Weekly Market Update

Realtor.com Survey Tells A Lot About Today’s Housing Market

Earlier this week Realtor.com released a survey discussing some of the key factors which are motivating buyers in today’s market. It was an interesting read and I thought I’d share the highlights:

“Price declines and low interest rates are motivating millions of home buyers to shop for bargains in the most affordable housing market in 28 years, yet at the same time only one in ten of today’s home owners say they have delayed selling their home due to those same market conditions.”
“Affordability is clearly driving more than two thirds (65.2%) of potential buyers back into today’s housing market. Nearly one of five prospective buyers (19.6%) say foreclosure bargains in their communities would motivate them to purchase a home, the most important reason they’re interested in buying in the near future.”
“An additional 15.5 percent said they’re motivated to buy soon because they think prices are as low as they will go and another 15.5 percent said they were motivated to buy before interest rates rise. For 14.6 percent of first time home buyers, the Federal $8,000 tax credit is the impetus to purchase a new home in the future.”
“In the past year, the Housing Affordability Index maintained by the National Association of Realtors has increased 29 percent overall and 19 percent for first-time homebuyers, and is higher now than at any time in the 28 year history of the index.”
"Value is clearly motivating potential home buyers, and today's new level of affordability is still an under-appreciated reality that needs to be explored," said REALTOR.com President, Errol Samuelson. "The variety and quality of homes currently within reach of the average American family is much greater than most people realize. Making credit available to responsible borrowers and building consumer confidence in the economy are now key factors in restoring vitality to the nation's housing market."
Now, let’s take a look at this week in real estate: The key takeaways—inventory is low with multiple offers in the lower price ranges, and improved activity in the higher priced markets.

