Mixed Housing Market Data Gives Reason for Cautious Optimism

Real estate industry observers are busy trying to decipher a handful of key reports out last week that offer a mixed view about the housing market’s recovery nationwide and here in the San Francisco Bay Area.

DataQuick, the La Jolla-based research firm, reported that Bay Area home sales in April fell slightly below the year-ago level and remained well below average as “increased high-end activity couldn’t offset sales declines in the lower-cost areas and in the new-home market.” The shift toward more sales in higher-cost countries helped push the Bay Area’s median sale price up nearly 22 percent from last year, but the median fell from March.  (See county-by-county chart below)

Also out last week was the S&P/Case-Shiller Indices for the first quarter, which indicated some weakening in home prices nationwide. The National Home Price Index fell 3.2% in the first quarter of 2010, but remained above its year-earlier level. Analysts said housing prices have rebounded from crisis lows, “but recently have seen renewed weakness as tax incentives are ending and foreclosures are climbing.”

Interestingly, the region that showed the biggest increase in prices from first quarter 2009 to first quarter 2010 was the San Francisco metropolitan area, which saw a 16.2 percent year-over-year change from its recessionary lows.  S&P/Case-Shiller defines the San Francisco metro area as the counties of San Francisco, San Mateo, Marin, Alameda and Contra Costa.

So what to make of all this? A couple of things: First of all, these reports are a strong reminder that real estate – like politics – is a very local business. By all signs, the housing market recovery is slowly moving forward but the speed and degree of the rebound varies from region to region, from county to county and even from town to town.  

While the S&P/Case-Shiller indices show our local region’s prices up 16.2% from last year’s crisis levels, many of our cities have only seen modest median price increases of around 2 percent (including San Francisco itself). What’s really happening is that the mix of homes that are selling in our region is changing. A year ago, most sales seemed to be foreclosures and other distressed properties. Today, we’re seeing many more sales in the mid- and even upper-end of the market, which is driving up median prices for the region.

In our recent Coldwell Banker Residential Brokerage luxury reports, we have seen strong increases in home sales above the $1 million level and even (in the case of San Francisco) above the $2 million. Million-dollar sales in Silicon Valley in April, for example, were more than double last April’s level. At the same time, the median sale price climbed 7.3 percent over the same period a year ago. This trend away from entry level and distressed sales to higher-priced properties is a healthy sign that our market is steadily moving back towards normalcy.

While the improvement in the market so far this year give us reason for optimism, we must be mindful that we have our share of storm clouds overhead.  The federal home buyer tax credit has ended, and it’s uncertain what that will mean to the market. The financial markets, while greatly improved over last year, as still seeing a lot of volatility of late. And our unemployment rate remains stubbornly high.

Nonetheless, it’s important to remember that economic recoveries are rarely smooth. There will be potholes along the road, and lots of fits and starts. But given all the data in recent months – and what I’m hearing from agents and buyers out in the market – I’m cautiously optimistic that our local market is indeed on the road to recovery.

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

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

• North Bay — Greenbrae and Corte Madera are hot markets right now.  The under $1 million segment of the market is gaining momentum and the high end continues to attract new buyers. One Tiburon property had been reduced a couple hundred thousand a few months ago and finally got into contract on a contingent offer. When buyers couldn’t sell their home, one agent put the listing back on the market and had multiple offers going well over asking price. Over the past two weeks the Southern Marin office has seen offers come in on listings that have been on the market for several months. Buyers are coming in so low, sometimes the sellers are not even countering. On lower end properties we have had a few multiple offer situations, but the offers are not at full price. There has been a slight upswing in sales activity in all price points in the Northern Marin area. The majority of the new inventory coming on is non-distressed. Short sale approvals from various banks are moving a bit faster. Our Santa Rosa office reports that for weeks the market has been active below 350K and increasing activity above 1 million.  We are seeing an increase in activity up to 500K now, with 500K to $1 million quiet.
• San Francisco— The Lakeside office reports the local market is steady, but there’s a definite need for more inventory. Meanwhile, the Lombard area had a slow start to May, down in all activity from April, but a more balanced market.  More inventory is needed in this neighborhood as well.  The Market Street office reports good attendance at most of the properties being held open.  Per our weekly inventory reports, inventory for SFR and Condos, Lofts, TIC’s is increasing.  Some 70% of ratified offers are in a competitive situation.  It appears that a lot of the buyers are looking for the same property!
• SF Peninsula— The Peninsula market seems to be steady to flat right now. The Burlingame office reports that although things are a little slow in that community, this typically happens around Memorial Day. The good weather and some nice new inventory that is well priced and attractive should bring the buyers out over the weekend.  The Half Moon Bay market seems to be lagging behind the Mid-Peninsula in listings and sales. But as usual, well-priced, good condition homes will receive an offer within the first 10 days of marketing. Both of our Menlo Park offices report the local market as steady. But things are actually picking up in the $2 million and above market.  There are pockets of hot and cold areas in this price range. In Palo Alto, inventory remains low. What is listed between $1M – $2M have sold with multiple offers.  San Mateo reports a steady, healthy market. Things seem to be moving in a positive direction in San Carlos. Homes priced correctly and shown well are selling quickly. And in Woodside, inventory and sales are decreasing. But there definitely is some life in the market – especially on the listing side.  There are now 24 listings over $4 million in Portola Valley and Woodside.
• Silicon Valley– Inventory is increasing in Los Altos, but single-family homes are still selling with multiple offers if they are in the good school districts and priced below $1.5 million, the hottest price range.  Four and five-bedroom homes are getting the most offers. Condos are very slow. Los Gatos reports that inventory and sales are steady, with the Previews luxury market continuing to improve.  Open houses remain very busy in Cupertino, but the market has definitely slowed down. New transactions are not keeping pace with closings. Market seems to have settled down a bit, according to our San Jose-Main and Willow Glen offices. Open house traffic this past two weeks was down compared to previous weeks. Activity seems to have slowed and buyers seem to be on the fence again. Meanwhile, the Almaden area is seeing inventory and sales activity increasing, with many homes still selling with multiple offers. A similar story is told in Saratoga, where there are numerous multiple offers for homes under $1 million – and even some under $2 million.
• South County– Sales and inventory are decreasing, reports our Morgan Hill office as the market appears to be softening. There are fewer purchase contracts being written and accepted.  This phenomenon is most likely attributed to the lack of inventory and the fact that the federal tax credit is no longer in play. In addition there seems to be a question as to the viability of the state tax credit (will there be enough money to fund the program?) Short sales still dominate the market but REO listings are less prevalent than before. Prices, however, continue to increase as demand does outweigh supply.  Similarly, our Gilroy office reports the market has remained flat for the past month.  Buyers are looking, but there seems to be no sense of urgency.  Many buyers seem to be back to a “wait and see attitude” in regard to making offers.
• Santa Cruz – The Santa Cruz County market is relatively flat in terms of closed transactions.  Approximately 43% of the sales in April sold were under $500K, with a high percentage of those short sales. A beach property that sold 3 years ago for about $1.5 million, recently sold on the court house steps for $780K, cash, after the bank walked away from a $950k price tag and escrow. On the bright side, some extremely well priced homes (below the last comp in the area) are selling, some with multiple offers.  The median price continues to inch upward since the low 18 months ago. In April, there were 7 properties sold in the $800 – $900K price range, 3 sold from $900,000 – $1 million. And over $1.1 million, 6 sales in April and there have been 20 sales at this point YTD.
• Monterey Peninsula – The Monterey area mainly has short sales on the market now and they represent an increasing number of the local escrows.  While we are seeing a couple of the lenders get more efficient and organized in dealing with them, in general they still require many months for agents to get approvals on the sales. And we are seeing more instances where the lenders come back and ask for an increase in the purchase price; and, if substantial, the buyers declining and the property goes back on the market.
• East Bay – Berkeley agents are busy writing offers, and competing more in multiple offer situations.  There still is a need for more listings to meet market demand. Castro Valley has seen a flurry of sales.  The market is picking up speed as we hit the summer months.  There is no shortage of buyers in all price ranges. Entry level and mid range price properties are going fast, and even the big ticket homes are starting to move.  The market is steady in Danville and Fremont, with more activity in the moderate price ranges, the Danville office reports. In Fremont, listing inventory is increasing due to the approaching summer months. Traditional sellers (active detached listings) are starting to dominate the market in the Tri-Valley area again. Traditional sellers make up 61% of the detached active listings in Livermore, 75% of the detached active listings in Dublin, and 85% of the detached active listings in Pleasanton. The Oakland/Piedmont office is seeing average sales price continuing to improve as low-end foreclosures wane.  Sales and inventory remain steady in Orinda and Walnut Creek. 

