Weekly Market Watch

Week of October 27- Nov 2

Regardless of your political persuasion, this week’s election was one for the history books. After a long, defining, historical race to the White House, Senator Barack Obama defeated Senator John McCain, earning him the position of the 44th President of the United States. Just two years ago, with home prices in the US at an all-time high, it seemed the war in Iraq would be the single leading issue for both parties going into the campaigns. During the past 12 months, and particularly the last three, the #1 concern by far turned to that of the economy. CNNMoney ran a very good story, “How the Economy stole the Election” which chronicles the recent historic economic events that have touched every American, as well as every economy throughout the world. http://money.cnn.com/galleries/2008/news/0810/gallery.economy_election/index.html

On Wall Street, after a sharp rally through Election Day, stocks plunged sharply in the two sessions following Obama’s victory. The Dow had lost 929 points, its biggest two-day point loss ever. With growing unemployment figures released, and news of GM’s massive quarterly loss, Wall Street saw yet another rally on Friday as investors jumped in to pick up some bargains, and the Dow ended up 248 points. Although it was an historic election week for the US, watched by the entire world, the roller coaster pattern on Wall Street seemed just like any one of several recent volatile weeks. President-elect Obama has stated the economy is facing the "greatest economic challenge of our lifetime," and said he will take all necessary steps to confront the crisis. He said if a second stimulus package is not passed by the lame-duck Congress that it will be his first priority once he takes office on Jan. 20.

The weeks ahead will bring many debates on what kind of financial stimulus is needed where –how much, how fast. The good news is that some signs are appearing that we are taking steps in the right direction. The 3 month Libor lending rate has fallen to a four year low, which is critical to economic recovery. The Fed has injected another short term funding of $100 billion through their Commercial Paper Funding program to help businesses. Although credit isn’t flowing as quickly as hoped, these steps are necessary to get banks loaning to businesses and to consumers. Several gauges noted by Libor and Treasury bill rate-spreads show that credit confidence is finally on the rise.
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Incoming NAR President Charles McMillan concurs noting, “We’re in a good place. Realtors are excited by this historic election and stand ready to work with our new president and the new Congress on issues that are at the heart of the American dream of homeownership.” Here is what our offices are saying:

East Bay—After a few slow weeks, our Castro Valley office is reporting that it had a pick up in sales this week. We have a lot of buyers who seem enticed by the dipping of prices in San Lorenzo and Castro Valley. Our Berkeley office is sharing a similar story noting that sales picked up in the past week and some listings we have been waiting for finally arrived. The $700,000 to $900,000 market is active. Rumor has it, according to our on the ground experts, that things will pick up after the election, especially now that consumer confidence has been restored. Fremont is reporting that sales and listings are generally slow this time of year but possibly slower this year due to the economic downturn. Owner occupied sales are selling IF (and this is a big if) they are priced aggressively. You can’t test the waters in this market. You need to be priced aggressively from the beginning to ensure your home gains the exposure you need.
Monterey County—Even after a tumultuous month on Wall Street, we put 51 properties into escrow last month. Though it takes much longer, properties well-priced and well-located over $1.5 million are still selling. Sales activity is decreasing and our listing inventory remains steady. Agents are reporting slower attendance at open houses over the weekend, though I do believe that the seasonality has something to do with it.
North Bay—Our Greenbrae office is reporting that deals that fall out of contract then return quickly. Houses that have been on the market for over 100 days suddenly get two offers in one day. These are the sudden changes we felt over the last week. Buyers are waiting for the perfect moment and it seems now is the right time to place an offer. Some times it just takes buyers a while to get to the point of realizing that. Our San Rafael office notes that they are still seeing a mixed bag of properties listed in the marketplace that appear overpriced by a long shot. Having said that, sellers who price homes just under their competition in their surrounding area are seeing multiple offers and in some cases, causing a “feeding frenzy” for buyers who are driving the price over asking. There are so many buyers out there NOW is the time to write an offer, before they all come out at the same time.
Peninsula— Everyone last week seemed to be in waiting mode, until after the election. Sales are picking up, however, and we are seeing more multiple offers. The “off market” trend continues with sales in the high end. We are also beginning to see more offers with home contingencies and sellers are accepting them if they think the location and price is right. In terms of the local luxury market, Hillsborough currently has 63 active listings and five pending sales. That is about 20% more than typical inventory. Half Moon Bay saw a bit of a slower week—possibly due to the rain, the economy, the election—or better yet, a combination of the three. Inventory is up, sales are slow to ratify. The remainder of the Peninsula continues to see a slow down in sales activity—though buyer interest remains high. We are still seeing a lot of activity at open houses and in floor calls which is a good sign for the near future. The buyers that are in the market, as reported by our Redwood City-San Carlos office, who have good credit scores and large down payments aren’t shy about cutting deep into the list price, offending some sellers. Possibly the best news reported by our offices was that of our San Mateo office. Manager Chuck Cwieka shared that his office had its best weekend in six weeks—a sign of promise for our future.
San Francisco—Slow but steady. That seems to be the underlying theme for the City. Some Agents report increased activity at open houses while others saw a slowdown. A few transactions that seemed near death got a revival and will now close escrow –that’s a good sign. For the most part, higher end properties show little movement. Last week there were more than 100 properties available in San Francisco MLS at $3M and higher - more than we’ve seen in several years. Some buyers understand the scarcity of San Francisco property in its unique 49 square miles surrounded by water on three sides. Savvy investors with some cash for down payment are seeing the opportunity this current economic uncertainty brings.
Santa Cruz County—Inventory levels have dropped below 1,000 single family residences in the county. This represents about a 10% inventory decrease within the last four weeks. The market continues to be driven from the bottom up—with most pendings in South County. The under $500,000 market continues to attract many potential buyers who are out and looking hard at potential properties. Some are investors but many are first time home buyers. The luxury market is lagging both in closed sales and price point. Over two million is less than 2% of closed sales for the year and $1-2 million is about 11% of the closed sales. We closed two sales over $1 million in the past week.
Silicon Valley—Just as I said last week, though buyers are still cautious, things seem to be brighter in Silicon Valley. Many of our Agents are gearing up their business for the start of 2009. Buyers—though cautious—are out touring properties, visiting open houses and meeting with their Realtors. We seem to have a lot of buzz, though little of it has resulted in notable amounts of activity. I think much of that is due to the volatility in the stock market over the last several weeks and the lack of knowing who our next President would be. Now that one of the two is settled, I think we should see a return to stability and security in this region.
South County—Though REOs continue to gain the most interest, we are seeing an increase in market activity in the $500-$700K—but only on well-priced homes. Homes that are considered a value are gaining interest in this price point. Our Morgan Hill office reports that the Previews market in South County is a series of “contrasts.” We have one new home development with list prices of about $1.2 million that have continually slashed prices and offered buyer incentives. As a result, they sold several homes in the past week.
My message this week to everyone is let’s embrace this time of change. Whether you are a Republican, a Democrat or an Independent, we all need to join together in restoring our economy and move ahead with the bright prospects of our future just ahead. It is very possible that the worst of times has passed. And even with some challenging times ahead, real estate remains an important investment, not only financially, but personally as well. It is in times like these that we need to be reminded of and embrace the American dream of home ownership. We need to remind ourselves that owning a home is more than an investment—though it remains one of the best investments we will make in our lifetime. Our home is also where we raise our families, build traditions and create memories that will last a lifetime. And I can’t think of a better investment in our lives and our own well-being than that.

Have a great week and here’s to our future!
Rick

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