Weekly Market Watch

It’s On The Table!
There’s no question that the government’s first-time homebuyer tax credit has spurred a significant amount of sales this year. Latest estimates show that some 400,000 additional sales occurred this year due to the first time home buyer tax credit, which is about 8% of all sales this year.
In the latest news, The Senate has reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers. While its passage remains uncertain, this plan would extend the existing credit for first-time homebuyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners. The reduced credit would be available to homeowners who have been in their current residence for a consecutive five-year period in the past eight years. Lawmakers in Washington also raised the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000. Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, said the sources. The measure still faces votes in the full Senate and the House.
The U.S. Senate won’t vote until next week at the earliest. As soon as they do we intend to create a piece that will allow you to communicate the news to your clients.
This week, Business Week reported “The broad improvement in the housing indicators in recent months leaves no doubt that the long-awaited housing recovery is finally under way.” The article went on to report: “Policy alone cannot explain the 24% gain in existing home sales since January, nor the 22% increase in new-home purchases, the 40% rise in single-family housing starts, and the recent upturn in home prices. The primary driver is historically high affordability. Fixed 30-year mortgage rates are at 5%, a multi-decade low, and prices have plunged a total of 30% since May 2006, based on the Standard & Poor's Case-Shiller Home Price Index. By that price gauge, homes are well undervalued relative to both rents and aftertax income.”
Take a look at this graph which indicates the recent decline of inventory, of both new and existing homes in the US. When inventory levels drop and demand is on the rise, what typically follows is rising home prices.

Now let’s take a local look at this past week in Bay Area Real Estate:
East Bay—Castro Valley reported the market is starting to slow with less multiple offers to compete with. One Agent was thrilled that her recent offer was one in only five. Yet there are so many pendings, one Agent was recently lamenting that by the time a listing hits the MLS, it goes pending. That is partially true, especially in the low income markets. What a great time to be a seller! One of our recent listings, a short sale, was on the market less than a week, taking 14 offers. So, we are encouraging our Sellers that now is the time. Danville reported inventory continues its descent. We have very little inventory in San Ramon or Dublin - only about 1 month supply. Fremont reports there appears to be an increase in activity as buyers try to purchase before the first time home buyers tax credit expires. Livermore reports for the past week in the Tri-Valley market active listings are up; in Pleasanton they were down; and in Dublin they remain stable. Pending sales in Livermore and Pleasanton were up this week and remain stable in Dublin. Oakland reports sales are in all price ranges, the upper end is moving better. The hottest properties are in the $500K to $700K range and go in multiple offers if priced right. Sales have been very consistent, but take longer to close because there are so many short sales. Walnut Creek reports a few more REO listings have hit the market, more short sales approved by lenders. Inventory is extremely low. The lack of inventory is having an impact on sales.
Monterey County—The market continues on in its slower but steady pace, with many more sales in lower price ranges, but at least a smattering of higher priced properties in Carmel, Pebble Beach or down the coast.
North Bay—Greenbrae reported a tear down property in Kentfield for about $650,000 received 11 offers and went well over asking price. Most offers were all cash. Still plenty of bigger activity in Marin with Agents reporting steady traffic at open houses. Southern Marin reported buyers are more cautious, few attending open houses, fewer homes being open. Santa Rosa reported Agents are managing their client’s expectations and finding a way to win the multiple offer. Sometimes it’s how the offer is packaged that wins the day. Could use some inventory! Sebastopol reported almost every offer under $500k is a multiple offer mostly in the double digits. If every offer we wrote was accepted our openings would be double digits too! There has been a noticeable slowdown of new listings across the board.
Peninsula—Half Moon Bay reported it is sensing a slow down with less inventory. MLS tour sheet reflects all the retours, many with price reductions and few new listings. Menlo Park El Camino reported a bit of a sea change in the market-not much new inventory, only three new listings on tour this week which is very, very low. Menlo Park Santa Cruz Avenue reported very slow open house activity this last week. Many listings are receiving price reductions as new inventory is limited. Pricing is critical. 52% of the listings on the Menlo Park Atherton Broker tour have price reductions and 82% are retours. Palo Alto Downtown reported the market is generally slow. We feel like the holiday season has started early. The activity is reflective of that. Sales are down in our area. San Mateo reported a look at its pending sales (SFR) of its six main communities; here is a breakdown of the total and the percentage of short sales plus REOs. Belmont 31 pending sales (35% SS/REO), Burlingame 27 pending sales (33% SS/REO), Foster city 12 pending sales (18% SS/REO), Hillsborough 22 pending sales (23% SS/REO), Redwood shores 10 pending sales (10% SS/REO), San Mateo 109 pending sales (52% SS/REO). Most of San Mateo SS/REO is in entry level areas.
San Francisco—The Lakeside office reported sales are slowing down. The whole process of buying real estate has been delayed from beginning to end. Lombard reports a good week for ratified contracts, including some more stale listings that finally got reduced appropriately. Most multiple offers were again in and around the entry level price. A couple of commercial deals having to close all cash, as commercial paper a huge challenge. Market Street reports Agents are working harder to keep the deals in contract. We’ve had delays closing lately due to appraisal problems. Open house attendance this weekend was good throughout the city even though Tuesday Broker’s tour was quiet. Van Ness reports we did close 20 deals this week ranging from $549K to $4.5 million (10 being over 1 million). The market remains strong in our areas.
Santa Cruz County—October looks to be a fairly active sales month for the three offices. However, there is a real lack of inventory and those sellers who do not have to sell in this market are not. Escrow times are longer due to completing the financing aspect of the transaction and we are holding our breath on many deals until the end of the transaction. All in all - there is activity, and still a guarded optimism about the market - with buyers looking for the extension of the tax credit.
Silicon Valley—Cupertino reports well priced and well presented properties get lots of attention. We had 11 offers on a Sunnyvale townhouse that went way over what it will appraise for. The buyer is aware and will make up the differential in cash. Los Altos reports the market seems to have slowed a bit as we head toward the end of the month and into the winter weather. Almaden reported inventory continues to shrink and put pressure on what little remains. Almaden, Cambrian and Blossom Valley homes are all receiving multiple offers. San Jose Main reports excellent activity in lower price range of $250k-550k. Active weekend for open houses in all price ranges. Multiple offers common with properties of $700k and less. Saratoga reported the market seems to be about the same for us. The bank owned and short sales seem to dominate the market. Homes in Saratoga under $2,000,000 are selling easily, but the upper end is slow.
South County—Hollister reports it is still lacking listing inventory. Clients are hoping the first time home buyer credit is extended due to the inability to secure a property by the end of November. Cash buyers prevail. Morgan Hill reported October saw a decrease in the number of properties going into contract. Most selling Agents feel challenged as the inventory is low and multiple offers are the norm for moderately priced homes. The fact remains, however, that once a property is put into contract, appraisals are often sending buyers and sellers back to the negotiating table. The overall market is improving--but improvement is being measured in small and sporadic increments.
With so much focus on the entry level and lack of inventory, I thought it would be good to include some market data on inventory in a higher price tier – homes between $1M and $2M. The graph below shows a 2 yr history on new listings and closed listings as reported monthly from our local MLS for San Mateo, Santa Clara, Santa Cruz, and Monterey Counties.
Description
Sep 07
Oct 07
Nov 07
Dec 07
Jan 08
Feb 08
Mar 08
Apr 08
May 08
Jun 08
Jul 08
Aug 08
Sep 08
Oct 08
Nov 08
Dec 08
Jan 09
Feb 09
Mar 09
Apr 09
May 09
Jun 09
Jul 09
Aug 09
Sep 09
New Listings
673
605
390
229
512
603
704
808
784
697
660
540
628
560
375
236
462
524
644
582
506
520
524
424
462
Sold Listings
290
344
292
248
162
192
286
315
384
394
340
303
267
208
138
165
81
103
129
153
198
312
296
239
279

Notice that the trend lines are nearly parallel; there has been a fairly steady demand for the amount of new listings coming to the market. Most agents will tell you that there is not enough new inventory at this price point. If the market feels sluggish at all, it’s probably due to lack of good inventory –not because homes are not selling. September 09 has nearly the same amount of sales as September 08, but a year ago there were about 35% more homes coming on the market in September. And the absorption rate this year is even better when you compare to September 07. You can run all these comparisons and many more for your city or county and any price points in Market Trends in MyRECafe. I am attaching this Market Watch as a PDF as well this week, in case you have any trouble reading the graphs.

