Weekly market Watch

Week of November 3 - 9
What we are enduring is no longer a national economic crisis. We are full swing in a global financial crisis that has affected at least 11 countries around the world. Brazil, China, Germany, Iceland, India, Japan, Russia, Saudi Arabia, South Africa and the United Kingdom are now all reporting economic declines and many experts agree that their woes are a direct result of the U.S. housing decline.

World leaders gathered in Washington on Friday to talk about what is needed to get the global economy back on track. Leaders from the Group of 20, which includes the United States, members of the European Union, China, Saudi Arabia and Brazil, agreed to the summit late last month at the height of the global financial crisis.

Our government continues to struggle with finding a solid, coherent plan to give necessary aid to the troubled credit and housing sectors. The administration is still working on the best way to deploy the remaining money in the $700 billion financial rescue plan passed last month. Treasury Secretary Henry Paulson said Wednesday that the government will no longer buy troubled mortgage backed securities—the original intent of the legislation—and will mainly focus on injecting money into the financial sector.

The stock market continues its frenetically sharp swings. This week brought further poor unemployment numbers, and then disappointing retail sales which were off, the resulting fear causing sell-offs, which ultimately attracted buyers taking advantage of lower stock prices. Sounds familiar, right? Each week for more than a month and a half, it’s been about the same story on Wall Street.

CAR’s chief economist Leslie Appleton-Young recently gave her 2009 housing forecast at the CAR statewide meetings in Long Beach. Here is the link to her video presentation, which I encourage to take the time to watch. It’s a little over 45 minutes, and very worthwhile. (http://www.car.org/newsstand/2009forecast/).

Specifically, Leslie shares how California compares to the rest of the country, noting that while our hardest hit areas decreased further and faster than the country as a whole, these areas are also rebounding at a much faster rate than the rest of the country. It is an important fact that consumers should be aware of.

She also shares the importance of local forecasting noting that it really is a mistake to paint the California real estate market with a broad brush. Markets like the Central Valley were hit much harder than the Bay Area yet are often lumped in to make sensational headlines for real estate stories. Our sales in the Bay Area, according to DataQuick, have increased 45% since 2007. Two things we know about this sharp rise in Bay Area sales is that they are largely fueled by REO’s, and that they are dramatically pushing median price down. The positive fact is that these homes are indeed selling, and at a fairly rapid rate. As we weed through the bank owned listings, inventory will begin to decline, which will eventually cause the price point to increase.

With this week’s economic update in tow, let’s take a look at our week in real estate:

East Bay—It seems we saw a little life breathed into our East Bay market this week. After a quiet week last week—when we were in the height of the economic rollercoaster—we started seeing some steady activity this week. Nothing to write home to mom about, but some steady activity just the same. Walnut Creek reports that sales are slow but REO properties remain active. Orinda reports that sales have cooled with the weather and that buyers remain very cautious. Pleasanton concurs noting that buyers have once again adopted the wait and see attitude. Livermore saw an anomaly this week with 50% of its new pending sales were normal sales (not REOs) and two of the sales exceeded $500,000. This was a major feat as 85% of its pending sales are below $500,000. Fremont is reporting steady traffic at open houses and increasing sales activity. Castro Valley noted a lot of activity, though prices are still dropping in Castro Valley and San Lorenzo. The good news is that deals—for the most part—that go into contract are staying in contract and closing.
Monterey County—Listing inventory remained steady and sales activity decreased, though this is typical and expected for this time of year. The luxury end is slower but homes priced at $1.5 million and above that are priced well and show well are moving.
North Bay—Listing inventory in Marin County is down. New REO listings that are coming on the market priced under what is generally perceived as “fair market value” are driving prices down in San Rafael, Novato and outlining areas. Southern Marin noted that the higher end market just might be waking up. The office represented both sides of two different Previews listings for a total of $11 million in one week. REO inventory in Santa Rosa is shrinking (also noted in Sebastopol) creating a bit of a seller’s market in that niche. We are seeing more pendings than new listings, which is a sign that price points could begin to strengthen in this market.
Peninsula—Buyers are taking a little time to see what will happen now that the election is over and are looking for some stability in the stock market to give them a level of comfort. Many FHA buyers are scrambling to fund and close before the end of the year. Our Half Moon Bay office is reporting that very few buyers visited open houses and fewer actually made offers this past week. Only 10 homes are sale pending on the entire coast. Of those, six are below and four above the $1 million price point. Our Menlo Park El Camino office is reporting that this week was better than last. Listing inventory continues to build and sales activity continues to be very slow out of our Menlo Park Santa Cruz Avenue office.
San Francisco— Open houses were well attended with a lot of buyers, and some who have been sitting on the fence for a while were writing offers this week. Our Van Ness office noted that while there are still sales happening, many buyers without an urgent need seem to just want to hover to wait and see which direction the market will go in the upcoming months.
Santa Cruz County—Inventory levels overall in the county continue to move downward while pendings have remained about the same week over week at 255 total single family residences in the county. Most of those are in South County—the area hardest hit by REOs—with currently 107 pendings and 50 in San Lorenzo Valley. The remainder are spread through the county with Seacliff Beach, Rio Del Mar, Seascape and La Selva Beach with the highest number at 24 pendings. Foreclosures continue to be at an all time high in the county—however we remain optimistic.
Silicon Valley—Morale remains high under challenging conditions. Properties under valued often receive multiple offers signaling that the buyers are still hanging around for the best values. Our Saratoga office experienced a slight increase in sales in the non-Previews market. Also, listing activity has slowed as expected given that we are approaching the end of the year.
South County—According to our Hollister office, REO listings are 49% of our active market in this region. Listing prices are still being reduced. We are still seeing multiple offers on well-priced REOs. Some are requiring pre-qualification with listing Agents’/bank’s preferred lenders. Our Morgan Hill office shares that the market continues to be a “Tale of Two Cities.” Though the number of REOs and short sale listings continue to increase, there are excellent opportunities for buyers. This is especially true in the South County. Homes that were once selling in the $600,000 range are now offered (and sold) for about half that price. Most buyers are seeing this as a great time to obtain a very nice home at very attractive prices.
The uncertainty in the financial markets is causing consumers to be cautious in all purchases, not just real estate. Today’s consumer is looking for some certainty that there is real value in what they are considering buying. Fully informed on the detailed local real estate market, and armed with a good solid loan approval, some buyers are stepping up - and in some cases getting into neighborhoods and homes they couldn’t afford in previous years. I met a young couple in one of our offices this week who were excited about their recently accepted offer on a home in San Francisco. They told me that after some negotiating on price throughout several counteroffers, they were quite pleased to have come to terms with the seller, and are really excited to become new first-time homeowners in about three weeks. Stories like this are happening every day throughout our Bay Area.

Have a great week!
Rick

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