Weekly market Watch

Week of November 10-16, 2008

A number of real estate organizations released their third quarter and/or October statistical reports—revealing some very interesting and important trends in our market. Let’s take a look:

NAR Presents Four-Point Housing Stimulus Plan to Congress

Earlier this week, NAR representatives presented a four-point plan to help foster a housing recovery to support an economic rebound. The plan calls for eliminating the repayment of the first-time home buyer tax credit that was passed in the February stimulus bill and to expand the tax credit to include all home buyers.

The plan also recommends making the increased FHA and conventional loan limits permanent to stimulate home sales and stabilize prices. In addition, the plan urges that the Troubled Asset Relief Program be put back on track by targeting the funds for mortgage relief through a mortgage interest rate buy-down. Finally, the plan recommends finalizing legislation to prohibit banks from entering into the business of real estate brokerage and property management.

“The only way to overcome today’s economic turmoil is to motivate and encourage worried or cautious housing consumers to enter the marketplace,” said NAR President Charles McMillan. “Stabilizing the housing market will lead to a quicker and greater economic recovery. Our goal is to ensure there is a healthy market and sufficient capital to support mortgage lending to qualified borrowers.”

CAR Releases First Time Home Buyer Housing Affordability Index
CAR released its First Time Buyer Housing Affordability Index which showed that the percentage of households that could afford to buy an entry-level home in California stood at 53 percent in the third quarter of 2008, compared with 24 percent for the same period a year ago.
The organization also reported, “At $56,100, the minimum qualifying income was 44 percent lower than a year earlier when households needed $100,500 to qualify for a loan on an entry-level home. Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California households, where the median household income is $59,160.” We are already beginning to see the benefits of new affordability ratios in our outlying areas around San Francisco Bay where some homes can now be purchased in the $300’s. While it doesn’t seem like much help for San Francisco, most of San Mateo Co, and Southern Marin – that affordability factor is slowly making a difference. It will begin to nudge move-up buyers and sellers toward our median price in these counties, which remains more than double the median price of California homes. (new State median: $278,000 – new SF median: $699,000 )

DataQuick Releases October Sales Figures

“Bay Area homes sold at their fastest pace in 17 months in October as buyers favored more affordable inland areas where depreciations and foreclosures have hit hardest. As a result, the median sale price continued its steep, months-long decline, falling a record 40.6 percent, or $256,000, from a year ago,” reported DataQuick.
“A total of 7,613 new and resale houses and condos closed escrow in the nine-county Bay Area in October. That was up 4.7 percent from 7,271 in September, and up 38.8 percent from 5,486 in October 2007,” continued the report.
“The median price (Bay Area) paid for all new and resale houses and condos combined fell to $375,000 last month, down 6.3 percent from $400,000 in September and down a record 40.6 percent from $631,000 in October 2007.”
“Inland communities continued to fuel the bulk of the Bay Area's sales gains, attracting buyers searching for the biggest discounts.”
“Contra Costa, Napa, and Solano counties - where prices are down sharply and sales have risen the most - accounted for 36.4 percent of Bay Area sales in October.


Sales Volume
Median Price
All homes
Oct-07
Oct-08
%Chng
Oct-07
Oct-08
%Chng
Alameda
1098
1,544
40.60%
$570,000
$369,500
-35.20%
Contra Costa
1011
1,888
86.70%
$530,500
$285,000
-46.30%
Marin
216
220
1.90%
$875,000
$599,750
-31.50%
Napa
71
135
90.10%
$548,750
$400,000
-27.10%
Santa Clara
1,381
1,520
10.10%
$683,750
$477,000
-30.20%
San Francisco
526
414
-21.30%
$795,000
$699,000
-12.10%
San Mateo
512
530
3.50%
$775,000
$605,000
-21.90%
Solano
309
745
141.10%
$391,750
$240,000
-38.70%
Sonoma
362
617
70.40%
$473,000
$330,000
-30.20%
Bay Area
5,486
7,613
38.80%
$631,000
$375,000
-40.60%


Notice in the chart above, San Francisco County is the only one to register a drop in sales activity ’08 over ’07 – while it also has the smallest decline in median price. Contra Costa, Sonoma, and Napa Counties are off the charts with increased level of sales – at the same time showing some of the sharpest declines in price.
How do you spell R-E-O?