We will keep you posted on the pending legislation regarding Homebuyer Tax Credit, as well as the latest on extension of the Conforming Loan Limits.
Until then – Have a great week!
Rick


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

Weekly Market Watch

“U.S. Economic Recovery on Track”

While we await the results of the possible expiration, extension or expansion of the $8,000 first time home buyer tax credit, one thing is for sure, the economy seems to be moving forward—which is driving consumer confidence. Earlier this week, Reuters.com ran a very interesting story on the U.S. economic recovery and the result was very encouraging. Among the story’s highlights:

· “The U.S. economy is firmly poised for a recovery from its deep recession but growth may be moderate and the job market will not revive immediately, senior White House aide Lawrence Summers predicted on Wednesday.”
· “On the economy, Summers said the $787 billion stimulus package and inventory rebuilding by businesses were among the “dominant drivers” lifting the economy.”
· “It will be some time before unemployment starts to decline. Once it declines it will take a long time to return to normal levels, given how elevated it is…The jobless rate is now at a 26-year high of 9.8 percent.”
· “Most private economists think the recession, which began in December 2007, ended in the third quarter. But there is much disagreement about the path to recovery.”
· “Some see above-average growth continuing through next year, arguing that deep recessions are typically followed by powerful recoveries, helped along by pent-up demand as consumers and companies resume spending.”

Obviously this is welcome news for the economy which ultimately benefits the local housing market. What I can tell you is that I am encouraged by the progress we are making in the real estate market. We’re beginning to see more days of progress than days of back stepping. We’re watching sales activity and consumer sentiment and we are expecting over the coming months a moderate and more sustainable pace of sales at most price points. We will probably see a modest rise in housing prices in the coming year; both nationally and statewide. In the Bay area, it will probably be the entry level brackets which will show price improvement. Will it be the double digit appreciation we saw in the earlier part of the decade? Probably not. But this “new normal” is much more sustainable and a much healthier path to build upon. It makes me excited about the future and gives us all hope for a relatively busy and productive 2010.

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

· East Bay—Castro Valley reports inventory is slowing, with fewer investors and less multiples out there. We are seeing more pendings, which has made the market difficult for buyers due to less inventory. Listings are king right now. Many listings are going pending within a week or two of hitting of market. We had one listing that had an offer within an hour of hitting the market, sight unseen. Fremont reported listings under $800K still have the most activity. REO transactions at a slow pace but expected to pick up in the beginning of the new year. Short sales are increasing - lenders seem to be more receptive to adjust loans. Oakland reports REOs don't seem as robust but still going into escrow with many multiple offers. Starting to see more requests for units. Sales are in all price ranges. Orinda reported REOs have slowed but still have a presence in the market. Most are selling at or above asking price. Agents report open house attendance as spotty. Walnut Creek reported we are seeing prices in some areas inch up a bit especially in East County and also part of Central Contra Costa County. Inventory is still very low.
· Monterey County—Listings are still selling if priced right and in good condition or super buys in not-so-good condition. The lower end is still where we are seeing the majority of sales; however, there are still multi-million dollar sales in Carmel, Pebble Beach and the coast, including one we closed on last week in Carmel for $5,000,000.
· North Bay—Greenbrae reported the low-end of the Marin market (under $700,000), cities of Novato and San Rafael, condos and REO properties have all experienced solid sales in the past few months. Multiple offers are quite common in these areas and cash is certainly king in those battles. Other markets like Larkspur, Corte Madera, Greenbrae and Mill Valley are all holding their own with four to seven months worth of inventory – that’s actually pretty good in this market. Reasonably priced homes that show well, offer friendly floor-plans and close proximity to schools and shopping are still receiving multiple offers. Marin buyers know what they are looking for and when they find it, so too do a few others with the same thoughts, bidding on the same house! At least the Marin buyer is consistent. And, savvy, too. They know the inventory. They compare properties and they look for bargains! Sellers, in most cases, are getting the idea and pricing to sell, though buyers still might want to see one price reduction before pouncing on a property – even if priced at what seems to be a bargain from the get go. Santa Rosa reported that we’re starting to see the first signs of slow down heading to the holidays. An influx of inventory would be countered with a host of offers. Sebastopol reported listings and sales dried up last week. Many clients are struggling against all cash offers! This was our slowest week for both new listings and sales this year.
· Peninsula—Burlingame reported there is more sales activity and great competition at the lower price ranges with many buyers losing to investor / cash offers. More high end listings are coming to market with very tight inventory in the $800K-1.3M range. Menlo Park El Camino reported many sellers are just not coming to terms with buyers. Lots of rejected offers. Build up of inventory of overpriced properties. Menlo Park Santa Cruz reported open houses were very slow this last weekend. High end sales are still weak and the middle price ranges are moving well. Good inventory is getting to be a huge issue. Palo Alto Downtown reported the overall market is slow. Well priced homes do sell with multiple offers, but the overall activity has been quieter and a bit unexpected, meaning the holiday season seems to have started sooner rather than later. Redwood City/San Carlos reported an extremely slow week. Very little new inventory. Only two new listings in our office. The one multiple we had had three offers, two of which were below asking.
· San Francisco—Lakeside reported there is a lot of activity with the homes under $800K. Lombard reported that entry price levels are bringing the most interest and multiple offers. An off-market $4m home brought two unsolicited offers while others in that price point go begging. We are seeing continuous loan delays and occasional appraisal problems. The Market Street office reported an agent holding an open house in the $1.8m price point was very pleased to have over 20 prospective buyers attend actively looking in that price range. All other open houses were well attended. Our ratified sales this week ranged from $275k to $1.6 and everywhere in between. Oddly enough the lowest priced property had one offer and the highest priced had three.
· Santa Cruz County—No information reported.
· Silicon Valley—Cupertino reported things are hopping! We had 27 offers on a home in Cupertino listed for $1,049,000. Needless to say, it went way over. Most of the Agents are working hard. Los Altos reported the low end is still very busy especially in single family homes. San Jose Almaden reported listings are slowing down, it’s too bad as lower priced homes are flying off the shelf. San Jose Main reports activity remains strong in the $250-550k range. Multiple offers on most. Upper market still slow but showing signs of improvements. Saratoga reports the market for all price ranges has slowed for us. I'm not sure what the cause is, but there may be an impact from buyers holding off pending the potential extension of the $8000 buyer credit.
· South County—Hollister reports the market is still driven by cash buyers on most REO sales. Appraisal issues on some multiple offer situations due to increased offer price. Open houses have been productive. Buyers are willing to wait for short sale process due to low inventory.

