Weekly Market Watch

Stress Test Reveals More Work to Be Done By Banks- While Entry Level Local Real Estate Market Heats Up!

This week the results of the long-awaited Stress Test on US banks were released. What the government hoped to accomplish through this Stress Test was to determine how much capital the banking sector currently has, and what level they deem appropriate to withstand the recession. The result was that 10 of the nation’s 19 largest banks will need to raise a total of $74.6 billion in capital. The Stress Test revealed that banks like Goldman Sachs and J.P. Morgan seemed to be better positioned than Citigroup and Bank of America.

At this point, according to Kiplinger, “The stronger banks will actively do what they can to return any money borrowed from the government to get out from under restrictions on dividends and executive compensation. Their ability to sell common stock to the public is far better than their weaker counterparts, who may have to privately sell stock to investors or raise capital with so-called mandatory convertible preferred shares.”

According to industry analysts, it seems that until the banks get back on their feet, credit will continue to be tight. That leaves the Federal Reserve responsible for filling in the gaps with its own programs aimed at jump-starting lending.

On a brighter note, however, the real estate sector of our economy continues to show some positive signs. USA Today reported earlier this week that “More homes for sale are attracting multiple offers as buyers pursue lower-price homes and banks low-ball asking prices to attract competing bids on foreclosures.” It’s exactly what we’ve seen locally, the entry level home buyer market is fueling this recovery. We forecasted this, and now that multiple offers are the norm in the majority of our entry level markets, some frustrated buyers are scratching their heads and wondering what happened to the buyer’s market. We warned that things could turn on a dime, and it seems in many starter home markets, prices are already on the rise.

Here are some links to some interesting news stories from the week:

USA Today: More homes get multiple offers; downturn may be nearing end (http://www.usatoday.com/money/economy/housing/2009-05-05-foreclosure-home-sales_N.htm?loc=interstitialskip)
Business Week: Want to Sell Your Home? Lower Your Price (http://www.businessweek.com/lifestyle/content/may2009/bw2009055_075566.htm?chan=top+news_top+news+index+-+temp_news+%2B+analysis)
RISMedia: Relocation.com Survey Shows Consumers Moving Further Due to Economy (http://rismedia.com/2009-05-05/relocationcom-survey-shows-consumers-moving-further-due-to-economy/) – This is a good reminder to consumers on why they should choose an Agent who is affiliated with a large, global real estate company that has the breadth and influence to reach the largest pool of buyers.
NYTimes: Where Home Prices Crashed Early, Signs of a Recovery (http://www.nytimes.com/2009/05/05/business/economy/05turnaround.html?_r=2&hp)
Realty Times: Real Estate Outlook: Sales Rising in Some Areas (http://realtytimes.com/rtpages/20090505_realestateoutlook.htm)

