Weekly Market Watch

Weekly Market Watch
September 15-21

If you were like me, you came home from work Wednesday evening, started to cook dinner, turned on the television, and listened as President Bush announced that “we’re in the midst of a serious financial crisis, and the federal government is responding with decisive action.” He went on to describe his plan to use $700 billion in taxpayer money to help solve the problem, sparking several days of heated congressional arguments, a flurry of economic predictions and lots of media coverage. And, if you are like me, you have been left wondering how all of this will affect you, your family, your clients and consequently your business.

In his speech, the President reminded us that much of the trouble in the financial market was sparked by mortgage lenders approving loans to borrowers who shouldn’t have qualified. They used the money to buy houses they couldn’t afford and eventually defaulted on their homes. This is nothing we don’t already know but it reminded the public, including potential buyers, which domino caused the rest to fall.

For months, you’ve no doubt encountered buyers who have been content sitting on the sidelines waiting for prices to fall. The recent economic developments only reinforce the fact that they should wait to buy, right? Wrong! The real estate market continues to improve and it’s important, probably now more than ever, for you to educate buyers on why this is a good time to get into the market.

For much of northern California, homes are at their lowest prices in years. There is a large amount of inventory out there (and I can honestly say now –finally a bit more inventory in our higher-end /heavily sought-after communities, too) and buyers have a plethora of well-maintained and affordable homes to choose from. First time buyers and investors are taking advantage of REO and short sale properties, and current home owners are finding the possibility of moving up in the market within their reach. It’s not often that buyers are able to get the exact home they want that is also in their price range, but this is definitely a likely possibility right now.

One of the strongest factors buyers have in their favor is current mortgage interest rates. For the past several weeks, rates for 30-year fixed-rate loans have been falling to levels we haven’t seen in four or five years. Lenders are currently hovering around 6 percent, and some even below that. As our national Coldwell Banker CEO Jim Gillespie addressed in an interview with CNN this week, “consumers have been subjected to a barrage of information. Once they grasp what has happened, they’ll understand that mortgage interest rates are still near historic lows, that they have a lot of homes to choose from, and that price corrections have improved affordability.”

It’s no secret that lenders have become more stringent on their loan qualifications, but buyers with good credit and at least 20 percent for a down payment should not have much difficulty getting approved for a loan. (and don’t forget about FHA with roughly 97% financing available in the areas where home prices support it). The proposed bailout plan is designed to pump more money into banks and lenders which will then be able to lend more liberally, making it easier for buyers to qualify for loans. That could lead buyers to feel more confident in their loan qualifications and contact you to start looking to buy. And next, what generally follows when more people are buying and borrowing and the economic picture gets brighter? Of course – interest rates are generally pushed up to curb possibility of inflation.

We may be in a “wait-and-see” mode when it comes to the financial market, but it’s the housing market we are all directly concerned with. Let’s take a look at this week in real estate:

East Bay—Busy, busy, busy were the open houses in the East Bay. The Danville office reports sales picking up for properties that aren’t bank owned. The same is the case in Fremont, though REOs are still scorching there. At an open house in Livermore, the Agent wrote an offer on the spot. The Oakland-Piedmont office says that buyers nervous about the financial market, are offering less than asking price in multiple-offer situations. Nerves were also to blame for two offers canceled at the Berkeley office. But overall, our East Bay offices report that buyers are still out there looking. Desirable listings are getting lots of visitors. Buyers are on the move to find the right homes and the market remains active.
Monterey County—This seems to be an area where buyers are really taking a step back to consider the financial market before moving forward. Several buyers there were considering making offers, but have put things on hold for now. There have also been a few requests from buyers already in escrow to reduce prices from what was already agreed to in the purchase contract. But overall, things remain steady and 14 offers were ratified.
North Bay—It’s not a surprise that the Greenbrae office reports that buyers fear not being able to get a loan, paying too much for property, or trying to come to terms with a loss of equity. But the San Rafael office reports that a home in Petaluma they listed for $319,000, had eight offers and sold over asking price just two days after it was listed in MLS—a sign that smart buyers know a good opportunity when they see it. Our Santa Rosa office reports that the market below $500,000 has increased in activity, almost doubling the open escrows for the week. Activity is also increasing over the $1.5 million range in Southern Marin. Our Mill Valley office has put three of their listings between $1.5M and $2.6M into contract this past week. The Sebastopol office says “cash is king” when it comes to REOs, as all accepted cash offers were not the highest. And though inventory has slowed in the Petaluma office, open escrows continue to be strong.
Peninsula—The key words on the Peninsula are “reasonably priced.” That’s what the Burlingame office attributed to a house in Hillsborough selling in 24 hours, and the Half Moon Bay office says one of their listings had two offers after the seller reduced the asking price. The Redwood City/San Carlos office reports having more inventory coming on the market—all more realistically priced. Though buyers there are taking their time, once they find the right property they move quickly. Open houses were busy in Palo Alto and Menlo Park, where the El Camino office reports contingent sales becoming more common.
San Francisco—Lenders seem to be causing some hiccups for some transactions in the City by the Bay. The Lombard office says that most deals are being sold very close to asking price and about one deal a week has numerous offers and sells over asking. But skittish lenders are causing more 11th hour problems and appraisals are becoming more of an issue. The Noriega office also reports new obstacles when it comes to loans. Overall, inventory is growing in the City, and the Market Street office says it is seeing great attendance at open houses for well priced listings.
Santa Cruz County—Inventory levels are starting to drop slightly in the county and our offices report sales in July and August have exceeded those of 2007. Much of those have been REOs, with about half the sales under the $500,000 price point. But, one Agent sold his $5 million listing to a cash buyer and closed in 21 days, and has other cash buyers making offers in the $3 million-plus market.
Silicon Valley—This area continues to be a little bit of a mixed bag. The Cupertino De Anza office is reporting an increase in pending properties, which are mostly in the low-end or under-priced. Those are the only kind of deals the San Jose Almaden office says buyers are willing to pull the trigger on. But an open house in Sunnyvale has had an excess of 175 people on recent weekend openings, and open houses and floor calls are still keeping the San Jose Willow Glen office busy. REOs are still the hot ticket, but non-bank owned properties are also selling well.
South County—REOs are still in demand in South County, especially in Salinas, Watsonville and Hollister. Activity on that front is booming and the Hollister office reports multiple offers on many bank owned properties.

It’s true that what happens on Wall Street affects Main Street, and in our case Oak Lane and Maple Drive. But we all know real estate is one of the best investments one can make. I have to say that this past week I was really pleased to see 11 of our listings over $2M go into contract within our immediate region of the Peninsula, San Francisco, and North Bay. And of these - as you would expect – the listings over $3M were located in Menlo Park, Woodside, Hillsboro, and San Francisco, but a very welcome addition to this week’s high-end pending sales was a Santa Rosa listing at $3.9M! Even Donald Trump told Larry King this week, “it's an unbelievable time to buy a house…go out and make a deal!”



Rick Turley
President, San Francisco/Peninsula/North Bay
Coldwell Banker Residential Brokerage
tel 415.437.4505