This week I’ll conclude with a few articles of interest:
What Housing Bust?; CNN Money
Housing Tax Credit Working, So Keep Momentum Going, NAR Urges Congress; Realtor.org
Shape Of The Housing Recovery; CNBC
Real Estate Outlook: Mixed Signals; Realty Times
Until next week,
Rick

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

Weekly Market Watch

Recent Housing Upturn Sparked By Buyer Leverage

The latest S&P/Case-Shiller home price index reveals home price for 10 major cities rose 3.6 percent between April and July. So does this recent uptick in the housing market mean we are on the cusp of an all-out housing boom? Probably not. In all likelihood, the recent upturn in the housing market has been sparked by several factors:

· The impending expiration of the $8,000 first-time home buyer tax credit
· The impending expiration of current conforming loan limits
· The recent uptick in the stock market
· Increased consumer confidence
· Continued low interest rates
· Increasingly low supply of entry level homes
As you look through our past weekly reports – you’ll see that in the Bay Area it’s our entry level that has continued to have the highest demand and lowest supply. This has resulted in multiple offers, often over the list price, in almost all of our entry markets. (Ex: Alameda and Contra Costa County homes under $600K= 1.6 Months Supply of Inventory –dropping every month this year) In some areas we’re beginning to see a trickle-up effect, where the next tier price-point of homes is getting some activity from move-up buyers. (ex: For homes priced over $1.5M: San Francisco = 4.9 Months Supply of Inventory, down from last month and down Year over Year. Santa Clara County over $1.5M = 6.8 MSI, down from last month, down Year over Year)

Will it last? It’s tough to say. Right now we’re in a slightly unique position because some of the stimulus dollars the government has put in play are working which may be causing a false front for the overall economy. The stock market is up, Dow hitting over the 10,000 mark this week. Consumer confidence is on the rise. The US housing market is looking up.

But, the fundamentals themselves haven’t changed. Outside of Fannie and Freddie, there are few resources for making home loans. It remains a challenge to get a good competitive market for Jumbo loans –and much of our Bay Area is Jumbo loan territory. Foreclosures remain a major issue. We know there is a shadow inventory of homes already foreclosed on and not yet released to the market place. Another new phenomenon is the creation of a market where under-performing and non-performing assets (mortgages) are being purchased in bulk by investors, most likely adding to a further delay of more foreclosed homes hitting the market. As unemployment remains a challenge and businesses and employers continue to tighten their belts, it would seem there are more foreclosures ahead of us. Loan re-sets will provide a challenge.

Sounds a little grim and sober, but probably a bit more realistic. Clearly we are in a much better position than the majority of the State. Our world-class desirability coupled with our finite amount of homes and buildable land will always keep real estate in the San Francisco Bay Area performing better than most markets. But we need our entry market to remain stimulated. One major factor that stands in our way is the impending expiration of the first time home buyer tax credit and the higher conforming loan limits. These have helped tremendously to drive much of our recovery. But right now the debate on Capitol Hill continues and everyone is waiting to learn whether the credit will be extended, expanded or will it simply expire. Many on the opposing side believe it is too costly to finance. But NAR had this to say: “Each home sale pumps an additional $63,000 into the economy through related goods and services, so the benefits of extending and expanding the tax credit far outweigh the costs.”

If the current tax credit and loan limits simply expire, NAR had this to say: “All we can say for certain is sales will decline when the tax credit expires because we are not yet on a self-sustaining recovery path. It also raises a risk of a double-dip recession. Extending and expanding the tax credit is the best tool in our arsenal to encourage financially qualified buyers to stimulate the economy and help reduce the budget deficit.”
As this debate continues, buyers seem to be leveraging today’s market advantages which continues to create great activity in our local markets. Let’s just hope the leveraging opportunities continue.

Now, let’s take a look at this week in real estate:
East Bay—Berkeley reported a much busier week than the start to October. We took in some good listings as well as sales. Still hard to get those listings; certainly not enough in Berkeley, Albany, and Kensington. Castro Valley reported REOs continue to trickle into the market, and there are still some incredible prices in San Leandro and Hayward, especially in the lower range market. Prices have stabilized overall, and are going up, except that appraisals continue to shock the market, although getting better. Danville reports we had 26 new pending sales in San Ramon this past week and we have only 1 month supply of inventory. Demand is clearly stronger than inventory. Fremont reports prices and interest rates are going to maintain a steady stream of qualified buyers, however increased moratoriums and state mandated extensions are hindering the inventory of bank owned properties which is why the listings are low. Livermore comments that REO business seems to be in somewhat better price ranges at the moment. Our sales are in all price ranges and our listings are selling faster than the listings coming in at the moment. And from Oakland/Piedmont: Sales are still taking more time to close. But agents are busy and the sales are coming in.
Monterey County—The market continues on at its sluggish pace, with listings declining as they do as we head into the final months of the year and without yet the surge of REOs we've been told to expect.
North Bay—Greenbrae reported the low end of the market is hopping! Two properties in Novato SFR under $450,000 with 7-8 offers each. Everybody is loving a bargain. San Rafael/Novato reported we are continuing to see multiple offers on homes priced to market value from entry level to million dollar homes. Southern Marin reported entry level prices slowly rising. One of our Agents was one of 15 offers on a bank owned property in Novato which went way over asking, and higher than when it was on the market as a Short Sale. Also seeing some buyers for a second and third time at Southern Marin open houses. Petaluma reports inventory continues to be snatched up as it comes on in the $500,000 and under price range in the double digits multiple offers continue to be the norm. Starting to see some strong movement in the $500,000 and above price range. Santa Rosa reported the market is strong but the shortage of inventory is keeping open escrows at bay.
Peninsula—Burlingame reported continuing appraisal problems are causing sales to fall out or to be negotiated down in price. Inventory is thinning somewhat. Half Moon Bay reported that we’re finally seeing some activity in the $1.0m+ listing range – one property sold in 2/08 for $2.9m now on the market for $1.9m with 3 interested parties. Menlo Park El Camino reports a bit of a lull here on the mid peninsula – slow on both listings and sales. Agents are busy but no results yet. Inventory is low. Palo Alto Downtown reports the market is very quiet. Multiple offers occur but volume of sales is down throughout Palo Alto in the $1.5 million and above. Redwood City reports slowly there is more inventory coming on the market and the list price seems to reflect the current market. Good activity at the open houses.
San Francisco—Lombard reports a slow October so far. REOs have dropped off. The rare property, priced right has multiple offers. A couple of cases this week where sellers took cash over higher price. Market Street reports two multiple offer situations. Three counter offers were what it took to get many of our contracts ratified. Lots of activity at open houses and buyers are mindful that the first time home buyers credit is going away at the end of November. Noriega reports well priced properties are still getting multiple offers. We noticed more investors are out making offer on well located and well priced properties.
Santa Cruz County—The market activity is good. We have received a couple of new REO listings in the last few weeks, and although the process is long, these are selling quickly if priced right. While the lower end continues to drive the market - we are seeing some slight activity in the higher end properties which is promising.
Silicon Valley—Cupertino reported most of the activity continues to be in the lower price ranges, which are very competitive. Lots of offers are getting written compared to the number ratified. Open house traffic continues to be excellent. Los Altos reported there is a shortage of low end properties for first time buyers that are scrambling to try to close before Nov 30 and the tax credit expires. The mid range is getting moderate interest and some of the higher end is getting a lot of interest in the best school districts. San Jose Almaden reported the low end still continues to drive sales. Listings picked up a little this week. Open house traffic was spotty. Homes even 3% above comps seem to linger while those -1% below are sold quickly and above asking. San Jose Main reported buyer demand is increasing due to low interest rates. Open houses are extremely busy in all price ranges. Sales of properties in the lower price range between $250k-550k are brisk and usually involve several offers. Upper market moving slowly at present. San Jose Willow Glen reported multiple offers are the norm on regular deals and REOs. As far as the REOs go, they are going well over the asking price in all cases. Homes in the $600,000 to $800,000 are selling quickly as well.
South County—Gilroy reported the local market remains pretty much the same as it has for several months. FHA buyers are out there competing against cash and conventional buyers for homes less than 400k. Every sale and closing seems to present new challenges. Morgan Hill reported you just can't keep some Agents down. A Morgan Hill Agent put five homes in contract this past week--they ranged in price from $350,000 to $1.2 million. He is a very hard worker and despite this "quirky" market manages to be a consistent "top producer" in this office. In addition, another of our top agents is expected to "close" five transactions during the last two weeks of October. These two agents are shining examples that hard work and dedication does pay off and no matter what the market.

This week I’ll conclude with a few story highlights:

USAA Praises Biggert Bill To Extend First-Time Homebuyers Tax Credit; Reuters
Hopes Run High For Tax-Credit Expansion; MarketWatch
Washington Report: $8,000 Home Buyer Tax Credit; Realty Times
Also, CAR released its 2010 forecast this week. Please read it here: http://www.car.org/newsstand/newsreleases/2010forecast/.

Until next week-Make it a great one,
Rick

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

Weekly Market Watch

Tax Credit: Expand? Extend? Expire?

The question everyone is asking is, will the government expand, extend or simply let the $8,000 first time home buyer tax credit expire. With just over 50 days left until it is expires, the debate is on and everyone is anxiously awaiting the result.

Whichever side you take on the debate, what you can’t deny is the fact that nothing has done more in the past year to jumpstart our housing market more than the $8,000 first time home buyer credit. Will all of that come tumbling down if it isn’t extended or expanded on? It’s hard to say but I believe that if it isn’t expanded we will see a definite drop in first time home buyers in 2010 and probably a much larger emergence of investors in the entry level arena. While on the surface that may not seem troubling, it actually is. The fact is that investors purchase homes solely for income while first time home buyers purchase homes for lifestyle. When we have a balance between the two it keeps home prices relatively stable. If our entry level buyers are predominately investors, we could see a drop in home prices in this sector which isn’t good for a market that has already taken its fair share of hits.

While Congress continues to debate the issue, we as Realtors, are calling for support for the expansion of the tax credit from first-time buyers to all homebuyers, increasing the maximum amount of the tax credit from $8,000 to $15,000, eliminating the existing income caps for eligibility purposes and extending this homebuyer tax credit for one year from the date of enactment.
We believe that stimulating demand for housing—particularly in the repeat buyer market—is the most effective way for Congress to help lead the U.S. economy into a recovery and back on the path to growth. And we have to remember that it’s not just the entry level that is affected. The move-up buyer begins the process in building more demand in our mid-tier price points and ultimately our higher-end markets. Timing is critical and we hope that Congress is listening.

While the clock ticks and we await the results of the debate on Capitol Hill, let’s take a look at this week in real estate:

East Bay—Berkeley reports a rather slow start to October, compared to our previous months. Anything priced $400-750k is getting lots of attention. Open houses were competing with a popular local street fair, but still garnered 45 to 30 groups at the newer listings. Castro Valley reports new construction in our area is looking up. Pricing seems to have normalized for new construction. Otherwise, we are still seeing lots of short sales. REOs are trickling through as well. We are starting to see the Castro Valley home median price range pick up somewhat. Fremont reports the market is typical for the Fall months as people prepare for school and holidays. REO properties are still hot, but have slowed a little too. Livermore reported during this past week active listings and total pending sales remained stable in both Livermore and Pleasanton. In Dublin, this past week, there was more than a 20% increase in listings, and a decline of 10% in total pending sales. $500,000 and below still remains very "Hot" with multiple offers. Walnut Creek reports very low inventory with multiple offers on almost every sale. Even with multiple offers, properties in the $600,000 - $1,000,000 range are not selling much over asking. Buyers are still very cautious, some not quite convinced that the market has hit “bottom.” REOs are barely trickling in.
Monterey County—Things seem to be slowing down just a bit, though we have had some high-end sales of late, as the inventory of REOs is dwindling and the expected onslaught of new REOs has not yet materialized. Great mortgage rates we're seeing right now may encourage another surge of sales.
North Bay—The San Rafael office reports the under $300K market in San Rafael has slowed due to lack of inventory. In Novato the $300-600K price point is steady and the under 300K price point holding steady over the past few months. Cash is still king in bidding wars. Southern Marin reports listings are slowing down considerably. Sebastopol reports buyers are kicking tires at open houses. Listing activity is very slow.
Peninsula—Burlingame reports appraisal problems are becoming more common and buyers demands are becoming excessive. The Agents are working so hard to hold their transactions together. The number of sales have picked up however and hopes are high for a strong Q4 finish. Half Moon Bay reports the price point is the only thing that matters in receiving offers on listings. Over the $1m mark is still very quiet. Menlo Park El Camino reports buyers are absolutely out there but come out of the bushes only when lured by a great house at a great price. We had nine offers, 25 offers, 6 offers – where are the 8 and 24 and 5 buyers that didn’t get the house? They will buy when the right house gets to the current market price. Redwood City/San Carlos reports one of the multiple offers was our listing and it was priced at $775,000—in San Carlos. There were five offers and it went $55,000 over list price. Three out of the five offers were very close. Moods seem positive. Woodside reported buyers are still on the fence for anything over $4 million. Almost nothing will lure them out. Under that level, it is price, price, price.
San Francisco—Lombard reported truism reinforced this week: "Price it right, right out of the gate.” Buyers are writing right away if they see value and sense competition. But not returning to see the stale listings with the multiple mini reductions. Many sellers are still not getting this. Market Street reported that there was a lot to do around San Francisco over the weekend so open houses were a little less well attended than past weekends. However, those who attended were especially eager to buy before the end of the year. Van Ness reported both large and small deals are moving well. Activity level is picking up again.
Santa Cruz County—The lower end market below $600K continues to dominate the lion's share of sales. Agents are working really hard to keep deals moving forward and at times buyers continued interest in the property if escrows drag on. The Agents are still doing a lot of short sales, some taking months and months. The REO market especially south County - Watsonville - is almost completely dried up and those few actives are getting multiple offers - with cash buyers winning the bids.
Silicon Valley—Cupertino reports we typically have a lot more sales than listings. Last week the numbers were just about even. Open house traffic was insane! Los Altos reports buyers are trying to find an affordable home in most cases and are competing in multiple offers with cash investors. Mid tier buyers have more time to consider and the upper end is slow. San Jose Almaden reports the market is tapering off a bit on the sales now, not by much but a little. Open houses remain very busy still. With rates as good as they are and inventory shrinking and tax credits ending I would expect more sales. Perhaps the upcoming weeks will prove this to be true. All sales made this week were multiple offers. Willow Glen reports multiple offers are still the norm and many of the Agents in this office have clients that are losing out. Inventory is somewhat down as well.
South County—Morgan Hill reports each local market is unique and comes with its own set of challenges. Here in South County offerings on the MLS range from one-bedroom condos to huge estates on acreage. We have horse properties, PUDs, single-family developments and attached housing and everything in between. The buying public, for the last six months, has zeroed in on entry level housing (those homes listed under $500,000). That segment of the market is thriving.
Here are a few informative links regarding the $8,000 tax credit that you may find helpful:
Update: Industry Makes Case For Home Buyer Tax-Credit Extension; Wall Street Journal
Builders Urge Congress To Act On Home Buyer Tax Credit, Appraisal And Lending Issues; National Association of Home Builders
Homebuyer Tax Credit Best Tool For Sustaining Housing Recovery, Says NAR; NAR
Make The Home Buyer Tax Credit More Easily Available At Closing; RISMedia
1.4 Million Families Have Taken Advantage Of First-Time Home Buyer Tax Credit, More Claims Expected; RISMedia
Until next week,Make it a great one,
Rick