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

East Bay—Castro Valley reports short sales continue to dominate the market. Listing inventory is so limited that properties are going pending as soon as they hit the market. One property went pending one day after listing. Many of our Agents are frustrated because they set appointments with buyers to view properties, but the properties are already in escrow. REOs are starting to reappear in the market. Fremont reports it seems that the market is starting to pick up and buyers are feeling more confident in the economy—they are starting to move forward, not just looking! Livermore notes the major part of our market are properties priced below $500,000. We continue to see multiple offers on almost all properties in this price range with the majority of the sales being REOs and short sales. Something noteworthy is that they had two sales in the office this past week in $800,000 range which has not happened in several months.
Monterey County—The market continues on with slowness in the higher prices ranges and multiple offers on the REOs in Seaside, Marina, Las Palmas in Salinas and South County, where you can now buy a 5-bedroom, 3-bath home for around $265,000. Seaside is the "hot" spot and has had 86 closings this year, with only 43 active properties at this point (10 of those in escrow), while Pebble Beach has had only 18 closings this year, with 106 active listings and only one of those pending.
North Bay—Greenbrae reports that Spring seems to have sprung in the million price range. We are seeing increased activity in all Marin cities. San Rafael notes that there is still a huge turn out of buyers at open houses in San Rafael and Novato at the lower end of the market. Southern Marin reports a great week as well. Agents were involved in several multiple offer presentations and won! The market is definitely picking up in Southern Marin. Santa Rosa reports that they are starting to really feel the effects of the shortage of REO inventory. Sales of non distressed properties have picked up. Short sale escrows have increased but no apparent increase in the percentage of short sales closing. The Sebastopol office reports multiple offers in all price ranges. A dearth of new REO properties is pushing short sale offers. We’re seeing that 10-15 offers are not uncommon.
Peninsula—The Burlingame office reports that the rainy weekend didn't dampen the open house attendance. Burlingame, Hillsborough and San Mateo opens were well attended. The Agents are reporting that many buyers are feeling that we are at the bottom and now is the time to buy. There is such a need for quality inventory in the $800,000 range as this is where so many of our clients are looking. Menlo Park Santa Cruz Avenue reports that open houses were packed over the weekend in all price ranges. There seems to be a ground swell of activity with Agents writing offers that will hopefully translate to transactions next week. Palo Alto reports some optimism and some movement in the area. As inventory builds, buyers have more selections. San Mateo had a good analogy about the market: Buyers seem to be “on your mark, get set…there just isn’t enough ‘go” yet but open houses are well attended.” It’s the indecision on the part of buyers that we’re still seeing in this market.
San Francisco—The Lombard office is reporting good traffic and sales activity in the $500,000-750,000 price range. They saw more multiple offers, winning and losing, this week than any time in the last year. But buyers above $1.5 million continue their reluctance to make a move. This will all come in due time. The Market Street office reports that this is the third week in a row that a property was brought on the market and sold with multiple offers in less than one week. The list price was $749,000. The other property that was in multiples had been on the market for 90 days when two offers came in on the same day. More offers are being written and open houses are well attended. The Noriega office reports two out of the three multiples were REOs, the one that was not is an Outer Sunset home listed for $539,000, original fixer, received 11 offers, 8 out of 11 were over asking. We’re expecting a flood of REO listings coming, starting mid-late June this year. Their BPO activities were way down in Feb/March, but it really picked up in April. If you have a “value minded” buyer on the sideline, get them ready, get them pre-approved and get your Agents ready to sell these REOs. The “sale" is a limited time offer only.
Santa Cruz County—With some positive news abounding in the news and some positive indicators in the market, it seems consumer confidence is beginning to come back (we are very cautiously optimistic). We are expecting another wave of REOs to come through within the next couple of months. The inventory in South County has for the most part dried up and there are multiple (multiple) offers on what is left of the REO properties. We are seeing prices increase in South County from three months ago. Overall throughout Santa Cruz County, inventory levels are way down and we have experienced multiple offers on many properties below $800,000.
Silicon Valley—San Jose Almaden reports distressed sales continue to dominate our market. 11 or the 13 sales are distressed. Almaden which had been slow is beginning to pick up nicely. Three properties sold in Almaden within two weeks of being listed last week from this office. San Jose Main reports activity and sales continue to be brisk in the price range of $550,000 down. Many multiple offers on $250,000 to $550,000 homes and condos. Sales are up but listings continue to lag. Saratoga notes we're still experiencing a slow upper end. We're seeing some multiple offers on REOs and well priced lower end properties.
South County—The Hollister office is reporting that last week in San Benito County we had 198 active single family listings and 140 pending transactions. This week we have 183 active single family listings and 200 pending transactions. The month of April reports 52 closed single family transactions for San Benito County. Multiple offers are still being seen on most REO properties. Last month the Morgan Hill office had incredible sales activity. Agents were very busy writing offers and getting them accepted. Response time for short sale and REO offers is much more acceptable. Interest rates continue to be attractive. Our goal is to keep up the momentum.

What do we do with this information? The responsible thing is to make sure everyone hears it. It’s one thing for me to talk about a recovering market but it’s another when even the most pessimistic analysts are doing the same. The stories above share the real story. All of our offices are reporting similar stories and as I visit our offices and talk with our Agents, I’m hearing the same scenario: the market is heating up. The window of opportunity has been open and it has been inviting buyers in for months. With the speed that buyers are responding today, it won’t be open long. I can assure you there will be people years from now who will say “Why didn’t I buy more real estate in 2009?”

Until next week-
Rick
Rick Turley
President
Coldwell Banker Residential Brokerage San Francisco Bay Area
Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage