Weekly Market Watch

Week of Nov 17-30
Earlier this week, President-elect Obama announced many of the new members of his cabinet—an important move which showcases his commitment to hitting the ground running once he takes office in January.

Not surprisingly, the order of his political appointments has even been well-planned with Obama first selecting the appointment of his economic team (which he has made very clear is his first order of business), led by Timothy Geithner as Treasury Secretary, and this week his national security team, picking once rival Hillary Clinton as Secretary of State and President Bush’s Defense Secretary, Robert Gates, to continue at his post.

Obama announced on Saturday that he has asked his economic team to develop an economic recovery plan that will (by 2011) “help both Main Street and Wall Street help save or create at least 2.5 million jobs while rebuilding our infrastructure, improving our schools, reducing our dependence on oil and saving billions of dollars.” Many members of the media are calling his plans a “teched out” version of FDR’s New Deal which many arguably believe helped to pull America out of the Great Depression.

It remains to be seen whether or not this can be done but I’m excited about the prospects for our country and am looking forward to watching the plans unfold over the next several months. In the meantime, there are two things pressing right now for our local market. The first is talk of decreasing interest rates into the 4.5% range which could increase a buyer’s purchasing power dramatically in today’s market. Couple that with one of the most pressing issues for our local market which is the fact that the conforming loan limits (increased earlier this year to $729,750 in most Bay Area markets) are set to expire at the end of 2008.

Perhaps there will be another stimulus package that will raise the conforming loan amount but at this point, that answer is unknown which is giving many buyers a reason to act now. Knowing this, the last couple of weeks—though holiday weeks—have had some surprising twists. Let’s take a look at this week in real estate:

- East Bay—Castro Valley notes that it is being driven by buyers and we have several new listings that are not bank owned and are not short sales. The office is very busy so far this month and have yet to feel the slow-down that typifies the December market. Berkeley saw a busy bump for REO listings with seven REO sales in one week and four had multiple offers. We also received multiple offers on two listings, one priced at $890,000 and another at $995,000, one in Berkeley Hills and one in Oakland. In the Tri-Valley area (Pleasanton, Livermore and Dublin) for the past couple of weeks active inventory has remained basically stable while total pending sales have decreased by about 10%. A large part of the market continues to be REOs. We did have a listing in Pleasanton that went into escrow at $1.65 million. We have not seen a sale at that price range in months. Almost all of our closed sales for the past several months have been $500,000 and below. The Walnut Creek office is noting some positive news in the luxury home arena with four sales closing between $915,000 and $1.5 million (not short sales or REOs). The REO inventory is selling fast. There are 1-2 months of available inventory in East Contra Costa County and the office is considered about the good, clean listing inventory available. There just isn’t enough.
- Monterey County—We had a reasonable good last two weeks for writing offers and getting properties in escrow, considering the general market and the fact that it is usually slower this time of year. We had a lot of people in town for the long Thanksgiving weekend and scattered open house attendance, though good in Carmel-by-the-Sea.
- North Bay—Our Greenbrae office reports that it is still seeing multiple offers for REO properties under $1 million. We have many buyers waiting in the wings in Marin for the perfect property. Petaluma notes that inventory has come to a screeching halt. Serious buyers and sellers are still putting transactions together. Multiple offers in the Petaluma area are still dominating the market. Santa Rosa notes that the market above $500,000 remains very quiet. Below the $500,000 mark the inventory is being bought faster that it is being replaced—making for stressed buyers and Agents.
- Peninsula—Our Burlingame office notes that Thanksgiving week saw a surprising amount of activity. Agents reported excellent attendance at Saturday and Sunday open homes. Loan approvals are becoming more difficult and we have had a few transactions fall through. One San Mateo REO property listed in our office sold in five days with four offers. It was listed under $600,000. Our Half Moon Bay office points out that San Mateo County sales tend to track the NASDAQ market and these past few weeks are no exception. The uncertainty of the market along with the continuing issues surrounding credit and money flow resulted in one of the slowest weeks in years. Our Redwood City office notes that there has been little activity but a few properties are selling. There seem to be a lot of complications in many transactions and buyers, sellers and Agents alike are focusing on solutions with a positive attitude.
- San Francisco—Our Lombard office notes that the market has been pretty quiet. REO sales are leading the way. Open house traffic is light. We’ve seen a huge number of withdrawn listings after this week’s Broker Opens but widely differing opinions as whether or not sellers should stay on the market during the holidays. Our Market Street office had one property go into multiples this week with 10 offers. The property needed fixing but had a great location. It did go over asking but not quite as much as one would have thought. For the few opens that were held open over the weekend, the traffic was good and Agents felt qualified buyers were coming through and ready to buy. Our Noriega office notes that the market is slow all the way around over the last weeks of November. There is a lot of uncertainty with buyers at the moment. We’re seeing more deals fall apart due to financing and buyers’ cold feet.
- Santa Cruz County—Local inventory in the county continues to drop weekly as we move quickly into the holiday season. Single family residences in the county are down to 883 total with 259 total pendings in the county. 104 of the pendings are in Watsonville and represent the very active REO market and another 45 are in San Lorenzo Valley, the two outer ends of the county. The remainder of the sales are spread throughout the county with the Aptos, Seacliff, RDM, Seascape and La Selva Beach collectively with the highest number of pendings. Buyers continue to control and drive the market and few changes are expected through January.
- Silicon Valley—Our Cupertino Stevens Creek office reports that the market continues to be slow as sellers are holding their homes off the market for the holidays. Buyers continue to circle like shares looking for the best deals. Open houses reflect a large number of buyers still in the market for homes. Our Los Altos First Street office notes that open houses are still getting good activity but buyers are wanting to wait. Older listings are not getting much interest even after a price reduction which is a good reminder for sellers to price and present the properly correctly from the beginning. Our San Jose Will Glen office notes that it is still pretty busy and open houses continue to draw interested buyers.
- South County—REO listings slowed down county wide. Buyers are still looking and writing offers with now even more multiple offer competition. Our Gilroy office notes that open house traffic is good and that the market is still driven by REOs. Our Morgan Hill office notes there seems to be an air of excitement about the impending interest rates and the possibility that they will reach the mid 4% range. This, coupled with low home prices, again underscore the historic opportunity for a larger group of individuals to own real estate. In the South County, there are hundreds of homes priced at or below $471,000. It’s a good time to buy real property

Though historically speaking December is a slow month, I suspect with the impending decrease of the conforming loan limits as well as the impending interest rate decrease, we may see a busier December than expected.

Today’s market may not be for the weary. Today’s market is for the serious buyer and seller. Buyers who are taking the time to shop for a home right now—not only in today’s economic conditions but also during the holidays—are serious and typically, are ready to make a move. Sellers who are selling right now—again, in this market and during this time of year—tend to be serious and motivated. The key is to bring the two together –there are good opportunities out there for both parties.

Until next week-
Rick

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