Rick Turley
President, San Francisco Bay Area

Weekly Market Watch

“The patient is out of intensive care, but still has a very long road ahead to a clean bill of health.”
Those were the words last week from Fannie Mae Chief Executive Officer Michael Williams. The CEO went on to say, “Anyone looking objectively at the economy and the housing market sees hope.”
Another good solid indicator of what I’ve been saying in my weekly updates. The U.S. housing market still has a long road ahead but we are making some definite moves towards a housing recovery. So what’s the challenge? Well for starters, rising unemployment numbers aren’t helping. The United States Department of Labor reported in its September 4 Economic Situation Summary that the number of unemployed persons increased by 466,000 to 14.9 million and the unemployment rate rose by 0.3 percentage point to 9.7%. Just to give you an idea, since the recession began in December 2007, the number of unemployed persons has risen by 7.4 million, and the unemployment rate has grown by 4.8 percentage points.
We also need to couple that with the challenges in the mortgage industry. Bloomberg reported, “The mortgage market is still dependent on government-affiliated programs, with private banks providing just 10 percent of loan liquidity, down from about 60 percent in 2006. Fannie Mae and Freddie Mac are responsible for about 70 percent of all new mortgages, while the Federal Housing Administration accounts for about 20 percent.”
Before we can be truly reformed, we need to get into a position where there is more of a balance between private bank loans and Fannie Mae and Freddie Mac loans. In all actuality, we probably won’t see that for some time.
Having said that, U.S. mortgage applications surged last week with demanding rising to its highest level since late-May as consumers sought to take advantage of the lowest interest rates in months, according to Reuters.
The Reuters article reported, “While home refinancing loans dominated demand, the appetite for applications to buy a home, a tentative early indicator of sales, hit its highest level since early January. The overall trend bodes well for the hard-hit U.S. housing market, which has been showing signs of stabilization.”
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications which includes both purchase and refinance loans, for the week ended September 4 increased 17.0 percent to 648.3, the highest level since the week ended May 29.
These are all very positive indicators that showcase that we are on the right track…it’ll probably be a slow track…but we’re on the right one.
Now let’s take a look at this week in real estate:
East Bay—Berkeley reported a slow week compared to our brisk start to September. Castro Valley reported our local micromarket is full of challenges. Not enough inventory, hungry buyers with lots of cash, Agents who must navigate the challenges of appraisal problems, short sale bank frustrations and stiff competition for limited inventory. We are seeing more listings out there. They are selling quick, though, often within a week or so of listing. Danville reported a spurt of activity the first week of September and then it got quiet. Inventory and sales activity is down both in our office and in our service area. Fremont reported it seems that the recent Wall Street financial information has made buyers more comfortable and motivated to purchase now that prices are starting to increase and the first time buyer program is ending in November which is another motivator. Walnut Creek reported sales activity has really slowed down. Fewer REOs coming on the market though there is an increase of short sale listings. Multiple offers on most every sale. Orinda reports lower attendance at recent open houses, but the Buyers who do show up are more serious and ready to make offers.
Monterey County—REOs and Short Sales are continuing on at steady pace, but we are seeing more "traditional" sales than over summer. We're getting lower on inventory in the hot REO market of Seaside; however, we keep hearing that the release of a large number of REOs there is imminent. With Labor Day holiday last week, our closings were weak, though had one over $1 million and one over $2 million, but had good week for new escrows.
North Bay—Petaluma reported lots of movement in the $500,000 and above range. Under $300,000 continues to be a frenzy with double digit multiple offers. Cash is king. Santa Rosa concurred noting, too, that cash was king though the Sonoma County market did also note that open houses weren’t as well attended last week as they have been in recent weeks. Sebastopol reported lots of folks out despite the weather. Good attendance in all price ranges but most offers remain in the low end. San Rafael reported the market has slowed in the past few weeks. Inventory is still low. 78 people came through a new listing held open for the first time in Novato in the mid $700s. An offer came in the next day. Greenbrae reported (San Rafael & Corte Madera) had two $1 mil properties come on for the first time last week and had multiple offers by Monday. Activity not as robust as we hoped but lots of new properties coming on the market so perhaps buyers need a chance to digest the new investors.
Peninsula—Menlo Park El Camino reports Agents are busy. The job of being a real estate Agent right now is very hard but the Agents see some deals are being made. Big loans are still like apparitions. Menlo Park Santa Cruz Avenue reported good activity following the Labor Day Holiday. One Hillsborough listing ($6,500,000) was ratified after one week on the market! Redwood City-San Carlos reported open house activity has definitely picked up. Buyers seem more ready to make offers. Woodside reported Woodside and Portola Valley are extremely difficult markets (especially Woodside). The price point is so high that buyers will not buy and those who are selling are only selling because they have to. EX: just closed a house at $5.6 mil that the owners paid $13 million for in yr. 2000. Very few homes on the market representative of the usual Woodside market.
San Francisco—Lombard reported the number of houses going pending look OK but mostly entry level prices. Labor Day listing surge is happening in the City: 165 new listings entered. The lower the price the more offers. One REO we got in Hayward yielded 33 offers. The Market Street office reported open house activity was brisk last weekend with 60 groups going through a listing in District 5. 2/3 of the ratified offers were for new construction where good deals are still to be had. This week the only multiple offers came in on a short sale. Prices varied from $300K to $940K. The Noriega office reported Agent activities are high but it's tough to get deals ratified. Even after deals are ratified, it takes a lot of work and negotiations afterward to keep the deal alive.
Santa Cruz—August was slower than 2008 in terms of number of sales and overall prices have dropped within the office about $100K since last year at this time. Open house activity is still good and there continues to be a pent up demand for properties as the inventory levels remain low.
Silicon Valley—Cupertino reported it's busy and an ever increasing challenge getting those deals closed. Los Altos reported activity is picking up as we head into the normal fall home buying season. San Jose Willow Glen reported things are slowing up a bit. Open houses still draw a lot of crowds. A couple of the sales that have been turned in, have sold over the asking and it appears that the listing prices were set low to attract buyers. Saratoga reported a steady increase in average sales prices over the last six months. Instead of the sales consisting of REOs and Short Sales we're seeing brisk sales activity up to two million.
South County—Hollister reported we are seeing great opportunities in establishing client relationships with office floor calls and walk ins this past week. Inventory is still low and first time homebuyers are struggling trying to secure a contract. Some REO Listings have received up to 20 offers. Morgan Hill reported the South County market continues its same scenario--lots of potential buyers and very low inventory. This week the number of total listings in all of Morgan Hill fell to 125 units--an all time low. Employing simple "supply and demand" economics, this situation should result in prices beginning to rise--though none of us has witnessed this phenomenon yet.
I did want to let you all know that I will be taking next week off of Weekly Market Watch but I will return the following week with another robust edition.
Until then,
Rick


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

Weekly Market Watch

“Yes, the housing market has rarely looked better.”
That was the headline in a September 2 Wall Street Journal article. Click here to access it: http://online.wsj.com/article/SB10001424052970204047504574386802310702622.html. This was a really interesting piece which looked at numbers from Standard & Poor’s and NAR. Following is an excerpt from the article:
“Last week, Standard & Poor's reported that its S&P/Case-Shiller U.S. National Home Price index of real-estate values increased this past quarter over the first quarter of 2009, the first quarter-on-quarter increase in three years. Its index of 20 major cities also rose for the three months ended June 30 over the three months ended May 31, with only hard-hit Detroit and Las Vegas experiencing declines. The week before that, the National Association of Realtors reported that sales volume of existing homes was up 7.2% in July from June.
In short, the data suggest that real-estate prices hit a bottom some time during the second quarter, and have now begun to rise. There's no way to be certain that this marks the end of the long, painful correction that followed the real-estate bubble, but clearly prices are no longer in free-fall. That means if you've been sitting on the fence, it's time to act.
Ordinarily I'd never try to time the real-estate market, but I can understand why buyers have been cautious. Few want to buy in down markets, just as stock buyers avoid bear markets. And for most people, of course, buying a house is a much bigger decision than buying a stock. But with real-estate prices nationally now down about 30% from their 2006 peak and showing signs of turning up, the prices aren't likely to go much lower. Every real-estate market is local, and so there may be a few exceptions. Overall, though, I can't imagine a better time to buy than now.”
Although I’ve been sharing this view for quite some time, it is nice to see the preceding quote from the Wall Street Journal, and to hear someone from the media say that it’s a great time to buy.
Now here’s a local look at our past two weeks in real estate:
East Bay—. Berkeley reports we are expecting a big push this week as Agents and clients return from vacations, children are back at school and the clock is ticking for loan amounts and credits to buyers. We still need MORE LISTINGS! Great time to prospect with the "we have a buyer but not enough listings, are you thinking of selling" language. Castro Valley reports the local market is on fire, hungry for more inventory. Every listing seems to have multiples within days of hitting the market. Several Agents report that listings are met with up to 40 offers. Livermore reported the office was very active over the Labor Day weekend. The majority of Agents were working with buyers and multiple offers are still dominating the market. Oakland-Piedmont reported we have 10 new first time open houses this weekend coming up. Lots of open houses are scheduled and Agents are feeling that a lot of nice properties are going to come on the market. Walnut Creek reported almost every sale was over asking. Half of the sales were all cash and most of the others had substantial down payments 30-50%. The most common challenges are frustrated buyers waiting for short sale bank approvals, low appraisals and LOW INVENTORY in ALL price ranges. Orinda says entry level very hot with many multiples, while upper-end may be taking a break due to last of vacations and school starting soon. Danville observes inventory continues to decline and they are now seeing multiple offers on good homes in the median price range.
Monterey County—We moved along at a steady pace for the last two weeks, have had lots of activities in town and, therefore, lots of people too. We had many offers being written and about the current usual number of new escrows; most are in the $400,000 to $600,000 range, but some higher and several over a million.
North Bay—Greenbrae reported buyer interest is resurfacing and more properties coming on now that summer is over. Should be a good pool of homes to choose from. Expect strong activity through mid October. San Rafael is still very active and condos seem to be the target for entry level buyers. Novato is a strong Sellers market! We are still experiencing multiple offers on homes priced 5-10% below market in the under $500,000.00 price point.
Southern Marin reported it is getting steady but is considerably down from a year ago. In the Previews market, most communities in Southern Marin are only doing 50% of the units they did in 2007. Petaluma reported one property in Rohnert Park came back on the market at 6 AM for $219000 (REO) and by 6 PM it had 15 offers and was in escrow. We are starting to see more multiple offers in the $500,000 and above. Inventory continues to be snatched up as soon as it comes on. Sebastopol notes multiple offers in all price ranges, and double-digit attendees at all open homes. Santa Rosa reports signs of life in the high end in the last week of August. One Agent opened escrow on $2.2 million and is actively showing two more buyers in that price range. All three buyers came off her listing at $1.6 million. 1st week of Sept cash is the king in the REO market. We have many more buyers than inventory.
Peninsula—Half Moon Bay reported activity slowed down with the Labor Day holiday although listing inventory is expected to increase afterwards – market still strong in the $500k to $800k range, anything over $1.2m is slow. Menlo Park El Camino reports pretty good sales for over the Labor Day Weekend. Agents are positive about the last quarter of the year. A few Agents are VERY busy. The San Mateo office reported city figures as follows: (Belmont, Burlingame, Foster City, Hillsborough, Redwood Shores & San Mateo) SFR 2008 vs 2009. Active listings up 8%, Pending sales up 39%, and solds up 9%. Hillsborough has about 96% more active listings in 2009 which indicates that financing and the high end market are still having their difficulties. Woodside reports still slow, both seasonally and market-wise. Open houses have been OK. Still lots of money around for vacations and many clients are out of town. Good expectations for the fall quarter by Agents. Redwood City/San Carlos reports that this is a difficult market to read. We’re still seeing the delayed effects of summer. The general feeling is that the market will start to be "better"….Now is the time for sellers to get their properties on the market.
San Francisco—The Lakeside office stated they are waiting for the momentum to start building for a strong finish to the year. The Lombard office reported a slow two weeks for traffic and deals. One 3-unit fixer brought multiple offers, but fewer than expected and no contractors. Fortunately, the $1.2m to $2m market seems to be showing some life. The Market Street office reported not many open houses this weekend, but the ones that were open had good attendance. The Van Ness office reported good activity for a holiday weekend.
Santa Cruz County—The high end is slow above $2 million with very low volume. $1 million to $1.6 market is decreasing in value at a higher rate than any other part of the market.
Silicon Valley—The Cupertino office reports the Agents are working hard, but things seem a bit quieter. It is really tough holding some of these short sale and REO transactions together. San Jose Almaden reported that listing count was low last week due to the holiday however sales remain very brisk. Multiple offers on properly priced properties all the way up to $950K. Short sale approvals from banks are coming much faster in most cases. The Willow Glen office reported multiple offers are happening again and we are getting quite a few rejected offers as well. Saratoga reported the office has been very active. Short sales are still tough going, but it seems like lenders are getting a little more serious about approving them.
South County— The Gilroy office reports the local market has remained pretty much the same. There is a lack of inventory in the first time buyer price range. Most properties under $400k are receiving multiple offers with cash buyers having the advantage. With kids back in school and vacation season at an end we are hoping for a boost in listings and sales.

A quick look at our high end closings for the past week reveals two Woodside sales, closing approx. $5.5M and $2.3M, three in Los Altos between $2.2M and $2.6M and a Kentfield home closing at $2.3M. Also noted are 5 more in San Francisco, Carmel, and Burlingame between $2.2M and $2.5M, as well as another 41 closings between $1M and $2M. Correct pricing is still critical to get the proper amount of showings to garner offers. When priced correctly, the higher end is moving much better now, and it’s been almost exactly one year since the financial crisis on Wall Street brought it to a screeching halt.

This week I’ll leave you all with the reminder that the $8,000 federal tax credit for first-time homebuyers is scheduled to expire on December 1. However, in order to qualify, the transaction must be closed on or before November 30, essentially leaving first-time buyers with less than three months to complete the process. While the urgency of trying to find and close on a home before the deadline may seem stressful, it doesn't have to be. Just contact your Coldwell Banker Realtor today and they can walk you through the process or visit us online at CaliforniaMoves.com.
Until next week,
Rick
Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

Weekly Market Watch

So Much for a Sleepy Summer

Generally speaking the Bay Area real estate market has seen a bit of a bounce this summer with sales increasing in all categories—from the entry level homes and condos to the high-end market.

