Weekly Market Watch

Weekly Market Watch
July 7-13

It’s the Best Time to Buy in More Than Four Years!

At least that’s what I gathered from DataQuick’s release of its June report (http://www.dqnews.com/News/California/Bay-Area/RRBay080717.aspx) late last week. Of course the media took a different spin, focusing heavily on the negative. Some say I am the eternal optimist, but I do have several quantifiable reasons for my take. Read on.

Let’s start with DataQuick’s lead: “The median price paid for a Bay Area home plunged to $485,000 in June, marking the first time in more than four years that it was below the half-million mark.” Of course, news media outlets ran screaming with headlines like “Home sales plunge to near record lows” but how can you not look at the other side? The fact is, when prices fall to their lowest levels in four years, what it becomes is music to the ears of buyers. And here comes that first time home buyer again, creating that domino effect (I mentioned two weeks ago) for what could be our entire housing market in the coming months.

Yet another reason? The Commerce Department said Thursday that construction of single-family homes dropped 5.3% in June to a seasonally adjusted annual rate of 647,000 units, the weakest performance since January 1991, another period when the housing industry was going through a severe downturn. So how could this possibly be good? The fact is that our population is growing and over the next several years, we are going to continue to need additional housing. When construction of new homes slows, increasing demand will lower inventories, pushing prices back up again. All of these factors are positioning us for a turnaround. And while we prepare for that, my best advice to you is to stay the course. Continue to support your clients with your professional advice and your expert local market knowledge.

A lot of buyers are finding that they can afford more house now than they could’ve hoped for a year or two ago. Certainly, there are tremendous buys out there. But, on the contrary, most sellers aren’t going to give their homes away. Not all sellers are willing to deeply discount their asking prices. Buyers need to be aware of this before they go into an offer hoping to deeply discount it without fully understanding the appropriate local comps.

So, enough said, let’s get into our market updates for the week:

East Bay—The theme in Berkeley? “Bring on the listings!” This market is enduring what the Peninsula and the City saw for some time—low inventory. In fact, they only have 2-3 months of core inventory in their market. Oakland reports that good inventory isn’t sitting long and cautions sellers to decide if they are truly motivated to sell if a listing doesn’t go under contract in the first month. Castro Valley, after months of rapid fire REO activity, is starting to see listing inventory grow again. Our Livermore office is reporting that one Agent wrote an offer on a Tracy REO listing that had 22 offers. The Tri-Valley seems to be relatively unchanged week over week with still plenty of buyers who are just holding out for the value.
Monterey County—After coming off a slow, three day weekend which is typically our Monterey heyday, we were surprised to find that this week was surprisingly strong. Activity picked up and we had 14 deals go into escrow. Yet another example of how difficult this year is to predict in real estate.
North Bay—REOs continue to be the driving force for much of Sonoma County. This week our Petaluma office reported that they had 22 new sales, 16 of which went into multiple offers. The majority of that activity was in the below $500K mark. Again, welcome home first time home buyer. We’ve missed you! Nearby Marin is a mixed bag. San Rafael agents are seeing price points drop to all time lows thanks in large part to the flurry of REO activity. In our more affluent Marin markets, things have gotten a bit quiet. Opens seem to be seeing less traffic and deals aren’t as plentiful in Greenbrae and Mill Valley. But I also chalk that up to a lack of inventory in some areas. So we’ll see how it plays out over the next few weeks as inventory levels increase a bit thanks to the summer doldrums.
Peninsula—It seems reality has finally sunk in for many sellers (maybe Reality Check is working?) along the Peninsula and they are finally shifting their price points to reflect current market conditions. Price points are now more in line with today’s trends and buyers seem to be more pleased with their positioning and are starting to get in on the market. Sellers, though resistant at first, seem to have come around and, after coping with the reality of the offers they’ve been receiving, are coming to realize this may be the current “value” of their home. In Menlo Park, Palo Alto and Redwood City, markets that have been plagued for at least a year by low inventories, are witnessing an increase of inventory by more than 50% year over year. San Mateo, on the contrary, is reporting pending sales up 22% for July (from 2007) and closed sales are up 22% (from July 2007).
San Francisco—The market seems to be picking up after the 4th of July slowdown. In fact, we had 13 multiple offer listings among our five San Francisco offices this week. Not bad folks! But while some listings are getting multiple offers, typically prices aren’t going much over asking, if at all. We are also seeing some listings that sit. Demand for well-located and desirable properties is constant but anything less than that is languishing and driving inventories (in some neighborhoods) up. Sellers beware of this fact as you prepare your home for sale. You need to properly position your home BEFORE it hits the market or, in all likelihood, it could go relatively unnoticed—even in our beloved City.
Santa Cruz County—A market plagued by REOs, Santa Cruz County has definitely seen its share of falling prices. In fact, the median price has dropped $150,000 over this time last year and unit sales are down 29.5% from the first half of 2007 versus the same period of 2008. But going to my glass half full reference, if buyers don’t see the opportunity that is presenting itself here, they better start!
Silicon Valley—A mixed bag. Cupertino saw a huge surge this week with their pendings increasing from seven to 19! An anomaly? It’s hard to say. This market seems to change with the wind and we never know from one week to the next whether inventory and sales will be up or down. Silicon Valley is also seeing its fair share of price reductions as sellers begin to come to the reality of today’s market conditions. Sellers who seem to prevail are those who price their homes competitively from the start and don’t test the waters.

Both pricing and presentation are vital in today’s market. Buyers seem to be only noticing two things: new inventory, and new price reductions. If you want your home to remain competitive in today’s market, you need to consider this fact. I urge sellers to not test the waters when placing their home on the market. Homes that sell will be priced competitively and presented in the best light possible