer confidence showed solid improvement. The Thomson Reuters University of Michigan’s final reading on the overall index on consumer sentiment rose to 69.9 points in December from 64.1 the previous month, a sign that Americans are feeling better about the economy’s prospects for 2012.

Finally, the Commerce Department said that the nation’s GDP grew at a 1.8 percent annual rate in the July-September quarter, down from the previously estimated 2 percent. Spending on health care dropped by $2.2 billion to drive the revision slightly lower. But encouraging news in the report showed that spending on durable goods was stronger than previously estimated, an indication that consumers still have a strong appetite to spend their money despite the economic challenges.

While the recent reports all indicate the economy could be gaining momentum, we know that there are still economic headwinds that could slow the economy and the housing recovery – the European debt situation, the squabbling in Washington and the still high unemployment rate. Nonetheless, we’re moving in the right direction. And if we see this trend continue, it bodes very well for our housing market here in the Bay Area in 2012.

Thank you for taking the time to read Weekly Market Watch throughout this year. I really appreciate your interest and your feedback. I hope you have a wonderful holiday season and best wishes for a happy and healthy New Year!

Below is a market-by-market report from our local offices:

• North Bay – In Northern Marin County, it is very slow right now. Inventory has been falling in recent weeks.  The Market Action Index, which measures Buyers/Sellers’ “Advantage Zone,” shows we are in a strong buyer’s market, which is no surprise to anyone selling real estate in this area.  Our Southern Marin office says there are currently 117 properties on the MLS, which have been on the market for an average of 158 days. Total unit sales are up in Southern Marin versus a year ago (YTD) but the last two weeks have slowed down in all price ranges. The number of sales in the $2 million plus range in Mill Valley and Tiburon year to date is down 42% and 35% respectively.  Belvedere is equal to a year ago and Sausalito is up 50%.     In Santa Rosa, our local office has seen strong activity with 54 ratified offers in recent weeks, including four multiple offers. Sebastopol agents report exceptional activity at open houses for this time of year. Agents are still struggling with appraisals and lender requirements but on the flip side they are also seeing lots of cash sales.
• San Francisco – San Francisco Lakeside’s office manager says inventory just keeps dropping.  Buyers who are serious are feeling frustrated with few new listings to see and pouncing on properties that meet their need  – but only if they are well priced, and then they are not backing off from offering more than the asking price. Our Market Street office is still seeing a flurry of activity as we approach the year-end.   One third of contracts saw multiple offers, as demand is still strong and property priced well commands significant interest.   One interesting observation is that property that has been on the market for some time that had not previously seen interest is now selling.  Three properties in SF all actively being marketed for over 120 days finally saw ratified contracts in December, which speaks to the diminishing inventory versus the pent up demand to buy property here in the city. The Sunset office reports decreasing inventory but steady sales activity.
• SF Peninsula — Our Burlingame manager says there is a large group of very “pent up” buyers who are looking for that perfect family home. They are ready to buy, financially qualified and will make an offer as soon as the right home comes on the market. This would seem to be a good indication of an early spring market. It’s a great time to be a seller. The Burlingame North office says they’re seeing the normal holiday slow activity with a slight increase in sales. In the Previews high-end segment, many listings are coming off the market for the holidays although there are still very motivated buyers looking at this time. It appears that there is a lot of inventory waiting to come on in Jan/Feb. Across the hills in Half Moon Bay, some properties coming off the market to refresh the DOM and putting the homes back on in mid-January. Agents are still working at putting last minute offers together. It’s a good time to put an offer in front of sellers. Things have slowed down in Redwood City with both inventory and sales activity easing.
• East Bay – Berkeley agents are still busy showing property, writing offers, saving deals and closing.  They’re looking at December as the first month of 2012, time to renew ones energies, create leads, and plan for a great 2012.  There is optimism among agents – No exponential leaps, just steady determination and appreciation for the several signs of recovery. The overall active inventory in Livermore hit another low for the year with 208 listings on the market. Total pending sales in Livermore continue to decline with 234 properties in escrow.  Only serious buyers and serious sellers are in the real estate market today.  In the last couple of weeks the Previews inventory in Livermore has declined from 21 listings to 16 listings on the market.  The inventory level of Preview homes in Livermore is very close to low inventory level for 2011. Our Oakland/Piedmont office reports a property offered at $1.95 million that was not on the MLS went into contract within 3 days. The rest of the market activity is slowing down due to the holiday season. Very few new listings are coming on the market now; most are waiting until after the first of the year. Buyers who are attending our open houses are looking but letting the agents know that they are just starting their search, waiting for the new year to buy. The Lamorinda market remains steady, our local manager says. Buyer’s still out there in Pleasanton making offers on the right-priced homes.  Inventory is still low. In Walnut Creek, our local manager says there continues to be very low inventory, multiple offers on most properties, and appraisals coming in a little higher on some sales.
• Silicon Valley – Our Cupertino manager says both listings and sales activity are down with most buyers and sellers in a holiday and vacation state of mind. Similarly, listings and sales are down in Los Altos but new single-family home listings in good school district continue to draw buyer interest. The high end between $1-$2M is active due to low inventory, but when you move up to $2-5M it slows down to about the same as the previous quarter at 3 months of available inventory.  Above $5M is slower but still has activity. Our Los Gatos office says the last two weeks have been very exciting to say the least.  Our office recorded the highest residential sale in the history of Santa Cruz County at $7 million, the third highest sale in the history of Los Gatos listed at $15 million and closed an Atherton sale for $6.5 million. The holiday slowdown has hit, according to our Menlo Park manager, with both listings and sales tapering off. In San Jose, the Almaden office manager says there are very few new listings.  Those that hit the market are selling within days provided they are priced at or near the most recent sales.  People are willing to pay quite a bit more for fully remodeled homes.  Recently in a local neighborhood, a turnkey seller got $649K for the same size house that sold weeks later that only had new carpet and paint at $545K. Open houses continue to show lots of activity, according to our San Jose Main office. Many open homes had more than 15 groups over the weekend. Low rates and low inventory are creating excitement in the market. Many of the sales the past two weeks have been “multiple offer” sales in all price ranges. And our San Jose Willow Glen manager reports that even after the Thanksgiving holiday, agents turned in six ratified contracts and there were seven closings delivered on Monday. Our Saratoga manager says the holiday mode is in full swing. Agents are working hard to develop business for next year though.
• South County – We are seeing a huge decline in the inventories of Gilroy and Morgan Hill, our Gilroy manager reports. Gilroy only has two months worth of supply. Hollister has seen an increase in inventory, although that community only has about 2.5 months worth of supply. Well-priced homes are getting multiple offers. Prices have stabilized, and South Santa Clara County and San Benito County continue to be a great buy. According to our Morgan Hill manager, 2011 started out very slowly, then, during the mid part of the year, really took off.  The last three months, however, showed a sharp decline—revealing a graph that is an almost perfect “bell-shaped” curve.   During the last months of this year, homes stayed on the market an average of 150 days before garnering an offer compared to 99 days for May thru August.  Inventory remains very low, with only 125 Morgan Hill homes currently listed on the MLS.  On the positive side, demand remains high, interest rates are good and agents are reporting fairly good attendance at open houses.
• Santa Cruz – Sales for Santa Cruz County continue tracking about the same they have all year.  The local market is relatively flat; closed home sales will be up slightly from last year – about 5%.  The inventory is down year over year and currently there are about 800+ single-family residences for sale in Santa Cruz County. Agents are struggling to find good inventory for their buyers. And once again, good properties, priced competitively, are selling, some with multiple offers.  The overall market has been and continues to be heavily impacted by the number of “distressed properties” which is hovering just under the 50% of the total market.  This inventory is impacting pricing on “equity sales” and driving prices downward.  The median price for the County is under $500,000 and our median for our three offices last month was in the mid-$400,000′s, down from the mid to high $500,000 last year.   We are also seeing more Short Sales in the over-$800,000 price point.  On a brighter note, an Aptos Agent sold a property this week for over $2 million – exciting as those sales are few and far between these days.
• Monterey Peninsula – Our local Peninsula offices continue to be amazed at the steady pace of activity going on in the marketplace even as we head into the holidays when minds are usually more into holiday activities.  Between these appealing prices and the low, low mortgage rates right now, it appears that we still have many folks who feel they should act now in buying homes. They’ve had 28 ratified offers in recent weeks, including two multiple offers.

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

Positive signs for the economy and housing market

Between the euro zone debt crisis, the sluggish economic recovery here at home and the bickering in Washington, we’ve certainly had a share of bad news this year. But there were encouraging signs in recent weeks that the tide could be turning on the economic and housing front.

Pending home sales both nationally and in California shot up in October, the most recent figures available. We also learned that the economy grew faster than expected. And unemployment actually moved lower last week as well – all very positive signs for the real estate recovery.

Nationally, pending sales rose 9.2 percent in October compared to the same month a year ago, according to the National Association of Realtors. Meanwhile, the California Association of Realtors reported that pending home sales in our state were up for the sixth straight month in October, climbing 3.1 percent from the previous month and 10.7 percent from a year ago.

A sustainable recovery in the housing market depends a great deal on the labor market bouncing back. And last week we saw signs that could be starting to happen, albeit slower than any of us would like.

The Labor Department last week announced an unexpected drop in the unemployment rate in October to 8.6 percent from 9 percent, raising hopes of a solid recovery. Although some of the improvement was due to a contraction in the labor market, the country did add 80,000 jobs, marking 13 straight months of employment gains.

Finally, U.S. manufacturing expanded at a faster rate in November than expected and the overall economy grew for the 30^th consecutive month, according to a closely watched index released last week by the Institute of Supply Management.

All of this is not to suggest that the economy and the housing market are out of the woods yet. But the combination of positive economic trends – coupled with strong corporate earnings reports through much of this year – certainly gives us reason for optimism as 2011 comes to a close. If these trends continue into the new year, they will go a long way toward reigniting the housing market across the country.

One final note: Getting Congress to agree on anything these days seems virtually impossible. So it was all the more surprising – and encouraging – when the U.S. House of Representatives and the Senate pulled together a couple of weeks ago on a critical piece of legislation returning the  maximum loan limit on FHA-backed mortgages to $729,750.   

The bill that was passed by Congress and signed by President Obama will give more homeowners access to lower cost loans at higher limits, especially necessary in high-priced markets like the Bay Area. Moreover, it was an encouraging sign that our Congressional representatives understand how fragile the housing recovery is right now and the importance in doing whatever they can to create sustainable growth.

The limit on the loans, known as FHA-conforming loans, had been $625,500 after a temporary increase on limits expired on Oct. 1. The House voted in favor 298 to 121, with 101 Republicans voting against the bill. The Senate voted 70 to 30 in favor of the bill.  The vote raising the FHA limit was a big victory for the housing industry and for consumers. Credit goes to industry groups like the National Association of Realtors and the National Association of Homebuilders for making persuasive cases on Capitol Hill in recent weeks.

“Restoring the higher loan limits for the FHA will provide homeowners and homebuyers with safe and affordable financing, while providing a much-needed boost to housing markets all around the country,” James Tobin of the National Association of Homebuilders wrote in a letter to Republican Speaker John Boehner.

Below is a market-by-market report from our local offices:

• North Bay – November marked the best month for open sales in our Central Marin operations for the past three years, according to our Greenbrae manager.  Buyers are coming out in force to make offers on properties they feel are finally priced appropriately for the market.  With good news in real estate, the European economic crisis, consumer confidence from Black Friday and Cyber Monday, people seem to be ready to make a move. Our Northern Marin office says there have been 16 new listings in the last two weeks, ranging from $90,000 to one Previews property at $1.1 million.  The average listing price is $412,494.  There are 33 properties that went contingent, with an average listing price of $410,673.  This price point is remaining consistent with an average sale price of $413,167.  Distressed properties are still strongly impacting the market – out of the Active & Contingent properties currently on the market, 125 are distressed, and 108 are not – representing a market with 54% distressed properties. The seasonal slowdown is slowly creeping up, according to our Sebastopol office – lots of lookers but no sense of urgency. Both the Previews market and general market have slowed down in the last two weeks, according to our Southern Marin office, as it seems everyone is turning their focus towards the holidays.   Open houses are slower, and many agents say their clients are waiting until late winter or early spring of 2012 to put their houses on the market.  Inventory is quite low, so the buyers who are motivated, are having a smaller pool from which to choose.   Showings are still happening on the available listings, but buyers aren’t stepping up to the plate, even with lowball offers.
• San Francisco – Holiday season has arrived, our Lakeside office noted, with listing inventory standing at only two-thirds of last year’s level and buyers getting distracted by seasonal duties. Our Lombard office says sales activity is increasing. It was a busy November for open houses, but a holiday drop in inventory started early. The Market Street office reports that listing inventory has begun to diminish for the holiday season, which is resulting in much of the unsold inventory being spoken for.   We continue to see a demand for well-priced property in prime locations.   The office ratified this week a two-unit property in the Mission that saw over 150 parties at the open house resulting in 21 offers.   The driver here was location, price and perceived value.   Ironically I am told that 4 of the 21 offers were buyers from Google.   We also recently ratified on a small house, 26 offers… all at ask or above, all buyers with a minimum of 20% down, several 50% and some cash purchases.   To sum it up, there are a lot of well-qualified, motivated buyers out there- our challenge remains inventory. The Sunset office said they are seeing surprisingly strong pending sales, open houses are well attended but many sellers are holding off putting their property on the market until after the new year. 
• SF Peninsula — Burlingame agents are busy and looking for inventory for the many smart buyers who are waiting to take advantage of the interest rates and end of year slow down. There are currently 50 active and nine pending listings in Hillsborough. This is a reduction in inventory from the past months and probably reflective of the end of year slowdown, which is typical. Upper end San Mateo listings are very slim with only 10 active at this time. Our Half Moon Bay office says the local market is starting to reflect the holiday slow down – buyers are looking but difficult for them to put the pen to the paper. The local market is slowing down, according to our Menlo Park office. There were only six properties on tour last week, an extraordinarily small number. But our manager says there still is a fair amount of “off-market” activity. Our Portola Valley manager said the seasonal slowdown has begun, but one $8 million-plus sale did take place. Similarly, the Redwood City office reported the holiday slowdown has hit that local market as well. In San Mateo, listings are decreasing while sales activity is steady.
• East Bay – Our Berkeley office says sales activity is increasing and listing inventory is declining. Overall, they’ve seen good sales since June and it is continuing.   There still are the usual frustrating stories of having to deal with banks and appraisers, but also some happy tales of banks acting faster than anticipated.  Sales activity and inventory are both decreasing, according to our Livermore office. Total active inventory in Livermore hit a new low for 2011 with 215 homes on the market.  Total pending sales, 236, in Livermore are also on the decline, but still above the low of 186 total pending sales for 2011.  The average sales price has declined nearly 11 percent since last year. Our Pleasanton office reports low inventory with multiple offers on right-priced homes. Lastly, our Walnut Creek office reports inventory is still very low.  Buyers are still in multiple offer situations with some overbidding.  Some sellers are still waiting until the beginning of the year to list. 
• Silicon Valley – Our Cupertino office says they have lots of buyers and few good houses to sell. Inventory is half of what it was this time last year in Cupertino. In Los Altos, our local manager says open houses are still drawing buyers at recent listings for single-family homes, but condos and townhomes are still slow. Our Los Gatos office reports multiple offers are increasing due to the low inventory. All three San Jose offices report a slowing market as we approach the end of the year. The Saratoga market is tracking just like we would expect for this time of year as we go into holiday mode.
• South County – The holiday season slowdown has begun in the South County, our Gilroy office reports. While open house activity has remained steady, averaging eight groups each open house, overall buyers are not pulling the trigger and writing on properties. Inventory is low and there are a lot of short sales and REOs. Year to date the local market is about 37% short sale, 35% traditional sale, and 27% REO. Morgan Hill agents managed to put 34 homes into contract in November despite the short month and the four-day Thanksgiving weekend.   Buyer demand for entry level (and investment) properties remain high—as listing inventory for these types of properties is very limited.   The South County market continues to prove that a well-priced, well-presented home will garner an offer (or perhaps several offers) once it hits the market.  This is very true for homes in all price ranges—but those priced under $400,000 sell exceptionally well.  There is also increased demand for “upper-end” homes—those priced over one million dollars. 
• Santa Cruz – Seasonal slowing down of the market has begun as we wind into the holidays.    Distressed properties – REO’s and Short Sales – continue to represent approximately 44% of the local market.    We have seen a decline in prices overall in the county this year, with closed sales up slightly.     New home sales in our 3 offices are up 7%, closed home sales are up 18%, and average sale price is down 7%.   
• Monterey Peninsula – While listings have slowed down on the Monterey Peninsula, as is generally true around the end of the year, the sales activity has remained at a steady level, not so much affected by the holiday season.  It looks like we will march toward the end of the year with a relatively strong market here, certainly a good increase in numbers of sales for the year and the appearance of a leveling off in prices.

Seeing the erratic activity and volatility daily on Wall Street, and trying to keep up with global economic news each day (this past week it was “European sovereign debt credit swaps” )  is causing more and more investors and homebuyers to look to San Francisco Bay Area real estate as a terrific investment.

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

While the Bay Area housing market has had its ups and downs much of this year, a couple of segments of the market remained resilient through much of 2011. In previous columns, I’ve talked about the strong rebound in the luxury market from Silicon Valley up through Marin. But one other sector has also played an important role in keeping the overall real estate market going: the investment segment.

According to DataQuick, the La Jolla-based real estate information service, absentee buyers – real estate investors for the most part – bought one out of every five single-family homes and condos in August. Buyers paying cash accounted for more than a quarter of sales. And short sales – those transactions where a home sells for less than the homeowner owes on the mortgage – added up to another 20 percent of sales.

The trend has caught the attention of the local news media with the San Francisco Chronicle and San Jose Mercury both running long articles on the topic in recent weeks.

In her article, Chronicle reporter Carolyn Said noted that, “Real-estate investors have become a potent force in a moribund housing market…” She went on to say that, “despite record low interest rates, many consumers simply don’t have enough confidence in their economic outlook to buy houses. Investors have kept prices from falling further…”

Today’s market is extremely attractive to investors. Record low mortgage interest rates, coupled with very favorable asking prices for distressed properties and other entry level homes, mean that rental income can easily cover the expenses for a new landlord owner. And given the volatility in the stock market and with other investments, real estate is looking like a better and better alternative.

While not everyone would agree, I think real estate investors are playing an important role in our market. When they buy, they’re often upgrading properties that in many cases are badly in need of maintenance. They’re helping to clear out the supply of vacant, bank-owned properties that can be a blight on neighborhoods. And in general, they’re reducing the huge inventory of distressed properties that serve to keep all home prices down.

“The market would be quite a bit sicker were it not for investors snapping up a lot of the properties,” Andrew LePage, an analyst at DataQuick, told the Chronicle. “They account for a meaningful portion of the demand. To the extent to which there’s at least a temporary floor under this market, they’ve helped to build it.”

However, real estate investors – many of whom are paying all cash for entry-level properties – are making it hard for some first-time buyers and others to compete for those homes. Given the choice, it’s understandable that a seller would opt for a cash offer that’s likely to close quickly rather than take their chance that a buyer can secure mortgage financing.

Unlike past investors, today’s new landlords are generally not expecting to quickly flip a home for a profit, according to the Chronicle story. Instead, they see are seeking reasonable returns by simply owning and managing a rental property.

Realtors who work with these buyers say that many are first-time investors who like the long-term potential of investing in real estate over other investment vehicles. With prices and interest rates this low, they reason, there may never be a better time to jump in.

It’s also important to remember that most housing recoveries are preceded by a rise in rental housing rates.  This has two effects, both positive for our housing recovery.  The rise in rents attracts more investors as purchasers.  As we noted earlier, they also unfortunately cause stiff competition among first-time buyers; but in some areas these investors are necessary to help stabilize hard-hit foreclosure areas and thus stabilize pricing.  The other effect of rising rental rates?  It causes more renters who qualify for homeownership to consider a purchase, especially with today’s interest rates.

As we approach a New Year, we are expecting more and more of both types of buyers in 2012 to come to the same conclusion.

