Weekly Market Update

YOU’VE GOT TO GO THROUGH “LESS BAD” TO GET TO GOOD
July 31, 2009

It seemed everywhere you looked this week, the media was reporting on some sort of positive indicator relating to the real estate market. For starters, Good Morning America ran a story on Tuesday about the state of the housing market. You can see the interview here: http://abcnews.go.com/video/playerIndex?id=8190034 Liz Ann Sanders, the Chief Investment Strategist for Charles Schwab, and Mike Santoli, Assoc Editor of Barron’s were interviewed. Essentially they both indicated there are enough cumulative signs from indicators to say that things are not only “less bad”, but we are starting to see some pockets of improvement in the housing market. Among the vital signs they said to watch for in calling a recovery are; Index of Leading Economic Indicators, currently up three months in a row; drop in new unemployment claims (the four week average is down 93,000 from the peak, and never before has there been this large of a drop while still being in a recession); and the spread between short term (set by Fed) and long term (driven by the market) interest rates, which is widening. Additionally an opinion was shared that if the Dow stays above 8,000 – this would be a good indicator that we’re on the road to recovery. This week we danced over the 9,000 mark, closing today at 9,171; making it the best July for the Dow in over 20 years.

Our industry was the first to be hit by the economic downturn and if all continues on this path, we will be the first out. We probably won’t see housing numbers start to appreciate across the board anytime soon. What we are seeing right now are signs we typically see at the bottoming-out of a down market. Speculators and investors are competing with first time home buyers. Those individuals are going to continue to gobble up the inventory—both REOs and non-bank sellers at the entry price level. In many metros across the country, there are very low levels of inventory at the low end. I was on the phone this afternoon with the Coldwell Banker president for Arizona. They were hit hard, and early, with foreclosures. He told me that today the Phoenix Metro area has under 2 months supply at their entry level, <$250k – yet a 7 years supply of inventory at their estate home level of $2M+.

Also this week the Standard & Poor’s/Case-Schiller 20-city index was released and in it, home prices in May posted their first monthly increase since the summer of 2006. Prices rose from April in 13 of the metro areas tracked, notably Cleveland, Dallas, Boston and the Bay Area. The news followed reports showing sales of newly built and existing homes rising in June for the third consecutive month. New home construction, though still weak, is the best it’s been since the fall.

