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

Despite Choppy Economy, Wall Street Journal Makes the Case for Buying a Home Now

Reading business headlines these days is not for the faint of heart. I’m beginning to think that my morning paper should come with the same kind of legal disclaimers and health warnings that accompany some wonder drugs: Could cause shortness of breath, heart palpitations, sleepless nights and irritability.

Recent financial articles have noted that hiring has slowed, the stock market could be in a correction, and the nation’s economic recovery may be hitting a “soft patch.” It’s no wonder that the housing market, at least nationally, has struggled to gain traction after last year’s boost from the federal tax credit.

Against this backdrop of gloomy financial and housing news, it was interesting to open the Wall Street Journal last week and see in big, bold headlines: Why It’s Time to Buy. As the Journal put it, “The clouds haven’t quite parted, but the long-term case for home ownership is looking stronger.”

Journal reporters Ruth Simon and Jessica Silver-Greenberg researched and wrote one of the most thorough and rationally analyzed articles I’ve read on the market in quite some time. Far from being Pollyannaish, they acknowledged the economic headwinds facing the market and the clouds overhead. But they also spent a great deal of time arguing the positives for buyers today as well as the long-term investment opportunities.

“Despite all the gloom…there are growing indications that it is a good time to buy,” the Journal reporters noted. “Mortgage rates, which fell to 4.55%…are near 50-year lows. Homes have become more affordable than they have been in years. According to Moody’s Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average. A historic glut of homes, meanwhile, has created a buyer’s market. There were about 15 million vacant homes in the U.S. last year—some 3.1 million more than normal.”

Simon and Silver-Greenberg then said what Realtors have been telling clients: “Such conditions might not last long,” they warned. “Moody’s Analytics predicts that the number of distressed sales will begin to fall in 2013, and that prices will begin to edge upward then. Home building is at a virtual standstill, so the supply overhang isn’t likely to get much worse. Meanwhile, demographic indicators such as “household formation”—the number of new households each year—are on the rise, and promise to take a bite out of the glut in coming years.”

In their analysis, the Journal reporters looked at several financial and psychological aspects of the market and determined that the winds are shifting:

• Lending: “As rates hover near historic lows, experts expect banks to ease borrowing standards over time;
• Psychology: If prices stabilize, it could tip the balance away from fear and pull more buyers back into the market;
• Affordability: In several markets, it’s becoming cheaper to own than to rent;
• Demographics: The rate of “household formation” is expected to climb in coming years;
• Employment: The strength of the housing recovery depends on job growth. Despite some hiccups, the job market is improving in most parts of the country;

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

• North Bay – While sales and inventory have eased recently, according to our Greenbrae office, they are noticing some increased activity around the office.  They are still inventory starved, which makes the ideal homes go quickly when they come on the market.  Greenbrae, Corte Madera, Larkspur and parts of Novato are very hot.  Luxury sales are sporadic, but still happening.  Cash deals are still prevalent.  In Northern Marin, the lower end of the market is extremely active with multiple offers on properties in the $200,000-$500,000 range.  Activity falls off around the $500k-$850k range but is still seeing some activity.  Over $850k range is slow. Petaluma is starting to see more properties in the $500,000 to $900,000 range come on short or real close to being short. Open houses are well attended with 10 or more groups in most. Things are heating up in Santa Rosa, with the market surprisingly active given the recent holiday weekend. Our local manager says buyers are aware that interest rates are incredibly low and want to take advantage of the favorable rates.
• San Francisco – Our San Francisco Lakeside manager says agents are working overtime to find sellers. More than half of the new sales this past week were multiple offers.  It is too early to tell if this summer will see the typical inventory buildup but so far there are no signs of it. Our Lombard office says it was a good May and early June, but buyers remain very cautious – except on the “flawless” homes that generate multiple offers. It’s hard to pin down any trends. That assessment is echoed by our Market Street office manager, who says that the local market continues to be erratic.   Some properties are seeing very little activity; broker tours and showings are minimal, whereas others are mobbed.  Location, price and perceived value seem to be everything.   A recent home listed in West Portal came on the market, a dozen disclosure packages went out, followed by multiple bids.   A multi-family in average condition in the Castro area had a ratified offer within the first two weeks of coming to market.  Other properties are oddly quiet. A turnkey Bernal Heights one bedroom is quiet, as is much of the TIC market. The Sunset office says their local market has been steady with 10 ratified sales, three of which were multiple offers.  Finally, the Van Ness office says listings are taking longer sell in the lower ranges while the more expensive homes continue to move at a good pace.
• SF Peninsula — In Burlingame, our local office says that open house activity is telling them that there are many buyers right now who feel that we are at the bottom of the market. This is late for our usual spring selling season but it seems that there may be a push going on to get into homes and register for school in the fall. Multi-million-dollar homes are continuing to see activity. There has been very good activity these past two weeks in Menlo Park, despite the holiday weekend. Buyers hungry for properties in “A” locations and will bid them up.  Palo Alto continues to be a strong market with multiple offers on homes up to $4 million. Open houses have ranged from relatively quiet to extremely busy, depending on the neighborhood and area. Sales activity in Portola Valley is on the rise. Our local office had a large sale of more than $6 million. Our Redwood City office said buyers are taking time to make up their mind about purchasing at this time.  In San Carlos the activity seems to have slowed down.  The list price must be right on for the home to sell quickly.  Redwood City and Redwood Shores have quite a bit of inventory.  Townhouses and condos are taking a long time to sell, even when priced well.  Belmont inventory is stable and again depends on list price as to days on the market. In San Mateo, late spring is showing signs of good activity. Properties priced right that show well often lead to multiple offers.
• East Bay – The Berkeley office reports a steady market with more activity in the $900,000–$1.5 million range.  The Castro Valley market has also been steady in recent weeks. In Fremont, inventory is remaining steady but sales are increasing. Buyers are taking longer to make decisions on purchasing, according to our Livermore manager. And when they do purchase, they want a good value or price for the home. The Oakland market has been steady with open house activity up over the past weekend.  Offers have been ratified at all price points.  There are still many homes with multiple offers and many with a few price adjustments. In Orinda, sales activity has been steady with 16 ratified offers, five of which were multiple offers. Finally, in Walnut Creek, the there are lots of buyers at open houses but they’re not making offers in many cases.  But on some lower-end properties, agents are receiving multiple offers. 
• Silicon Valley – There is a lack of urgency among buyers in Cupertino, except in the case of the most special properties, which translates to the best schools. In Los Gatos, the pace of the market is picking up dramatically, especially under $2 million.  A property was listed at market value at $1.4 million in Los Gatos and sold with four offers for over list price.  Our San Jose Almaden office says there has been a slight increase in activity of late, which is a welcome sign since the cooling off period that began in April.  It’s too early to say if it is a trend yet, but last weekends open homes were much busier than previous ones.  Agents are seeing a lot of price reductions, as much as 4% since March. Meanwhile in Willow Glenn the local office says it has been steady as far as sales are going. There have not been many multiple offers lately. Open houses still get a lot of traffic.
• South County – The local market has been steady, according to our Morgan Hill office. Agents are spending time trying to calm nervous buyers, who react to negative media reports that the sky is falling (again) on the housing market.  Recent articles, especially on the national level, concerning prices and sales volume are having an adverse affect on potential buyers trying to make a decision to jump into the market.  As we’ve said before, the South County market continues a steady recovery, but does so with agents working hard to assure buyers that they are receiving a good value.
• Santa Cruz – The market seems to be changing from week to week depending on the current economic news and forecast. Bad news keeps buyers and sellers on the sidelines. There are flurries of activity, a cluster of sales, and what appears to be some momentum and then it slows.  Sales in our offices are steady and fairly consistent although the prices are much lower than a year ago. The median price for a single-family home is down $105,000 (19%) from the same time last year, to $445,000.  Overall prices have dropped 40% since the peak.  Closings in the County appear to be up over 2010 by about 9% so far this year. Particular price points like $700,000 – $1,000,000 can be challenging and agents are counseling sellers to list slightly below the last sale to attract interest when going on the market.  In the Previews end of the market, it’s good news for buyers that this is perhaps the best time ever to buy a wonderful beach property.  There are many options ranging from $1 million up to $8 million, with views ranging from peeks of the ocean to living right on the sand.  
• Monterey Peninsula – May was a good month on the Monterey Peninsula. Our sales associates opened 86 new escrows across all price points.  It appears that real estate is coming back into favor as an investment for the long term. The lower-priced homes, particularly REOs, are selling fastest.  There are not enough of them on the market so that’s where we are seeing most of the multiple offers.

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

As we head into the heart of this year’s spring season, I thought it would be helpful to share what we are seeing from a national perspective in the housing market and point out a few reasons for optimism in the months ahead. 



Bruce Zipf, president and CEO of NRT, our national parent company, said this week that our overall business results have managed to exceed expectations, thanks in large part to a surprisingly resilient high-end market.

Our company’s agents across the country closed 32 homes over $10 million in March, up from 10 last year and just six in March 2009. The total number of homes sold over $2 million is up 12%. There was particular strength in the luxury segment of the market in the Northeast, Florida and right here in the Bay Area and in Southern California.

Normally, we judge the strength of the housing market by looking at current sales volume against the same time last year to gain a sense of how things are improving. But we couldn’t properly compare data from this March and April due to the artificial stimulus effects of last year’s Home Buyer Tax Credit. In May, these effects should lessen and give us our first true glimpse of the market’s strength. 



Nonetheless, I’m optimistic that we’ll continue to see improvement in the market as we head into the heart of the spring buying season, especially right here in the Bay Area. Many of our local offices report seeing growing momentum from buyers looking to take advantage of mortgage rates while they’re still low, as well as prices that remain affordable.

In a number of our markets, especially in high-end areas on the Peninsula and in Marin and Silicon Valley, we continue to have more qualified buyers than listings. This situation is resulting in multiple offers for many attractive homes, often bidding up the sale price over the asking price. Buyers are coming in with a lot of cash or all cash to win out the competition. My how things have changed since the depths of the recession!

Million-dollar home sales in Silicon Valley surged 24% in March from a year ago as the South Bay’s luxury market continued its strong turnaround. Marin County saw even stronger gains, with sales spiking 55% and the median price 20%. San Francisco’s multi-million-dollar market saw sales rise nearly 14%. It’s often said that the high-end market – the so-called “smart money” – often leads the overall market’s turnaround. If so, this is a very positive sign indeed.

This is not to say that every market around the Bay is experiencing the same strong buyer demand. Certainly a number of communities and even neighborhoods within those communities have more balanced markets, and some homes continue to sit while others sell briskly. But in general, we’re seeing well-presented, well-priced homes selling much better today than they did a couple of years ago.

Another reason for my optimism is that mortgage rates are likely to remain affordable for some time to come. I know a lot of market-watchers were concerned that the Fed could ratchet up interest rates soon in response to inflation fears and the end of the government’s bond-buying program. But Fed Chairman Ben Bernanke largely put those fears to rest in his first-ever press conference this week.

Although Bernanke signaled the end of its $600 billion bond-buying program, as expected, he made it very clear that he isn’t inclined to raise interest rates for a long time unless the inflation outlook worsens. More than anyone, the Fed chairman is very aware that the economy continues to face headwinds in the form of high unemployment levels and a tepid housing market in many parts of the country. While things are certainly getting better, Bernanke isn’t likely to do anything to douse the nascent recovery.

So as we look to May and the summer season before long, there are many reasons to be encouraged that our housing recovery will continue to gain traction – especially here in the Bay Area.

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

• North Bay – The market has been steady with spurts of activity here and there, our Greenbrae manager says. Listings are slow to come on the market, so we are still experiencing an inventory shortage in Marin County. That said, sales keep creeping in and we are above targets in open escrows and closed sales. Buyers seem more eager to place offers. Multiple offers are more frequent yet rarely go over asking price. In Northern Marin, our local manager says inventory is increasing but sales activity has eased of late. Our Southern Marin office had the highest closed sales month in two and a half years. A $1.2 home in Kentfield received 7 offers, and an offer over $1.5 did not get the house. The most active area in the market is in the $ 1 million and under category. That said, the Previews market is strong with pending sales ranging from 18% of listings in Mill Valley to 42% in Belvedere (from a very small sample). One of our new Mill Valley listings at $1,795,000 received on all cash pre-emptive offer above the list price. Higher end listings that aren’t in the best neighborhoods are sitting and not getting much activity. Up in Santa Rosa, new open escrow activity is brisk. Open houses continue to be very well attended, and we are still facing a shortage of new inventory. On the upper end of the market, showings are around 1 to 2 a week. Relocation companies are buying homes and dropping the prices to sell, which is hurting the high-end market and leading to price declines. In Sebastopol, the market has been pretty steady. There has been really good attendance at open homes, including on Easter Sunday. We are also seeing more activity in the move up price range between $600k and $1 million.
• San Francisco – Our Lombard office says sales activity is on the rise. Agents are very busy and open house traffic is quite good. Some condo listings are languishing and 11th hour loan problems are still prevalent. The San Francisco Lakeside office says some buyers are worrying about prospective interest rate increases but are nervous about prices. Ultimately what motivates them is the desire to settle down if they find the right home. However, picked over inventory makes choosing difficult. Our Market Street manager says the number of sales is down slightly from a year ago during the same period. However, the average sale price is up about 8% from last year at this time. An appropriately priced property continues to move very quickly, often with multiple offers and ratified contracts within a week from listing. Open house attendance over Easter weekend was also very strong. Finally, our Sunset district office says buyers are still cautious but they will act when they see good value. A lot of first time buyers are out there looking, but financing is still a key issue for most of them.
• SF Peninsula — There is much more activity in the upper-end market, our Burlingame manager reports. Burlingame has 13 active listings and nine pending Previews listings. We are seeing a lot of cash buyers and frequent multiple offers as prime locations are always in demand. The true “sweet spot” is in the $1 mill. to 1.5 mill. range. Just about every property is seeing competition and multiple offers if their condition and location are right. The pent up demand of “move up “ buyers is very evident. We had one first open house in Burlingame’s Ray Park with close to 200 attendees. As the weather becomes better we are seeing young families moving south from the City seeking yards and parks for the kids and of course Peninsula schools. Across the hills in Half Moon Bay, the market has been steady with five ratified offers, our local office reports. In Menlo Park, the local market is hearty now. Buyers definitely have their feet back in the water. Good properties carry even more of a premium. Open houses are strong, particularly in Palo Alto. The local inventory is extremely short, resulting in multiple offers on many homes priced up to $5 million. Our Portola Valley-Woodside office says sales in Woodside and surrounding areas have been steady lately, but not as much in the high end – over $5 million. Big sales have been few and far between in recent weeks. In San Mateo, our local manager says the market is heating up with more multiple offers chasing little inventory. One listing had seven offers and five were all cash. Finally in Redwood City, the local market continues to struggle with a lack of inventory. There still is a large number of buyers attending open houses. There have been fewer multiple offers but more in San Carlos than other areas.
• East Bay – Sales are picking up in Berkeley, but agents are still working very hard to find the few houses out there and get buyers into contract. Some buyers are still hesitant to write offers and others are waiting. Our Danville office says market activity has taken a real jump in the past 10 days. The overall market in Livermore has remained relatively stable the past couple of weeks with very little change in total inventory of homes on the market or the pending sales. Quality listings are bringing multiple offers in Livermore within a few days of the listing being put on the MLS. Our Oakland-Piedmont office reports a fairly steady market with lots of activity at open houses, including Easter Sunday. A couple of our listings had over 40 groups through. The Upper Rockridge area is hot with most listings receiving multiple offers. Buyer activity is strong with many buyers writing offers, sometimes losing out in a multiple offer situation, but getting right back on the horse and writing an offer on another property quickly. Sales activity is also on the rise in the Lamorinda area. Well-priced homes sell in a flash and most have multiple offers. Some qualified buyers are very interested but still holding off for the best prices. Both sales activity and inventory are climbing in Pleasanton. Homes over $500K are staying on the market longer, but anything under that are seeing multiple offers. Buyers are continuing to look for the best deal. Finally in Walnut Creek, sales are on the rise and buyers are becoming a bit more serious. Inventory is selling very quickly.
• Silicon Valley – Our Cupertino office reports that activity is brisk and attractive inventory is in high demand. We are back to having the majority of our sales involve multiple offers. A very original fixer-upper was listed for $988k, got 11 offers, and was bid up about $100K. Activity is strong in Los Altos, our local manager reports. As goes the Dow so goes the high-end market, he said, and the stock market is up. About a third of the sales are multiple offers. The Los Gatos market is steadily improving. The high-end buyers are starting to feel more comfortable writing offers on properties priced in the $3-6 million dollar range. High-end homes that have been sitting are starting to see offers and pending sales are up. In San Jose, our Almaden office says that what started off as a brisk three months has turned into a noticeable slow down in recent weeks. It’s possible that it could be the result of multiple spring break weeks. The Saratoga market seems to be very active, according to our local manager, although the high-end market seems to be calming down a bit.
• South County – April is finishing as a strong month, reports our Gilroy manager. Agents are seeing increased activity in open house traffic and clients that have been slow to look for properties or list their homes are now moving ahead with plans. It appears the buying season is officially on. Our Morgan Hill office, meanwhile, says that while March was a great month in terms of sales and listings, April has seen less activity. There have been fewer consummated contracts and fewer listings. Higher gasoline prices have impacted client’s interest in looking at rural or suburban properties (which constitute a high percentage of Morgan Hill listings). But well-priced, well-presented homes still are garnering offers. Optimism continues grow and most agents agree that the market is gaining momentum.
• Santa Cruz – In March there was a 12% increase in closed home sales in the county – an encouraging sign. Activity seems to be steady lately and we have seen multiple offers recently on three well priced and staged listings. One home sold in six hours with three offers, going slightly over asking of $1 million. The properties and sellers were well prepared before going on the market and the smart agents are counseling their clients to price well, prepare the property for optimum exposure and selling the home. They understand that slightly under pricing is the key to attracting buyers. There are a few well-priced Previews homes in pristine condition that are selling. Our office recently sold an oceanfront home in Capitola that was listed at $2.2 million in a coveted neighborhood for $1.5 million. In the real estate heyday, the property might have sold for double that. Recently we have seen some very high-end homes on the market as short sales or REO properties, and these prices are definitely impacting overall values. There are many buyers searching for their dream home and now are able to afford to purchase and are doing so.
• Monterey Peninsula – Our local offices seem to be enjoying spring fever in sales activity in last two weeks, with more new escrows than usual. The weather has been great and the area has been extra busy with people from out of town. And the more folks visiting the Monterey Peninsula, especially Carmel and Pacific Grove–the weekenders’ favorites–the more sales activity there is. There have been 37 ratified offers, several attracting multiple offers.

Here’s to a few more warm days ahead and a beautiful weekend.

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

“Home sales catch fire in March”  “Local home sales at 5-year high”.  Before the cynics accuse me of being a “homer” for the housing market, I have to tell you that these aren’t my words, but the opinion of our local news media. Specifically they are headlines from the San Jose Mercury News, Oakland Tribune, and the Santa Rosa Press Democrat. I know that’s a twist, considering some of the negative headlines we’ve seen in the press lately.

As reporter Eve Mitchell and other journalists around the region noted, Bay Area home sales had their best March in four years, with 7,051 new and existing single-family homes and condos changing hands. That was up a whopping 41.3 percent from February. It’s normal for sales to rise from February to March, but last month’s surge was far more than usual.

Certainly historically low home prices are having an impact.  So are historically low interest rates, spurring buyers to jump off the fence. It appears that we’re finally seeing some of the pent-up demand that has been building for the past few years being released into the market – at least here in the Bay Area. Most of our local offices around the Bay are reporting steady to improving sales activity and overall market conditions. Multiple offers, low inventory;  here are just a few examples:

There is a lot of pent-up demand up and down the mid-Peninsula. Our Palo Alto office says they’re seeing an extremely strong market with “almost everything below $3.5M getting multiple offers;

• In the South Bay, our Cupertino office reports buyers are chasing too few good properties. When was the last time you heard that?
• The Los Gatos market has heated up a lot lately, especially in the lower price ranges where multiple offers are the norm. But even in the upper end, sellers are “feeling more confident putting their homes on the market” and getting a good price;
• The market in Saratoga is hot, according to our manager there. In the last few days they had one property with eight offers and another with 19 offers. Both sold significantly over the asking price;
• In the North Bay, our Greenbrae office had a number $2-$4 million homes go into contract recently with a lot of activity in the high-end markets of Ross, Belvedere, Tiburon, Sausalito, Larkspur and Kentfield;
• And our San Francisco Van Ness office is seeing a strong increase in sales, especially in the higher end properties.

While many parts of the Bay are seeing progress on the housing front, the picture isn’t uniform across the board. Some cities are experiencing stronger markets than others (the Peninsula, Silicon Valley, San Francisco and Southern Marin are particularly strong). In some communities, certain price ranges are hot while others are tepid. And even within a local market, while one property may get a eight or 10 offers, another sits idle waiting for a single buyer.

Nonetheless, the recent uptick in activity in general is providing encouragement to Realtors as well as home sellers. 

In its April 14 report on the Bay Area housing market, DataQuick noted that “a variety of indicators – including investor and cash purchase levels and adjustable-rate loan use – pointed toward a more normal market,” but the firm added that we’re not there yet. “The housing market has certainly moved well back from the abyss of two years ago, but there is quite a ways to go,” said John Walsh, DataQuick’s president.

