Weekly Market Watch

From A Slow Crawl…To a Brisk Walk

I heard someone earlier this week say that the housing market has gone from a slow crawl to a brisk walk. I think that is the perfect metaphor to explain the recent changes in the real estate market. The market is coming back. It’s not roaring, but it’s coming back.

This week, according to Reuters.com, U.S. mortgage applications jumped as record low interest rates spurred a surge in demand for home refinancing loans. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 32.2 percent to 1,159.4 for the week ended March 20. Refinancing accounted for 78.5 percent of all applications.

Furthermore, interest rates on mortgages fell after the Federal Reserve last week said it would buy Treasury securities for the first time in more than four decades as well as more than double its planned purchases of mortgage-related securities. Reuters.com reported that “Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.63 percent, down 0.26 percentage point from the previous week, reaching a record low….Interest rates were well below year-ago levels of 5.74 percent.”
Meanwhile, according to Realty Times, housing starts took a surprise jump of 22 percent in February over January's depressed levels. Most of the increase was attributable to apartments and condominiums, but single family starts were up by one percentage point, and new home permits were up by 11 percent, after months of sharp declines.
Existing home sales are also seeing some good trends. NAR reported this week that sales activity for single family, townhomes, condominiums and co-ops rose 5.1 percent to a seasonally adjusted annual rate of 4.72 million units in February from a pace of 4.49 million units in January.
The West is leading much of the nation’s recovery, with California leading the charge. Our median listing price is beginning to rise for the first time in three years. Existing home sales in the West increased 2.6 percent to an annual rate of 1.2 million in February and remain 30.4 percent higher than a year ago.
Last week I recommended that you watch Coldwell Banker president and CEO, Jim Gillespie on CNBC’s “Roadmap to Rebound” which focused on the state of the housing market. If you missed it, Gillespie stated that “the government could do a lot more than they are already doing in order to get the real estate market moving again.” Congressmen and economists continually say that in order to get the economy going, we need to first get real estate going. Gillespie believes that two key changes are needed in order to get the economy moving, and the first item that needs to be addressed is to set a fixed-rate mortgage. “Lowering the interest rate to 4% to 4.5% for 12 months is one way to get the inventory moving.” Along with setting a fixed-rate mortgage, increasing the tax credit to $15,000 and including all buyers of primary residences will help move buyers along and get the market to shift.

Gillespie also stated that the demand side needs to be looked at closely, because once we start to burn off the inventory that we currently have, prices will begin to stabilize and go up again, which will help those in distressed situations. “Fifty-five percent of loan modifications have failed after six months because jobs are not being created and homeowners are losing the jobs they have,” says Gillespie. “In order to create jobs, we need to create demand, both of which will get the housing market and economy moving.”

I for one appreciate seeing our leadership team speaking out on our behalf, serving as the visionaries for our industry. It’s enlightening and certainly makes me proud.

Now, let’s take a look at this week in real estate:

East Bay—Berkeley reports we are busy selling every day. There appears to be more optimism amongst the Agents, but still some trepidation from buyers. Eight of our most recent sales had 2-5 offers, though, so buyers are beginning to buy. Buyers are being a little less demanding if they are in contract on a house they really want. Still tough to get sellers to price right or lower a list price. Danville notes that inventory and new pending sales have remained flat the past couple of weeks. The high-end in Blackhawk and Alamo is very slow. On the other hand, a condo in San Ramon priced at $200,000 got 17 offers. Fremont reports that listings are starting to pick up. Sales are somewhat slower than last week, but still, they are selling. People are looking for a great deal! They continue to watch and wait. Because of the moratorium, the REOs are still slow at this time. Oakland reports that our sales inventory is increasing because deals are taking longer to close. The prime issues are short sale approval, REO approval and now appraisals are starting to ask for conditions that were ignored in the past as well as numbers are coming in below the sales price. New sales for the month are coming in slower than they did in February. Orinda reports steady market in the Lamorinda area. Lots of new listings, not so many sales, but we are hanging in there and keeping our eyes on the prize! The market will pick up soon; we have faith and are staying very positive and supporting one another.
Monterey County—Though last week was a rather slow one for new escrows, activity at open houses and writing offers seem to be picking up. Also over the past three weeks, we've had price reductions on about 40 listings as sellers become more resigned to the current buyer’s market.
North Bay—Greenbrae reports that open houses were well attended this weekend. Despite more homes going into contract, negotiations are tough and more complex. Short sales are creating some new issues for Agents as they try to work with the banks to make deals happen and we’re starting to see more of them in the high-end of the market. Well presented homes in the $1 million range in Corte Madera, Greenbrae and San Anselmo seem to be gaining interest. Three of our Greenbrae listings just over $1 million experienced significant price reductions and went into contract. A Fairfax listing hit the price reduction point and garnered four offers—with the victorious offer from our office! Southern Marin notes that we are seeing a number of new listings coming on and sales are starting to trickle in. There seems to be more consumer confidence that is at least getting buyers to be a bit more serious and now they are even writing up some offers. The $2-3 million price range is still extremely sluggish. Petaluma reports that open houses are generating double digit attendees with one property on the west side having 40 groups. We are still seeing multiple offers and Agents are picking up buyers. Floor time has been productive with unattached buyers calling in on properties.
Peninsula—The Half Moon Bay office reports the coast is slow, especially over the $1 million price point. Sales activity has increased with the REOs and short sales. The Menlo Park El Camino office reports a sterling week in sales—all over the map sales. From $800,000 to $5.9 million and multiple offers to boot. We are hoping this is not a blip on the screen but as the song says, “The start of something big.” Open houses were buzzing many turn into a roar! The Menlo Park Santa Cruz Avenue office concurs noting there was a jolt of life in our market last week. Energy seems to be building. We saw sales in the $230,000 to $5.9 million. Good interest rates and well priced inventory seems to be the ticket. One REO listing in San Mateo had 10 offers. Palo Alto notes the luxury market is extremely slow but activity between $1 million and $2 million has picked up. If well priced, properties will sell and some times with multiple offers—although not typically over list price. Inventory is building. Woodside reports sales all over the map—from $500,000 to $3.5 million. Sales over $3 million are running 15-25% off their pre September prices.
San Francisco—Our Lombard office reports good traffic but only a trickling in of transactions. Fallouts returned this week, one each for cold feet, financing and a short sale appraisal. REOs yielding multiple offers in 1-2 days. Private sellers could learn some pricing lessons from Asset Managers. Our Market Street office reports a single-family with unit in the Eureka Valley-Dolores Heights are garnered three offers in only 13 days at a list price of $1.695 million. A 4-unit building on the market for six days received five offers. It was listed for $1.050 million and was close to USF. There is a lot of optimism at open houses this weekend with buyers getting back into the market due to low rates.
Santa Cruz County—In the past five months the overall inventory level in the county has dropped by about 30% and the number of pendings have gone up about 10% overall. There seems to be an uptick in activity this week with some positive news from the media and the stock market. Open houses have been very well attended in most areas and new listings are attracting a lot of attention from buyers.
Silicon Valley—Our Cupertino De Anza office reports that things are picking up and nearby Cupertino Stevens Creek concurs noting that we’re seeing increased open house activity. Los Gatos notes that more buyers are coming into the market, with more confidence. Our San Jose Almaden office reports some interesting trends. The days of inventory in Almaden is just a little less than three years. High end properties are not moving. Blossom Valley and Santa Teresa however are above 40% pending. 25% of that inventory is traditional sellers while the rest are distressed sales. Almaden has about 15% pending. Cambrian seems to be the healthiest with 28% pending and fewer distressed properties. Prices have held better there, too. I would say that Almaden has dropped nearly 25% in the last year. Blossom Valley around 30% and Cambrian closer to 20%. Our San Jose Main office notes that buyer interest continues to be brisk. Sales of homes in the $250K-600K range are on the rise. Weekend open house traffic was excellent in all price ranges. Lower interest rates are helping to influence sales.
South County—Our Gilroy office notes that we had 20 multiple offer situations. Agents are suddenly experiencing a similar situation as they did in the peak of the market: low inventory and not being able to get buyers a home due to multiple offers. Hollister notes that REO inventory decreased this week. Short sale listings increased.

After a week of positive indicators, my best advice is for buyers to get out there. There are some fantastic deals out there right now and as more people begin to realize it, competition will come back and begin to drive activity. You know what they say about the early bird!

I am headed away for vacation and will be gone through April 7. During this time, we’ll take a brief hiatus from Weekly Market Watch but will return the following week with a robust edition.

Until next time,
Make it a great one,

Rick Turley
President
San Francisco, Peninsula, North Bay