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

East Bay—Berkeley reports REOs continue to amaze. One Richmond property received 36 offers and the bank countered six of them, which were all cash. Appraisals are still a challenge, with appraisers appearing from San Jose, Sacramento and other areas out of the market area. One appraiser admitted he'd gone to Zillow for numbers. Castro Valley reported that inventory is flying off the shelves. Several listings have gone into contract within just a few days of listing. We've had a few houses on the books for months that have finally ratified offers and gone into contract. Fremont reports listing and sales have decreased due to lack of inventory. REO and short sales still moving quickly. Fair market/seller owned listings are even moving faster due to lack of inventory. Buyer competition is fierce on all properties under $500,000. Livermore reports the total number of active listings in Livermore continues to decline each week and total pendings keep increasing on a weekly basis. The majority of sales are below $500,000, but we are starting to see some activity in the $500,000 - $900,000 the past couple of weeks. Appraisals are still an issue, and the market values determined by individual appraisers are unpredictable and arbitrary at best! Walnut Creek reports very low inventory in every corner of our market. Consequently, multiple offers on most listings, especially ones priced below $500,000. Orinda reports steady sales activity, with the high end homes beginning to move, but at reduced prices.
Monterey County—The newspapers and TV are now reporting increased sales and even sales prices in some areas and it seems to be spurring on some buyers to finally make a move. Our Agents are writing more offers these days. Still buyers are cautious and want to make sure they get a good value. We had a couple of higher-priced properties close last week, one around $1.5 million and the other around $3 million.
North Bay—Southern Marin reports heated-up activity at all price points. From the Greenbrae office: “you’d think summer would be much slower but there is still quite a buzz of activity.” San Rafael reports listing inventory is still low. The buyers are still flocking to Novato for well priced homes. Petaluma reports frenzied activity in the $350,000 under range. One property had 48 offers and rumored to go well over asking. Inventory in that price range is snatched up or in multiple offer negotiations directly after listing is posted on MLS. We are starting to see more movement in the $500,000-750,000 range. Sebastopol reports low end inventory continues to fly off the shelves with multiple offers. Agents are busy writing offers and managing client expectations. Santa Rosa reports almost all lower priced homes generate multiple offers. Mid priced homes, if overpriced, will sit without lower offers and many buyers are stuck in shopping mode finding reasons not to pull the trigger.
Peninsula—Half Moon Bay reports they need more inventory in the $500k to the $800k range as that is what seems to move. High end over the $1m mark is still very slow. Menlo Park El Camino reports four offers on a million dollar house. Buyers continue to migrate to VALUE. Otherwise they stay in the background. Open houses continue to be pretty strong even for mid July and buyers openly talk of waiting for further reductions. Menlo Park Santa Cruz Avenue reports we had a $5M & $4M sale this week. All other price ranges are busy for open houses. Redwood City reports good open house activity, especially on new listings. Well priced homes in most areas move within one to two weeks (well priced is the key word). We’re seeing multiple offers on REO/short sales. Woodside reports very slow here in the country. The high end is very slow and sellers are slow to realize that reduced prices are the only way to move their properties. This high end will be the last to actually see the lower prices and accept them as they are able to hang on longer.
San Francisco—The Lombard office reports good news that our $1.4 - $2.2 market in the City has some deals. Four REO listings this week all lasted less than four days with 8, 15, 25, and 30 offers. On the contrary, the Market Street office reported an unusual week where there were no multiple offers. Good traffic at open houses and offers coming in after price reductions. The Noriega office reported a slow week for new contracts last week, BUT activity is definitely up. A lot of offers and counter offers out. It takes a lot of negotiation to ratify a contract. The Van Ness office had a phenomenal week reporting it closed $30,000,000+ this week (15 sides) and ratified 16 deals.
Santa Cruz County—Market activity seems to be steady. The agents are definitely feeling more optimistic about the market. Showing activity and open house attendance has been very good; we have a lot of "out of towners" from Palo Alto - Los Altos area as well as the East Bay looking for beach homes. Prices have gone up the last three months here and the lower end properties are selling quickly.
Silicon Valley—The Cupertino office reports the market is active and Agents are working hard, especially for August. San Jose Willow Glen office reports things have slowed up a bit. Agents are writing a lot of offers that are getting rejected. Also, some of our existing sales are sold at one price and are not getting appraised. Therefore, prices are lower than what they originally sold for. The San Jose Main office reports a very busy week with sales, mostly $250-500K. Open houses were extremely busy in all price ranges. Inventory seems to have flattened out.
South County—Gilroy reports traditionally, this week is slow due to the Garlic Festival. The past several weeks have been slow due to lack of inventory and vacations for both Agents and clients. Hollister reports short sale pendings are falling apart and becoming active in a continuous cycle. Active inventory on $300K and under are decreasing. Great floor activity and open house activity. Most REO listings have a pre-qualification process in place before submitting offers. Typical 3 days on the market before submitting offers to the bank giving the property time for multiple offers creating more frustrations for the buyers. Morgan Hill reports once again, they managed to put 53 properties into contract for the month of July. Agents are mostly representing buyers—listings are few and far between. It is refreshing to see that there is increased interest in real estate from the buying public—as open house attendance and floor calls are at a very high level.

I’ll leave you with two interesting articles from the week. In the first, our Orinda Manager Val Cook-Watkins is quoted on the local market:

http://www.insidebayarea.com/business/ci_12932118
http://www.usatoday.com/money/economy/housing/2009-07-28-home-prices_N.htm

Have a great week!
Rick
Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage