Weekly Market Watch

Memorial Day is Over…but will it be a typical Summer Real Estate Season?

Memorial Day is behind us and the traditionally moderate summer selling season has begun. Some of our offices are saying that it’s feeling more like a late Spring season right now. Activity is fairly brisk – it goes without saying that the entry level is hot – short on listing inventory and high on Buyer demand, but there is also good activity to report in the mid-to- high end in most communities.

This week NAR announced that existing home sales rose in April with strong buyer activity, as expected, in the lower price ranges. Nationally, existing home sales increased 2.9% to a seasonally adjusted annual rate of 4.68 million units in April from a downwardly revised pace of 4.55 million units in March, but were 3.5 percent below that 4.85 million-unit level in April 2008.
While most of the sales are taking place in lower price ranges, we are seeing increased activity in the mid-priced markets. This is a domino effect; a turnaround begins with the lower price range homes and once that sector of the market is stabilized, we begin to see changes in the mid and upper price ranges. The upper end, while most recently seeing increased activity, still is considered a Buyer’s market. This seems to be fairly consistent in major Metros on both coasts.

Across most of our local MLS’s, there is approximately an average of 14+ month’s supply of homes over $2 million. This is about twice the inventory for the same period last year. Just the opposite has occurred in the <$800k market. Estimating the average month’s supply of homes across several MLS’s in this price range, we are seeing about 3 months or less – which is half of what we had this time last year – and is considered to be a Seller’s market. If you look at the same months where inventory has shrunk in the entry level – you’ll see stabilizing prices, and in some areas, increasing home values. And of course the higher end has seen declining median price as inventory has been building. This appears to be the perfect opportunity for the move up Buyer – they have a fairly captive audience for selling, and are coming from a better position to negotiate on the buying side.

It’s also important to note that investors reacted to concerns about the mounting size of our national debt this week. The yield on the 10 year T-bill increased mid-week as stocks took a hit, and interest rates for mortgages were affected by a ½ to full one percent increase. Since purchasing power decreases with a rise in interest rates, some Buyers will have an increased sense of urgency to get a signed contract on their new home.

You’ll find links to some interesting real estate stories from this week below:

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/05/28/financial/f070602D30.DTL&hw=real+estate&sn=002&sc=842
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/05/28/financial/f110028D09.DTL&hw=real+estate&sn=003&sc=766
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/28/BUJT17S3B2.DTL&hw=real+estate&sn=008&sc=607
http://sanjose.bizjournals.com/sanjose/stories/2009/05/25/daily47.html

Now, here’s a look at our week in real estate:

East Bay—Berkeley reports five of our last seven deals had multiple offers, from two or three on each to up to 12 on a wide range of asking prices. Among the lower end and REO market, the highest cash offer gets the property. One Richmond REO listing of ours received six cash offers. Castro Valley reports many Agents are saying we are back to the 2003 market. Multiple offers, frenzy of activity, houses going pending within a few days of listing. Some agents feel as though we are on the incline at this point, that we have turned the corner and the "bottom of the market is now behind us.” Danville reports Agents are getting frustrated. They are running into lots of multiple offers and having trouble getting buyers into contract. This is going on in price ranges up to about $600,000. One property in San Ramon priced at $613,000 got 30 offers this past week. Meanwhile the high end continues to slumber. Livermore reports the Tri Valley Market continues to improve each week as active listings in all three cities, Livermore, Pleasanton and Dublin declined and total pending sales in all three cities increased this past week. Orinda reports strong sales market this week with buyers ready to make offers.
Monterey County—Activity in lower price ranges continues on at a very active pace, but not the higher luxury-home price range, where we the inventory is mounting up. The last three weeks have been slow in closings for us; however, we've opened 52 new escrows in that time, which is a very positive sign for us.
North Bay—Greenbrae reports more deals going into contract, but also a bit of an increase in deals falling through. Negotiations are critical to keeping deals together. San Rafael reports a home listed in the low $700s in San Rafael went into escrow after less than a week on the market with a back up offer in place! Open houses are busy with plenty of buyers at all price points. The Petaluma office was involved in 19 multiple offer situations. Although our inventory is shrinking and multiple offers continue. The multiple offers are two and three in numbers and only one in double digits. Agents are working with multiple buyers. Interesting enough, six of the multiple offers were on properties with days on the market of 50,75,90,130,400+. Properties in the $500,000 range and up are starting to see activity. Sebastopol reports few lookers at higher priced inventory. As the lower priced homes sell with the dearth of low priced inventory we have seen a real slowdown.
Peninsula—Half Moon Bay reports a slower week with the long weekend. Listings inventory is picking up. 168 active SFR listings on the coast with only 24 pending sales; we need some serious price adjustments. Menlo Park Santa Cruz reports many Agents took advantage of the Memorial Day holiday and took time off. We were feeling some energy in the market w/some sales activity last week. Hopefully the holiday didn’t dampen the momentum. Palo Alto reports if priced well in the Palo Alto marketplace, from downtown to S. Palo Alto, we are experiencing an unusual amount of multiple offers. Almost every property priced well will have multiple offers and prices that exceed the list price from $800k to $3M. Open houses are double and triple what they have normally been-even over the holiday weekend. A lot of optimism in the Palo Alto marketplace. The volume is still low but the activity intense. San Mateo reports inventory six months ago in Daly City was over 300, today its is about 60. San Bruno & So. SF are experiencing the same. We might be building a solid base as many properties are selling in those areas with multiple offers that are not short sales or foreclosures.
San Francisco—The Lakeside office reports there seems to be a huge backlog at the banks. Many conforming rate FHA loans are being drawn out way past the estimated close of escrow date. Every deal is complicated by the new lending practices that are being implemented. The Lombard office reported the market is picking up steam. Multiple offers are on the heels of healthy price reductions or aggressively priced fresh listings. Most activity is under $1m. Still numerous escrows problems—mostly related to financing. The Van Ness office reports some very exciting news in the upper end arena.. In fact, we closed 13 deals for over $15,000,000. There is about the same activity for +million and -million. Strong activity continues. Our Noriega office reports we had a busy week as far as pending sales is concerned. But we really need more listings in the entry level.
Santa Cruz County—Still no word on any new REO business. This is a mystery. South county inventory is depleted and buyers are now competing on most of the lower end properties. Overall the market seems to be picking up and we are seeing multiple offers on some well priced properties under $800K, especially close to the beach. There are more positive indicators in the news, consumer confidence is up and this is lending to a more favorable real estate climate overall.
Silicon Valley—San Jose Almaden reports low end continues to drive the market. Buyers are frustrated at losing out in multiple offer situations. Some homes going 25-30% over list price. San Jose Main reports inventory continues to drop as homes in the mid to low price range sell fairly quick, many with multiple offers. Low interest rates and signs that the mid range properties and below have bottomed out are fueling sales. Slower than average open house traffic this past weekend probably due to the 3 day holiday. San Jose Willow Glen reports we are busy and multiple offers are starting again. Buyers are apparently feeling more secure about the market. Good energy in the office as well. Saratoga reports we had two sales over $3 million turned in last week. Hopefully, this is a sign of an improving Previews price point.
South County—Our Gilroy office reports local inventory continues to shrink. As of today there are 146 active single family homes. 23 are bank owned, 42 are short sales and 81 have an equity position. Of the 81 there are only 9 homes listed under 500k and 40 over 1mil. Hollister reports multiple offers still a norm on most REO listings. Office activity is quiet this weekend due to the holiday. Open house activity is increasing. Short sale listings have increased. The Morgan Hill office reports the South County market remains interesting in that demand is strong for entry level homes. Great prices, coupled with tax incentives and attractive mortgage rates have stimulated this segment of the market. More importantly, Agents are reporting that optimism has replaced pessimism on the part of the buying public.

Historically speaking the week of Memorial Day quiets things down in the housing sector but this year it was a bit different. Thanks to the $8,000 first time home buyer credit, low interest rates and increased affordability, buyers in the first time home buyer market are out in droves and really are snatching up properties. It seems they have been pushing activity into the mid and higher price ranges as well. If it is truly a late Spring flurry this year, we could be in for a very busy Summer.

Until next week,
Make it a great one,
Rick

Rick Turley
Coldwell Banker Residential Brokerage San Francisco Bay Area

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage