Weekly Market Watch

Happy New Year! It certainly is nice to be back and full swing into work. The holidays are great but oh how I miss the energy, enthusiasm, excitement—and who could forget the 200 e-mails a day—that our day-to-day business brings.

I would imagine the most frequent questions you were asked over holiday parties and gatherings were: “When will this recession be over?” and “When will the housing market begin to rebound?” I know these seemed to be the most frequent topics everywhere I went.

First, let’s look at the economy. Anyone who believes that the economy will completely rebound in 2009 is probably in fantasyland. Without a doubt, President-elect Obama has his work cut out for him when he enters office in less than two weeks. Most experts agree that the year ahead will bring an increased jobless rate, already at 7.2% and the highest in 16 years. Consumer consumption will dip further as people hunker down and spend with caution.
Our economy in the US will continue to be affected by global monetary concerns.
While differences of opinion and a lack of agreement on policy keep TARP money on the sidelines, more businesses and homeowners are in greater risk of failure each day. But there are some bright spots to consider as well.

For starters, our new administration is committed to developing an economic recovery plan designed to create 2.5 to 3 million jobs while rebuilding our infrastructure, improving our schools, reducing our dependence on oil and saving billions of dollars. Speaking to a group to George Mason University in Fairfax, Va. Thursday, President-elect Obama said, “It’s a plan that recognizes both the paradox and the promise of this moment—the fact that there are millions of Americans trying to find work even as, all around the country, there is so much work to be done,” he said.

Of course it won’t happen overnight and I think we all anticipate that much of 2009 will be focused on creating and implementing this recovery plan, but the positive news is that we are heading in the right direction for growth and prosperity with some experts predicting that by 2010 we could see as much as a 1.5% growth in our economy.

Additionally, there has been much discussion that before long we may see mortgage rates at 4.5% which could spur a great deal of positive attention for our industry. Qualified homeowners could potentially be able to refinance at a historically low rate. According to the Wall Street Journal, “up to 34 million households would be able to do so, at an average monthly savings of $428—or a total reduction in mortgage payments of $174 billion. Potentially this would represent a permanent reduction in payments and is thus likely to spur appreciable increases in consumption.”

In terms of the local real estate market, the timing of our price recovery may depend on how quickly the government takes steps to mitigate foreclosures, but looking forward to 2009, many experts agree that the financial system will begin to show signs of stabilization in early 2009 and we may begin to see a real estate turnaround by the summer. Our industry was one of the first to be hit by this recession and in all likelihood will be the first to overcome it.

And with that good news in tow, let’s take a look at this week in real estate:

East Bay—The Berkeley office notes that the holiday open houses were busy. We had the most December sales in our history—many of which were REOs and short sales—but other sales where buyers were wanting to take advantage of rates under 5%. Our Castro Valley office notes that though it slowed in the last few weeks of the year, we did see a lot of REO business (though less short sales). Our Danville office notes that the luxury market remains cool and the market seems to be holding its breath waiting until after the inauguration. Having said that, open houses are well attended and people seem to be upbeat about what is to come in the market. Our Fremont office reports that bank owned properties and short sales represent approximately 25% of its sales. Livermore concurs noting that of the eight sales in the office, six sales were REO sales that we listed. We also had two normal sales with the highest sale at $517,500 and the lowest at $108,000.
Monterey County—With two weeks of holidays and only three business days each week, naturally everything really slowed down and we only had 10 new escrows over those two weeks. This is seasonal and pretty typical for this time of year. We did have two properties that earned multiple offers. One of those properties was $1.5 million.
North Bay—Our Southern Marin offices are reporting that based on the number of calls from buyers and possible listings, we are optimistic about 2009! Sebastopol notes that listings were slow as expected and sales were strong for the two weeks of the holidays. Nearby Santa Rosa notes that the under $500,000 continued to be robust over the holidays. Our San Rafael office finished up with a great December, well ahead of forecasted number of new pending sales for the month.
Peninsula—Our Burlingame office notes that Agents are back and reporting that buyers and sellers are calling with plans to get pre-approved, start looking at homes or want to discuss listing their home. Things are still slow but there are definitely signs of activity and optimism which is great news. Half Moon Bay notes that the past two weeks were slow holiday times but this past weekend Agents reported very busy open homes with some earning as many as 15 groups. Buyers appear to be ready to hear good news—they’re looking for the reasons to buy now and we have them: inventory of homes that’s about 20% higher than usual at this time, low financing rates, money supply increasing, very motivated sellers and the optimistic news of a new administration. Our Menlo Park El Camino office reports that one Palo Alto property had eight offers and went 4% over. Open houses in this market were very encouraging. Our Palo Alto office reports that the market is extremely slow—with very few listings. The office is hoping for more over the next three weeks to help restore buyer interest. Our Redwood City/San Carlos office notes that it saw typical holiday activity but the few open houses we had were very well attended. Agents, buyers and sellers all seem to have a positive feeling about ’09. Our Woodside office reports that we had 14 offers on an REO in East Palo Alto. Buyers were out in force this week and according to the Agents there were many new buyers beginning to look.
San Francisco—Our Lombard office reports a very slow holiday season for sales. Many listings were pulled for the month. Now that we’ve entered the new year, we’ve seen a listing surge that should build through January. Our Market Street office is reporting that Agents were very pleased with activity at open houses this week. A condo in Potrero Hill which had experienced low traffic in the previous weeks had over 55 people at Sunday’s open houses. This seemed to be the case with several other properties.
Santa Cruz County—The local single family residential inventory continues to drop and is currently under 800 homes in the county. The number of pendings overall remains about the same with the majority of sales in the under $500,000 price range and almost are in Watsonville. Most REO properties are getting multiple offers and it seems to be the cash buyers who are having the most success getting the properties. Agents are writing five to six offers or more sometimes before getting their buyers into escrow.
Silicon Valley—Our Cupertino De Anza office is reporting that listing inventory decreased from 101 to 86 single family residential properties. On the flip side, sales activity decreased as well from seven to two pending properties. Our Los Gatos office is reporting that we are seeing a lot of new listings coming on the market now that the new year has begun. We’ve suspected this for some time but it is nice to see the new, fresh inventory take hold and help to restore buyer interest. Our San Jose Almaden office is reporting some interesting trends noting that listing inventory is decreasing while sales activity is increasing. Even during the slow holiday weeks we saw five multiple offers and 17 ratified offers. The market is almost exclusively being driven by REOs and short sales, however. Our San Jose Willow Glen office noted that though the holidays were quiet buyer interest continued with quite a few open houses earning some heavy traffic. The office also reports some nice success with two million dollar plus sales within the last 2.5 weeks. Our Saratoga office is reporting the contrary noting that we are seeing some buyer reluctance—possibly due to the holiday season. We’re hoping to see a pick-up in this market now that the new year has begun.
South County—Our Morgan Hill office notes that there is a lot of activity with bank owned properties and well priced short sale homes. Potential buyers are intrigued with what they can buy in South County—very nice homes, lots of square footage and in many cases, unbelievable prices. The Gilroy office has seen a substantial decrease in inventory over the last two weeks. We expected a slight increase in the first month of ’09 as usually happens as listings that failed to sell or sellers that took their home off the market come back on the market sometime in the next 60 days. However, we are expecting a smaller % than normal. REOs are still leading the market in sales. Our Hollister office notes that REOs are still receiving multiple offers. Cash offers and investors are being seen more than usual. First time home buyers are taking advantage of our market and low interest rates.
As you can see, activity in nearly every market is picking up now that the holidays are over. Buyer and seller activity is increasing and it seems many buyers are finding comfort in the fact that interest rates are low, inventory is strong and many sellers are motivated. While being realistic about the current state of our economy, we have every reason to be optimistic about real estate activity in the Bay Area for 2009. Qualified buyers and reasonable sellers will continue to come together in this market. Until next week-

Rick

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