Below is a market-by-market report from our local offices:

• North Bay – Our Greenbrae office just reduced the price of a home in Kentfield in the $2.2 range and received multiple offers.  Buyers are out there and perhaps coming out a little more aggressive in the search now.  The Chronicle article on investors buying local homes has been encouraging for buyers to get into the market.  In Northern Marin, agents are reporting a definite increase in open house traffic.  We are seeing more multiple offers on well-priced properties.  There has also been an increase in floor calls and walk-ins of interested buyers. In Petaluma, the competition is fierce for buyers in the under-$500,000 price range. The inventory is dwindling and well-priced properties are snatched up as they come on the market. With Sonoma County featured as one of the top 20 destinations by National Geographic, many buyers are trolling the open houses. First-time customers are becoming more and more common. The Santa Rosa market remains steady with some increase in REO inventory and a number of new escrows. Finally in Sebastopol, the majority of activity is in the lower end of the market with emphasis under $400k. One new listing in the country, priced at $399k, attracted over 22 groups. We are seeing a little activity in the move up range of $600-$800. Low appraisals continue to be problematic.
• San Francisco – Our Lakeside office manager declares “outstanding lenders or cash” – that is what it takes to buy a home in this market.  In spite of the dramatically low interest rates, deals are being held up by the lender’s increasingly high hurdles for property qualification.  Buyers are being weighed down by poor lender choice.  Still, we are finding a large number of cash buyers who can sail through transactions without the underwriting obstacles. Meanwhile, the Market Street office says sales activity is increasing and they finished a strong October with new transactions.   The strategy seems to be price to sell or even price to induce multiple offers.  The average list-to-contract time frame is less than three weeks, and on average they are selling at or slightly above asking price with 64% of the transactions seeing multiple offers.  The Sunset office reports decreasing inventory but steady sales while the Van Ness office says inventory and sales activity have been steady in recent weeks.
• SF Peninsula — Our Burlingame offices report that light inventory is fueling multiple offers for well-prepared and priced homes. There are waiting buyers out there.  One home had over 200 attendees at open house and sold on the spot to a well-prepared buyer who had lost out in other recent multiple offers. The home had been carefully prepared and staged by the agent down to the last detail. In the Previews market, inventory is beginning to come off for the holidays if it has been on the market for a while, with sellers anticipating a better, more optimistic spring. At the same time there are some fabulous buys in Hillsborough at this time. Nov. Dec. could be the best time to negotiate with little competition. Across the hill in Half Moon Bay, the market has for $750k to $1m homes has been slow.  However, homes in the $550k range move quickly, as do second homes over the $1.5m, sometimes for all cash. Our Menlo Park offices say inventory continues to be scarce. Open houses have been busy and the office is getting a lot of calls and walk-ins from interested buyers. In Palo Alto, the market changes on a weekly basis. In general, there’s very short inventory – including Palo Alto and surrounding communities, Mt. View particularly, compared to last year.  The move-up market is slow and as a result we are slow to see new inventory. There also has been a serious lack of inventory, according to our Redwood City office, with most sales activity in the lower-price ranges. Sales activity has slow in the San Mateo market, possibly due to a lack of inventory, the uncertain economy or the upcoming holidays.  Finally in Woodside, both inventory and sales activity are down in a fairly quiet market.
• East Bay – Berkeley agents are busy working with buyers, getting price adjustments from sellers who want to move their properties, and telling renewed horror stories of appraisers creating obstacles by reading online disclosure packets and demanding repairs/clearances. Our Castro Valley office reports increasing inventory and steady sales activity. Inventory continues to decline in the Danville area while the buyers are becoming more active. Inventory stands at about 2 ¼ months in the San Ramon Valley – San Ramon and Danville are very active, while Alamo and Blackhawk are very slow. Our Livermore office reports inventory is increasing while sales are steady. In Fremont, both sales and listings are increasing. Our Oakland-Piedmont office says listings have picked up with clients making the decision to get their house sold before year-end. Open house activity was steady even at properties that have been held open for several weeks. Buyers are still being very discerning and don’t exhibit any urgency in writing an offer quickly. Our Orinda manager says it’s becoming more difficult to obtain loan docs and loan approval. Extensions of escrows are becoming more common. In Pleasanton, the local market has been steady with buyers still out there looking. Finally in Walnut Creek, our local office says inventory remains low and there are multiple offers on all well-priced properties.
• Silicon Valley – Steady sales activity is reported in Cupertino. With inventory declining, open houses are busier than ever. In Los Altos, sales activity is increasing including a small increase in the $2 million and up market. Open houses are well attended at new single-family listings. Our Los Gatos manager says that overall, the high end continues to remain strong. Inventory remains low in most entry-level markets. The San Jose Almaden office says sales activity has been steady. Properties are selling, but buyers wish there was more to choose from.  Pending sales in this region are 10% up over last year at this time but listings are down 33%.  Low-end buyers are having trouble competing against all-cash or large-down payment buyers.  All properly priced listings are getting multiple offers.  The San Jose Main office also has seen a continued drop in inventory but activity at open houses is very strong. There are multiple offers on most homes in a variety of price ranges. Low interest rates and low inventory are main factors in the multiple offers we are currently experiencing. And our Willow Glen manager reports that regular sales are taking a little longer to close than expected and banks are slowly approving short sales. The Saratoga market seems like it’s slowing, which is normal this time of year.
• South County – The Gilroy and Hollister markets both saw an uptick in REO listings coming onto the market. Open houses have been fairly well attended, but a lot of buyers are sitting on the fence. Sales are slow. Inventory is steady, but low for both markets. Gilroy has 3.3 months of inventory and Hollister has 3.6 months of inventory. Our Morgan Hill manager says that as the year winds down, the number of Morgan Hill listings has increased dramatically, but the ratio of listings to sales has decreased.  In January 2011 there were only 138 listings available in Morgan Hill—with 27 closings (20%).  October showed 311 listings with 51 closings (16%).   While sales are up from the first months of 2011, a lower percentage of listings are actually selling.  Prices on the other hand are down.  The average sales price of a single-family home in Morgan Hill has dropped from a high of just under $600,000 to about $475,000 (a 25% differential).   Morgan Hill remains a buyer’s market—many listings, good prices and great interest rates.
• Santa Cruz – As we move into November and toward the end of the year and the holiday season, sales continue to be steady in the Santa Cruz area.  There is definitely more activity in the under $600,000 price range, heavily influenced by short sales and REO business.  We are finding some of the banks on the short sales are reacting much more quickly and we are seeing a shorter process with some of lenders, Chase being one of them.   On “organic deals” financing is the biggest hurdle and agents need to pre-approve and counsel their clients through the buy process.  Appraisals are all over the map, and we have had a couple of deals where the property did not appraise and the buyer and seller were able to come to a successful resolution and the sale went through.  It is all about perceived value for the buyers. The home has to be a really good deal – and sometimes even then, the property may sit on the market. 
• Monterey Peninsula – The beat goes on with the steady activity in the Monterey Peninsula marketplace.  These low mortgage rates seem to have brought some of those hanging-back buyers into the market, especially in the lower prices ranges.  In looking through the lower priced homes in Seaside and Marina, for instance, we see that most of them are pending with very few “actives” on the market.  And on the other end, the higher-priced properties, the volatility in the stock market may be contributing to increased sales there, many of them all cash.  While we normally would be beginning to slow down about now, we continue to have a pretty consistent number of sales each week. 

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

Housing recoveries – like housing downturns – never move in a straight line. As much as we’d like a clear, fast turnaround, real estate cycles are never that way. They seem to have lots of fits and starts, two steps forward and then one step back. We’re reminded of this economic truism as we looked at the Bay Area housing market over the past month.

As DataQuick, the La Jolla-based real estate research firm, reported recently, Bay Area home sales increased in August – the most recent figures available – by a solid 12.2 percent from a year ago. But the good news was partially offset by the fact that median sale price dipped nearly 4 percent with distressed property sales accounted for nearly half of the sales. It was the 11^th straight year-over-year monthly decline in prices.

Clearly, bargain-hunting buyers chasing distressed properties continue to be a driving force in the market. That’s as true here in the Bay Area as it is in markets across the country. And it’s not just entry-level prices that are attracting bargain shoppers. An REO listing in our Southern Marin office priced at $858,000 received 16 offers and will sell for substantially over list price.  We’ve seen similar stories play out in the East Bay and South Bay as well.

But this doesn’t tell the whole story of what’s happening in the Bay Area housing market. It’s not just the bank-owned and short-sale properties that area getting buyer attention. As I mentioned in my last column, we have a real, honest-to-goodness housing shortage in many of our communities – at least a shortage of reasonably priced, well-presented homes. And it’s not just at the lower price ranges.

A $2 million plus home went into contract immediately following the broker’s open house last week in Mill Valley, continuing to prove there are buyers for homes that are perceived to be good values, even on the high end.   Another one for $1,350,000 received offers right away. 

Marin County isn’t the only region to have buyers ready to purchase but is struggling with a shortage of attractively priced listings: 

• Our San Francisco Market Street office said two-thirds of its sales had multiple offers, generally more than five for every property.  “Ratified contracts seem to be happening almost immediately after the first open house with strong back up offers in place,” the manager noted. “Price, location and well-staged, clean property sells fast quickly.   We are starved for inventory, as buyer demand is very strong.”
• In Berkeley, our local office says they’ve had a string of four strong months of home sales since the end of May. Even though there are still challenges with sellers, buyers and lenders, sales are steady. And even those homes that saw deals fall through are selling again quickly. And buyers, who may have dropped out or canceled deals, are coming back to the market.
• In Sebastopol, our local manager said as surprising as it may seem, they have a “sellers’ market” once again. One new listing had more than 45 people at the open house and another new listing had multiple offers the first day on the market.

The current market is sort of a catch-22 for sellers: Many pulled their listings off the market or decided not to sell at all for fear that they couldn’t get top dollar for their homes in this challenging housing market. But in doing so, they’ve created an inventory shortage – not in every town or every neighborhood, but in many communities.

As our San Jose Almaden manager noted, with inventory shrinking, it seems to be leaving only motivated buyers and sellers. Those sellers who “had to get a certain price” seem to have taken their properties off the market.  Those left are more willing to price their properties competitively given the market realities, which is leading to sales – and multiple offers in many cases.

This all is not to say that every home in every community is seeing buyers beat a path to their door. As another manager noted, while some new listings flew off the shelf, others have languished. A number of agents who held open houses for homes that have been on the market for quite a while received no visitors in recent weeks, even after price reductions. 

 Two steps forward, one back.

 So where does this all leave us? The Bay Area housing market has fared considerably better than most other parts of the country. We’ve seen solid improvement in many communities since the nadir of the recession. The high-end markets in Marin, San Francisco, the Peninsula and Silicon Valley have all have bounced back nicely – if not all the way back to normal.  And the entry-level market and distressed housing market continue to see good activity from investors and average buyers alike.

But at the same time, many lower and mid-priced markets are still churning through the recovery process. Some buyers are still hesitant to pull the trigger on a purchase while they remain concerned about their job future, the stock market and the economy in general. And distressed sales continue to put downward pressure on prices.

We’ve come a long ways since the recession and are moving in the right direction. But it’s going to take time. Housing recoveries always do.

