Weekly Market Watch

Weekly Market Watch
Week of June 23 – 29

It’s a great time to buy real estate.

Consumers need to be reminded that you can’t and shouldn’t play the housing market like the stock market. It’s not a quick-in, quick-out type of investment. Real estate is meant to be a long-term investment——one that historically speaking yields positive results. If consumers intend to be in their home for at least a few years, buying right now may make good sense. Couple that with the fact that your home provides shelter—a place for you to call home—it makes for one of the safest investments consumers can make.

So why are consumers still sitting on the sidelines? Is it fear? Overanalyzing? Lack of access to facts? Low consumer confidence? In all honesty, it’s probably a combination of them all. And our economy—including those darn gas bills—isn’t helping. But now truly is one of the best times in our recent history to buy real estate.

What I can say with the greatest level of certainty is that what goes up, must come down and on the flipside, what goes down, must come up. The down cycle has to stop somewhere and the good news is that we are seeing some consistent and positive trends that are making even the most pessimistic of analysts raise their eyebrows. Take a look at what came out this week:

Home sales increased 18.1% in May in California compared with the same period a year ago, according to CAR.
Furthermore, CAR recently reported “Home sales exceeded 400,000 last month for the first time since early 2007. While this is a welcome sign for the market, it was due in part to the large share of distressed homes for sale in many parts of the state,” said CAR President William E. Brown. “Sales also rose above their year ago levels for the second month in a row after 30 consecutive months of year-to-year decreases. The lower prices associated with distressed sales along with favorable interest rates both contributed to higher sales levels.”
The latest home resale report from NAR notes that sales were up by 2% nationally in May. Condo sales also jumped up 5.5% nationwide.

I know what you’re thinking, “Yeah, but this is just because of all of the REOs.” And yes, on some levels, this is true. But what this means is that while the recent slowdown in the housing market has softened prices for home sellers, it has also resulted in an unusually good opportunity to buy rentals and other investment properties. And savvy investors are taking notice and making offers, which is helping to drive an upswing in our market.

So now, on to our local markets:

- East Bay – The East Bay remains a market full of mini microclimates. Take Castro Valley for example. This market has been full steam ahead since late Spring which launched a flurry of REO sales. This week was no different. In fact, one Agent reported that for the first time in nine or ten months, there were more Agents representing buyers than there were listings. There are buyers everywhere that are taking advantage of the REOs and lower prices. Nearby Fremont concurs noting that they are enjoying a typical summer market with increased listings and increased sales—again, largely in part due to REOs. The Walnut Creek office reports that pending sales are up 300% in East Contra Costa County—one of the Bay Area markets hit highest by foreclosures. The affluent East Bay community of Orinda is what surprises me this week. They reported 15 ratified offers—three of which went into a multiple offer situation. All but one of the nine East Bay offices reported that sales activity were steady or increasing. A great sign as we had into the 4th of July holiday.
- North Bay – Yet another market enjoying the benefits of the flurry of REOs, Sonoma County continues full-steam ahead. Our Petaluma office reported that multiple offers are “dominating our marketplace” with five of 13 offers going into multiples. Our Santa Rosa office concurs reporting that the majority of their open escrows are in the entry level market—another sign of REO flurry. Neighboring Marin has been hit the least by REO activity but, thanks to its lack of buildable land and its global destination locale, remains a relatively stable market.
- Peninsula – We saw a much slower week along the Peninsula than we have in recent weeks. But in all honesty, we can’t really complain. The Peninsula has been its own mini microclimate through much of this real estate downturn with its most common problem being lack of inventory. Somehow the Peninsula has almost weathered the storm with very little effect to its bottom line. A couple of bright spots for the week: The Menlo Park El Camino office reported that there was strength in all price ranges this week—$290,000 to $7 million. Oh, and that $290,000 listing received 13 offers! The Palo Alto office reported that multiple offers are occurring about 80% of the time in Palo Alto proper. Not bad for a market that had a “slower than usual” week.
- Monterey – This week was a very busy one with writing offers and closing sales before the month’s end. The offices reported that they closed 10 sales on Friday alone. Phew! Why is this market moving so smoothly? I chalk it up to a consideration that they may not be quite as impacted by the effects of the national economy as some of our inland communities. Monterey by nature is a more affluent and upscale community and lending issues and credit concerns become less relevant.
- Santa Cruz – No information reported this week.
- San Francisco – I think we can chalk this slower than usual week up to an early 4th of July holiday. Many City residents are heading out on vacation and thus, the market traditionally takes a bit of a pause until San Franciscans return. Having said that, well priced and presented properties are still yielding multiple offers—though, for the most part, homes don’t seem to go wildly over listing. The Market Street office is reporting that they are getting a lot of multiple offers with buyers much less hesitant to act. Some Buyers are even setting up “Plans B and C” in case they lose out on their first choice.
- Silicon Valley – Silicon Valley is one of the broadest areas for micro climates. Take San Jose for instance. This market is currently enjoying the REO flurry as well with many listings going into multiples. Our Cupertino Stevens Creek office reported that Cupertino and Sunnyvale listings are moving quite well—as long, of course, as they are priced well and show well. One listing this week received three offers. Neighboring South County (Gilroy, Morgan Hill and Hollister) are also seeing the short sale and foreclosure frenzy. Our Gilroy office reported eight multiple offers this week alone and that a large percentage of available listings are short sales. The affluent communities of Los Altos, Los Altos Hills, Los Gatos and Saratoga are seeing movement but only if the old adage of “price it right from the start” holds true. Homes that test the waters often sit while those that price their homes competitively from the beginning—and show well to potential buyers—seem to move almost as soon as they hit the market.