Weekly Market Watch

Showing Activity In the Entry Level and Mid-Level Markets Continues to Rise

Now that school is almost out, we’re finding many families are starting to look at homes in anticipation of getting settled prior to next school year. Showing activity in many markets has increased considerably.

Sellers are getting their homes on the market and, in general, seem to be quite receptive to staging and pricing strategies. The homes in the entry-level market are moving well if they are in good condition, and if fairly and competitively priced. We are seeing multiple offer situations in most of our first time home buyer markets. The price point for this activity is of course different by county, and by specific MLS zones, but this week as I visited several Santa Clara County and Marin County offices – I was told about numerous multiple offer situations garnering 10 to 20 offers in the $400,000 to $500,000 range. One property listed at $399,000 (in a mid-$400’s neighborhood, I believe) received over 50 offers.

Though we have seen sporadic new activity in the upper end market, it is still relatively slow for properties over $2M. The month’s supply of inventory for high end properties is more than triple that of homes listed under $800,000. Having said that, we also need to make note of the current momentum we’re starting to see in our offices in the high end. Just looking at one particular day this week, among many other sales, we closed escrow on homes ranging from $1.7M to $2.7M in Palo Alto, Carmel, and Mill Valley, and a home in Los Altos Hills just shy of $3M.

This week LORE Magazine and the Wall Street Journal released their 2008 Top 400 Realtor list. You may view it online at http://online.wsj.com/ad/top400-articlecontinued.html. I'm very proud that we have an impressive number of SF Bay Area Coldwell Banker sales associates who were recognized within this coveted ranking, and for that—along with all of their hard work and dedication, we salute them.

The most notable news this week was The Mortgage Bankers Association’s (MBA) release of is Weekly Mortgage Applications Survey for the week ending May 29, 2009. The Market Composite Index, a measure of mortgage loan application volume, was 658.7, a decrease of 16.2 percent on a seasonally adjusted basis from 786.0 one week earlier but was 14.4% higher than the same week a year ago. This increase is due, largely in part to the first time home buyer market which, as we know, has been vastly stimulated by low interest rates, the $8,000 first time home buyer tax credit and increased affordability. Together these incentives are finally getting buyers in the first time home buyer market off the fence and into the market which is why we are starting to see some price stabilization at this level.

While entry level prices currently seem to be on an upward trajectory, it will take some time to return to the median price levels of our pre-recession market. A recent study notes that US real estate is now as affordable as it has been in the past 38 years (this of course relates to median homes when compared to median mortgage rates and incomes). The fact is, the peak of unaffordability was in 2006, when an average family in the United States needed to spend 44% of their monthly income toward the purchase of an average single family home.

A couple of other interesting articles of note this week:

- RISMedia’s First Time Home Buyers Grabbing Houses and Tax Credit (http://rismedia.com/2009-06-03/first-time-home-buyers-grabbing-houses-and-tax-credit/)
- Realty Times Multifamily Builder Confidence Up From Record Lows; Interest From Prospective Renters and Buyers Rises (http://realtytimes.com/rtpages/20090603_confidenceup.htm)
- Realtor.org Pending Home Sales Up For Three Months in a Row (http://www.realtor.org/press_room/news_releases/2009/06/phs_up)