 Below is a market-by-market report from our local offices:

•  North Bay – We are seeing strong movement at all price points in Marin County with more unit sales than last year, but lower volume overall, according to our Greenbrae manager.  There is more activity in the Previews marketplace with cash sales.  Multiple offers are common for homes in the million-dollar price range.  There still is a shortage of inventory, but more is trickling on the market. The Novato market is still being impacted by distressed sales, with the lower-priced properties accounting for most of the brunt of it.  In the last three months, the majority of sold properties in the lower price range were distressed. Just 12% of the properties over $1 million are distressed.  We have seen a slight increase in the average sale price of high-end properties this quarter, from $1,281,817 to $1,311,000. In Santa Rosa, the local market is improving, but in fits and starts, our manager says. In the Previews high-end market, the $2-3 million segment is around 25% stronger. Equity sales are trending upward, which is important because there is a buyer coming out of these transactions. In Sebastopol, sales are moving higher but inventory shrinking. One new listing had more 45 people at the open house. Another had multiple offers the first day on the market.
• San Francisco – The San Francisco Lakeside area has been steady, our local office reports. Tuesday Broker tours are slow, but well-priced public open houses are mobbed and buyers are active and fight for properties when they are well priced. Sales activity is on the rise, according to our Market Street office manager. The office saw a strong finish to September with two-thirds of the sales multiple offers, generally more than five offers per property.    Ratified contracts seem to be happening almost immediately after the first open house with strong back up offers in place.   We have limited inventory, and location seems to be key.   Price, location and well-staged, clean properties sell quickly.   He says agents are starved for inventory, as buyer demand is very strong. Our Sunset manager says the local market remains steady – great open houses activity and market pricing the key to getting the listing sold. 
• SF Peninsula — Our Burlingame offices say there is a lack of inventory in the $800k to $1.5 million range. There are lots of buyers in the pipeline all just waiting to jump on low rates and waiting for the perfect property to come along.  It is a bit slower than normal but open house attendance has picked up and our managers anticipate a good last quarter. Some very dramatic price reductions are making Hillsborough a great buy right now. Inventory has built up over the summer, offering many choices to luxury home purchasers. The Menlo Park offices report sales activity is increasing with listing inventory holding steady. Our Palo Alto manager says the market is seasonally slow in the mid-Peninsula high-end area.  One week it seems to be doing well and the next week it’s slow. In Portola Valley, our office reports that they have seen some strong sales these last two weeks.  List prices include properties priced at $12.5 million, $6.9 million and $4.4 million.  The Redwood City market has been quiet of late. There is a great amount of focus to get escrows closed prior to drops in loan limits at Freddie Mac and Fannie Mae, our San Mateo office says. Escrow and lenders are working hard to meet the deadline.  There have been fewer closings in September, but a slight increase in pending sales.
• East Bay – Our Berkeley office reports steady sales in the local market since the end of May.  Houses where deals fell through are selling again quickly and buyers, who may have dropped out or canceled deals, are coming back. Both sales activity and inventory is increasing in Castro Valley. In the San Ramon Valley, the local market has really slowed down.  Active inventory stands at 918 units, down from 956 one week ago.  New pending sales in the past week were at 57, while the week before there were 80.  It is especially quiet are Alamo, Blackhawk and Diablo. Fremont has also been slow but steady, according to our local office. The overall housing market in Livermore is healthy.  Active inventory continues to decline from high of approximately 275 total listings to 227 today.  At current selling rates we have less than two months of inventory on the market in Livermore.  Lots of great traffic at open houses, according to our Oakland-Piedmont office, but there has been no urgency to write the offers. Finally in the last few days people have started to put pen to paper and submit offers resulting in multiples and rounds of counter offers. We’ve seen an increase in the move-up market in the last couple of weeks, clients wanting to take advantage of the great interest rates and looking for more room for family. The Lamorinda market has been steady of late with 19 ratified offers, five of which resulted in multiple offers. In Pleasanton, inventory is still low but sales activity has been steady.  Finally in Walnut Creek, there continues to be very low inventory. After a short reprieve, some are buyers are back on the fence, our local manager reports.
• Silicon Valley – In Cupertino, well-priced homes with excellent schools are still getting lots of attention and multiple offers. Open houses continue to be busy. Los Altos has seen an increase in sales activity, but buyers are still very selective.  Multiple offers are coming in closer to list price. The Los Gatos market has been steady as the high end continues to remain strong. In San Jose, our Almaden office says that shrinking inventory seems to be leaving only motivated buyers and sellers.  Those sellers who “had to get a certain price” seem to have taken their properties off the market.  Those left are increasingly pricing them correctly for the market, which is leading to sales.  REO listings and sales continue to dominate the market when it comes to multiple offers. The San Jose Main office manager reports listing activity is down, however buyer interest seems to be increasing. Open houses the past two weekends had lots of activity and the upper end of the market is picking up. Sales activity is increasing, according to our Willow Glen office. But short sales are taking longer for bank approval. In Saratoga, September started out slow and then increased as we headed to the end of the month. The end result put the local market on target for monthly sales.
• South County – South County agents are reporting that open houses are very well attended—yet sales were down for September and the first part of October, according to our Morgan Hill office.  Buyers seem cautious but with interest rates and prices at record lows, it is the perfect time to purchase.  In-house lenders are very busy providing pre-approvals for potential buyers and agents are busy showing the ever-decreasing listing inventory.   Local builders have started construction on two major projects in Morgan Hill and are reporting brisk sales—even for houses that are not yet constructed.  This is a positive sign that demand remains high.  Morgan Hill’s proximity to Silicon Valley also has a very positive influence on our market.  Buyers can purchase a good home in South County for less money than a comparable home in San Jose, Campbell, or Los Gatos. Gilroy’s market has been relatively quiet, although there has been an uptick in multiple offer situations – about 10 in the past two weeks. There has been very light open house traffic, our Gilroy manager reports.
• Santa Cruz – The Santa Cruz County market overall remains status quo. In a general sense the unit count of closed escrows comparing 2010 with 2011 is up slightly, 5%.  This is not a significant change, although prices reflect a lower price point than this same time a year ago, down about 6-8% with the median price for the County under $500,000.  Inventory levels are down 8% from this same time last year, hovering right around 1,000 homes currently on the market.   Most of the escrows are taking longer, and there is more negotiation with new and always different complexities on each deal.  We continue to see a steady stream of short sales coming on the market, and limited releases of REO properties.    
• Monterey Peninsula – Carmel and Pacific Grove continue to be the bright spots of the Monterey Peninsula in sales, with both showing some gains in median price when compared to 12 months ago, while other areas here are generally showing declines in prices. Both towns are particularly popular for second homes, and we are still seeing many such buyers coming from Silicon Valley.  However, all areas here except Seaside – where inventory itself is down – are showing an increase in pending sales when compared to this time last year.  So as local agents approach the fall season, normally a good selling season for the Monterey Peninsula, they are in a positive frame of mind that the real estate activity we’ve seen thus far will continue.  

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

Wall Street volatility and economic issues weigh on housing market

It has certainly been a rough August for the financial markets, and we still have more than a week to go! Wall Street has taken us on a wild rollercoaster ride with volatility spiking to its highest level since the end of the recession. One day the Dow’s down 400 points, the next its up 400, then down again. Much of the turmoil is due to worries about the U.S. economy and whether we’re headed for a double-dip recession, as well as the political infighting in Washington over the debt ceiling, and the European sovereign debt concerns.

The troubled economic backdrop has many people wondering if this is 2008 all over again. And more specifically, what impact will all of this have on the nation’s housing market, and our local markets here in the Bay Area?

Without glossing over our current economic challenges, I strongly believe that we are in a very different place today than we were three years ago. At the depth of the recession we had a liquidity crisis. Today, banks aren’t lending as much as we’d like, but their balance sheets are strong with enormous cash reserves. Top 500 corporate earnings continue to be very strong, and capital investment is increasing. Although GDP growth rates are lukewarm, we’ve nonetheless had eight straight quarters of economic growth.

Nationwide, foreclosures have declined for a 10th month in a row. We have not seen the end of the foreclosure pipeline, but these declines are still a good signal to the public. There is no doubt that structural issues remain in our economy. But they are not fundamentally different from two weeks ago, before the S&P downgrade of U.S. debt. As such, there’s little justification for the current reaction other than issues of confidence and perception.

Real estate has always been a very local business. And while the national headlines may frighten us, it’s important to remember that the Bay Area has consistently had a stronger economic base and thus a more resilient housing market than most other parts of the country. That’s especially true with Silicon Valley, the Peninsula, and San Francisco.

Why is it that the Bay Area seems to fare better than many parts of the U.S. when economic turmoil strikes? One reason, of course, is the rapid growth of new Silicon Valley companies, and along with them, high-paying jobs. Another is the booming social media sector, which is also being led by Bay Area firms (Facebook, Twitter, LinkedIn). We’re also the center of the rapidly expanding biotech field and the burgeoning “green” technology industry.

According to the Bureau of Labor Statistics, seven of the nine Bay Area counties saw year over year employment growth. Additionally, the jobs being created tend to be much higher-paying positions than elsewhere in the U.S. Santa Clara County recorded the highest average weekly wage in the state, as well as the nation, at $1943, more than twice the national average, followed by San Francisco ($1573) and San Mateo ($1564).

A couple of recent reports by the Bay Area Council underscore why our local region really is at the forefront of job creation.

According to a report released by the Brookings Institution, in partnership with the Bay Area Council Economic Institute, the San Jose-San Francisco-Oakland Bay Area now leads the nation in clean tech jobs, with 11 percent of all US clean tech jobs located in the region. The Bay Area exports more than $1 billion in clean tech products, including building control systems and electric vehicles.

What does this translate into as far as hiring? The Bay Area now supports 70,679 clean tech jobs (51,811 in San Francisco and 18,686 in San Jose). In San Jose, the largest segment is wind energy with 3,000 jobs, and the fastest growing segments were Fuel Cells, where employment grew 24.7 percent in the past seven years, and Wind Energy, where employment grew 17 percent. In the San Francisco-Oakland area, the largest employment is Professional Energy Services with 7,532 jobs.

Likely due to the passage of the Global Warming Solutions Act, and various tax credits and incentives, between 2003 and 2010, clean tech jobs grew by an average annual rate of 5.4 percent in San Francisco and 12.6 percent in San Jose, far outpacing the 4.2% pace of job creation for jobs nationally.

The growth of the clean tech sector in the Bay Area is one more reason why local hiring is one the rise, according to another study by the Bay Area Council. In spite of the economic headwinds at the national level, small and medium Bay Area businesses are still looking to hire over the next six months, researchers found. The business confidence index – the number that distills the survey findings – registered at 62. A reading over 50 signals positive economic times, while below 50 is negative.

“Despite all the national talk about a dreaded double-dip recession, the Bay Area seems to be weathering the recovery much better than other regions,” said Jim Wunderman, President & CEO of the Bay Area Council. While acknowledging the economic concerns, Wunderman said, “Confidence amongst business leaders continues to slowly build.”

All of this is not to sugarcoat our current economic problems. We’re certainly not out of the woods yet and we have a ways to go before we see a full housing market recovery. But we are making progress, even if it’s not at the pace we’d all like to see. And given our region’s track record of economic growth and leading the way in the creation of jobs for the future, I’m confident we’ll continue to see better days ahead.

Below is a market-by-market report from our local offices:

• North Bay – Despite all the fluctuations in the stock market, the Greenbrae office reported a good weekend of increased activity in Central Marin. There is a bit of buyer backlog coupled with our low inventory for well-priced well-presented homes, which is causing a multiple offer flurry. We are seeing activity in all price points – slower in the luxury market. Unit sales are up in all Southern Marin communities through August 15 versus a year ago, but the median sales price is down 11% in Mill Valley, 16% in Tiburon, and 5% in Belvedere. In Sausalito the median sales price is up 37% and unit sales are up 31% accordingly. The median sales price figures are through July 31st. Our Northern Marin office says the market for non-Previews properties remains quite busy. There are 197 Active listings, of which 74 are distressed and 123 are “standard” offerings. There is a large price differential between these types. The average price in Novato of active distressed (short sales/REOs) properties is $382,000, whereas the average price of standard homes is $799,000. The Petaluma market has been steady with multiple offers in all price ranges. Specifically the $500K – 900K range had increased activity. Multiple offers are starting to become more prevalent in this higher price range. The market in Santa Rosa is holding steady but is a little on the quiet side. Open house attendance seems to be increasing again now that the County Fair is over.
• San Francisco – According to our San Francisco Sunset office manager, there has been good traffic at open houses at all price points. Additionally, he’s seen a little spike in sales activity. It appears more agents and buyers are back from their summer vacations. There has been an increase in ratified offers in recent weeks, including multiple offers. Our San Francisco Market Street office reports that 1/3 of its signed contracts saw multiple bids. They all shared one thing in common: they were turn-key and showed beautifully. Renovations, staging and professional photography seem to command immediate interest and an increased activity compared to property that doesn’t show nearly as well. A two-unit in district 5, with a tenant in one unit, saw four offers and was ratified within six days of list date. A single-family Noe Valley home in terrific condition also saw a ratified contract in less than a week of being listed. Of course price is everything. A property listed for over a year that had seen a series of price reductions resulting in a most recent asking price of 50% off the original list price was ratified.
• SF Peninsula — In Burlingame there is a shortage of inventory for a very focused, pent-up group of buyers in the $800,000-$1.5 million price range. There is inventory being prepared for the fall market, which should be coming after Labor Day. Our North Burlingame manager reports the local market has slowed down over the past two weeks as clients focus on this tumultuous economic environment. There are currently 65 active and 18 pending listings in Hillsborough. These numbers have been pretty consistent all summer. There are still cash buyers waiting for the right property at every price point. A home in old Palo Alto listed at $1.1 million received 34 offers and the property is pending for roughly $900,000 over list price. A majority of the offers were all cash. Sales activity has quieted along with the end of summer in Menlo Park. In Palo Alto, listings and sales are generally low and will probably remain that way until mid- September at which time it should pick back up again after everyone returns from summer vacation. Woodside is at a bit of a standstill, possibly due to summer and the financial market volatility. There has been great open house activity in San Mateo. San Mateo Highlands had over 75 groups at two different listings. But buyers are still reluctant to pull the trigger, he said, with unemployment and the debt ceiling political turmoil a factor.
• East Bay – According to our Berkeley manager, the first two weeks of August have been strong, but not sure what the final two weeks will bring. Danville and San Ramon have slowed down in August as always as it seems everyone is on vacation. The story is echoed in Fremont, where our local manager says the slowdown is possibly due to parents getting ready the new school year. In Livermore, open houses are very active, but buyers are taking their time in making offers. Active listings in Livermore have declined almost 10% in the past two weeks. The active inventory for Preview homes in Livermore dropped slightly from 23 to 21 listings. August is proving to be a busy month for vacations and slow for the local market, our Oakland/Piedmont manager says. Open house activity has been slow and buyers that are coming in are not in any rush to put pen to paper. Properties are still going into contract at a slower clip than the last few months. There are a lot of listings getting ready to come on the market after the Labor Day weekend. The Lamorinda market continues to remain strong in the $500,000 – $750,000 range.
• Silicon Valley – This last week was slower than it usual in Cupertino due to economic uncertainty, causing buyers to be very cautious, our local manager reports. Our Los Altos manager said new listings and new sales were both much slower in recent weeks. He attributes it to the end of summer vacation for many people, and the debt limit debates and stock market gyrations. Our Los Gatos office reports the local market has been steady with the Previews upper end of the market steadily improving. Our San Jose Almaden manager says many sellers are taking their homes off the market rather than reducing prices further. Those motivated sellers must price accordingly to sell, he said. Our Saratoga office says the local market has been steady, although the upper end is quieter lately.
• South County – Sales activity in the South County has tapered off in August, according to our Morgan Hill manager. The stock market volatility, unemployment numbers and uncertainty about our government’s ability to govern certainly have impacted consumer confidence and our local market. Closings in the Morgan Hill office for July were almost half of those for June. On the brighter side, agents report that there is increased attendance at open houses and there seems to be interest in homes priced at every level. Last weekend one of our office listings (advertised for $1.5 million) had 35 groups of potential buyers walking through in one day. Inventory is steady, interest rates and prices are incredible but getting buyers “off of the fence” remains the biggest challenge facing agents.
• Santa Cruz County ¬–The Previews/upper end market continues to be slower, although there have been more closings this year as compared with last and there are some great buys at the beach. Overall, the last two weeks have been a bit of a roller coaster ride with buyers/Investors reacting to the stock market swings. A few transactions cancelled, and a couple were delayed as buyers did not want to pull the money out for down payment or to close an escrow. On a $1.5 million listing, the buyer requested an additional 45 days extension, which fortunately was agreeable to the seller. Most sales continue to be under $600K and the market seems to be unremarkable. 70% of the sales are $650K or less.
• Monterey Peninsula – Our local manager says that the activity level in the lower price ranges has continued at a relatively constant pace this summer, and they’ve seen more sales in Carmel–Monterey Peninsula’s most active area– this summer than last. However, there is lots of inventory, especially in the over $2 million category. And while a couple of those properties have gone into escrow in this past two weeks, there seems to have been a slowdown in past couple of weeks in showings in those higher prices. The good news is the renowned Concours d’Elegance is here in Pebble Beach on August 21, with lots of activities each day for five days before. And this event brings in not just magnificent automobiles but also the wealthy people who own them and run in those crowds, so we are anticipating some will become interested in our higher priced homes here, though sales from events do tend to occur months down the line.

All in all – given the schizophrenic numbers on Wall Street, summer vacations wrapping up, and school starting back for some families – not really a bad few weeks in Bay Area Real Estate.

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

It’s time for the President to host White House summit on housing

Anyone who has followed this column knows the many challenges facing the nation’s housing market today. While some areas of the country, including Silicon Valley, have held up reasonably well, much of the country is still struggling to recover from the sharp downturn of recent years.  The housing market is arguably the most important foundation of our nation’s economy. Without a solid, sustainable recovery in real estate it will be difficult for the overall economy to see strong growth once again.

With that in mind, our parent company, Realogy Corp., has issued a formal request to President Obama calling for a White House summit on housing to address some of the major hurdles holding back the housing market. Richard Smith, chief executive of Realogy, urged the President and his Administration to seek recommendations from real estate business leaders to help stimulate a sustained housing recovery.

As Smith noted, housing has an enormous impact on our nation’s GDP and given its substantial influence on all aspects of the economy, he believes it warrants special attention from the White House.

The key to the proposed White House summit on housing would be its emphasis on bringing together real estate business leaders to make actionable recommendations designed to stimulate the growth necessary for a sustained recovery in housing, which would have an ensuing positive effect on job creation and the broader U.S. economy.

Frontline business leaders from the residential real estate industry would add a valuable perspective to the process, and the summit would give the Administration the benefit of “unfiltered, real-time market feedback” from residential brokerage operators, real estate franchisors, homebuilders, mortgage lenders and other related industry groups.

In a letter sent to the President last Friday, Smith concluded by saying “your leadership on this issue would bring together the top business minds of the residential real estate industry at a time when practical business experience may very well offer the guidance necessary to stimulate housing, and thus, the U.S. economy.”

I’m proud that Coldwell Banker is taking a leadership role in finding solutions to get the nation’s real estate market humming again. While there are many challenges facing our economy, much of it begins and ends with housing.

Below is a market-by-market report from our local offices:

• North Bay – Our Southern Marin office says sales have been steady during what is normally a slow summer period. There has been an uptick in the market with a number of higher-end properties getting into contract.  We’ve seen several go into contract during this period with tough negotiating between buyer and seller, and sellers ultimately accepting prices far below their expectation, but realizing it made sense to accept given the market. In Greenbrae, inventory is steady and sales activity is on the rise. The Northern Marin market for properties between $500K – $1MM is much more active.  There are 80 active listings, 37 contingent and 13 were sold during the second half of July.  The average time on market for the sales was 168 days.  The lower end remains hot. Under $500K, there are 93 active listings, 89 contingent, and 12 sold.  The sales are more evenly split between distressed and regular sales, with seven being either short sales or REOs and the remainder regular. Activity remains steady in Santa Rosa – not slow, but it is not robust either.  Buyers seem to be more cautious and sellers less patient than usual. In Sebastopol, open house traffic was down week over week. It’s not too surprising, as Sonoma County gets very distracted when the County Fair is in town. We continue to see multiple offers with regularity in the entry level. Appraisal problems plague the upper end. If it’s not cash, can be a problem. Well-priced Previews properties sell in a reasonable amount of time, but those perceived to be over-priced linger. 
• San Francisco – Our Lakeside office reports an uptick in sales activity, including 22 offers on a property in the inner sunset and five offers on a property in Twin Peaks. Buyers are stepping up to the plate significantly over the asking price when the property meets their needs.  On top of that, sellers are picking buyers that appeal to their sense of “who should get the property,” not only who has the highest price. Meanwhile, the Lombard office reports the usual summer slowdown, but buyers are out there and ready to jump on a good deal or a flawless home. Listings are coming in slowly. Our Market Street office says that the second half of July ended very strong with a nice uptick in ratified contracts and closings.  Properly priced inventory is moving; everything else is sitting.   Unless a property is priced correctly out of the gate, it will sit and buyers watch the listing as the price is reduced with little to no activity.    Conversely the inventory that is well priced is seeing a lot of activity, often with multiple bids.  Recently a two-bedroom fixer-upper condo was listed and resulted in 13 offers, with a ratified contract nearly 25% over the asking price.  Finally, our Sunset office reports both sales activity and inventory decreasing in recent weeks.
• SF Peninsula — School is starting earlier than usual this year, which seems to have shifted the market timing, according to our Burlingame office. Families are doing their last vacation trips and finishing up summer projects, which have slowed down open houses in some cases. You still can’t hide a great deal however. The pent up buyers who are waiting for something specific are poised and ready when the right property hits the market. There is a lot of inventory sitting on the market in Hillsborough right now. The listings are being actively shown with great regularity but buyers seem to be holding back and waiting. There are some spectacular listings available right now with the entry level at just under $1.5 mill. That makes Hillsborough a great value and extremely competitive with surrounding areas. Meanwhile, the market is still slow on the coast, according to our Greenbrae office. Either all-cash second homes will sell or the lower-end short sales and bank-owned properties. The mid-range – $750-$850k – is very slow. The Portola Valley office says that the summer slowdown has set in with many clients and agents out of town.  That story is echoed by our Redwood City office. Finally in San Mateo, the upper end market has had a sudden rush.  The change in Freddie and Fannie may be a contributing reason.  Things are moving if they are priced right and show well.
• East Bay – June and July were sizzling, according to our Berkeley office, with a lot of sales and multiple offers. August is starting out slower. Sellers may be waiting for post Labor Day or agents/sellers are out of town.  Both sales and listings are up in Castro Valley. Sales activity in the San Ramon area has been very strong for the past month.  It may be that buyers are trying to get in before the beginning of the school year. Inventory is down a bit in Fremont, but sales are increasing. Our Livermore office has seen a positive uptick in listings and sales in the office, despite the negative financial and political news and the sagging stock market.  Open houses have been active, and there are a lot of buyers out in the market. The Previews segment of the market has remained steady. Agents who are holding open houses in the Oakland area are having great traffic and sending out several disclosure packets but are finding that buyers are slow to pull the trigger and write an offer because they are waiting for the best deal.  Buyers feel no urgency. In Walnut Creek, the potential buyers visiting open houses seem to be serious but only for the perfect property that fits all their needs.  There’s no sense of urgency.  Pricing is very unpredictable.  Some properties that seem to be priced right may sit and some have multiple offers.
• Silicon Valley – Our Cupertino manager says the local market has had a very busy couple of weeks, despite all of the negative economic news. Quite a few of our long-time buyers have finally pulled the trigger. In Los Altos, the mid-range single-family homes seem to be very active and drawing multiple offers in the city and surrounding communities. The high-end of the market in the Los Gatos area continues to show a lot of promise.  Our local office just put a $5.2 million listing under contract with one of our buyers. We are starting to see a summer slowdown in Menlo Park, although it has occurred later this year than usual after a pretty strong market through July. Our Palo Alto offices report that the market continues to see an increase in sales activity, with many if not most of the sales coming from multiple offers. The summer slowdown seems to have hit the San Jose offices with sales and listing activity taking a breather. The entire Saratoga market has been much slower than anticipated for a few weeks now. With low rates, it’s a bit baffling why this would be the case.
• South County – Statistics for the last two months in the Morgan Hill office show an increase in the number of sales, but a decrease in the average sales price.  In June the office closed 47 properties with an average price of $457,000.  In July the office closed 56 homes with an average price of $440,000.  Interpretation would suggest as homes are becoming more affordable, more buyers are willing and able to make the commitment to buy.  Despite the obstacles inherent with strict underwriting guidelines, buyers continue to take advantage of the opportunities available in South Santa Clara County – quality homes at affordable prices. 
• Santa Cruz – July sales in the county were down 19% over 2010. In the last 12 months, there have been approximately 1600 total single-family residential sales in the county.  The median price is also down month over month for July by 9% with the price hovering around $460,000.  Total inventory level is also down by 19% with SFR hovering around 1050 homes currently on the market, contributing to a 3.8-month supply vs. 6.4-month supply the same time last year.  70% of the sales are under $650,000, with 28% under $350,000. There are some attractive deals for first time buyers and investors.   Short sales and REO’s continue to be a large part of the market. Approval times on short sales are really getting shorter in many instances.  Buyers actively continue to shop at open houses for homes and price comparison.
• Monterey Peninsula – The summer beat goes on along the Monterey Peninsula, where the market has been fairly steady, according to our local manager.  Lots of folks are in town, there are more interested walk-ins to our offices than last year, and we’ve seen good open house activity, especially in Carmel and Pacific Grove–the primary second home areas. Sales have been largely to the Silicon Valley crowd who still love to own a weekend cottage in the Carmel area.  The last two weeks have been especially strong, with our offices having the same number of closed-to-open escrows – 40 each.  Now we’re looking forward to the upcoming biggest event drawing the very moneyed auto buffs – the Concours d’Elegance in Pebble Beach, rated the best Concours in the U.S.

The last several days have seen some large losses on Wall Street, and there’s been growing uncertainty with several large European economies. The price of gold continues to soar.   While so much of our global economy is uncertain, it seems that our limited Bay Area real estate inventory of housing remains to be a fairly good investment, especially at today’s prices and interest rates.  That’s it for now. Have a good week!

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

Bay Area Housing Market Heating up Along with Summer Temps

Maybe we just had a late spring. That’s one possible explanation for what we’re seeing in the Bay Area housing market. Normally, the real estate market picks up in March, April and May and then takes a breather over the summer for vacations, graduations, weddings and other activities. But this year it seems like that’s being reversed.

After a modest spring, the local housing market has been heating up this summer with strong sales in June and even into July in many areas. Sales activity has been especially robust in the higher end of our markets – over $1 million in much of the Bay Area and $2 million and up in San Francisco. But even the mid-level market was surprisingly active (more on that below).

As I was combing through last month’s sales figures, I noticed an interesting trend: In most of our Bay Area markets in June we had the highest level of million-dollar home sales since the summer of 2008. You might recall that was just weeks before the collapse of Lehman Brothers sent the financial markets into a tailspin and pushed our economy into the “Great Recession.” Now, three full years later, we’re seeing a much brighter picture for the local housing market.

Coldwell Banker Residential Brokerage will be issuing our luxury market reports next week, but I thought you’d be interested in getting a sneak preview today. Here are a few highlights from various markets:

• East Bay – Sales of million-dollar homes jumped 26 percent in June from the previous month to 159 transactions, the most since last summer. Even more impressive, multi-million-dollar sales quadrupled from a year ago to 16 last month. The median price was also up nearly 13 percent;
• Silicon Valley – There were a whopping 284 million-dollar home sales in June, up from 230 the previous month and the highest level the region has seen since June of 2008. The very high end of the market – those homes over $2 million – saw sales spike to 52 from 36 a year ago;
• Marin County ¬– Million-dollar sales totaled 80 in June, up from 60 in May and the most that county has seen since July of 2008;
• San Francisco – $2 million sales spiked from 50 in the first quarter of the year to 86 in the second quarter, the most since 2008. And sales of $3 million-plus homes more than doubled to 33 in the second quarter (April-June) vs. 16 in the first.

The high-end of the market is not the only segment doing well. The entry level and mid-level markets have shown solid signs of improvement as summer rolls along. Bay Area home sales overall rose sharply last month to the highest level for any month since June 2010, when expiring tax credits gave housing a final boost, according to DataQuick, the La Jolla-based research firm.

The only thing holding back the lower end of the Bay Area market in many cases has been a lack of inventory. “Inventory remains elusive,” Sebastopol manager, Stephen Liebling, said in speaking for many of the managers around the Bay. Because of the shortage of good, well-priced homes, multiple offers are picking up in many communities. In nearly every one of our regional markets, you can almost be assured of multiple offers for a well-priced, well-located, and nicely staged home in the entry price level for that market.

Clearly, the Bay Area’s relatively strong economy – especially the robust tech sector ¬– is playing a key role in our housing market. As Inman News put it in a Friday article, “Tech is back — and tiptoeing along behind it, at least by some measures, is the San Francisco-area real estate market.”

The Inman story recounted what a lot of the local media have discovered in recent weeks: That the tech sector is giving new life to housing in many parts of the Bay Area. “Tech jobs are on the rise, and with the increase in high-paying jobs, we are seeing more and more younger, first-time homebuyers,” one San Francisco agent noted.

“Indeed, technology-based industry — which drove Bay Area home prices to fabled levels during the headiest days of the housing boom — seems to have found its legs,” Inman reported. At the end of 2010, San Francisco had an estimated 30,700 tech jobs, compared with the 32,800 at the peak of its tech boom in 2001, according to an analysis by real estate firm Jones Lang LaSalle.

This all is not to suggest the housing market is completely out of the woods. Real estate is very much a local business. And while many of our markets are on the mend, others are still softer than they were a few years ago. And there still is an overhang of distressed properties that will continue to come on the market as bank owned REO sales in the months ahead.

While we take quite serious the nation’s fragile economy, and most recently the stalled talks to come to terms with our national debt limit, we can be thankful for the Bay Area real estate activity that continues to move forward. We are fortunate to live and work where we do. The limited housing stock, diverse job base, incredible universities, and great weather are all factors that help homebuyers focus on these terrific home values and low mortgage rates.
Below is a market-by-market report from our local offices:

• North Bay – We are still seeing multiple offers when the price and property are appealing to buyers, our Greenbrae manager reports. It seems buyers all know a good deal when they see it. One short sale in Greenbrae has been on for the past two months, and then finally a price reduction to the magic number that elicited four offers, ultimately selling at a nice reasonable price. The high-end Previews market has slowed just a bit, but there are still buyers out there looking for the perfect homes. In Southern Marin, it has been surprisingly steady. Sellers seem to be getting a bit more realistic in pricing and accepting offers. Buyers are starting to step up to the plate more readily in this price range. In Northern Marin, both sales and inventory are on the rise. Sales appear to be holding steady in Santa Rosa – and very active in the $400K market. Between $500k and $800 things are fairly quiet, and there’s some activity between $800k and $1.2 million and above. Sales are on the rise in Sebastopol. In fact, this was the most productive two-week period this year, our local manager says. Inventory remains elusive. Most of the sales are on the lower priced properties but there were a few in the move-up territory of $600,000 to $900,000. Developable vineyard land remains a hot commodity.
• San Francisco – There seem to be fewer buyers out on the hunt, according to our San Francisco Lakeside office manager. But those that are there are serious and respond quickly to good value. Similarly, our Lombard office says things are slowing down for summer, except the well-located, well-priced homes that are still attracting multiples. But there hasn’t been anything significantly over asking price for a couple of weeks now. Our Market Street manager says the local market feels erratic. In one week, multiple contracts are ratified, the next week it’s oddly quiet. We are seeing offers come in quickly, with plenty of interest… often buyers are coming in with offers full price or above, but then they are waiting out the entire contingency period and backing out, causing many properties to come back on the market. Probably due to the July 4 Holiday, activity has slowed, our Sunset office reports. With that said, open houses are still well attended. One entry-level listing had 30 groups and an upper end listing of $2 million had 10 groups.
• SF Peninsula — The multiple offers are happening with ever-greater frequency, our Burlingame office reports. The inventory remains low in the most desirable areas. It remains a mystery why 1 home will get multiple offers and a similarly priced home nearby sits for weeks. The initial pricing is more critical than ever. There are 29 active Hillsborough Listings at this time. The inventory has slowly built up. Open house turn out is very strong in all price ranges. Location is a key factor. In Menlo Park, sales continue to be strong in the $1 million to $2.2 million market. In Palo Alto, week-to-week inventory ranges from low to very low. There continues to be strong demand up to $5-6 million. Meanwhile, things have quieted down a bit in Portola Valley but low and mid-range properties are still selling well. Our Redwood City manager says the local market has been seasonably flat. Good inventory is still very low and open houses are not as busy with summer upon us. However, one San Mateo property listed at $1,350,000 had 13 offers. The buyer paid all cash.
• East Bay – The Berkeley office continues to experience a busy market ever since June and still going strong. Still seeing REO’s in our general area, more and more short sales and auctions beginning to creep in. While inventory has been decreasing, sales have been steady in Danville. Our local manager says the market is more active than usual for the summer months. Both sales and listings are picking up in Fremont over the past two weeks. Sales activity has eased a bit in Livermore, but buyers are still out in the market and jump when they see a good value. A unique custom home one nearly an acre with a picturesque country setting generated 11 offers and sold for substantially over the list price of $899,900. The Oakland-Piedmont market has been steady. There are a lot of first time home buyers just beginning their search as well as buyers who have been looking for a while and are taking a wait and see attitude based on economic news and personal uncertainty. There are a few more instances of multiple offers in the marketplace but some of those are on homes that were priced under value in our office’s opinion. The Lamorinda market has slowed a bit due to summer weather. Some buyers have placed their search on hold while they vacation. In Walnut Creek, buyers seem to be coming off the fence. Many selected areas and price ranges are getting multiple offers.
• Silicon Valley – The best homes are getting lots of offers. Our Cupertino office says the majority of its sales are multiple offers. Seems like we are having a delayed spring. New single-family home listings in good areas of Los Altos, Mountain View and Sunnyvale are getting multiple offers and selling up to 15% over asking price, according to our Los Altos manager. Activity has increased recently in the Los Gatos area with more properties seeing multiple offers. Well-priced homes are continuing to sell at a quick pace while not so well priced homes continue to languish. Our San Jose Almaden manager says a number of price reductions have led the way toward sales over the last week. Prices overall are not going up, but in fact appear to have dipped a bit. Multiple offers still abound for the “good deal.” In the San Jose Willow Glen area, open houses are pretty busy and sales have been steady. The Saratoga market seems to be steady. One home listed in Saratoga for $1.5 million received 18 offers and was bid up astronomically.
• South County – That past two weeks showed an increase in traffic at open houses in the South County. Our Gilroy manager says it may be a sign that buyers are out ready to buy at the right price. Short Sales and REO’s still make up about 40% of the South County real estate market, according to our Morgan Hill manager. Buyers still are making offers on these types of properties and seem willing to wade through the laborious process to obtain a home. Properties listed under $700,000 that are “regular sales” (and that are correctly priced and staged) are garnering offers almost immediately upon hitting the market. June was a very good sales month for the Morgan Hill office and July is also going to be a good one as well. Average sales price, sales volume and the number of units sold all are greater than this time last year. There is a prevailing feeling of cautious optimism by local agents.
• Santa Cruz – Summer vacations and great weather always bring out the potential buyers in Santa Cruz, and open house activity this year is no exception. It seems the buyers know a good thing when they see it and despite a lot of mixed indicators, savvy buyers know that this is probably the best real estate market for purchasing that they will ever see. Rates continue to be at an all-time low and some banks are seemingly making an attempt to reduce approval times on short sales. Overall, sales are up over 2010 and we continue to outpace last years’closed unit sales in our local branches and in the county.
• Monterey Peninsula – Carmel has been packed with people for the last two weeks, especially over the past two weekends including 4th of July. Our local sales associates have been busy showing properties, holding open houses and writing offers, many of which seem to end up in multiple-offer situations when they are priced well. As a result, sales activity has remained steady across all price ranges.

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

Bay Area housing market: It’s all about location

It’s an old real estate adage, but it couldn’t be truer today. When it comes to the health of the Bay Area (and the rest of the country, for that matter), the three most important rules for the housing market are location, location and location.

As readers of this column know by now, the upper end of the Bay Area market has fared relatively well in recent years while entry-level and mid-priced communities around the Bay have struggled far more to recover from the recessionary downturn.

I talked about this disparity in an interview with the San Jose Mercury for an article that was published on Sunday. As the Mercury noted, housing prices in many affluent cities in Silicon Valley and the Peninsula are nearing their pre-recession highs while other working-class communities have a long ways to go in their recovery.

One reason for this trend, as I pointed out to reporters, is that more-expensive markets never saw home prices drop as sharply as the areas with more subprime lending and subsequent foreclosures. Lower-priced communities had more marginal buyers, many of whom also made zero or small down payments. More of those buyers also took out resetting adjustable loans.

On the other side of the coin, residents and potential buyers in high-end communities generally haven’t been impacted by the overall economic downturn as much as homeowners in other areas. In Silicon Valley in particular, the strength of the tech industry and the growing number of successful start-ups and initial public offerings have created a tremendous number of affluent, well-capitalized buyers who are bidding up prices of a limited number of homes.

Because home prices in affluent communities never dropped as much as those in entry-level markets, these cities have less ground to make up in recovering from the downturn. Palo Alto’s median sale price, for example, is off about 12 percent from its peak in 2008 while the median in several low-to-middle income markets is still down nearly 50 percent, according to the news report.

Two of the largest Bay Area cities with a diverse mix of housing are recovering, albeit not quite as fast as Silicon Valley, according to the reports. San Francisco’s median sale price is about 22 percent below its 2007 peak while San Jose is 36 percent below its high-water mark. It’s important to note the sheer size of San Jose and San Francisco populations reflect diverse housing and incomes, compared to a small upscale community such as Palo Alto or Hillsborough. The same would hold true for Sausalito’s recovery versus County of Marin, for example. The smaller the community, the quicker median prices can move in either direction with just a few sales. In the East Bay, prices are rebounding faster in high-end communities like Orinda, Lafayette and San Ramon. Never before has the role of the local real estate professional been more important to help customers understand all the data available and sort through the appropriate comparable properties when home shopping or selling.

The market figures came from DataQuick, the La Jolla-based real estate information service. DataQuick compared quarterly median prices for single-family resale homes in 74 Bay Area cities since 2007 for stories that ran in the Mercury, Oakland Tribune and several other Bay Area news organizations.

If you’re interested in reading more, here is the San Jose Mercury story: Bay Area housing market reflects different rebounds. The Merc has created a link within the story to a table with many Bay Area communities listed, showing current, peak, and low points in median price.

Below is a market-by-market report from our local offices:

• North Bay – There is still plenty of buyer interest in Marin, according to our Greenbrae office. Buyers are all hoping to find that diamond in the rough. We are seeing a steady stream of new listings this summer, but the market can still use more inventory. Northern Marin agents report that there’s much interest in the $400,000-$600,000 range. June was the highest closing month this year, our local manager said, with sales in all price ranges. There are more multiple offers than in past months, especially on “move-in-ready” properties and those with updated kitchens and bathrooms. In Petaluma, many out of area buyers are visiting open houses. They’re coming from Marin County, the Peninsula, San Francisco and the South Bay. Many are seeing the value of the North Bay and what their dollars will buy. Our local manager says there are more all-cash buyers in the $600,000 -$900,000 range. That story is echoed by our Sebastopol office, which is seeing cash offers in all price range. There are some good values, including a three-bed, two-bath home on 10 acres under $700k and a coastal home with its own cove for less than $600k. Sales activity is also increasing in Santa Rosa. Finally, in Southern Marin, sales are flat for the first half of the year versus last year. The median sales price dropped between 7% and 12% in Tiburon, Mill Valley and Belvedere versus the same period a year ago. Sausalito was the exception, increasing 40% in both median price and units sold.
• San Francisco – The local market has been stable overall, according to our Lakeside office. There are lots of buyers with cash, but they are very selective. Two great homes in the San Francisco Country Club area received multiple offers, and several were all cash. One property in Parkside had 27 offers and sold for 20% over the list price. However, if a property is over-priced or under prepared it just sits and sits. Our Lombard manager says they’ve seen the usual summer holiday slowdown. The exception is that when somebody wants that one property, inevitably someone else does, too, and out come the multiples. One Pacific Heights three-unit fixer upper went 26% over its contracted price in bankruptcy court. Eleventh hour lending challenges are still prevalent. Meanwhile, our Sunset office says that open houses are very well attended. Pricing is still key to translate that interest into a sale. Almost half of the ratified offers were multiple offer situations. Activity overall is a little slow probably due to summer vacations.
• SF Peninsula — Our Burlingame office reported the typical early summer slowdown with school graduations and the start of vacation season. But activity has been increasing lately, and more listings are expected to come to market soon. Across the hills in Half Moon Bay, the local market has also seen a summer slowdown with many people on the coast visiting but few house shopping. Our Menlo Park manager says there’s strength in the market with many properties selling swiftly – from a $300,000 condo that attracted three offers to a $3.5 million house with two offers. The Palo Alto market slows when there is any kind of holiday – at least as far as listings coming on the market. But our local manager expects momentum to pick up soon. Sales are still steady with many resulting in multiple offers. The Portola Valley market has been pretty strong despite the 4th of July holiday. Meanwhile the Redwood City market has been quiet with the summer in full swing. One property in San Carlos did attract six offers. Listed in the low 900,000 it sold for close to $1,000,000.
• East Bay – In Berkeley, sales activity is on the rise. Our local office reported that the June board filled up dramatically and they’re looking forward to a hot July, both sales and listings. Our Fremont manager reports that with the middle of summer and people on vacation, the local market seems to be moving slowly. In Livermore, total pending sales in July to date are below the monthly average, which may have something to do with the extended 4th of July weekend. There have been 14 pending sales, all but two with list prices below $420,000. More than half of the new pending sales were distressed sales. Our Orinda manager reports that open homes are on the increase and have high attendance. A third of ratified sales are from multiple offers.
• Silicon Valley – In Cupertino, multiple offers abound. Half of the ratified sales are multiple-offer situations, our manager reports, adding that agents need more good listings. Los Altos buyers are focusing on single-family homes while condos are moving slower, our local manager reports. The Previews market is good up to $2.5 million, then slower after that. Meanwhile, inventory is down about 20% from the same time period last year in the Los Gatos market. There is a lot of activity in the $1.3-$1.8 million price range. Buyers are being selective, waiting for the perfect home, but there just isn’t much to choose from. Our San Jose offices report that they’re seeing the normal summer slowdown. Some of the listing prices are getting reduced, which seems to be enticing buyers. Open house traffic has slowed down a little as well. The same story is true in Saratoga, where the local market has quieted down recently.
• South County – The 4th of July weekend showed very little activity between traffic at open houses and ratified contracts, according to the Gilroy office. Our local manager says that hopefully, buyer distractions are now behind them, and serious buyers and increased traffic and purchases will prevail.
• Santa Cruz – Our Santa Cruz manager says that local real estate indicators are mixed. Prices are still declining, and to date, are down about 19% from last year. However, the number of closed sales is up about 8% and there currently is a 34% increase in properties in contract, which is a great sign. Inventory levels are down 15%, and it’s taking more time to sell a home on average. Open house activity has been very good in certain areas and the agents are meeting many out of town potential Buyers who are ready to move ahead with purchases. Twice last week buyers walked into an open house, met the agent, and within five days had made offers on other properties and are now in escrow.
• Monterey Peninsula – Carmel, Pebble Beach and the Monterey Peninsula market overall has been steady in recent weeks with 21 ratified offers, several of which attracted multiple bidders.