A final note on our Previews Luxury market: Things continue to slowly improve in many areas, as evidenced by our Southern Marin office. In the $2 to $3 million range in Mill Valley, 32% of inventory is in contract and in Tiburon, Belvedere, and Sausalito, an average of 23% are in contract. Mill Valley has seen the most dramatic increase, with twice the number of properties selling over $2 million year to date versus same period a year ago.  And in San Mateo County, there are nearly twice the closed properties (14) in MLS over $5 million YTD as of last week ,than there were at this point last year.

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

So much for a Spring break in the housing market! Home sales and median sale prices in the Bay Area continue to rebound, with much of the improvement coming from the mid and even higher-price ranges, including our Previews luxury market.

MDA DataQuick, the La Jolla-based research firm, reported that March sales and prices hit a three-year high in the Bay Area region. The median price of $380,000 paid for a home was 31 percent higher than a year ago. Some 6,992 new and resale single-family houses and condominiums closed escrow in March, up 40.2 percent from February and up 10.5 percent from March 2009.

As I said in an interview with the Contra Costa Times, what is particularly encouraging about the latest report is that there were more sales of medium and high-end non-distressed properties and fewer foreclosures compared to a year ago. Foreclosure resales accounted for 31.7 percent of Bay Area existing home sales last month, down from 36.3 percent in February and 50.2 percent from a year ago.

We’re seeing improvement in higher-priced markets from Carmel through Silicon Valley and up to San Francisco and Marin. Cupertino reports that open houses are “insane” with 100-plus groups in some cases viewing properties and multiple offers surging despite an increase in inventory.  I’m hearing similar stories in Saratoga, throughout Marin, The City, and even markets like Livermore, where there have been eight million dollar sales through March compared to two last year.

I think buyers are becoming more confident about purchasing a home now as the economy continues to show positive signs of a recovery and the stock market moves higher. Additionally, buyers are jumping into the market to take advantage of tax credits as well as mortgage interest rates, which could rise in the months ahead.

It’s important to remember that any road to recovery has its share of obstacles and potholes. There are still challenges ahead to the housing market, including stubbornly high unemployment and the expectation that another wave of bank-owned properties could hit the market in many areas before too long. Still, I am encouraged by the DataQuick report and our own updates from the field that we’re moving in the right direction again.

Here’s the Contra Costa Times article: http://www.contracostatimes.com/business/ci_14890565

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

• SF Peninsula— In Burlingame, multiple offers are happening every day in the $600,000 to $1 million range, as entry level buyer are scrambling to meet first-time buyer deadlines.  When the price is attractive enough, open homes are drawing big crowds. We had one Millbrae home open in pouring rain with over 60 attendees. Consistent activity at all price ranges was reported in Redwood City. Open houses have been well attended there regardless of Easter and pouring down rain. The market in Menlo Park is mixed. Spring break combined with Easter weekend caused the market to slow slightly.  However, good new inventory is still flying off the shelf.  There were a few multiple offer sales the last couple of weeks. Buyers are out there, dipping their toes in the water. Sales and inventory are also steady in Half Moon Bay. In Palo Alto, the market has mirrored the spring school breaks – the last week or so has been relatively slow for sales and inventory. But our local offices expect the north side of Palo Alto to have more sales activity in the near future.  The south side is waiting for more inventory to hit the market.
• San Francisco— Sales and inventory have been steady to increasing in many parts of San Francisco. The Market Street office reports lots of counter offers going back and forth before ratifying a property.  Open house traffic varies widely depending on the property.  There are many first time homebuyers still looking and this is the price point that has the most activity. The Lombard office reports early April has been erratic: One good week, the next one slow.  Many deals have multiple counters.  Open house traffic has been quite high. But sales are still facing financing challenges. Similarly, the Noriega office states that financing and appraisals continue to be an issue on some transactions. The SF Van Ness office has seen steady activity in all price points the past two weeks, including a single family residence sale in the $350,000 range (yes, that’s City of San Francisco) as well as several closings in the $4M to $6.5M range.  At least one of the sales in the latter range had multiple offers.   Also, a well cared-for and staged, but dated 1950’s home near Lakeshore priced about $900,000 had 13 offers, with a few at the top competing well over list price.
• Silicon Valley– The Los Gatos market is picking up “dramatically.” Inventory is increasing in Cupertino with about a third of the listings that sell getting multiple offers. Open houses are “insane” with 100-plus groups in some cases viewing properties and multiple offers surging despite an increase in inventory.  In San Jose-Willow Glen, sales are steady but inventory is still low. This is resulting in multiple offers, but it is a disadvantage to buyers. Saratoga reports a strong uptick in Previews sales over $1 million.
• North Bay— Our Greenbrae office reports that activity in Central Marin is brisk. Inventory continues to come on the market and buyers are still finding some bargains.  The Previews market is holding strong with multi-million dollar properties in Ross, Kentfield, and Tiburon/Belvedere attracting a lot of excitement. A similar story is being told in Northern Marin where 39% of listings went pending in the month of March in Novato.  The majority of new inventory to hit the market is non-distressed. One home in Novato over $1.9 million went into contract. Things did slow down a bit with spring break in Southern Marin, but in general sales and inventory are up. The Petaluma market is starting to see a lot of activity in the $500 – $700K range. They are experiencing up to five offers on some homes and anticipate more inventory under $800,000 coming to market.  Santa Rosa continues to see action in the lower price points and increased action in the high end.  The middle of the market is still very quiet. Sales are on the rise in Sebastopol, but Easter week and heavy rain seemed to slow activity at open houses last week.
• East Bay – Activity is good in Danville, but closings are still often challenging – lots of delays because of short sales and appraisal issues.  The Windermere area of San Ramon is hot.  A year or two ago there was lots of inventory and little demand.  Now it is just the opposite.  A new listing there got six offers in less than a week. Home sales above $800,000 in Livermore have been four times the amount of closed sales compared to 2009 through March.  Our average closed sales price for the first three months in 2010 is almost 21% higher than the same period in 2009.  Multiple offers are very common in Livermore, as we only have a 1.9 month supply of detached homes on the market at the current sales pace. Inventory is steady and sales are on the rise in Orinda, with entry-level properties continuing to move quickly. Fremont reports more REO’s than short sales.  Even though right now the market shows a decrease in sales, compared to last month at this time it has increased.
• Santa Cruz – Market inventory has been recently increasing along with sales activity.  Well-priced properties are selling with multiple offers.  However, the market is still showing signs of correction in the higher end inventory with price reductions occurring throughout the area.
• Monterey Peninsula — Activity continues to be steady on the Monterey Peninsula and greatly improved over this time last year.  Even the higher priced areas, like Carmel, are doing well as buyers become more confident about purchasing right now and want to take advantage of interest rates before they go up more, as is expected. However, we are expecting more REOs to come on the market in Seaside and Marina.
• South County– Unlike some other Bay Area markets, the South County market remains steady to slow.  In Gilroy, homes are staying on the market longer when initially listed. Buyers seem to be cautious when making offers. Some properties are still receiving multiple offers, but at less than list price, most likely due to appraisal concerns. Morgan Hill agents attribute the slowdown to the lack of inventory, lamenting that there are very few homes to show and those that are priced right and look good garner multiple offers and often sell for over list price.  Though this is good for sellers, buyers are becoming frustrated and discouraged. On the bright side, prices are increasing as demand far out weighs supply.

A final note on the Previews Market: Activity and sales overall are on the rise. So far this year, Mill Valley has seen nine $2 million-plus properties close escrow, versus only three a year ago. There are currently 68 active and 18 pending Previews listings in Hillsborough. New listings in all price ranges are coming on the market and entry-level properties under $2 million are bringing in multiple offers.  We are hearing similar reports in other higher-priced markets throughout the Bay.

That’s it for now. Have a great week!

- Rick Turley
President of Coldwell Banker SF Bay Area

In the last two weeks, two reports were released giving a strong reminder that we really can’t rely on the national news stories to tell our local real estate story.  NAR’s report was released last week revealing existing-home sales declined slightly in February, noting specific emphasis on softer sales in the West.  Sales, according to the report, slipped 0.6 percent nationally, though they were seven percent higher than a year ago.

Within a few days, DataQuick’s local Bay Area figures were released.  The report noted that total Bay Area unit sales had slipped (less than 1%) in February, however the largest county drop was in Solano, (not one of our markets) and the largest gains in units were in Marin at 38% and San Francisco at 20%.  Another interesting note was that median price had risen drastically and for the fifth consecutive month locally.  This is something you simply couldn’t derive from a national trend story.

Here are some of DataQuick’s county highlights:

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

As you can see, Contra Costa County saw an 18% increase in its median home price year over year with Alameda coming in a close second at 15%.  Overall, the report shows Bay Area with a 20% year-over-year increase in median home prices, which is very interesting considering not one of the 9 Bay Area counties showed an individual gain higher 18% and most were considerably lower.  It’s no surprise of course that the markets that saw the biggest gains in price also saw some of the biggest losses over the last several years.  And it’s fairly obvious to see that counties with big gains in price are also generally down in units due to lack of inventory.