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

East Bay—Berkeley reports we were inundated with multiple offers this week and large turnouts at open houses. 75% of our deals this week saw multiple offers, any number from 2-8 on seller owned and 12-18 on bank owned. Cash is still king on many deals because of increasing anxiety about appraisals. Castro Valley reports we are still facing an inventory shortage here in our micromarket. We are seeing cash offers everywhere and one Agent reports that she has been outbid from the last five offers she has written by all cash deals. The number of multiples in the low range markets has been in the range of 10-60 offers, to give you an idea as to the inventory shortage we are facing here in our micromarket. Agents are waiting for banks to release more REOs. One thing is certain, we are definitely a recovering market. The Danville office reported the activity level is good but we need more inventory. Lots of buyers are jumping off the fence. The Fremont office is reporting the market is becoming competitive in the Tri-City area. The listing inventory is reducing. The Livermore office reports our pending sales are up in the office and the overall market in the Tri-Valley area remains strong. Multiple offers are still the rage below $500,000. The Pleasanton office reports homes under $450K are moving very fast with multiple offers.
Monterey County—Market continues to have lots of activity in the lower price ranges and slower as price range goes up, as only 25 properties in Carmel and Pebble Beach have sold for over $2 million in the first five months of this year, with highest at almost $8 million. As is typical for end of the month, we had a good week for closings, even though Monday was a holiday, with 14 closed sales ranging in price from an incredibly low $128,000 in Seaside to a lot in Tehama at $1,325,000.
North Bay—The Petaluma office reports that the frenzy continues as buyers compete for entry level homes that are in the $200-$400k (2 years ago were $500-$600k) across the board these homes have multiple offers and are typically going into escrow over the asking price. One home on the west side of Petaluma had 32 offers and went $80,000 plus over asking. With inventory shrinking and more buyers entering the market we are seeing an upswing in median price in this segment of the market (under $500,000). Is this the bottom in that price range? Looking for more inventory REO or otherwise. The $500-700k market is starting to pick up. Inventory in the million dollar plus market is accumulating fast. Not as many buyers in that market. But there are some circling. Our San Rafael office reports there has been an increase in multiple offers over the past week in the price point of $300-500k in San Rafael and Novato. We ratified an offer on a home listed in Novato for $2.1mil. Our Southern Marin office reports quite a week in So. Marin, from a $2,725,000 Mill Valley closing where we represented both ends, to six offers on a $679k Corte Madera listing in our office. For the first 5 months of the year, Mill Valley is 24% down in sold units vs. same period a year ago and 18% down in average sales price, Sausalito is 43% down in units vs same period a year ago, and 15% down in average sales price and Tiburon is 57% down in sold units and 2.4% down in average sales price.
Peninsula—The Agents feel that we may be seeing the bottom in the North County and in the lower price points. The inventory has been greatly reduced in these areas and multiple offers have become the norm. The $1mil to $2.5 range is still slower and many buyers are concerned with availability of mortgage money. We still are seeing cash buyers however and others with large down payments. Our Menlo Park El Camino office reports we are still getting multiples on low end and well priced properties. Some Agents feel that buyers are beginning to realize what great rates are out there and afraid they are going to go away. They want sales contingent on COE not just a sale of their properties. Sellers will take LOWER offers if they feel it has a higher chance of closing. Very cautious clients, very risk-averse. Our Menlo Park Santa Cruz Avenue office reports one sale in Menlo Park (list price $799k) which sold with four offers and went substantially over list. Good feedback from Agents who held open houses. Buyers are out in full force. Palo Alto reports the following year to year comparison: The first three months of this year were slower, as far as closed sales compared with the first three months of last year. Months four and five of last year were actually slower than months four and five this year. Yet, we are one closed escrow short of last year per the MLS here in Palo Alto. Hopefully optimistic a trend going up.
San Francisco—The Lombard office reports the lower the price the more offers. As price goes up flawed properties and not price presented well are sitting. A couple of investment property closings this week, and completing the financing was extremely difficult. The Market Street office reports multiple offers were the order of the day with mostly two offers, but one received three and one received four. Negotiations in most cases are still lengthy. Great traffic at open houses over the weekend and Agents are seeing more private showings. Buyers are coming back three and four times before writing the offer.
Santa Cruz County—Agents are busy writing offers and June is starting out to be a stronger month than we have had the past few months. Inventory levels remain low; we are seeing multiple offers on homes that are not bank owned. Short sales continue to be a big part of the market and the timeframes remain slow and cumbersome for moving through the process in most cases. We know the pent up buyer demand is there and as rates start to creep up - it may bring more of them to the table ready to write.
Silicon Valley—Our Cupertino DeAnza office reported Agents are frustrated dealing with REO/Short Sale listing Agents who don't return calls or emails. On a positive note, we had a number of sales over $1M and one over $2M. Our Los Altos office reported buyers are making offers on the lower end homes. The higher end price tiers are slower in both the condo and single family homes. The San Jose Almaden office reported inventory is still shrinking and bringing more pressure to bear on our low end market in every area. I hear of multiple offers in all parts of our county. From Los Altos to Gilroy, it is not just limited to REO bargains anymore. The only criteria are that it has to be priced for this year’s market—not previous years. One traditional sale in Sunnyvale sold for 2% above list in as many days with back up offers in place, high $800,000 price range. Of those who report to me on open homes, I hear they’re busy. Time is running out for the first time buyers who are waiting for whatever… prices to drop, interest rates to fall further or more government concessions. Bottom was two months ago and we need to get that word out! Our San Jose Main office reports activity continues to be brisk in the lower price range of $250K to $550K with multiple offers on many properties. Activity in the upper price range is slow. Open houses in all price ranges were very active this past weekend. Increase in interest rates the past week may slow our current busy market.
South County—The real estate business cycle here in the South County has remained unchanged for the last several months. Entry level (investment properties) priced between $300,000 and $400,000 are selling with multiple offers. Upper end homes are still languishing on the market. Inventory is decreasing and demand remains high. This may result in prices (and values) moving upward.

It seems we’ve enjoyed another week in SF Bay Area real estate much like the past several weeks; stabilizing if not increasing prices in the entry level, and a nice up-tick in the mid and higher price points. The delayed Spring selling season continues – at least for another week.

All the Best,
Rick

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
tel 415.437.4505