National figures showed June with an 11% increase in home sales and the Bay Area seemed to share that trend with July sales up 15% over July 2008. As the number of sold units continues an upward trend, price recovery is a bit of a mixed bag depending on the area. The entry level median price is increasing in all counties, due to very little supply against a healthy demand. The just-under, just-over $1M mark seems to be holding its own, with a few multiple offers out there for the right property in a sought-after community. The higher end properties over $2M have, in the past 30 days, seen more activity than at any time this year, but price remains a critical factor as to which properties seeing this activity actually go into contract. It seems the higher the price-point, the more critical it is for a very attractive list price. Sellers who are selling are very realistic about marketing price, and Buyers who are buying are recognizing good value when they see it, and are taking action swiftly. For cash buyers or those with large down payments, this could be a great time to pick up a bargain in the luxury home market.

This week the National Association of Realtors released its monthly existing home sales report (http://www.realtor.org/press_room/news_releases/2009/08/strong_uptrend?LID=RONav0021) noting “For the first time in five years, existing-home sales have increased for four months in a row, according to the National Association of Realtors®.” The report went on to note, “Existing home sales – including single-family, townhomes, condominiums and co-ops – rose 7.2 percent to a seasonally adjusted rate of 5.24 million units in July from a level of 4.89 million in June, and are 5.0 percent above the 4.99 million-unit pace in July 2008. The last time sales rose for four consecutive months was in June 2004, and the last time sales were higher than a year earlier was November 2005.”

Lawrence Yun, NAR chief economist, said he was encouraged. “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,” he said. Ultimately these are all very positive signs for our market and are a strong sign that we are moving in the right direction towards a housing recovery.
A few other interesting articles of note for the week:

· Home Prices On An Upswing In The Second Quarter Of 2009 According To The S&P/Case-Shiller Home Price Indices; Case-Shiller
· New Home Sales Blast Past Expectations; CNNMoney.com
· The Housing Market: Has It Turned the Corner?; TIME Magazine
· Mortgage Applications Increase In Latest MBA Weekly Survey; Mortgage Bankers Association
· Home Market Shows Signs of Life as Declines Slow; Bloomberg

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

· East Bay—Berkeley reports some buyers are still not prepared to compete in a multiple offer situation and may not believe this market until they've lost out on a few properties. Castro Valley reports there is very limited inventory in our local market right now. We had nine homes on Brokers tour during the course of this week, and Agents are hungry for homes to sell. We had a few properties that hit the market this week and went pending in a matter of days. Multiples, multiples, multiples. There is an increase in the number of buyers calling our office looking for agents to help them buy. We have gotten a lot more floor activity in the past week, despite the drop off in activity due to kids going back to school. Danville reports all market activity is strong. Lack of inventory is holding down sales. Prices at the bottom are firm - prices at the top are still correcting. Oakland reported we had three nice sales averaging $2 million for the week. One of them was the property that we had marketed for a year and a half. The buyer came to an open house (we had over 100 groups through) and bought it all cash for over $2 million dollars and a very quick close. Everyone feels there is momentum in the market. We had more open houses last weekend than previous weekends and they are well attended
· Monterey County—The steady beat of listings and escrows continues the Monterey Peninsula. We are seeing sales in all price ranges, except the very top over $10 million and those are slow even in the best of times. One third of our new escrows last week were for properties priced between $1.2 million and $1.9 million. We see sales in that $1-2 million range really picking up of late.
· North Bay—San Rafael reported cash is king when it comes to winning the multiple offer game in the entry level market. Nearby Southern Marin reported every deal requires heavy negotiating and seller concessions and last minute delays in removing loan contingencies. Sebastopol noted open houses remain well attended. Every escrow has its own special demands, lender conditions, low appraisals, and Agents on the other side that won't play nice. Santa Rosa noted REO listings are starting to appear in increasing numbers. A noticeable increase in open escrows from $500,000-$900,000.
· Peninsula—Burlingame noted that activity has picked up a lot, many buyers are getting involved in multiple offers and are beginning to understand that the market has changed and they need to step up to the plate when that perfect property comes along. Half Moon Bay reported activity has picked up on the coast as seller's are pricing their properties to sell within one or two weeks, along with the moving of some stagnate listings requiring many counter offers. Menlo Park Santa Cruz Avenue reported two homes sold last week with multiple offers however neither went over the list price. Open houses were busy averaging 20-25 groups. Palo Alto reported Inventory is slow to come on the market. Listings and sales are seasonally slow. Looking forward to a brisk after Labor Day market. San Mateo reported there has been some more intense movement in the $1.2-1.5 range - Hooray!!!
· San Francisco—The Lombard office reported a slow week except for the entry level and REO markets which remain hot, with multiple offers, including a surprising number of all cash. Major price reductions on the upper-end bringing mixed results. More hints of a listing surge post Labor Day. The Market Street office reported lots of activity the last two weeks. Back-up offers being elevated, properties that have been on the market for a while getting into contract, and buyers who want to get in to a home before prices go up and be assured of their $8,000first-time home buyer credit. There has been more activity than a normal August with fewer agents in the office taking time off.
· Santa Cruz County—In last four months, the median price in the county has risen 23% or about $100,000 which is a very good sign. Prices are still down about 14% from where they were a year ago at this time but it is definitely going in the right direction. Inventory levels are down from a year ago with a 5.5 month supply of single family homes on the market as compared to 8.5 month supply in July/August of last year. Overall, there is improvement which is wonderful!
· Silicon Valley—San Jose Almaden reported a hot low end market continues to fuel sales. Highest sale last week was $550,000. Two-thirds of the sales were under $300,000! The Willow Glen office reported we are seeing a lot more multiple offers on our listings. Saratoga reported our Previews (luxury end) market is still slow. REOs and short sales still dominate the market; however there is a slow steady increase in our office's average sales price. I think this is due to a much healthier market in the $750,000 to $2,000,000 range.
· South County—Sale prices are exceeding list prices on sales under $400K due to lack of inventory. On REO listings it is typical to have 5-10 multiple offers in that price range. Contingency time frames are usually shortened to strengthen the offer. Short sale listings are increasing with back up offers in place. Open houses are well attended and floor calls have been on the rise! Morgan Hill reported the market remains unchanged for the past several weeks. There is great demand for entry level homes--multiple offers happen and then there is just one successful buyer.


Several offices are talking about a post Labor Day surge in new listings. The Buyer appetite seems to be there, as long as the listings are priced right. Typically August is the slowest of summer months with vacations taking priority, however this month has seen the best Buyer activity all year long for many offices.
Please note that next week we’ll take a brief hiatus from Weekly Market Watch for the Labor Day weekend, but we will return the following week.

Until then,
Make it a good one,
Rick

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

Weekly Market Watch

Good News On Wall Street Doesn’t (Necessarily) Mean Higher Housing Prices on Main Street

I had an interesting chat with one of our Agents recently. She mentioned that many of our sellers in the upper-tier price point are seeing the current strength of the Dow as a sign that their home will probably fetch more in the early part of next year. Academically speaking, there is a belief that there is a direct correlation between the housing market and the stock market. But from an analytical standpoint, although the stock market and the housing market correlate well, there is a variable time lag. The time lag between housing underperformance and stock market performance can vary widely. The average is 18 months.

Some high-end Sellers may be saying no to potential contracts on their home as they think by waiting another four to six months (thanks to the stock market’s recent gains) they may get more for their home. Of course every home is unique and each market is very local, but by and large, the higher end of housing probably won’t follow this reasoning. First, what we know is that in a “normal” market (of which this market is anything but), the average lag time between the two is 18 months (not four to six months). It’s also important to point out that we probably aren’t out of the woods as it relates to the volatility in the stock market and overall health of our economy. Many analysts are suggesting that our recovery may be “W” shaped rather than “V” so we could be looking at more challenges ahead.