What is promising about DataQuick’s report is that it indicates the overall Bay Area is likely heading in the right direction.  Our markets are seeing some of the nation’s biggest gains and we seem to be making some great strides from month to month.  In most branch offices, multiple offers are becoming common again.  We have to temper this optimism with the fact that unemployment figures (though improved) are still staggering, and there are no guarantees we won’t see further downward dips in the economy as we continue a conservative recovery. 

I want to point out one interesting story of importance that was announced last week regarding the new California home buyer tax credit.  As we all know, the Federal first time-home buyer and existing homeowner tax credit is set to expire on April 30.  To further support our local economy’s recovery, Governor Schwarzenegger signed AB183, providing $200 million for home buyer tax credits. Most people agree that when real estate sales are brisk, more jobs are created, and ancillary businesses are positively affected.   The new California tax credit available to qualified buyers is equal to the lesser of five percent of the purchase price or $10,000, taken in equal installments over three consecutive years.   The funds for these state tax credits are limited, but some California first-time buyers, and some new home buyers who aren’t necessarily first-timers, will capitalize on some great opportunities, especially when you factor in current interest rates.

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

• East Bay – Berkeley reports more listings are beginning to arrive, still many multiple offers.  Castro Valley reports we are very busy.  We are seeing more listing activity although we are still low on inventory.  We are still seeing lots of short sales listings but we are getting a fair amount of traditional listings as well.  We continue to see multiples due to the inventory crunch, but less than before.  Danville reports our market is heating up.  Buyers and sellers are more realistic and seem more motivated.  One well-priced listing in Blackhawk had about 80 groups attend the open house:  It’s still about value!  Fremont reports increased sales activity which may be a reflection of the expiration of the tax credit and there is a sharp increase in the listings which may be reflective of the economy.  Livermore reports the number of active listings and total pending sales in Livermore has remained stable the past two weeks.  In Pleasanton the number of active listings and pending sales both increased by 8%.  In Dublin active listings increased 10% and total pending sales increased 6% over the past two weeks.  In our office, we are seeing more listings and sales above $700,000 than we have seen in a long time.   From Orinda:  Activity has increased on inventory right around the million dollar range, and multiple offers seem to be the norm on these homes. Oakland reports 60% of our listings are regular business.  The foreclosure listing numbers in our office have diminished to 10% of the total.  We are bringing on lots of listings.  Walnut Creek buyers are actively looking and cautiously making offers.  While we are seeing more multiple offers, they’re on properties that are listed below the market value.
• Monterey Bay Region – Real estate activity continues to be humming along here on the Monterey Peninsula, so that agents are very busy showing property, writing offers, negotiating and closing escrows!  Yes, the challenges continue, especially with the Short Sales; however, some lenders seem to be getting more organized in the handling of Short Sales so that we are seeing some done more quickly than in the past.  Inventory is getting tighter in the REO areas and we are even seeing increased sales in the upper price ranges.  
• North Bay – Greenbrae reports the spring selling season is in high gear with the $1 – 2 million market showing some signs of life. Greenbrae and Corte Madera continue to be hot markets in addition to San Rafael and Novato.  Southern Marin notes that Tiburon, which has had a few sales in the early part of the year is also coming back a bit as is Sausalito.  Increased activity is reported by Santa Rosa in the lower price points with many buyers and few properties.  The $400K to $750K feels like a dead zone with little activity.  Above $750K the market is coming alive just a bit.  Sebastopol reported open houses continue to be well attended.  Homes between $500-900K are starting to get more attention and sales.  Some very nice properties are available in this range.  Multiple units are also selling quickly.  We put a tri-plex and a four-plex in escrow within days of listing. Even a vacant five acres sold this week!
• Peninsula – Burlingame reported lots of buyers competing for too few quality properties.  Multiple offers are common in all price ranges.  We are seeing more listings coming on the market with the beginning of spring. Entry level buyers are out in force.  Half Moon Bay reported active open houses on the coast side the past couple of weeks – seeing ratified offers mainly from relocation buyers.  It is still all about the price point of the listing.  Menlo Park Santa Cruz Avenue reported several multiple offer presentations.  We got a few of the deals, but not all.  Inventory is still our biggest challenge.  New listings that are well priced are attracting a lot of buyer interest.  Menlo Park-El Camino says the upper end is getting some legs. They saw some real action on 4 properties, all above 10 million.  The Redwood City-San Carlos market in our area seems to be coming very active; of the 19 ratified offers, 10 were multiple ranging from 6 offers to 2 offers.  The price ranges were from $699,950 to $1,199,000. Open houses were very well attended.  Palo Alto says there is high buyer demand for properties under $3M, and with their low inventory, multiple offers can be expected.  San Mateo reported all areas are moving if the prices are correct.  Open houses are well attended.  Active inventory down 18%, pending up 54% and solds up 134%!
• San Francisco – The Lakeside office reported the market seems to be a little quiet this week.  Multiple offers are still prevalent, producing offers over asking price. Inventory is increasing, but at a snail’s pace.  The Market Street office reported there has been a bit of a slowdown that is attributable to clients (both buyers and sellers) being out of town during this spring break period.  Open house activity was all over the board with attendance.  One Agent noted that while properties in the $1.1M to $1.5M range in Noe Valley were selling briskly a couple of weeks ago, that price range appears to have slowed.  The Noriega office reported we are just outright busy.  Business is good, but not easy.  Appraisals continued to be a problem.  Van Ness notes that over 1/3 of their sales were in multiple offers the past two weeks, with activity in all price points.
• Santa Cruz County – Inventory levels remain low.  We are expecting to see more homes coming on the market April/May.  Open house activity has been good.  Buyers continue to be finicky with many writing multiple offers on properties before settling on one. The home shopping process for some buyers is definitely putting the Agents through the paces – and there is stiff competition on the under $600k price point, with multiple offers. The demand exceeds the supply although many buyers are looking for the perfect house and taking their time.  Short sales continue to be a large part of the market and we are receiving a few new REO listings – and that segment has really slowed.
• Silicon Valley – Los Altos reports the market is improving and buyer confidences seems stronger. In the high end, things are picking up between $2M and $3M, plus a sale over $4M, and 2 over $5M.  Los Gatos reports the high end is showing signs of life.  Not sure of the duration, but definitely a spike in activity.  San Jose Almaden reports Almaden has dropped to the second slowest selling market in our region.  Only behind Los Gatos with 33% of its inventory pending.  Blossom Valley remains at 68% pending and Cambrian is above 50% pending. Reason for the slowdown in Almaden is an increase of inventory as the market was hot for the first three months of the year with motivated sellers.  New sellers coming to the market are attempting to raise prices and buyers are not willing.  Those still priced at or near the last comparables sell quickly.  San Jose Main reports activity is brisk and open houses seem to generate leads.  Most homes below the $700k price are still receiving multiple offers.  San Jose Willow Glen reports the market is extremely busy with a large increase of listings in which some of them are selling within two weeks after going on the market. Buyers are still in competition with each other.
• South County – Gilroy reports the market has not experienced its traditional increase in sales activity as normal.  Much has to do with the large number of short sale listings and the decrease in bank owned properties compared to the previous two years.  Agents are experiencing appraisal issues on most properties that enter into escrow.   Morgan Hill reports the Spring of 2010 brings renewed optimism and hope for the local housing market.   In the South Bay, as in most areas, there continues to be a shortage of listings.  Homes that are well priced garner multiple offers with only one victorious buyer.

So it would seem the last two weeks have shown brisk sales activity in all price points.  We’ll see how the end of spring break and this holiday weekend prepares us for April home sales.  It certainly seems we would benefit from additional well-priced listings coming to market.

- Rick Turley

My how things have changed in just one year! A year ago at this time, many homes were languishing on the market as buyers stayed on the sidelines, worrying about their jobs, the sharp decline in their 401k accounts, and whether housing prices would ever rise again. Today, many of those buyers have swallowed their fears and are out in force once again, spurred by an improving economy, a solid recovery in the financial markets, and federal home buyer tax credits that will expire this spring.

While no one claims the housing market is out of the woods yet, an unusual dynamic is occurring in many communities around the Bay Area:  Despite the choppy housing market, there is an army of confident, well-qualified buyers out searching for homes, but many sellers are now sitting on the sidelines! One listing in San Francisco’s Outer Mission neighborhood priced in the mid-$500,000 drew more than 100 groups during a two hour open house during the past holiday weekend.

Inventory shortages continue to be the challenge in many areas.  In Santa Clara County and the East Bay, for example, the number of homes for sale is standing at half of what it was a year ago! This has resulted in as many as half of the listings on the market attracting multiple offers as buyers fight it out for the best properties.

This conundrum has resulted in prices rising even as sales are falling.  DataQuick, the La Jolla-based research firm, reported that the median sale price of homes and condos in the Bay Area shot up almost 17 percent year over year in January while sales dipped 4 percent. The biggest jump in the median price was 18.3 percent in San Mateo, but all counties (except Napa) saw strong increases.  (see chart below) The upper end of the market is particularly sensitive to this trend, as illustrated by Santa Clara County, which saw sales of million-dollar homes half of what they were a year ago even as prices rose 4 percent, according to Coldwell Banker Residential Brokerage’s luxury market report.

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

Inventory levels are slowly rising in some communities, and the balance between buyers and sellers could shift in the weeks and months ahead. But right now it’s a good time to be a seller if you price your home for today’s market.

Here’s a market-by-market breakdown from our local offices:

North Bay – With a shortage of inventory, multiple offers are still the norm in Petaluma. Most agents are working with 4-6 qualified buyers ready to go. A lot of offers are written with fierce competition, and lots of activity in the $500,000 price range. Northern Marin reports lots of multiple offers on short sales, while the Santa Rosa market is seeing a growing number of sales. While there is almost no inventory now, there is a small flurry of new listings coming on the market. Lack of inventory continues to be a problem in Sebastopol with listings under $500,000 instantly getting multiple offers. In Southern Marin, sales have increased greatly so far this year versus same period a year ago with Tiburon and Belvedere experiencing almost three times the number of sales.

 East Bay—Inventory still low but slowly building in many cities. Berkeley reports the market is still slow and prices are far below several years ago. A local appraiser told Realtors that the $2 million plus market is so slow that appraisers are going back much further than three or six months to find comps. In Castro Valley listings abound.  There are homes for sale in all neighborhoods, which is resulting in fewer multiple offers. The Danville market still needs listings to sell and to hold open.  Homes in some price ranges are selling so fast that Realtors are not getting much open house time to meet new buyers! Livermore reports the upper end of the market improved greatly in January with three pending sales above a million. Overall, there’s a healthy market in the Tri-Valley area of Livermore, Pleasanton, and Dublin.  All three cities have experienced an increase in listings and pending sales in 2010 with multiple offers common. In Pleasanton, inventory shortages continue, with multiple offers on homes under $500,000 common.  Buyers are eager to get into a home due to tax credit.Oakland-Piedmont: Lots of action this month keeping agents busy.  Both Orinda and Walnut Creek are seeing listings and activity on the rise.

Monterey County— The market is steady on the Monterey Peninsula, where locals and visitors alike enjoyed a great three-day President’s Day weekend and the AT&T Pro Am golf tournament.  Realtors were busy with inquiries and showing properties, though mostly sales from events like this come later.  Nevertheless, the Peninsula did see a number of sales, including a multi-million dollar property.  Inventory is plentiful in the higher-priced areas of Carmel and Pebble Beach, but scarce in the lower-priced areas of Seaside and Marina, where we are waiting for another wave of REOs to hit the market.

Peninsula— Burlingame reports less inventory than last year and more buyer interest, including those paying all cash. Market seems to change day by day, but overall there are more sales and more multiple offers. In Half Moon Bay, agents say sales are slow although the number of listings are picking up.  It’s taking much more time and paperwork just in getting offers accepted, with many counters. Things are holding steady in Menlo Park, with the market showing signs of coming out of the winter hibernation. Inventory is slowly increasing in Palo Alto including higher end properties, in the $2 million to $4 million and some above $5 million.  Buyers and sellers are more optimistic that things are turning around. San Mateo is seeing strong activity in the post-Super Bowl market while Woodside and Portola Valley markets are quiet. There are buyers looking for homes, but the number of homes for sale is just too low.

San Francisco— Lakeside reports most of the activity is for properties under $1.2 million. A lot of energy is in the first time home buyer market as we approach the deadline for the federal tax credit. Inventory is still low for the Lombard office. Buyers are often surprised that they’re in multiple offer situations in this market. The Market Street office reports that agents are seeing a lot of well qualified buyers coming to their listings, many with a lot of cash. Multiple offers are still the order of the day, especially in the first time homebuyer’s price points. Properties that are in desirable locations are going into contract after the first open house. The Noriegaoffice has seen a lot more activity in the last two weeks.  There seems to be a renewed sense of urgency for buyers as the tax credit deadline gets closer.  One listing in the Outer Mission priced in the mid-$500,000 drew more than 100 groups during a two hour open house during the past holiday weekend. The Van Ness office is noticing lighter inventory of available homes, and had a handful of sales ratified over $2 million.

Santa Cruz County: There are many multiple offers on homes under $700,000 and REO properties and short sales. REOs and short sales continue to have a very strong influence in sales, pricing, and overall market activity.  There seems to be a lot of anxious buyers waiting on the sidelines for the right property to appear.  Buyers seem to acknowledge with some positive economic news that it is an optimum time to purchase – maybe the most optimal time ever.  Inventory still continues to be an issue, although as we move toward spring and warmer weather we are seeing more homes coming on the market.

Silicon Valley: Cupertino continues to see a severe shortage of homes for sale, with lots of multiple offers as buyers compete for good listings. In Los Altos, open house attendance is picking up as is overall activity, but the higher end market – above $2 million – is still slow. Similarly, things are slowly improving in the Los Gatos market with inventory and sales increasing. In San Jose’s Almaden and Willow Glen neighborhoods, inventory is gradually increasing although still far too low for buyer interest. Inventory in San Jose is half of what it was a year ago in all local markets, but sales are up between 30 and 70% depending on neighborhood.  The Saratoga market started very slowly the first few weeks of January, but Realtors have seen a definite increase in activity.

South County: In the South County it has become the “Tale of Two Cities.”  As potential buyers show interest in this area, they can select from either Morgan Hill or Gilroy.  In both cities, inventory is down, but Gilroy listings tend to be short sales or REO properties.  Morgan Hill has far less inventory, but non-short and REO sales are now the norm.   Agents are challenged when showing properties and well priced properties receive multiple offers.

In a quick update on our Previews properties – There continues to be gradual improvement in the luxury end of the market in many areas. For example, in the last couple of weeks the Santa Cruz area offices report multiple offers on listings for $2.4 million, $2.1 million, and $1.2 million.  A $7 million dollar property that literally sits on the ocean is now $4.9 million and getting lots of activity and could sell shortly.

Overall, a few dips of the Dow under 10,000 don’t seem to stick,  and the result is an improvement in consumer confidence.

- Rick Turley

Will Saint’s Victory Be Heavenly for the (Housing) Market?

Congratulations to the New Orleans Saints on an exciting Super Bowl victory yesterday! Now, the question is whether the Saints first championship will translate into a heavenly year for the stock market and – by extension – the housing market.

Popular wisdom maintains that the outcome of the big game can determine the stock market’s direction in the coming year. If the winning team is from the old NFL (now NFC), the theory goes, it forecasts a good year for the market vs. an AFC victory. So here’s to the former “Aints” and to a super year in 2010.

- Rick Turley

Football lore aside, we are seeing the market starting to pick up in much of the Bay Area as we head into the post-Super Bowl season for home buying. In general, 2010 is starting off considerably better than 2009 in terms of sales and overall activity. Open houses are seeing non-stop activity in many communities, an early indicator of future sales. There continues to be a shortage of properties in prime communities, but our offices are seeing a steady increase of listings as buyers realize that there are opportunities for them in this market.

The lack of inventory continues to make well-maintained, reasonably priced homes stand out. One property in southern Marin County listed at $1.35 million, for example, received 11 offers. While that was the exception to the rule, we are seeing multiple offers in many communities. Buyers are circling attractive listings and many are willing to make all-cash offers to win out.

I think we’ll see a much earlier spring selling buying season this year due to the upcoming deadline for the home buyer tax credit. The season typically takes off in March and runs through May. But buyers who want to claim this year’s tax credit, which ranges from $6,500 to $8,000, must purchase their home by April 30 and close by June 30. So look for more activity than normal in February and March as we head toward the finish line.

Here’s a market-by-market breakdown from our local offices: 

• East Bay—Berkley reports price reductions in the over 1.5 million range and even at the million plus range.   Castro Valley stated many new listings are coming on the market.  A welcome surprise.  However, cash is still king.  We recently sold a 600K plus house, all cash.  Danville reported that the high end is still slower than the rest of the market but activity is picking up.  Inventory is still an issue in the less than million market.  Many homes are being sold with multiple offers, which is helping to firm up sales prices.  Fremont supports the dynamic indicating extraordinary low inventories with a steady buyer pool actively pursuing properties.  Walnut Creek also reported the lower priced market is extremely active.  An REO listing in Antioch had 9 offers at 9:00 one morning when one of the agents called to check for a client.  When she checked back at 12:00 noon, there were 49 OFFERS.
• Monterey County— The Monterey Peninsula market is quite active for January, in terms of sales, open homes and even listings, which are on the rise.  The Peninsula offices report continued low inventory levels in lower-priced REO areas, but they are seeing more activity in higher priced properties. In fact, they closed on two properties over $4.5 million last week.
• North Bay— Low inventory is still a common issue in many areas of the North Bay. The result has been tremendous activity in many of the open homes that are out there. Novato reported one open house had 70 people, another 50.  Encouraging news in Southern Marin is that four new listings over $1 million last week received multiple offers, including one at $1.35 million that received 11 offers.  Greenbrae reports steady traffic at open houses but inventory still lagging behind consumer demand. Smart sellers are starting to realize now is a good time to have their home on the market. There were 13 multiple offers in Santa Rosa as open escrows are running high.
• Peninsula—Activity remains steady or even increasing on the Peninsula, but low inventory continues to be a hurdle in many areas. Inventory is close to half of what is was last year, Burlingame reports. Buyers are snapping up well-priced homes when they appear, many with all-cash offers.  Half Moon Bay reports seeing a dramatic increase in open house traffic with buyer’s looking for the best deal and the lowest price.  They report that sellers are starting to be more realistic on their list price – starting at market value rather than reducing each month. The Menlo Park offices also report that the local market is inventory challenged. Palo Alto and Redwood City are seeing sales activity slowly picking up as well. In San Mateo, anything under $1 million is selling very quickly, while the high-end Woodside market is very slow right now.
• San Francisco— Sales activity has been steady in much of The City, with buyers ready to move when they find the right property. The Lombard office reports good listings are going fast, and multiple offers are definitely back. In some cases, offers are coming in without financing contingencies despite the challenging mortgage market. Market Street reported 11 offers were received on an extreme fixer upper and seven offers were received on an entry level home. Agents are very busy writing offers, they stated. The Noriega offices reports deals are extremely difficult to get ratified in this market, while the Van Ness are is seeing a pick up in both listings and sales.
• Santa Cruz County:  Market activity continues to be picking up in Santa Cruz as we move toward warmer weather.  Lots and lots of buyers out there circling, ready to make offers. Open houses for the most part have been well attended, weather permitting.  The inventory continues to drive the multiple offer situation especially under $700K – driving prices in some areas up.  Appraisals continue to be an issue, and lending is taking longer. Some better economic news has prompted more people out along with the continued low interest rates.
• Silicon Valley:  Cupertino reports that 2010 is starting out much better than 2009, with non-stop activity in open houses and nearly all sales triggering multiple offers. In Los Altos, the market is waking up from the winter hibernation with new listings coming on the market and buyer traffic is increasing at open houses. But it’s still slow for sales above $2 million. Similarly, Los Gatos and the San Jose Almaden area are seeing an increase in both listings and sales.  Saratoga and San Jose Main are seeing a slow but sure increase in sales activity.
• South County:  Morgan Hill reports the buzz among agents continues to be the lack of inventory, sending many agents “back to basics” by talking to homeowners to explain why this could be a very advantageous time to list their home for sale. The old Real Estate adage, “List to Last,” rings true.

In a quick overview of our Previews properties – I’ve noticed an uptick in our luxury sales in areas that have been somewhat slower to see activity. For example- all within the past two weeks, in Burlingame we closed a $4.2M property – Carmel offices have closed three transactions at $4.7M, $4.5M, and $3.9M.  Woodside closed a $5.8M sale, and our Menlo Park Santa Cruz office closed a transaction in Atherton over $11M.   This certainly reinforces what we all know to be true – luxury buyers are out there, and they are purchasing properties when they find what they like, at what they perceive to be fair market value.

Happy Holidays and a Look Ahead

Welcome to our final edition of Weekly Market Watch for the year. What a ride 2009 has been. It will be interesting to look back at this edition of Weekly Market Watch a year from now to see how things have changed. Will we be out of the woods then? Will these tough economic times be a thing of the past? I believe 2010 will provide many opportunities for buyers and sellers of Bay Area real estate, and as Realtors, we can be assured of being very busy if we remain focused.

I know most of us are out finishing our holiday shopping and getting into full holiday swing so I’ll keep my last Weekly Market Watch of the year short and sweet. I came across a really good article in BusinessWeek this week and it had some very interesting images and graphics that I think help effectively tell the story of today’s market.

Following are excerpts from the BusinessWeek article entitled “A Housing Recovery Could Solidify.”

“Residential real estate prices have increased by about 5%, adjusted for inflation, since the end of the first quarter. As the inventory of existing homes for sale shrinks, a housing recovery could solidify. Sales have increased sharply in some of the hardest-hit states.

In Most of America, Home Prices Creep Up – A Lost Decade

Although home prices have been rising since March, after adjusting for inflation they are only at levels first reached in 2001.

Fewer New-Home Sales

Existing homes now make up about 93% of all sales, vs. a long-term historical average of about 85%.

Signs of Life in the Sunbelt—and Elsewhere

Four states—Nevada, Arizona, Florida, and California—have seen double-digit increases in sales volumes for existing homes since the end of 2008.”

So what does this mean and more importantly, the question of the day from so many of you is, what’s next? Well here’s what I think. While we probably are not out of the woods yet, housing is showing signs of stability, markets are showing signs of rational behavior and everyone is starting to understand the fundamental problems that brought us here. I think the combination of those have us on the right path. Are we going to suddenly see double digit appreciation in 2010? Probably not. But I think we are on a good, sustainable path that should give us some modest growth in the coming year, largely in the most sought after affordable and mid-level markets. In terms of the luxury market, I think only time will tell. It was the last to feel the downturn and in all likelihood it will be the last to recover. Knowing this, it is important to point out that there are always pockets that are the exception. Real estate is local and there are always going to be those sought after neighborhoods, those one-of-a-kind properties that just demand something different. With that said, I am pleased to say that just within the past three weeks, our local CB offices have closed an impressive number of transactions in the high end – over 15 properties closed in the $3M -$6M range, from Mill Valley in the north to San Jose in the south – plus two properties, each over $12M in Woodside and Atherton. Our inventory for desirable high end properties is surprisingly low, and it’s hard to predict what the New Year will bring. What I can assure you is that over the next year I’ll be watching the market closely and will keep you abreast of changes as they happen.

And with that said, let’s take a look at this week in real estate:

• East Bay–Berkeley reports buyers are out there and open homes are well attended. A good percentage of buyers want to buy before the end of the year and many are all cash at all price points. Castro Valley reports there are lots and lots of cash buyers. At least one in three of all offers we are receiving are cash buyers, which is amazing, since we are talking about offers in the middle price ranges in addition to the entry level markets. We have definitely slowed down as Christmas approaches, yet listings are still trickling in and we continue to show properties even as we approach the holidays. Danville reports we are definitely in the holiday slow down, although we had 2 sales in the million dollar range this week. Livermore reports an interesting trend: Since January 1. 2009 through November 2009 the inventory of active detached homes in Livermore has decreased by 52% while the average sale price has remained stable. In looking at November 2008 to November 2009, the average sales price is up almost 4% in Livermore. In Livermore, we are still seeing a lot of multiple offers due to the lack of inventory and an abundance of buyers. Bottom line, we need more listings! Orinda reports that inventory is down due to the holidays. Buyers are still out there and prices on remaining inventory remain stable.
• Monterey County–Market seems to continue to be active– more so than usual for the end of the year. Amazing number of offers still being written, at amazingly low prices that we thought we’d never see again. Last week we closed on a property at $100,000 and also five properties between 1.2 and 2.1 million.
• North Bay–Greenbrae reports lots of activity this month in the $1.5-$2.5 million range. Agents who are looking ahead to 2010 are working with serious buyers and serious sellers. While deals may not be pretty next year we are expecting a increase in number of sales. Northern Marin reports we are still experiencing multiple offers in the entry level price range of 250,000 to 450,000. We had five offers on a million dollar home as well. Inventory is lower than usual for December. Banks continue to slow down transactions with unusual conditions to fund loans. Sebastopol reports the market is very quiet! Agents are writing lots of offers on limited inventory. Cash remains king and we are seeing more multiple cash offers. Santa Rosa reports open house attendance is now very low, but those who show up are serious. Open escrows are up just a bit as last minute shoppers close out the year.
• Peninsula–Half Moon Bay reports we have experienced a real slow down this December in sales activity, listing activity and open house attendance. Menlo Park El Camino reports we had eight offers on a listing that was $899 in Menlo Park Open houses were not bad and Agents seemed to think that the buyers’ general state of mind regarding buying was positive. Little of the old comments ‘Prices are going to go down more’ and more of “We think Q1 is the right time to buy.” The only stall will be fear generated by more and more political discussion of the massive US debt. Palo Alto Downtown reports as anticipated, the holiday season has started – meaning inventory is low. Although a bit surprising, we have had a percentage of properties that have sold from $2M and up. So those buyers are still out there. Certainly the entry level market, if you have inventory, is very, very strong – anything below $1.4M/$1.5M in Palo Alto is extremely strong.
• San Francisco–Lombard reports a very slow start to December, but no consistency in traffic. We had two people through one house, 80 through another; a solo-offer deal well under asking to 13 offers on an entry fixer, well over. Some Agents working hard through the holidays, others withdrawing listings until 2nd week of January. Market Street reports that we are not seeing many multiple offers being received these last couple of weeks. Activity has slowed down at open houses and broker’s tour. We still have several buyers with cash that are looking for a home to call their own by year’s end but inventory has slowed down with the coming holiday season. Noriega reports the market is very slow, but still a lot of activities on the entry level. One REO listing in Daly City had over 120 people in a two hour span during open house. Same property received multiple offers, with several over asking, all cash. Van Ness reports that it closed 18 deals from 12/9-12/15.
• Santa Cruz County–Typical seasonal slow down with the holidays right around the corner. Agent activity including open house activity is minimal at this point in the year with many leaving town for the holidays. Inventory is down about 30% from last year at this time. REOs in south county (Watsonville) are continuing to draw multiple offers with many cash buyers – it is driving prices up slightly. Prices are about the same as they were a year ago overall, except in the high end where it seems to continue to drop.
• Silicon Valley–Cupertino reports it is remarkably busy for this time of year! Los Altos reports the market is still active. Buyers are coming to open houses and looking for the right opportunity. Multiple offers of 13 on one $500K fixer, and five offers on a modest $1.2M property with “potential.” San Jose Almaden reports a seasonal slow down but more than ever agents are working through the holidays. San Jose Willow Glen reports it has slowed down quite a bit due to the holiday season. Saratoga reports there seems to be a sudden increase in listing activity. I think that many agents are listing properties to prepare them to onto the market in early 2010. Although the previews market is slow a number of my agents are working on sizable transactions and I’m hopeful this area will open a bit in 2010.