· East Bay—Berkeley reports the Agents are busy working with buyers. They are writing offers, sometimes five or six after the original "bonding" offer. Castro Valley reports that there are plenty of backup offers for each deal that falls through, which is helping us to get our inventory sold. We are seeing a few more listings trickle in, but we are still hungry for fresh inventory. We do notice that there is a little more featured on brokers tour than in weeks prior, and that is a good sign. We are actively selling houses but the short sale lender approval process is still frightfully slow. We are still seeing increased activity in the midrange markets. Livermore reports the inventory of active listings (all types) continues in its downward slide in all three cities, Livermore, Pleasanton and Dublin, in the Tri-Valley area this past week. Total pending sales also declined this past week in all three cities, which may have attributed to the extended 4th of July holiday weekend. Still plenty of buyers are in the market, and listings that are properly priced are selling with multiple offers. Walnut Creek reports buyers are out in droves looking and making offers. Almost every listing under $350K (except condos) is getting multiple offers (as many as 10, 20, 30 and even 40+). One listing in Concord priced under $225,000 had 15 offers and offers were as high as $100,000 over asking. Agents with FHA buyers are writing multiple offers (one case - 28!) before getting one accepted. Definitely a shortage of inventory. Financing seems to be the challenge in almost every transaction. Either appraisals are too low, guidelines too strict or properties are too distressed for FHA financing. Also, 27% of buyer controlled closed sales in June were ALL CASH. Cash is still king.
· Monterey County—Overall the market seems to be continuing at a steady pace, with REOs in Seaside and Marina going relatively quickly and often with multiple offers. We had one listed at $180,000 that had 15 offers and sold for about $240,000. Sellers are becoming more realistic in pricing or, if they don't need to sell, are pulling their homes off the market and renting them. And buyers are still looking for value and are making offers when they see a property priced right or even a little below current comps.
· North Bay—Greenbrae reports there are great new listings coming on the market so hopefully buyers are seeing properties that appeal to them and are taking advantage of less competition over the summer as well as relatively low interest rates to make them happen. San Rafael reports activity slowed down dramatically in the past week at open houses due to the holiday. Many buyers are writing more aggressive offers after losing out in the entry level price point in San Rafael. Petaluma reports buyers are out in force. The properties priced below $500,000 are still receiving multiple offers in the double digits. We are starting to see movement in the next level $500-$800,000. Inventory still is the challenge. Sebastopol reports every offer on properties under $300,000 is multiple (as many as 16 offers). The open house activity below $600,000 is very active; above that it slows down.
· Peninsula—Burlingame reports the holiday weekend saw fewer opens but the ones that were open reported fabulous attendance. One San Mateo listing held open on Saturday the 4th had over 35 groups through and even more on Sunday. Agents were showing property as well. Agents felt that although the opens were generally well attended there wasn't a lot of motivation present. Buyers are watching jobs, the stock market and economic reports which are not instilling confidence this week. At the same time however we are having our best month of sales for this year. Many of our current buyers have been working with their Agents for some a year or more. It has taken many of them a long time to decide on the timing of when to buy. Half Moon Bay reports a slow couple of weeks due to the 4th of July holiday and graduations. Activity under the $800,000 range is active with showings, anything over $1.1m is just sitting. Redwood City reports low inventory continues. Not much activity due to the beginning of the summer and the fourth. Still a lot of first time buyers in the market. San Mateo reports many multiples on the lower end especially in Daly City, So. San Francisco and San Bruno. Strong market if price is reasonable.
· San Francisco—Lakeside reports the market under $800,000 is very dynamic. The Lombard office reported a divided market, with about $800,000 the dividing line. $1.6-$2.2 especially slow, a prime buyer’s market. REOs very active with multiple offers, often all cash. Market Street reported Agents worked really hard just before the holiday putting deals together for excited buyers and anxious sellers. The holiday weekend did not see a lot of open houses but the ones that were held open had good traffic with qualified buyers coming through. One Agent commented that a sentiment with buyers is that they have to move now because they believe it will heat up in September and they want to get into a home before then. One property in district 5 received an over asking all cash offer after the open house and the sellers ratified it quickly.
· Santa Cruz County—June turned out better than many previous months with nearly 60 sales overall. The Santa Cruz office had 17 sales and the Agents are very busy on that side of town, where well priced properties near UCSC continue to be in high demand. There is a strong rental market there and the ocean properties are receiving a lot of activity in this area also. Capitola office closed an ocean front property last week at $5,125,000. While it was significantly less than the asking price, with a longer market time, it was the 2nd highest sale in the county for the year.
· Silicon Valley—Cupertino DeAnza reports we are seeing 15 to 20 offers on the low-end homes. One listing in Santa Clara (listed @ $550,000) got 17 offers and was bid up to over $600,000. Conversely we are seeing many sellers having to sell NOT "as is" in the less popular (i.e. higher) price ranges. San Jose Willow Glen reports we have slowed up a bit as far as the sales go but our listings have picked up. Our Agents are busy with buyers that are looking for the perfect house to meet their needs.
· South County—Gilroy reports the 4th of July week was very quiet. Agents representing banks are starting to see new listing assignments and an increase in BPO’s. Hopefully, this is a sign of more REO properties coming on the market. The shortage of entry level homes has caused multiple offer situations on all properties within FHA loan limits. Hollister reports we have several Agents that have buyers unable to get contracts accepted due to multiple offers or all cash offers on most REO listings. Communication is lacking on some of these transactions in this market. Floor calls have decreased due to the holiday weekend. Morgan Hill reports last month, the Morgan Hill Agents managed to post 52 sales on their office sales board. There isn't enough inventory to satisfy buyer demand in the $300,000 to $500,000 price range. These types of properties are selling quickly with multiple offers. Appraisals are becoming an issue—and some listing Agents are countering out the appraisal contingency all together.

Although it remains to be the lower-priced entry level that is driving the bus in all our geographic markets, I think it’s important to note that the current uncertainty in the financial markets is kicking up some activity in our high end properties. Our Greenbrae office reported a closed sale in Tiburon at $7.5M. Our Aptos office closed an oceanfront property in Santa Cruz over $5M. Both Santa Rosa and Sebastopol offices had several Previews properties going into contract the past two weeks. The areas noted have had longer standing inventory in the high end – Santa Cruz Co with a 26 MSI over $2M, Sonoma and Marin Counties with a 17 MSI over $2M. San Francisco is seeing some $3M to $5M activity nearly every week, although sales over $3M are about 30% fewer than this time last year. The contrast here is a 5 months supply of inventory over $2M. East Bay offices have seen a recent pick up in higher end sales; Livermore noted there are more high-end pending sales currently than the total number of closed sales at that price point in the last 6 months of 2008. Sporadic high end activity occurs in San Mateo and Santa Clara counties, where there is an average of 10 MSI for homes listed over $2M. We are seeing more contingent move-up sales now; where homeowners are taking advantage of softened prices on the move-up property, combined with today’s great interest rates. It won’t last forever!

Until next week,
Make it a great one,
Rick

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