Walsh noted that the Bay Area has much less of a foreclosure problem than the rest of the state, but distressed properties are still an issue in some counties and a drag on prices. He added that mortgage financing is still problematic for many potential borrowers as well.

The monthly market analysis demonstrated that real estate is really a local business. Several of the higher priced counties in the Bay Area saw strong gains in sales last month, including 10.7% for Marin, 8.6% for San Mateo, 3.9% for Santa Clara, others experience declines. Alameda was down 7%, Solano 7.9%, and Napa 5.9 percent.

So we appear to be moving in the right direction. I’m encouraged that the spring rejuvenation in many of our markets will continue in the months ahead, especially if the economy and the local job market continues to improve. Only time will tell.

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

• North Bay – The $500K to $1 million market seems to be the hot segment right now, according to our Greenbrae manager.  There are fewer properties available in the under $500K range. The market is sorely lacking in inventory, down to a three-month supply overall in Marin.  Overall the market is healthy with renewed activity and a buzz that can’t be calculated quite yet.  The Northern Marin market continues to be active in the “bargain” price range with a large part being in short sales and REO’s.  The middle level market is starting to strengthen and show increased activity. The Santa Rosa market has remained steady, according to the local manager. While open house attendance has been high, many buyers seem hesitant to commit. Our Southern Marin office reports that sales are up, although sellers are having a hard time adjusting to current market valuations. Many offers will get close to asking, but sellers are passing. Overall the number of high-end homes sold in Southern Marin is less than a year ago, especially in Mill Valley and Tiburon.  Belvedere and Sausalito are up ever so slightly.  
• San Francisco – April off to a good start, our San Francisco Lombard office reports. Open houses are well attended, agents are busy, and some listings yielding 10-15 offers. But buyers still need to have a sense of a “deal.” The $2-3 million market in particular is very active, although it’s slow above $3 million. Our Market Street office says that properties that are priced well are moving fast. They had two deals this week where properties had over asking price offers within a day to two of being on the market.  There are also offers coming in as back up on short sale listings that are aggressively trying to knock the first position out.  The properties that seem to be moving are priced between $1 million and $1.4 million. Open houses are well attended, but inventory is still low, according to our Sunset office.  Agents are working much harder on their deals, as transactions are much harder to close. Finally, our Van Ness office reports that the local market continues to increase in volume, especially in the higher end properties.
• SF Peninsula — Our Burlingame office said they are seeing many multiple offers in the $900k to $1.5 million-price range. There are 62 active and 22 pending sales. The local market “has definitely heated up,” our North Burlingame manager says. Across the hills in Half Moon Bay, both sales activity and inventory are on the rise. The high end of the Menlo Park market is still showing strength, our local office says. Some homes are coming onto the market and “going right out the door” if priced right. And buyers absolutely know what is priced right, our local manager points out. Palo Alto continues to enjoy an extremely strong market. Almost everything below $3.5M generally has multiple offers.  As usual, there is a high demand for inventory.  Price points from $5.5 to $6M moving fairly quickly as well.  Open houses have been very strong – condos as well as single family. Our Redwood City office says that the local market has been fairly steady with sales of single-family homes in San Carlos still very active.  It appears that buyers are more willing to make offers even in multiple offer situations. In San Mateo, our local manager says inventory is slim and that which is priced correctly is getting multiple offers.  But even some of the multiple offers on a property still don’t produce a “full price” offer.
• East Bay – Sales activity picked up considerably in the past 10 days, according to our Berkeley office. But our Castro Valley office reports the local market has cooled a bit. The local manager said many buyers are afraid due to the uncertainty of the economy and are choosing to rent until the market/economy improves further. A similar story comes from the Fremont, where activity has eased recently. In Livermore, the Previews high-end market has remained very stable in 2011. During the first three months of the year there were six closed Previews property sales. Homes under $350k are moving fast, our Pleasanton manager reports. First time Buyers are eager to make offers. There has been a dramatic increase in inventory, our Orinda manager says, with our local tour doubling in size week over week. This has created a lot of great bargains. Our Oakland manager reports that short sales are still the order of the day, comprising a large percentage of the inventory and ratified offers. There are plenty qualified buyers out on weekends looking at the well-priced inventory in the East Bay. Open house activity was up in most areas with from 12 to 30+ groups going through our listings. Finally, our Walnut Creek office says they are seeing both multiple offers and price reductions.  There continues to be a lack of inventory in certain pockets of their marketplace, with an increased number of short sale listings.
• Silicon Valley – The only problem in Cupertino is not enough listings. Lots of buyers chasing too few good properties, our local manager laments. Similarly in Los Altos, the market is improving with listings slowly coming on. Due to the increased publicity of high-end sales, high-end sellers are feeling more confident putting their homes on the market, our Los Gatos office says.  Buyers are beginning to see some opportunities in the high end that were not available in the past.  In the lower ranges, multiple offers are becoming more of the norm rather than the exception. In San Jose, our Almaden manager reports that the market is healthy in the low end to middle range.  Above that it is slow, however. In Willow Glen, meanwhile, sales are progressing. But the closing dates seem to be pushed back quite a bit in many cases due to the lenders. The market in Saratoga is hot, according to our manager there. In the last few days they had one property with eight offers and another with 19 offers. Both sold significantly over the asking price.
• South County – A recent article in the San Jose Mercury indicated that the rental market is getting stronger as many younger workers, feeling more confident about job stability, are moving into their own apartments.   This can also be said for the real estate market as well.  The Morgan Hill office is seeing more first-time buyers making and consummating offers.  Interestingly enough, the “move up” market seems to have a renewed energy as well with buyers making and sellers accepting contingent offers.   Open houses are well attended and consumer confidence is better than it has been for quite some time.
• Santa Cruz – Looking at the heart of the market – the $500K to $800K range – there are fewer sales occurring, with closed transactions down 16% from the same time last year.  There has also been a drop in inventory from 115 to 80 properties in this price range. But homes are still selling in a relatively short 65-day average. This means that if the home is priced right it will sell and close in two months.    There is a four-month supply of inventory for this price range.  Agents are picking up buyers/sellers at open houses, and for the most part the agents are optimistic and working in this new normal market.
• Monterey Peninsula – The Monterey Peninsula market continues at a good, steady pace, with more buyers than properties in the lower-priced areas. We are seeing cash buyers buying low-priced homes, which they plan to use as rentals for 5-7 years and then sell, with the idea that the prices will be up by that time and they will cash out at a good profit.  An out-of-town agent was here representing such a buyer with $5 million in cash to buy such properties in Northern California.  Our local manager says about 33% of sales as short sales, which means they will likely take many months to close or may just fall apart before approval.

One final note: I want to congratulate Coldwell Banker Residential Brokerage’s 2010 Top One Percent, and offer a special acknowledgement to those superb Realtors who finished among our top 10 in Northern California – Malin Giddings, Nina Hatvany, Tim Allen, Bill Gorman, Keri Nicholas, Royce Cablayan, Tom LeMieux, Bill Lister, Scott Dancer and Dave Clark.

These incredible All Stars are the best of the best in real estate. Together, they were responsible for nearly $1 billion in home sales!  And more than half of these agents ranked among the top 10 in the nation as well, outpacing more than 100,000 Coldwell Banker agents across the country. We’re very proud that the most talented agents in the business work for Coldwell Banker.

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

Note: Actually it is bi-weekly now:

The Case Against Case-Shiller (and other lagging housing market indicators)

As I opened the morning paper the other day, I saw a story splashed across the business section suggesting that we might be heading into a “double-dip” housing recession based on the latest S&P Case-Shiller index report. What was ironic was that over the past week, I had just finished meeting with my office managers throughout Northern California ­– most of whom were reporting that their local markets were revving up with great activity, and some markets with a real sense of urgency. What gives?

The paradox made me think that a lot of people – consumers and real estate reporters alike – may not realize that such monthly reports as the Case-Shiller index and even the very popular DataQuick Bay Area market report are really lagging indicators of the housing market. They are in effect old news by the time they are released. These reports are based on closed sales the previous month that actually began two or three months before in many cases.

Take the most recent Case-Shiller report: This study came from closed home sales – not in March or even February – but January. Those same transactions began when consumers agreed to buy the home perhaps as early as the fall. These kinds of reports are a very old “snapshot” of the housing market by the time they get to the news media. This would be like someone opening up their sports section last October and instead of seeing the Giants in the World Series, found our local heroes 10 games out of first because the papers was still reporting the July standings.

So what’s a better way to take the current temperature of the market? New sales or pending sales are a much more accurate assessment of what’s happening now because they are a forward-looking indicator. These are sales that have just occurred, but haven’t gone through the 30 days or 60 days necessary to complete escrow. New pending sales offer the best barometer of what’s happening at the moment regarding buyer confidence in the housing market; the transactions that will be reported by Case-Shiller and DataQuick a month or two from now.

And what’s encouraging to me is that all across the Bay Area, pending sales in March are outpacing the same total last year – in some cases by as much as 200% over March 2010. Our Greenbrae office is a good example. The housing market in March was “on fire” in Central Marin, according to our Greenbrae manager. The office was planning for 26 new sales, but exceeded that with close to 60 sales. He said the office has not had a month like this since the boom in ’07 and even then it did not have such a high number of transactions. That story is echoed by many other offices, from Marin down through the Peninsula and across the Bay.

This is not to say that every community and every neighborhood in the Bay Area is seeing a revival in new sales. There are still slow areas that are still challenged, depending on the price point. And even within some cities, certain parts of the market are doing well while others might be soft. And the overall market will continue to be challenged by shadow inventory of distressed properties coming on the market.

But my point is that if you read the lagging indicators like the Case-Shiller report you’d think the market is dropping off the cliff. Far from it. We are definitely seeing a tremendous improvement in many parts of the Bay Area, and we’re not alone.

According to the National Association of Realtors, the pending home sales index for properties nationwide, a forward-looking indicator, rose 2.1 percent to 90.8, based on contracts signed in February, from 88.9 in January. Lawrence Yun, NAR’s chief economist, said, “Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20 percent above the low point immediately following expiration of the home buyer tax credit.”

The outlook wasn’t even across all regions, however. The PHSI in the Northeast fell 10.9 percent to 65.5 in February. In the Midwest the index rose 4.0 percent in February to 81.1. Pending home sales in the South increased 2.7 percent to an index of 100.3. While in the West the index rose 7.0 percent to 105.6 and is now 0.6 percent higher than February 2010.

“We may not see notable gains in existing-home sales in the near term, but they’re expected to rise 5 to 10 percent this year with the economic recovery, job creation and excellent affordability conditions providing confidence to buyers who’ve been on the sidelines,” Yun said.

One other thought when it comes to housing numbers: It’s important to take the lower median or average sale prices in monthly reports this time of year with a grain of salt.

In many markets throughout Northern California, REOs and short sales can make up as much as 20% to 30% of the entry level sales.  While typical homeowners might take a break from the holidays and list (or re-list) their property in January or February, banks don’t take any breaks in November and December. These listings stay on right through the holidays. So a greater percentage of available listings that sell are “distressed” properties at lower price points, bringing the median and average sales prices down for several months in the New Year.

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

• North Bay – Our Greenbrae office, as I mentioned above, had a record month with the local market on fire. Among those transactions are two $2.5 million range properties in Larkspur, a $4 million property in Kentfield and a $5 million property in Ross. The office is buzzing and buyers are out in full force.  Unfortunately, at the same time Marin still suffers from lack of inventory.  Contrasting the high number of opens was a low number of new listings.  We are hopeful that the lack of rain and abundance of sunshine will change some seller attitudes about getting their properties on the market.  In Southern Marin, there is continual activity, and a number of multiple offers on REOs and short sales.  In the upper end of the market, if properties are priced well, they will sell, but they must perceived as a good buy and value, our local manager adds. Meanwhile, our Northern Marin office says inventory is rising, but sales have dipped. In Petaluma, multiple offers in the under $300,000 range continue to dominate the sales activity. Open houses are well attended. And the town of Sonoma is starting to heat up in the million-plus price range. Our Santa Rosa office also reports that sales are on the rise, and the local manager says they expect more new listings for April.  Finally, our Sebastopol manager says that their local market has seemed a bit slow. But there seems to be interest in the upper end, where they sold a $2.5 million home in 15 days and have two more high-end open sales that have come in. 
• San Francisco – It is beginning to feel like the market has sprung into action, according to our San Francisco Lakeside office manager, who adds that their sales and listings board “is lit up like a Christmas tree.”  Meanwhile, the Lombard office says sales activity and new listings have been steady with about a third of their sales resulting in multiple offers. Our Market Street office reports that the market, especially in the upper end, appears to be gaining steam. There has been a lot of activity at open houses, with as many as 100 people through some listings. A condo in the Mission district was in contract within five days of being on the market. 
• SF Peninsula — In Burlingame, multiple offers are coming up in every price point as the available inventory is getting smaller. The opens are busy – even condo opens. It feels like all the “fence sitters” who waited out last year have decided to jump into the market. The only trouble is finding a property. Inventory is down in Hillsborough and the other high end markets. Across the hills, it’s still a bit slow on the coast. Our local office says they seem to have extremes – such as all cash for $1+m second homes or buyers wanting the lower end REO’s.  In Menlo Park, our local offices say that sales are on the rise. The market is showing some definite strength in the $2.5 mil plus range, but good inventory is still hard to find. Sales are definitely on the rise in Palo Alto, where inventory isn’t keeping up with buyer interest.  Properties in the $2M range are selling with multiple offers, in excess of 20% over list price. Activity in the $2-5M range is also brisk.  The activity in San Carlos in the last two weeks has been robust.  In the single-family market there were four properties that had multiple offers – including one with 12 offers!  The other nearby areas (Redwood City, Redwood Shores, Belmont) are selling but not quite as quickly and not with multiple offers. In Portola Valley, the market has been steady while in San Mateo, things are showing signs of improvement.  Listing inventory is still lighter than usual, causing more multiple offers. 
• East Bay – Our Berkeley office says that suddenly there are lots of deals on the board.  Even properties where a previous deal has fallen through are being quickly resold.  Short sale deals are on the rise. In Danville, the rain last week seems to have had a “dampening” effect although sales activity has picked up strength in the last 2 weeks. The Livermore market has remained steady, with total pending sales in March up about 6%.  At the current sales pace of detached homes in Livermore, we need more quality listings to meet the demand of the buyers, as we have only 2.6 months of inventory of detached homes on the market. The upper end of the market remains strong with four closings of Preview Homes in Livermore during March, which is twice the norm in a month. Things are steady, according to the Oakland-Piedmont office, with the upper end very active. Our Orinda manager says that market is definitely heating up, and buyers are serious and realize it is the time to jump in. Inventory that has been sitting idle is starting to see interest with showings, request for reports, etc. Finally, our Walnut Creek office reports both sales and inventory are climbing again. Previews listing inventory is increasing, too, and what little inventory is coming on, it’s selling.  But some buyers continue to be very selective and wait for the “perfect” home. 
• Silicon Valley – Our Los Altos manager reports that the market has been very busy in that city, along with Palo Alto and Mountain View. Buyers are attending open houses in large numbers, and sales above $2 million are picking up. Inventory is starting to increase in Cupertino, with about a quarter of the sales multiple offers.  In San Jose, our Almaden office reports that most areas are selling quickly provided they haven’t raised the list price over the last comp.  Traditional sales (non distressed) are fetching between 5 – 10% above distressed sales. Meanwhile, our Willow Glen manager says sales are picking up and agents are getting more counter offers as well. Open houses are quite busy. In Saratoga, the market has become very active in recent weeks. The only thing holding back more activity is the lack of adequate inventory, the local manager reports. The upper end of the market is particularly strong. The office says three properties over $3 million have sold in the last few weeks.
• South County – The past 3 weeks have been very mild in regard to sales and new listings, according to our Gilroy office. Some agents believe the slowdown is due to current world events and things should begin to pick up now that spring and the start of the home buying season is here. Agents in the Morgan Hill office have experienced their own version of “March Madness.”  They have managed to almost fill the sales board with more than 50 sales in one month.   One agent herself has put 9 properties into escrow during March.  In addition, there were 32 closings this month for the Morgan Hill Office.  All of us hope that the momentum continues.
• Santa Cruz – Sales activity is definitely picking up, our local manager says.  There are more sales in the over $1 million price point and a lot of cash buyers roaming around. From a year ago sales over $1 million are up 50%. We are watching the law of supply and demand affect this segment of the market, as inventory levels drop, prices edge up, and we are seeing a few more sales.  In the $500K – $1,000,000 range, the inventory is down from a year ago, prices remain about the same, and homes are selling in a relatively short at 92 days on average.  These are all good signs.  If inventory levels remain challenged, we may start to see an increase in prices. Under $500K there is a fairly significant increase in homes under contract from a year ago – about a 48% increase! There is a short supply of inventory, just under 3 months with an average market time of 90 days or less.  Those lower-end properties are getting scooped up by investors and first time buyers.
• Monterey Peninsula – There have been more short sale properties come on the market lately, our Monterey area manager reports. Additionally, there have been more REOs in the Seaside area, though not the big influx we’ve been told we’d see by now.  The prices on so many short sale properties are looking to be so low–like such good buys–that there are an increasing number of multiple offer situations.  Working with lenders on short sales continues to be difficult. We just closed escrow on a couple of properties that we’d had offers in on months ago as short sales, but the lenders turned them down, only to have them foreclosed, put back on the market as REOs, and sold to the very same buyers for 15-20% less than offered as short sales!   