I’d like to take this opportunity to wish all of you the very best of the Holiday season. I also want to add my thanks and congratulations to all who made our Food Bank drive for local Food Banks a huge success. Final numbers will be complete early next week, but I know that we beat our goal of $10,000 – so with the Coldwell Banker match, we will be giving more than $20,000 to your local Food Banks. Thanks again – you have shown that you are not only great professionals, but caring and compassionate as well.

- Rick Turley

It’s On The Table!

There’s no question that the government’s first-time homebuyer tax credit has spurred a significant amount of sales this year.  Latest estimates show that some 400,000 additional sales occurred this year due to the first time home buyer tax credit, which is about 8% of all sales this year.

In the latest news, The Senate has reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers.  While its passage remains uncertain, this plan would extend the existing credit for first-time homebuyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners.  The reduced credit would be available to  homeowners who have been in their current residence for a consecutive five-year period in the past eight years.  Lawmakers in Washington also raised the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000.  Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, said the sources. The measure still faces votes in the full Senate and the House.

The U.S. Senate won’t vote until next week at the earliest.  As soon as they do we intend to create a piece that will allow you to communicate the news to your clients.

 This week, Business Week reported “The broad improvement in the housing indicators in recent months leaves no doubt that the long-awaited housing recovery is finally under way.”  The article went on to report:  “Policy alone cannot explain the 24% gain in existing home sales since January, nor the 22% increase in new-home purchases, the 40% rise in single-family housing starts, and the recent upturn in home prices. The primary driver is historically high affordability. Fixed 30-year mortgage rates are at 5%, a multi-decade low, and prices have plunged a total of 30% since May 2006, based on the Standard & Poor’s Case-Shiller Home Price Index. By that price gauge, homes are well undervalued relative to both rents and aftertax income.”

Take a look at this graph which indicates the recent decline of inventory, of both new and existing homes in the US.   When inventory levels drop and demand is on the rise, what typically follows is rising  home prices.

Now let’s take a local look at this past week in Bay Area Real Estate:

• East Bay—Castro Valley reported the market is starting to slow with less multiple offers to compete with.  One Agent was thrilled that her recent offer was one in only five.  Yet there are so many pendings, one Agent was recently lamenting that by the time a listing hits the MLS, it goes pending.  That is partially true, especially in the low income markets.  What a great time to be a seller!  One of our recent listings, a short sale, was on the market less than a week, taking 14 offers.  So, we are encouraging our Sellers that now is the time.  Danville reported inventory continues its descent.  We have very little inventory in San Ramon or Dublin – only about 1 month supply.  Fremont reports there appears to be an increase in activity as buyers try to purchase before the first time home buyers tax credit expires.  Livermore reports for the past week in the Tri-Valley market active listings are up; in Pleasanton they were down; and in Dublin they remain stable. Pending sales in Livermore and Pleasanton were up this week and remain stable in Dublin.  Oakland reports sales are in all price ranges, the upper end is moving better. The hottest properties are in the $500K to $700K range and go in multiple offers if priced right.  Sales have been very consistent, but take longer to close because there are so many short sales.  Walnut Creek reports a few more REO listings have hit the market, more short sales approved by lenders.  Inventory is extremely low.  The lack of inventory is having an impact on sales.
• Monterey County—The market continues on in its slower but steady pace, with many more sales in lower price ranges, but at least a smattering of higher priced properties in Carmel, Pebble Beach or down the coast.
• North Bay—Greenbrae reported a tear down property in Kentfield for about $650,000 received 11 offers and went well over asking price.  Most offers were all cash.  Still plenty of bigger activity in Marin with Agents reporting steady traffic at open houses.  Southern Marin reported buyers are more cautious, few attending open houses, fewer homes being open. Santa Rosa reported Agents are managing their client’s expectations and finding a way to win the multiple offer. Sometimes it’s how the offer is packaged that wins the day. Could use some inventory!  Sebastopol reported almost every offer under $500k is a multiple offer mostly in the double digits. If every offer we wrote was accepted our openings would be double digits too! There has been a noticeable slowdown of new listings across the board.
• Peninsula—Half Moon Bay reported it is sensing a slow down with less inventory. MLS tour sheet reflects all the retours, many with price reductions and few new listings.  Menlo Park El Camino reported a bit of a sea change in the market-not much new inventory, only three new listings on tour this week which is very, very low.  Menlo Park Santa Cruz Avenue reported very slow open house activity this last week.  Many listings are receiving price reductions as new inventory is limited.  Pricing is critical.  52% of the listings on the Menlo Park Atherton Broker tour have price reductions and 82% are retours.  Palo Alto Downtown reported the market is generally slow.  We feel like the holiday season has started early.  The activity is reflective of that.  Sales are down in our area.  San Mateo reported a look at its pending sales (SFR) of its six main communities; here is a breakdown of the total and the percentage of short sales plus REOs.  Belmont 31 pending sales (35% SS/REO), Burlingame 27 pending sales (33% SS/REO), Foster city 12 pending sales (18% SS/REO), Hillsborough 22 pending sales (23% SS/REO), Redwood shores 10 pending sales (10% SS/REO), San Mateo 109 pending sales (52% SS/REO).  Most of San Mateo SS/REO is in entry level areas.
• San Francisco—The Lakeside office reported sales are slowing down. The whole process of buying real estate has been delayed from beginning to end.  Lombard reports a good week for ratified contracts, including some more stale listings that finally got reduced appropriately. Most multiple offers were again in and around the entry level price. A couple of commercial deals having to close all cash, as commercial paper a huge challenge.  Market Street reports Agents are working harder to keep the deals in contract. We’ve had delays closing lately due to appraisal problems. Open house attendance this weekend was good throughout the city even though Tuesday Broker’s tour was quiet.  Van Ness reports we did close 20 deals this week ranging from $549K to $4.5 million (10 being over 1 million).  The market remains strong in our areas.
• Santa Cruz County—October looks to be a fairly active sales month for the three offices.  However, there is a real lack of inventory and those sellers who do not have to sell in this market are not.  Escrow times are longer due to completing the financing aspect of the transaction and we are holding our breath on many deals until the end of the transaction.  All in all – there is activity, and still a guarded optimism about the market – with buyers looking for the extension of the tax credit. 
• Silicon Valley—Cupertino reports well priced and well presented properties get lots of attention. We had 11 offers on a Sunnyvale townhouse that went way over what it will appraise for. The buyer is aware and will make up the differential in cash.  Los Altos reports the market seems to have slowed a bit as we head toward the end of the month and into the winter weather.  Almaden reported inventory continues to shrink and put pressure on what little remains.  Almaden, Cambrian and Blossom Valley homes are all receiving multiple offers.  San Jose Main reports excellent activity in lower price range of $250k-550k. Active weekend for open houses in all price ranges. Multiple offers common with properties of $700k and less.  Saratoga reported the market seems to be about the same for us. The bank owned and short sales seem to dominate the market. Homes in Saratoga under $2,000,000 are selling easily, but the upper end is slow.
• South County—Hollister reports it is still lacking listing inventory.  Clients are hoping the first time home buyer credit is extended due to the inability to secure a property by the end of November.  Cash buyers prevail.  Morgan Hill reported October saw a decrease in the number of properties going into contract.  Most selling Agents feel challenged as the inventory is low and multiple offers are the norm for moderately priced homes.  The fact remains, however, that once a property is put into contract, appraisals are often sending buyers and sellers back to the negotiating table.  The overall market is improving–but improvement is being measured in small and sporadic increments.