With overall Bay Area sales up nearly 39% in October, many people feel like right now, real estate may not be a bad place to park their money. Compare that to the volatility of the stock market, housing is looking like a pretty solid investment.

Keeping that in mind, let’s take a look at this week in real estate:

East Bay—Our Walnut Creek office is reporting that sales have slowed however open homes are still very well attended. People seem to want to buy but continue to be swayed back on the fence due to the negative reports on TV and in the paper. Our Oakland office had a busy week. Buyers seem to be getting contracts in order to get in under the wire on the loan limits which change at the end of the year. In fact, the office saw a huge surge in sales this week. REOs continue to flow in Fremont; there were 10 new ones this week. There is still a lot of activity for the low end priced homes from first time home buyers and investors.
Monterey County—No information provided.
North Bay—Activity (in Sonoma County) continues to be steady in the under $400,000 range. An estimated 2/3 of the properties that close are short sales and REOs. The last three months have been record breaking months in units, according to our Petaluma office. Santa Rosa notes that the below $550,000 market is very active but once you pass that price point it becomes very quiet. The luxury home market is quiet though we took one new listing this week in our Santa Rosa office. We also had an escrow that fell apart but new buyers were waiting in the wings and it took five counters to make the deal work. Phew! In a sign of the times, our San Rafael office saw a home that originally was listed at $460,000 go into auction with a starting bid of $16,000 in Novato. Inventory is decreasing at the same time that more buyers are writing offers which is a sign of good things to come for this market. As demand increases and inventory decreases, the balance between supply and demand will be on a more level playing field.
Peninsula—Listing inventory continues to build and sales activity continues to be very slow. Our Palo Alto office reports that the market has all but come to a halt. From entry level to the luxury market, it seems very quiet. Our Redwood City office agrees noting that the market continues to be very slow. Activity at open houses is less than usual and buyers seem to be adopting the “let’s wait and see what happens” attitude.
San Francisco—Our Lombard office reports that things are very quiet. One deal brought multiple offers after two price reductions on a nice family fixer. Our Noriega office had a similar story to share asking the question, “Did some turn off the tap?” Opens seem to be very slow and REO offers are down but our Market Street office has a different story to share noting that open houses are well attended with a lot of confident buyers. People who have been sitting on the fence for a while were actually writing offers this week. Our Van Ness office reports a slowing down in activity but larger sales still have reasonable activity considering the economic climate.
Santa Cruz County—No information provided.
Silicon Valley—Our Cupertino Stevens Creek office is reporting that closings are steady but openings and listings are slow. Our San Jose Willow Glen office is reporting that folks are sitting back and waiting, waiting and waiting. We have buyers and some offers are getting rejected. Our Saratoga office is reporting that the upper end is extremely slow. Buyers are being cautious given the negative economic news.
South County—In symbolic proof of the inland sales figures released by DataQuick, Gilroy reported that its market is still very active in the lower end. First time home buyers and investors are taking advantage of the discounts on bank owned properties. Our median price is down 37% YTD over 2007. However, our office units sold is up 59%. The lesson: lower prices = more sales. Morgan Hill concurs noting that REOs and short sales are the key to success in this business. Normal sales are few and far between—at least in the South Bay. At tour meetings—when a new listing is announced—it is very common for the listing Agent to emphasize that the listing is not short or an REO.

So while sales have been quiet this week, the positive news I am seeing in our industry reminds me just how great this business truly is. No other sector of our economy is getting as much positive attention and focus right now. California real estate is positioning itself in all the right areas for a much desired turnaround. Some regions in the state have been waiting nearly three years for this turnaround to begin. As we’ve noted before, real estate makes up 20% of the Gross Domestic Product in this country, and the national economic landscape cannot be greatly improved without fixing the housing sector. That puts us in a very good position because real estate will be gaining a great deal of attention over the next several months. Whether that attention comes in the way of more tax benefits, home ownership credits, subsidies or interest rate stabilization, the leaders of our country are focused and diligent on fixing the housing sector which is perfect news for our industry and our business.

Until next week,
Rick

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