One final note on the luxury market – Silicon Valley has been buzzing about the very recent sale of a lavish 25,500-square-foot mansion in Los Altos Hills, reportedly to a Russian billionaire known for his investments in Facebook and Groupon.  The amount paid was anywhere from $75 million to $100 million or more for the property, according to various AP and WSJ news reports. That would make it one of the largest sales in U.S. history along with Donald Trump’s $100 million sale of his Palm Beach mansion in 2008. The buyer in that case was Russian fertilizer billionaire Dmitry Rybolovlev.  And another important fact I’ll share from a Coldwell Banker Previews meeting in Los Angeles this week:  Greater LA had 4 sales over $20M in 2008, and just another 4 over $20M in 2009.  In 2010, they had a 200% increase with 12 estates selling over $20M.  As I’ve said before, the “smart money” calls the bottom of a housing downturn.

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

Silicon Valley’s increasing dominance in tech sector bodes well for housing

Most of us in the Bay Area realize how important Silicon Valley is to the region’s health and wellbeing. The Valley has spawned many successful startups over the years, attracting highly skilled, highly paid workers, venture capital, and strong demand for housing. But just how dominant Silicon Valley is in the tech sector is surprising even the experts. And it bodes well for the long-term future of our Bay Area housing market.

Entrepreneur and former MIT research director Branko Gerovac examined the S&P Technology 1500 – the largest public technology companies in America – that have been created over the past 20 years to find out where and when they were launched. What he discovered was that every year, the Bay Area and the west coast are becoming more and more successful in spawning meaningful startups that grow into large companies – and the east coast tech hubs of Boston, New Jersey, Raleigh-Durham, and New York City less so every year.

In the past 20 years, Boston has added one company to the S&P-1500 technology sector companies, while Silicon Valley has added 19 companies. Our local startup list reads like a who’s who of publicly traded tech – Google, eBay, Yahoo!, Juniper Networks, McAfee, Palm…the list goes on.

Of course this doesn’t even take into account those burgeoning private tech concerns like Facebook that will become public one day soon. And then there’s Twitter, the company that could stake a rightful claim into leading the social networking revolution. Twitter just announced plans to lease headquarters space on Market Street in San Francisco as the company works to expand its workforce from 400 to close to 3,000 employees, as this story discusses.

Success breeds success. The Valley’s dominance in launching and growing tech companies will attract even more of the world’s top engineering minds, more creative entrepreneurs, more venture capitalists, and the cycle will repeat itself.

In a recent article entitled, Where the World’s Brains Are, best-selling author and urban studies expert Richard Florida said part of our formula for success comes from proximity to top-flight research universities (in our case, Stanford and U.C. Berkeley). Florida writes that these universities “increasingly function as a key hub institution of the knowledge economy” for Silicon Valley and the financial and biotech sectors of San Francisco and the East Bay.

All other things equal, Florida writes, “it is both easier for and more likely that leading scientists and researchers will move within these clusters” of local universities and remain in the general area to live and work. “This kind of proximity creates considerable short- and long-run advantages both for the universities and research centers within the cluster” as well as the region itself, he argues. “Established mega-clusters are likely to enjoy significant advantages into the foreseeable future.”

All of this could explain that while the overall Bay Area housing market has been holding steady in most areas, the high-end Previews market has seen strong activity in recent weeks in Silicon Valley, the Peninsula, and San Francisco. Just a few recent examples:

• A $17.5 million Atherton home on market for just 30 days sold with two offers;
• Another Atherton home listed for $6.9 million, sold for over $7 million, also with two offers;
• A $18.9 million Palo Alto property recently sold;
• And a $5.9 million Palo Alto home just sold for over $6 million with six offers;
• Our Burlingame office is in escrow now with a $16 million Hillsborough sale;
• Six San Francisco properties over $5M have closed in MLS since Jan.1, and at least one other off-market.
• Eight of the Oakland/Piedmont office’s pending sales are in the upper end of the market.

My sources tell me a lot of the buyers in Silicon Valley and the Peninsula are coming from our fast-growing social media companies. Stay tuned for more on the impact of this hot new economic sector.