With so much focus on the entry level and lack of inventory, I thought it would be good to include some market data on inventory in a higher price tier – homes between $1M and $2M.  The graph below shows a 2 yr history on new listings and closed listings as reported monthly from our local MLS for San Mateo, Santa Clara, Santa Cruz, and Monterey Counties.

See the graphs in the PDF.

Notice that the trend lines are nearly parallel; there has been a fairly steady demand for the amount of new listings coming to the market.  Most agents will tell you that there is not enough new inventory at this price point.   If the market feels sluggish at all, it’s probably due to lack of good inventory –not because homes are not selling.  September 09 has nearly the same amount of sales as September 08, but a year ago there were about 35% more homes coming on the market in September.  And the absorption rate this year is even better when you compare to September 07.  You can run all these comparisons and many more for your city or county and any price points in Market Trends in MyRECafe. I am attaching this Market Watch as a PDF as well this week, in case you have any trouble reading the graphs.

- Rick Turley

“U.S. Economic Recovery on Track”

While we await the results of the possible expiration, extension or expansion of the $8,000 first time home buyer tax credit, one thing is for sure, the economy seems to be moving forward—which is driving consumer confidence.  Earlier this week, Reuters.com ran a very interesting story on the U.S. economic recovery and the result was very encouraging.  Among the story’s highlights:

“The U.S. economy is firmly poised for a recovery from its deep recession but growth may be moderate and the job market will not revive immediately, senior White House aide Lawrence Summers predicted on Wednesday.”

• “On the economy, Summers said the $787 billion stimulus package and inventory rebuilding by businesses were among the “dominant drivers” lifting the economy.”
• “It will be some time before unemployment starts to decline.  Once it declines it will take a long time to return to normal levels, given how elevated it is…The jobless rate is now at a 26-year high of 9.8 percent.”
• “Most private economists think the recession, which began in December 2007, ended in the third quarter.  But there is much disagreement about the path to recovery.”
• “Some see above-average growth continuing through next year, arguing that deep recessions are typically followed by powerful recoveries, helped along by pent-up demand as consumers and companies resume spending.”

Obviously this is welcome news for the economy which ultimately benefits the local housing market.  What I can tell you is that I am encouraged by the progress we are making in the real estate market.  We’re beginning to see more days of progress than days of back stepping.  We’re watching sales activity and consumer sentiment and we are expecting over the coming months a moderate and more sustainable pace of sales at most price points.  We will probably see a modest rise in housing prices in the coming year; both nationally and statewide.  In the Bay area, it will probably be the entry level brackets which will show price improvement.   Will it be the double digit appreciation we saw in the earlier part of the decade?  Probably not.  But this “new normal” is much more sustainable and a much healthier path to build upon.  It makes me excited about the future and gives us all hope for a relatively busy and productive 2010.

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

• East Bay—Castro Valley reports inventory is slowing, with fewer investors and less multiples out there.  We are seeing more pendings, which has made the market difficult for buyers due to less inventory.  Listings are king right now.  Many listings are going pending within a week or two of hitting of market.  We had one listing that had an offer within an hour of hitting the market, sight unseen.  Fremont reported listings under $800K still have the most activity.  REO transactions at a slow pace but expected to pick up in the beginning of the new year.  Short sales are increasing – lenders seem to be more receptive to adjust loans.  Oakland reports REOs don’t seem as robust but still going into escrow with many multiple offers.  Starting to see more requests for units.  Sales are in all price ranges.  Orinda reported REOs have slowed but still have a presence in the market. Most are selling at or above asking price. Agents report open house attendance as spotty.  Walnut Creek reported we are seeing prices in some areas inch up a bit especially in East County and also part of Central Contra Costa County.  Inventory is still very low.
• Monterey County—Listings are still selling if priced right and in good condition or super buys in not-so-good condition.  The lower end is still where we are seeing the majority of sales; however, there are still multi-million dollar sales in Carmel, Pebble Beach and the coast, including one we closed on last week in Carmel for $5,000,000.
• North Bay—Greenbrae reported the low-end of the Marin market (under $700,000), cities of Novato and San Rafael, condos and REO properties have all experienced solid sales in the past few months.  Multiple offers are quite common in these areas and cash is certainly king in those battles.  Other markets like Larkspur, Corte Madera, Greenbrae and Mill Valley are all holding their own with four to seven months worth of inventory – that’s actually pretty good in this market.  Reasonably priced homes that show well, offer friendly floor-plans and close proximity to schools and shopping are still receiving multiple offers.  Marin buyers know what they are looking for and when they find it, so too do a few others with the same thoughts, bidding on the same house!  At least the Marin buyer is consistent.  And, savvy, too.  They know the inventory.  They compare properties and they look for bargains!  Sellers, in most cases, are getting the idea and pricing to sell, though buyers still might want to see one price reduction before pouncing on a property – even if priced at what seems to be a bargain from the get go.  Santa Rosa reported that we’re starting to see the first signs of slow down heading to the holidays. An influx of inventory would be countered with a host of offers.  Sebastopol reported listings and sales dried up last week. Many clients are struggling against all cash offers! This was our slowest week for both new listings and sales this year.
• Peninsula—Burlingame reported there is more sales activity and great competition at the lower price ranges with many buyers losing to investor / cash offers.  More high end listings are coming to market with very tight inventory in the $800K-1.3M range.  Menlo Park El Camino reported many sellers are just not coming to terms with buyers. Lots of rejected offers.  Build up of inventory of overpriced properties. Menlo Park Santa Cruz reported open houses were very slow this last weekend.  High end sales are still weak and the middle price ranges are moving well.  Good inventory is getting to be a huge issue.  Palo Alto Downtown reported the overall market is slow.  Well priced homes do sell with multiple offers, but the overall activity has been quieter and a bit unexpected, meaning the holiday season seems to have started sooner rather than later.  Redwood City/San Carlos reported an extremely slow week.  Very little new inventory.  Only two new listings in our office.  The one multiple we had had three offers, two of which were below asking.
• San Francisco—Lakeside reported there is a lot of activity with the homes under $800K.  Lombard reported that entry price levels are bringing the most interest and multiple offers. An off-market $4m home brought two unsolicited offers while others in that price point go begging. We are seeing continuous loan delays and occasional appraisal problems.  The Market Street office reported an agent holding an open house in the $1.8m price point was very pleased to have over 20 prospective buyers attend actively looking in that price range. All other open houses were well attended. Our ratified sales this week ranged from $275k to $1.6 and everywhere in between. Oddly enough the lowest priced property had one offer and the highest priced had three.
• Santa Cruz County—No information reported.
• Silicon Valley—Cupertino reported things are hopping! We had 27 offers on a home in Cupertino listed for $1,049,000. Needless to say, it went way over. Most of the Agents are working hard.  Los Altos reported the low end is still very busy especially in single family homes.  San Jose Almaden reported listings are slowing down, it’s too bad as lower priced homes are flying off the shelf.  San Jose Main reports activity remains strong in the $250-550k range. Multiple offers on most. Upper market still slow but showing signs of improvements.  Saratoga reports the market for all price ranges has slowed for us. I’m not sure what the cause is, but there may be an impact from buyers holding off pending the potential extension of the $8000 buyer credit.
• South County—Hollister reports the market is still driven by cash buyers on most REO sales.  Appraisal issues on some multiple offer situations due to increased offer price.  Open houses have been productive.  Buyers are willing to wait for short sale process due to low inventory.

