Weekly Market Update

One Good Week of News Leads to Another

Last week we had great housing news with the announcement that May home prices posted their first monthly increase since the summer of 2006 (based on the Standard & Poor’s/Case-Schiller 20-city index).

We also learned that sales of newly built and existing homes rose in June for the third consecutive month. New home construction, though still weak, is the best it has been since the fall.

This week the good news continued. As announced by the Mortgage Bankers Association, Mortgage loan application volume increased 4.4 percent compared to the previous week. On an adjusted basis, the Index increased 4.1 percent compared with the previous week and 18 percent compared with the same week one year earlier. In addition, the Refinance Index increased 7.2 percent from the previous week. The Index has climbed about 35 percent above its recent low at the end of June. The seasonally adjusted Purchase Index increased 0.9 percent from one week earlier.

Also interesting to note is this week’s release of the National Association of Realtors’ Pending Home Sales Index revealed an increase of 3.6% during the month. That was 6.7% higher than June 2008. It was the fifth straight month of increases, the first time that has happened since July 2003. The jump was much higher than expected with a consensus of industry experts put together by Briefing.com forecasting an increase of just 0.7%.

NAR’s Chief Economist Lawrence Yun had this to say, “Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who’ve been on the sidelines.” It seems all of these incentives, much like the Cash for Clunkers program in the auto industry, is finally pushing people off of the fence.

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

East Bay—Castro Valley reports open houses had slightly fewer visitors last weekend. Could be the buyers are taking a breath (or out buying a new car?) or could be August vacation time. We'll know soon. Danville reports of the 19 homes pending sale in Alamo between 1million and 2million, 8 (42%) are either short sales or bank owned. There are 3 pending sales above 2 million in Alamo and 2 of these have had 1million + price reductions. So we are beginning to see movement and price adjustments at the high end. Fremont reports the market is doing well for houses priced under $600,000. If a house is priced competitively then it becomes a multiple offer situation. Oakland reports our in-house loan officer is swamped with applications for loans. The properties that are foreclosures are all hot and homes under $500K move very quickly. Short sales are not taking as long to approve and some of the properties that have been pending for a long time are starting to close
Monterey County—Activity seems to be continuing at a somewhat increased pace. Agents are holding lots of open houses, showing property, writing offers and getting a few more of those into escrow. Last week was a productive and interesting one, as we put a trophy property listed at $35 million into escrow and we closed many escrows including a wide variety of properties from $84,000 in Salinas to over $9 million in Pebble Beach.
North Bay—San Rafael/Novato reports low end inventory continues to be the most attractive to buyers with multiple offers driving prices up. Southern Marin reports more pending sales than we have seen in any one week in a long time priced from $789 to $1,520,000. Closings are robust. Seems buyers are getting off the fence in all price ranges, including Previews, our luxury home market. Sebastopol notes all multiples in the under $350,000 range. Just not enough inventory in this range to satisfy the demand. New listings are exceedingly slow. Santa Rosa reports the market is currently defined by the shortage of inventory. One Agent had a new short sale generate 24 offers with the bulk of offers less than $10,000 apart.
Peninsula—The Half Moon Bay office reported a busier than usual week. Seeing more sellers taking all contingencies to move upper end properties. Pending sales this month more than doubled from April. Menlo Park El Camino reports that we’re struggling still at the $1,500,000 range and up. Scarcity of comps is making it hard to define prices and buyers are still holding back. Palo Alto Downtown reports we’re still building inventory in the Palo Alto, Menlo Park and Los Altos areas. If well priced, we will have multiple offers. Redwood City reports an active market in the $600-$900,000 range. Short sales and REOs are garnering multiple offers; we had 19 offers on an REO in Hayward, eight were all cash. Good open house activity both Saturday and Sunday - buyers are out there many without Agents. Woodside and Portola Valley have been seriously impacted by the financial downturn. Portola Valley has faired better due to some prices being in the low range for county property. Woodside is pretty much frozen. The San Mateo office says the lack of saleable listings is slowing down sales activity.
San Francisco The Market Street office reports there were 150+ buyers through a two bedroom unit on Bryant St over the weekend looking for a deal. The rest of our open houses were well attended. One of the properties that received multiple offers was ratified after the first open house. Conference rooms have been full this week with Agents writing offers. The Van Ness office reported the market remains strong with agents ratifying and closing transactions. SF Noriega says that some anticipated REO listings they’ve been looking for are beginning to flow back in –and hoping it’s a steady flow, not a flood.
Santa Cruz County—The local market continues to be about the same with limited inventory, multiple offers on properties under $500K. The REO inventory has dried up . Very few sales in the upper end however there are a lot more showings. The slow but steady gains in the stock market along with the more positive media housing information lately seems to have contributed to a more optimistic attitude by buyers. With three months of housing price increases, buyers are realizing that we may be at the bottom.
Silicon Valley— The Cupertino office reported the office is buzzing with activity and the vibes are positive. The Los Gatos office reported good movement if priced right. The over $2.5 is still very weak. The San Jose Almaden office reports REOs continue to be hot and receive multiple offers. Short sales in some cases are moving a little faster and in other cases, not. It depends on the bank and Agent. Outlook among Agents is positive as there are numerous signs that the market is improving and properties are selling. The San Jose Willow Glen office reports the lower to middle end is extremely active. We’re still seeing multiple offers in many cases.
South County—Hollister reports active inventory for San Benito County is down. June new listings for SFRs were 94. We had 78 new listings for the month of July. Average list price for June was $288K. REO and short sale offers competing with cash buyers. There are appraisal issues for properties way over list price offers. The good news is we have lots of buyers that are pre-approved and ready to buy! Morgan Hill reported, although short sales and REO's remain the order of the day, the office has experienced several "Civilian Sales" (not short or REO). In fact, a Gilroy home listed with a Morgan Hill Agent at over a million had two offers in the first week that it was on the market. In addition, this week the office put two homes into contract listed for over $750,000 that were also "Civilian" listings.

Overall the market this week is much like it has been over the last several. Low-end sales have been the strongest segment of the market, an indication that the first-time homebuyers tax credit is contributing to the rise. The clock, however, is ticking on this credit and it may have buyers stepping up their shopping to get their purchases in under the wire. Because it may take as long as two months to close on a home after signing a contract, first time home buyers must act fairly soon to take advantage of the credit. To qualify, they must close on the sale by November 30.

I’m also pleased to report more Previews high-end sales this week from our Luxury Leader Coldwell Banker offices. Among last week’s closings are: San Francisco -$11.5M Ross -$11M Pebble Beach- $9.2M Hillsborough- $8M Atherton- a $5.3M and a $3.9M closing Monte Sereno (Los Gatos/Saratoga) -$4.2M Orinda $3.5M Los Altos $3.6M and 5 more in the City between $2M and $3M. I’m very proud of the fact that we are not only the Bay Area Market Leader – but also, thanks to our Previews program, and our incredible Previews agents –we dominate the Luxury market as well. As confidence begins to return to several economic sectors (some of us are finally starting to open up the mail when the 401K statements come), we will see continued activity in our Previews markets around the Bay Area. Price/Value/Condition will remain to be key and critical for these sales to continue.


All the Best until Next Week-
Rick

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