A final note on the Previews market – As noted earlier in this column, the high-end market continues to do relatively well. The latest example is Santa Cruz County, where inventory of million-dollar listings has declined dramatically – half of what it was a year ago. Agents are seeing cash buyers in the upper price ranges. One of our agents just closed a $2 million property and the same agent will be closing another property over $2 million home within a few days.

That’s it for now. Have a good week!

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
tel 415.437.4505
rturley@cbnorcal.com

Foreign Buyers Snapping up Bay Area Real Estate

Facebook investor and Russian billionaire Yuri Milner made worldwide headlines recently when he purchased a Los Altos Hills estate for a reported $100 million, the most expensive residential real estate deal in the U.S.  But while Milner’s purchase caught the attention of reporters here at home and the paparazzi around the world, he’s not the only foreign buyer to be placing bets on the Bay Area housing market.

Silicon Valley, Hillsborough, San Francisco and other parts of the Bay are attracting growing interest from offshore investors these days. We’re seeing it in our own offices on the Peninsula and in Silicon Valley. The foreign buyers are usually looking for upscale, single-family homes and often pay for multi-million-dollar purchases in cash. Unlike Milner, most of the foreign buyers aren’t seeing their deals reported in the news media – and that’s just fine with them as they truly value their privacy.

The offshore buyers are buying here for a number of reasons, according to recent studies and our own agents who have represent them: U.S. homes are generally less expensive than comparable foreign properties. Investors understand that U.S. real estate prices are unusually low right now, and in the long run could be a great investment. Additionally, the U.S. is looked upon as a more secure and stabile place to own property. Finally, some buyers are concerned with the financial markets and believe that investing in real estate over the long run will be a much wiser investment.

Our Burlingame North Office had a number of recent sales to Chinese buyers – all for several million dollars and all in cash. The investors used profits from antiques, commodities and other investments to funnel into the real estate market. One Peninsula listing received seven offers – four of which were all-cash offers from China buyers. A Chinese investor, with family and interpreter in tow, bought two houses in Pebble Beach, one on 17 Mile Drive, another above The Lodge, for $7 million and $10 million in March.

What’s driving the Chinese interest in U.S. real estate? One of the fundamental reasons, we’re told, is that you can’t buy fee-simple real estate in China like you can in the U.S. As a result, no matter whether you’re purchasing a single-family home or a condo, you cannot own the land underneath your home. The land is always leasehold property held by the Chinese government.

Silicon Valley and the Bay Area are considered highly attractive to foreign investors. Obviously, having the world’s leading technology hub in our backyard doesn’t hurt. Our tech industry is attracting top-flight engineers and other highly educated, well-paid professionals from around the world. The growing field of tech startups and tech IPOs are attracting some of the world’s wealthiest investors. Having two world-class universities in Stanford and Cal has also proven to be a strong magnate, as we’ve noted in past columns.  San Francisco and the Bay Area have always been popular destinations for people around the globe. And finally, real estate in the Bay Area has a long track record of being a good investment for patient buyers. These offshore buyers fully appreciate that.

A recent study by the National Association of Realtors found that international purchases in the U.S. surged by $16 billion last year, the highest gains in recent years. “The U.S. has always been a desirable place to own property and a profitable investment,” said NAR President Ron Phipps, “In recent years we have seen more and more foreign buyers coming here to take advantage of low prices and plentiful inventory.”

Recent international buyers came from 70 different countries, up from 53 countries the previous year. Canadians accounted for the largest percentage of international purchases with 23 percent, while Chinese buyers were second with nine percent. Tied for third were Mexico, the U.K., and India. Argentina and Brazil combined reported an increase in foreign sales with five percent, up from two percent in 2010.

Not surprisingly, California was among the top states in attracting foreign buyers. But Florida actually was number one with 31 percent of total foreign transactions.  California was second with 12 percent, Texas was third with nine percent, and Arizona fourth with six percent. Generally, the East Coast attracts European buyers. The West Coast remains popular for Asian purchasers. Mexican buyers are traditionally attracted to the Southwestern markets. And Florida is most popular among South Americans, Europeans and Canadians.

If you’re interested in learning more about the trend in international homebuyers, the NAR report is available here.

Below is a market-by-market report from our local offices:

• North Bay – In Southern Marin, there has been a slight slowdown, both in open house attendance and sales.  Many are attributing it to Father’s Day and graduations, and trying to be optimistic that we are not already in a seasonal summer slowdown. But on the plus side, there has been an increase in the number of high-end sales ($3 million and above) in the south part of the county. Our Greenbrae office says that inventory has declined but sales activity is steady. In Northern Mark, the lower end of the market continues to be the strongest, with either investors paying all cash or owner-occupiers utilizing FHA loans. We continue to see first-time buyers who are now looking further afield (Petaluma, Vallejo, etc.) for homes. Our Petaluma office reports that sales have been steady with double digit multiple offers in the under $300,000 range.  Activity is also starting to heat up in the $400,000 to $800,000 range. Both sales and inventory are on the rise in Santa Rosa. Although buyers and sellers seem to be spending a lot of time sitting on the fence, the local market is slowly getting more active. In Sebastopol, open houses are well attended and the market remains steady overall. Most agents are involved in multiple offers. Cash is king when it comes to winning out.
• San Francisco – Our Lombard office reports that sales activity has been steady with most deals resulting from multiple-offer situations and prices over asking. On the flip side, open houses and broker traffic have been slower, possibly a sign of the early summer slowdown. Our Market Street manager says the saying the “first offer is the best offer” is turning out to be quite true.   Coaching sellers to act fast and respond to interest when the property is first listed is paramount. It’s often the first party with an offer that has the best terms and price.  Sellers who wait often find themselves losing the first interested party in hopes of getting additional interest.  Our Sunset office says open houses are still well attended but buyers are a little bit more reserved when it is time to make an offer.  The summer slowdown is starting to show.  Pricing is still the key in all markets.
• SF Peninsula — Our Burlingame office said the local market has slowed recently, which generally corresponds with the end of school and summer vacations. Across the hills in Half Moon Bay, there has been good activity on the coast. The hottest segment is from $550k-$650k three-bed, two-bath and not a distressed property. Our Menlo Park office says the local market is still very strong with healthy sales volume. Lending is getting more onerous (conditions, etc.) but loans are out there. In Portola Valley, there have been a couple of bigger sales recently and still lots of strong buyers, but they’re being very cautious, our local manager reports. In Redwood City and San Carlos, activity seems to be picking up. Offers are taking longer to put together but with persistence they are coming together and closing. Selling still seems to be about location, condition and mostly price. If priced right, particularly in San Carlos, the properties go into contract quickly. In San Mateo, it’s a mixed market with single-family residences doing well but the condo market is still soft. It’s even more challenging because of banks looking at delinquent homeowners association dues and the ratio of owner-occupied units to renters.
• East Bay – In Castro Valley, the market has quieted with inventory declining but sales steady. The market in Livermore for detached homes remains strong with less than three months inventory.  Some 69% of the detached homes that are pending since June 1 were listed below $600,000.  Most of the pending sales in Livermore in the $200,000 to $400,000 price range are multiple offers. Open house activity was lighter over the weekend, according to our Oakland/Piedmont office. But potential buyers were indicated that they were ready to buy if they found the right house. There is not a sense of urgency with the buyers so they are looking until they find the “perfect” house while investors are still looking for the best prices. In the Lamorinda area, the market has been steady of late. New listings and sales remain strong. However, It is very area specific. Some listings sell the moment they hit the market while others seem to take much more time. Finally in Walnut Creek, it’s steady as she goes. Open house activity has been good.  Buyers seem to be out there looking, but many are hesitant to move ahead with purchases.
• Silicon Valley – The Cupertino market has been much slower than usual with lots of agents on vacation. The Previews high-end market has been flat as well. Both sales and inventory are on the rise in Los Altos. Buyers are attending open houses in good numbers.  Some are cautious while others are jumping in, especially in the single-family home market in Los Altos and Palo Alto. The Los Gatos market has been steady with inventory increasing, according to our local manager. Palo Alto remains a red-hot market with sales continuing to rise and inventory drop. Multiple offers in excess of 30% over list price are not uncommon in some areas due to the short supply and strong demand. Our San Jose Almaden manager says open house activity is starting to resume again.  There were 54 groups through one house over the weekend in Willow Glen and 28 through one in Almaden.  The Willow Glen office says sales are starting to pick up as compared to one to two weeks ago. The Saratoga market has been steady, tracking closely to what our local office sees this time of year. Our manager reports that they’re still seeing multiple offers for the under $2 million market in Saratoga and the Cupertino market.
• South County – The last two weeks has seen a decrease in ratified contracts and buyer traffic, according to our Gilroy office. Traditionally, this happens at this time of year due to the end of school, graduations and vacations. However, with recent negative media coverage it seems the slowdown is a bit deeper. Best quote of the week: “Real Estate is local and consumer confidence is national.” Our Morgan Hill manager said that the local market continues to take one step forward and two steps back.  March, April and May were very good sales month, but by the first of June sales activity slowed dramatically.   This slowdown sometimes is attributed to the “June Swoon”—graduations, vacations, and end of school.  In this case, however, he said national economic news, gas prices and the job market are also contributing factors.   The market continues to be attractive to cash investors who are buying and either renting or “flipping” discounted properties.   
• Santa Cruz – Closed sales overall in the county were down 18 percent in May from a year ago while the median sale price has declined to just under $450,000. The good news is that there are significantly more properties under contract than there were a year ago, up 47%, and less inventory available, down by 8%.   Nearly 60% of the properties closing are $500,000 or less with a high percentage of short sales and REO’s.  Pricing and the buyer’s perception that the home is a great value is the driving force. It’s critical for sellers to price appropriately at the beginning. In the Previews segment of the market, sales over $1 million in Santa Cruz County totaled 10 in May vs. seven a year ago. The overall percentage of homes over $1 million is up from 4% to 7% of the total sales, a good sign.   In the over $2 million mark, there are currently 52 homes on the market and two that sold in May.  The market time for these homes is half of what it was a year ago, which is a sign that the high-end buyers are recognizing the time is right for that once in a lifetime purchase of a second home. 
• Monterey Peninsula – Our local offices report that they’ve had a busy May, putting 82 properties into escrow including several all cash sales with quick closes of only 7-10 days.  By comparison, the first half of June feels a little less active.  However, the area is filled with visitors now. Open houses are good with lots of showings of properties going on, so we’re expecting to see more new sales in coming weeks.  The local inventory has gone down considerably since the beginning of the year, when we reached the highest point in January for the past two years. We are now at a new low of only about 21 months’ supply of inventory in our primary coastal market (not including Seaside or Marina).  Those communities are down to a four-month supply. With the selection of properties not as good, quick action and even multiple offers happen on desirable, priced-right properties coming onto market.

That’s it for now. Have a good week!

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
tel 415.437.4505
rturley@cbnorcal.com