This week I’ll conclude with a few articles of interest:

• What Housing Bust?; CNN Money
• Housing Tax Credit Working, So Keep Momentum Going, NAR Urges Congress; Realtor.org
• Shape Of The Housing Recovery; CNBC
• Real Estate Outlook: Mixed Signals; Realty Times

- Rick Turley

Recent Housing Upturn Sparked By Buyer Leverage

The latest S&P/Case-Shiller home price index reveals home price for 10 major cities rose 3.6 percent between April and July.  So does this recent uptick in the housing market mean we are on the cusp of an all-out housing boom? Probably not.  In all likelihood, the recent upturn in the housing market has been sparked by several factors:

The impending expiration of the $8,000 first-time home buyer tax credit

• The impending expiration of current conforming loan limits
• The recent uptick in the stock market
• Increased consumer confidence
• Continued low interest rates
• Increasingly low supply of entry level homes

As you look through our past weekly reports – you’ll see that in the Bay Area it’s our entry level that has continued to have the highest demand and lowest supply.  This has resulted in multiple offers, often over the list price, in almost all of our entry markets. (Ex: Alameda and Contra Costa County homes under $600K= 1.6 Months Supply of Inventory –dropping every month this year)   In some areas we’re beginning to see a trickle-up effect, where the next tier price-point of homes is getting some activity from move-up buyers. (ex:  For homes priced over $1.5M: San Francisco  = 4.9 Months Supply of  Inventory, down from last month and down Year over Year. Santa Clara County over $1.5M = 6.8 MSI, down from last month, down Year over Year)

Will it last?  It’s tough to say.  Right now we’re in a slightly unique position because some of the stimulus dollars the government has put in play are working which may be causing a false front for the overall economy. The stock market is up, Dow hitting over the 10,000 mark this week.  Consumer confidence is on the rise.  The US housing market is looking up.

But, the fundamentals themselves haven’t changed.  Outside of Fannie and Freddie, there are few resources for making home loans.  It remains a challenge to get a good competitive market for Jumbo loans –and much of our Bay Area is Jumbo loan territory.   Foreclosures remain a major issue.  We know there is a shadow inventory of homes already foreclosed on and not yet released to the market place.  Another new phenomenon is the creation of a market where under-performing and non-performing assets (mortgages) are being purchased in bulk by investors, most likely adding to a further delay of more foreclosed homes hitting the market.  As unemployment remains a challenge and businesses and employers continue to tighten their belts, it would seem there are more foreclosures ahead of us.  Loan re-sets will provide a challenge.

Sounds a little grim and sober, but probably a bit more realistic.  Clearly we are in a much better position than the majority of the State. Our world-class desirability coupled with our finite amount of homes and buildable land will always keep real estate in the San Francisco Bay Area performing better than most markets.   But we need our entry market to remain stimulated.  One major factor that stands in our way is the impending expiration of the first time home buyer tax credit and the higher conforming loan limits.  These have helped tremendously to drive much of our recovery.  But right now the debate on Capitol Hill continues and everyone is waiting to learn whether the credit will be extended, expanded or will it simply expire.  Many on the opposing side believe it is too costly to finance.  But NAR had this to say:  “Each home sale pumps an additional $63,000 into the economy through related goods and services, so the benefits of extending and expanding the tax credit far outweigh the costs.”

If the current tax credit and loan limits simply expire, NAR had this to say:  “All we can say for certain is sales will decline when the tax credit expires because we are not yet on a self-sustaining recovery path.  It also raises a risk of a double-dip recession.  Extending and expanding the tax credit is the best tool in our arsenal to encourage financially qualified buyers to stimulate the economy and help reduce the budget deficit.”

 As this debate continues, buyers seem to be leveraging today’s market advantages which continues to create great activity in our local markets.  Let’s just hope the leveraging opportunities continue.

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

• East Bay—Berkeley reported a much busier week than the start to October.  We took in some good listings as well as sales.  Still hard to get those listings; certainly not enough in Berkeley, Albany, and Kensington.  Castro Valley reported REOs continue to trickle into the market, and there are still some incredible prices in San Leandro and Hayward, especially in the lower range market.  Prices have stabilized overall, and are going up, except that appraisals continue to shock the market, although getting better.  Danville reports we had 26 new pending sales in San Ramon this past week and we have only 1 month supply of inventory.  Demand is clearly stronger than inventory.  Fremont reports prices and interest rates are going to maintain a steady stream of qualified buyers, however increased moratoriums and state mandated extensions are hindering the inventory of bank owned properties which is why the listings are low.  Livermore comments that REO business seems to be in somewhat better price ranges at the moment.  Our sales are in all price ranges and our listings are selling faster than the listings coming in at the moment. And from Oakland/Piedmont:  Sales are still taking more time to close.  But agents are busy and the sales are coming in.
• Monterey County—The market continues on at its sluggish pace, with listings declining as they do as we head into the final months of the year and without yet the surge of REOs we’ve been told to expect.
• North Bay—Greenbrae reported the low end of the market is hopping!  Two properties in Novato SFR under $450,000 with 7-8 offers each.  Everybody is loving a bargain.  San Rafael/Novato reported we are continuing to see multiple offers on homes priced to market value from entry level to million dollar homes.  Southern Marin reported entry level prices slowly rising.  One of our Agents was one of 15 offers on a bank owned property in Novato which went way over asking, and higher than when it was on the market as a Short Sale.  Also seeing some buyers for a second and third time at Southern Marin open houses.  Petaluma reports inventory continues to be snatched up as it comes on in the $500,000 and under price range in the double digits multiple offers continue to be the norm. Starting to see some strong movement in the $500,000 and above price range.  Santa Rosa reported the market is strong but the shortage of inventory is keeping open escrows at bay.
• Peninsula—Burlingame reported continuing appraisal problems are causing sales to fall out or to be negotiated down in price. Inventory is thinning somewhat.  Half Moon Bay reported that we’re finally seeing some activity in the $1.0m+ listing range – one property sold in 2/08 for $2.9m now on the market for $1.9m with 3 interested parties.    Menlo Park El Camino reports a bit of a lull here on the mid peninsula – slow on both listings and sales. Agents are busy but no results yet. Inventory is low.  Palo Alto Downtown reports the market is very quiet.  Multiple offers occur but volume of sales is down throughout Palo Alto in the $1.5 million and above.  Redwood City reports slowly there is more inventory coming on the market and the list price seems to reflect the current market.  Good activity at the open houses. 
• San Francisco—Lombard reports a slow October so far. REOs have dropped off. The rare property, priced right has multiple offers. A couple of cases this week where sellers took cash over higher price.  Market Street reports two multiple offer situations. Three counter offers were what it took to get many of our contracts ratified. Lots of activity at open houses and buyers are mindful that the first time home buyers credit is going away at the end of November.  Noriega reports well priced properties are still getting multiple offers.  We noticed more investors are out making offer on well located and well priced properties.
• Santa Cruz County—The market activity is good.  We have received a couple of new REO listings in the last few weeks, and although the process is long, these are selling quickly if priced right.  While the lower end continues to drive the market – we are seeing some slight activity in the higher end properties which is promising. 
• Silicon Valley—Cupertino reported most of the activity continues to be in the lower price ranges, which are very competitive. Lots of offers are getting written compared to the number ratified. Open house traffic continues to be excellent.  Los Altos reported there is a shortage of low end properties for first time buyers that are scrambling to try to close before Nov 30 and the tax credit expires.  The mid range is getting moderate interest and some of the higher end is getting a lot of interest in the best school districts. San Jose Almaden reported the low end still continues to drive sales.  Listings picked up a little this week.  Open house traffic was spotty.  Homes even 3% above comps seem to linger while those -1% below are sold quickly and above asking.  San Jose Main reported buyer demand is increasing due to low interest rates.  Open houses are extremely busy in all price ranges. Sales of properties in the lower price range between $250k-550k are brisk and usually involve several offers. Upper market moving slowly at present.  San Jose Willow Glen reported multiple offers are the norm on regular deals and REOs. As far as the REOs go, they are going well over the asking price in all cases. Homes in the $600,000 to $800,000 are selling quickly as well.
• South County—Gilroy reported the local market remains pretty much the same as it has for several months. FHA buyers are out there competing against cash and conventional buyers for homes less than 400k. Every sale and closing seems to present new challenges.  Morgan Hill reported you just can’t keep some Agents down.  A Morgan Hill Agent put five homes in contract this past week–they ranged in price from $350,000 to $1.2 million.  He is a very hard worker and despite this “quirky” market manages to be a consistent “top producer” in this office.  In addition, another of our top agents is expected to “close” five transactions during the last two weeks of October.  These two agents are shining examples that hard work and dedication does pay off and no matter what the market.

This week I’ll conclude with a few story highlights:

USAA Praises Biggert Bill To Extend First-Time Homebuyers Tax Credit; Reuters
Hopes Run High For Tax-Credit Expansion; MarketWatch
Washington Report: $8,000 Home Buyer Tax Credit; Realty Times

Also, CAR released its 2010 forecast this week.  Please read it here:  http://www.car.org/newsstand/newsreleases/2010forecast/.

- Rick Turley