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

• North Bay – Sales activity seems to be increasing, our Santa Rosa office says. New open escrows are holding strong. Open house attendance has been high, even in the rain. However, we are starting to feel the squeeze of not enough inventory. The Greenbrae office says local listing inventory has been steady and sales increasing with 17 recent ratified offers, including one multiple offer. Of the eight ratified offers in Northern Marin, four have been multiple offers. In Southern Marin, our local manager says that there are a number of quality listings in the area. But the market seemed to come to a halt after a flurry of activity last month.   Several sellers are reducing list prices, from prices that originally seemed to be a good value. The total number of units sold in Southern Marin is overall fairly consistent with last year.  Open houses are seeing good numbers but buyers are still hesitant to step up to the plate with solid offers.  The REOs are getting tremendous activity as buyers feel they are seeing good value at the price listed by the banks.
• San Francisco – The Lakeside office says sales are on the rise, but negotiations are the order of the day. Sellers are reluctantly pricing closer to sale price.  Buyers are frightened about paying too much but are stepping into the market to try to put an end to their home search. Pending sales are on the rise, our Sunset office reports.  Half of the ratified sales during this period were in multiple offer situations.  Open houses are very well attended, but the local market is still lacking inventory. Both inventory and sales are increasing, according to our Van Ness office. Five of the 41 recent sales were multiple offers.
• SF Peninsula — Our Burlingame offices report a steady to improving market. The Hillsborough market over $2 million is “robust” as long as the price is reasonable and the home is well staged. Hillsborough is often perceived as a bargain compared to other high-end markets on the Peninsula.Across the hill in Half Moon Bay, our local manager says there has been a noticeable drop in activity on the coast these past couple of weeks. Buyers continue looking but are not writing offers. Our Menlo Park offices say they are seeing strong sales in the over $2.5 mil market – a $3.85 million listing in Menlo Park is getting three offers today!  Buyers are exhibiting even more discretion as the ratio of houses sitting while others go multiple is rising.  Houses sit until the price is reduced and then the buyers jump. The “off-the-market” high-end properties continue to attract buyers. With all the technology we have, word of mouth networking continues to be a factor. One recent off-market sale went for $7.9 million in Atherton. The Redwood City office says inventory is still low.  Open houses, particularly first time opens, are extremely well attended.  The attitude of the buyers seems to be positive. Palo Alto remains a very strong market with more than half of the transactions getting multiple offers. Finally, the San Mateo and the Woodside markets are holding steady. The over $3 million market is doing well with three sales over this price in the last couple of weeks. Woodside is slowly waking up. Portola Valley has been much stronger the last couple of weeks – brisk sales of $1.3 million to $4 million.
• East Bay – Our Castro Valley office says if the market activity continues at its current pace, it will surpass its forecast for the month of March.  Closings for the month remain unpredictable due to the high number of REO’s and short sales taking longer than anticipated to close. In Danville, sales activity has been steady with four sales over $1 million in recent weeks. The Fremont office reports that inventory is still low.  The market is seeing more REO & short sales rather than traditional listings. Buyers seem to be waiting to see what interest rates are going to do as well as waiting on other economic news. In Livermore, both sales and inventory are on the rise. Total pending sales in the Tri-Valley area have increased dramatically in 2011.  Pending sales are up 38% in Livermore, 56 percent in Pleasanton, and 32 percent in Dublin since the first of the year. Additionally, there are lots of multiple offers. Our Orinda office reports inventory and sales are holding steady. Buyers are continuing to take their time and are in no hurry to make offers. Finally in Walnut Creek, our office says the market is picking up. More listings are coming on the market, and not necessarily distressed properties. But buyers are nervous regarding world news.
• Silicon Valley – Listings are on the rise and sales are steady, according to our Cupertino office. The Los Gatos manager says sales activity is increasing. The office just put a $5 million dollar home into contract and closed on $2.4 million dollar home from a walk-in client. The San Jose Almaden office reports sales activity is increasing, although it’s slow over $1.2 million. The San Jose Main manager says the local market is holding steady with excellent activity at open houses over the weekend. Low rates are keeping buyer interest in all price ranges. That story is echoed in Willow Glen, where the office reports they’re also seeing more multiple offers again. Both sales and listings are climbing, according to our Saratoga office. Not only has the office seen a spike in the number of new transactions, but agents are very actively working on additional deals.
• South County – In Gilroy, agents report buyers have a cautious mindset and seem to have no sense of urgency. Many feel prices are still falling. Two large builders, DR Horton and Hovnanian, just reduced their prices and increased upgrade packages due to slow sales after their launch two weeks ago. Properties in certain Morgan Hill neighborhoods are experiencing huge buyer interest and often are garnering offers almost immediately after they are placed on the MLS.  This phenomenon occurs despite the condition of the property, according to our Morgan Hill office.  Listings in other areas languish on the market.  Overall, however, the market is sputtering its way to a recovery.  Agents continue to report a steady stream of potential buyers at open houses and interest and demand remain high.
• Monterey Peninsula – The Monterey Peninsula market continues at a steady pace. Our local office says they seem to list and sell a similar number of properties each week, though down a bit from a month ago.  While properties at the lower-price ranges are selling quite readily, many with multiple offers, we’ve seen an increase in sales of higher-price properties, so that properties across the board are going into escrow.  In the past few weeks out of the 35 properties we closed, sales prices started at $195,000 and 10 were over $1 million, including one at $4 million and one at $6.5 million.

We continue to see a mixed market throughout the Bay.  The common thread seems to be low inventory at the entry level and generally more multiple offers in the entry level. The mid-price market is probably the most perplexing with a lack of move-up buyers.  The increased activity at the Luxury end is certainly a strong sign, but common thread here is that this sector remains very price sensitive; luxury buyers are pulling the trigger when they perceive value. 

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

Bay Area Home Sales Slowly Improving in the New Year

A closely watched housing report was released last week showing the Bay Area market slowly improving in the first month of the new year. DataQuick, the La Jolla-based information firm, said combined new and existing home sales were up 2.3 percent over January of last year. While that increase is less than many of us would like, there are signs that today’s market may actually be gaining more momentum.

What’s important to remember is that closed sales are really just a snapshot of sales activity that began as much as two to three months before – in this case the fall of last year. But as I said in an interview with the Oakland Tribune and Contra Costa Times, we should balance the DataQuick report with more timely market indicators. And in that case, we have reason for optimism.

As the Tribune and Times articles point out, things are starting to improve. Pending sales for January in the East Bay, for example, are much better than a year ago. Overall, pending sales in Alameda and Contra Costa counties were 34 percent higher last month compared to January 2010 – even though at the same time last year home sales were being stimulated by tax credits that have since expired. January marked the highest number of pending sales since last April – the final month of the credit. 

Although this is more anecdotal, it’s interesting to note that many of our offices report that they are busier with new transactions today than they were at this same time last year. They are seeing greater numbers of buyers and not just “lookers” at open houses. They’re getting calls from customers who have been sitting on the sidelines over the past year or so and are now ready to move forward.

Apparently, we’re not alone. Other brokers in the East Bay quoted in the news media said that pending sales last month were up anywhere from 18 percent to 66 percent over last year at this time, depending on the community.  While I don’t have figures yet for the rest of the Bay, indications are that sales activity is on the rise.

The bottom line is that there are strong indications that more buyers are seriously looking for a home or even going into escrow. And although we won’t see that activity turn into closed sales for another month or two, I’m encouraged that we are moving in the right direction.  It will be interesting to see sales figures as we head into the spring buying season.

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

• North Bay – January sales in Marin were up year over year, but prices are down since last January, according to our Greenbrae office.  We are seeing increased market activity with lots of buyers ready to go once they find the property they want. Closes in January and February are less than anticipated, but opens for February (March & April closed sales) are up. One of our listings in Larkspur at $2.5 million is receiving significant market interest but no buyers have stepped forward yet – indicative of a market where buyers take their time to make sure they are making the right decision. Activity is increasing in Southern Marin. Buyers are out there, and many are starting to step up to the plate with offers.  Deals continue to be fraught with problems, with both buyers and sellers sensitive to every term of the contract. But they are closing more often than not. Our Northern Marin office says there have been great turnouts at Sunday open houses (even Super Bowl Sunday). The spring market feels as if it’s starting already, our Santa Rosa office reports, with sales and listings increasing. Open house attendance has been very strong especially in the high price points. In Sebastopol, the market has been fairly steady. Open houses have been better attended and agents are writing offers and showing properties. List price is crucial; even a little too high and no offers will be tendered. Price it right and there will be multiple offers. . In Petaluma, open houses have been well attended in the double digits.  The weekend continues to bring numerous walk-ins into the office.
• San Francisco – The local market has been steady, our Lakeside office says. There has been good open house attendance and lots of activity. But agents are having a hard time finding good, well-priced product to sell to buyers who are ready to buy. Our Lombard manager reports lots of open traffic and busy agents without the corresponding number of sales. Open house activity was brisk, our Market Street office says, with a property in the Mission Dolores area where agents stopped counting after 120+ came through on Sunday. The Previews market is also picking up. Our Sunset office reports that more inventory is slowly coming on the market, but still not enough to meet demand. There is a strong demand for solid residential income properties in the City.  There was portfolio of 20 multifamily properties that came on the market couple weeks ago with a total asking of over $63 million that received seven offers for the entire portfolio. Finally, our Van Ness office says both inventory and sales activity are on the rise – including in the Previews high-end segment of the market. There were 34 ratified offers in the past couple of weeks – three of which were multiple offers.
• SF Peninsula — The spring buyers are out and ready to buy when they can locate the right inventory, our Burlingame managers report. We are routinely seeing multiple offers on well-priced homes under $1 mill. Open house activity has increased with as many as 100 people through one open house. Buyers are more positive and sellers more flexible on price. Across the hills in Half Moon Bay, there seems to be two extremes in the market – the very low end selling quickly or the upper end second home, all cash, selling quickly. Our Menlo Park offices report that they are definitely seeing a stronger high-end market in that community. Buyers are not afraid to spend $2.5 million for a house anymore. The inventory is slowly increasing, our Redwood City office says.  Buyers are taking their time before making a decision.  Agents are working with both buyers and sellers for longer periods of time.  Overall attitude seems to be positive. The Palo Alto market is extremely tight in inventory.  The $2.5 million price range is strong and getting multiple offers.  One example: a Palo Alto listing at $2,195,000 had 118 groups through open house, 14 packets are out, offers on Wednesday. Our San Mateo offices say open houses are still very well attended, although many buyers still on the fence. Finally in Woodside, our local manager says sales activity and inventory have dipped. Still a lot of interest, but no action.
• East Bay – Our Castro Valley office reports that there has been a significant increase in the number of ratified offers and listings taken during the past two weeks. Typical of Berkeley this time of year, there is a low supply of inventory of homes while sales activity has been steady. In particular, there have been no listings in the $1.5 million to $2 million range since October. In Fremont, listing inventory is steady and sales are picking up – most likely to the recent uptick in interest rates. Our Livermore office says that both inventory and sales activity in the Tri-Valley area are on the rise. Total pending sales in all three of the cities are up since the start of 2011.  Total pending sales are up 17.2 percent in Livermore, 25.7 percent in Pleasanton, and 22 percent in Dublin. Our Oakland/Piedmont office reports that open houses have lots of new buyers and the agents are busy. Most of the sales for the month are in the mid price range and many are short sales.  Lots of new listings are coming on to the market. In Orinda, the market remains steady for sales and new inventory. And finally, in Walnut Creek, our local office says there are more REO’s coming on the market.  More listing inventory will be coming in March.  Open house traffic is good, but many buyers still sitting on the fence.
• Silicon Valley – Our Cupertino office reports that although the local market was off to a slow start, it is definitely picking up steam. Buyers at open houses seem more committed to buying, rather than just looking. The Los Altos market is improving in most price ranges.  Our local office was involved with multiple offers on a higher end townhouse in Cupertino that sold for the high $800s and had 22 offers.  We also had one of our listings of a high-end condo in Mountain View that was listed in the mid $800s sell with 6 offers in the low $900s.  And one of our Palo Alto single-family homes sold with 6 offers over 10% above the $2M list price. Open house activity is also picking up in Los Gatos, where sales are on the upswing. Both sales and inventory are picking up, according to our San Jose Almaden office. Attractively priced homes that are considered a good value by buyers are selling quickly.  Our sales are keeping pace with new inventory in markets west of HWY 87.  Over all, this appears to be starting off as a healthy market. Similarly, the Willow Glen market has been steady in the new year. Open houses have been very, very busy, and there has been cash offers than usual. Finally in Saratoga, as expected, we are seeing the market improve with listings and sales both on the upswing.
• South County – The South County market is showing signs of life—agents are reporting that open houses are well attended and that buyers are interested and engaged.  But buyers also seem to be divided into two distinct groups: Those buyers on the fence who just won’t make a buying commitment and those buyers who believe that making lots of very low offers will garner them a bargain.  This seems to be a common theme across most price ranges.  South County is also seeing an increase in REO listings, and short sale transactions seem to be the norm.
• Santa Cruz – January and February are seasonally slow real estate months in the Santa Cruz area, and it’s is no different in 2011.   There is a steady “buzz” in the offices, and the agents are definitely working to gear up for the spring market. In general, we’re starting out stronger this year than in 2010.    Open houses are hit and miss – depending on location, weather, etc. Some have been very well attended, others rather stale.  We have a lot of new inventory coming on the market.  Sellers still want to try the higher price of the recommended range. However, those sellers who listen to their agents and price slightly below or at the last sale price are much more likely to attract a buyer.  It is extremely important for the agents to understand the importance of managing the client’s expectations especially with sellers, providing definite timeframes for price adjustments at regular intervals.  Those agents who are having these purposeful conversations with their sellers, and revisiting the price at specific intervals, are having more success.

 One final note on the Previews market: The upper end of the Bay Area market continues to improve in many areas. One of our agents won a multiple offer situation representing a buyer for a property in Kentfield listed at $4,695,000 this past week.  Our Southern Marin managers says Previews listings are getting more activity than last year, and high end buyers seem to be out in droves.

One extreme example of the improvement in the luxury market just happened in Silicon Valley where an off-the-MLS listing has sold. The palatial estate sitting on 17 acres boasted two homes – a main house at 25,000 square feet and a “small” home at 5,000 square feet. The price is one of the Valley’s best-kept secrets, but insiders said it was between $50 million and $100 million. The buyer will certainly be helping Santa Clara County coffers. His or her new property tax bill alone could be in the neighborhood of $1 million a year!

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