Focusing less on the stock market and more on the level of supply and demand in the particular market and neighborhood will most likely be more helpful. In most markets, the upper-tier price point remains relatively soft; in some cases offers can be few and far between, and may be worth a second look. A few examples: In San Mateo and Santa Clara counties, there’s currently less than a month and a half’s supply of inventory for homes under $750,000. For homes over $3M, there is a 13 month’s supply. In San Francisco, for homes under $1M – there is a 2 months supply of inventory. For homes over $3M, a 14 months supply. That’s not to say buyers should be throwing out unrealistic offers and expecting them to be accepted. The real story here is that across the board we’re seeing very favorable increases in interest and in buyer activity. Sellers may want to consider taking advantage of that interest…before the typical seasonal slowdown. Our agents are making great use of Coldwell Banker’s “Market Trends” tools in MyRECafe –drilling down to particular neighborhoods and particular price-points, and having factual discussions regarding inventory and activity levels with Buyers and Sellers.

For those who focus on the stock market daily, it is probably a better indicator for the economy as a whole rather than a predictor of where real estate is headed. With the DOW closing Thursday at just over 9,300, it doesn’t suggest home values will rise in a direct correlation, but it may mean that the recession is subsiding which would be good news for us all. Now let’s take a look at this week in real estate:

· East Bay—Castro Valley reports appraisals are shattering a substantial amount of our sales. Even with properties that have multiple offers, in which the properties are clearly offered for a fair market value, appraisals are coming in as low as 50K below. We have lost a number of deals due to this appraisal controversy. Otherwise, inventory continues to fly off the shelves. Buyers are presenting lots of cash offers. We've closed two deals this week alone that were all cash buyers. Oakland reported open houses are busy, buyers are out there and we’re seeing lots of interest. More short sale listings are coming on the market and agents think we will see more listings coming on in September when vacation time is over. Pleasanton reported homes that are priced well are seeing multiple offers, higher end homes are moving slowly. Walnut Creek reported sales are coming in steadily. Agents are working with buyers in ALL price ranges even reaching into the Previews range. Listing inventory is still VERY low. Orinda office reports vacationing clients may contribute to a slower week.
· Monterey County— We've enjoyed four weeks of above average sales each week. Not only are seeing good activity in the lower end, also there are increasing sales in the higher price ranges. We had four closings last week from $1.3 million to over $4 million. And we've put seven properties into escrow this week at similar if not better prices.
· North Bay—San Rafael/Novato reported inventory is still low compared to last year at this time. We are experiencing a slight upswing on REO listings. Southern Marin reported listings are light right now, but are predicted to increase greatly after Labor Day. We saw an interesting turn of events in Santa Rosa this week with our Manager noting well priced properties above $500,000 (the move-up buyer market) are beginning to draw multiple offers. We had one Agent with 5 offers on a $520,000 property with each buyer willing to bring money if it did not appraise. Sebastopol noted open house activity remains strong while new lists remain weak. Appraisals remain challenging.
· Peninsula—Burlingame reported the hot price range is under $500,000. These properties are typically short sales and REOs and they are garnering major multiple offers, many times 20 or more. This has resulted in some of our buyers seeking opportunities in the East Bay or further south. Meanwhile, the $800K-1.2M range is lacking in inventory and there is strong demand. Typically we see the inventory drying up at this time of year and then more coming on the market in mid September. Menlo Park Santa Cruz Avenue reported an Atherton sale with a list price of $11,900,000 and sold by our Menlo Park El Camino office. Maybe the high end is loosening up! Open house activity was very busy for mid-August. San Mateo reported the overall mix is balanced with the exception of $2.5mil and up which still lags the market. Woodside reported four sales at $1.8mil plus--that is very good.
· San Francisco—Noriega reported the low end is on fire and it's not just from first time buyers. Case in point, one REO, fixer property in the Ocean View district listed at $350k received 40 offers. One offer was reportedly $150,000 over asking all cash and the individual did NOT get it. There were 10 all cash offers. It's very obvious that these all cash offers are not from first time buyers, they are from investors. Maybe the investors are seeing that the market has bottom out and even from them, it's a good time to buy. Lombard reported a slower week on traffic, opens, new listings and sales. Quite a number of listings are off the market until after Labor Day. Lakeside reported it is like August in Europe: the population as well as the economy has taken the month off. Optimistically looking forward to a return. To rituals in September. Van Ness reported slow but steady. Large sales are still running at a good pace.
· Santa Cruz County—No information reported.
· Silicon Valley—Cupertino reports the activity is fantastic! Open houses are very well attended and deals are being made. San Jose Almaden reports there are multiple offers on everything under $400,000 and depending on area up to $600,000. The high end remains extremely slow. Agents are getting creative to help them get their offers excepted. Like paying for moving costs for the sellers. Open houses can, depending on location, be busy. Willow Glen reports median price homes are selling nicely. Multiple offers are plaguing some of our clients’ offers though eventually the buyers are successful in purchasing a home. Saratoga reports short sales and REOs still dominate the market. It seems that lenders are getting a little more serious about approving short sales.
· South County—Hollister reports appraisals are still an issue with some offers leading to asset managers not necessarily taking the highest priced offer. REO listing agents are having buyers go through lenders of their choice with writing an offer for prequalification status. Open house activity is increasing. Buyers are extending their search to the Los Banos area. Morgan Hill reports we are seeing a slight slowing of the market with fewer sales. This could be attributed to a "back to school" mentality as well as the approaching Labor Day holiday. Inventory is down and so perhaps some buyers are taking a "wait and see attitude" as to what will be available in September.
This week I’ll leave you with a few good articles of note:
· Mortgage Applications Increase In Latest MBA Weekly Survey; Mortgage Bankers Association
· Optimism Grips Homeowners: 81% Think Home’s Value Will Increase Or Stay Same In Next 6 Months; RISMedia
· Are New Home Prices, Starts And Sales Rates Nearing Bottom?; RISMedia
Very best, until next week-
Rick

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

Weekly Market Watch

What Will the Road To Recovery Look Like?

I was driving home from an office meeting this week and listening to NPR. Health Care and Town Hall meetings have been taking the spotlight lately, with the recession and the more recently upbeat Dow Jones moving down a few stories. This in itself is somewhat a good sign. During the drive, an interesting report came on which mentioned that the Federal Reserve, having just finished a two day meeting, was reporting the recession is ending.

When I got home I decided to Google the news and I found this article on the NYTimes.com website: http://www.nytimes.com/2009/08/13/business/economy/13fed.html?_r=2&partner=rss&emc=rss&src=igw. The article reports, “Almost exactly two years after it embarked on what was the biggest financial rescue in American history, the Federal Reserve said on Wednesday that the recession is ending and that it would take a step back toward normal policy.”
The article goes on to note “Though the central bank stopped well short of declaring victory, policy makers issue their most upbeat assessment in more than a year by saying that the downturn appears to have hit bottom and that consumer spending, financial markets and inventory building by corporations all continued to stabilize.”

I put a call into colleague Brendon Riordan of Princeton Capital to get his take on what those in the mortgage industry are seeing in relation to the current state of the economy. Brendon had some comments that I tend to agree with. He noted that “Many are concerned we’re going to have a ‘W’ shaped recovery versus a ‘V’ shaped recovery. We don’t want to proclaim the recession is over, only to see the economy struggle for another year. It’s going to be a long, slow recovery. One month we may have positive economic news and the next, poor economic news.”

Having said that, here is what we tend to be seeing about the market:

· It does appear that the worst of the recession may be behind us.
· In all likelihood, the Fed is going to keep rates relatively low well into next year by continuing to purchase mortgage backed securities and keep the Federal Funds Rate close to zero. It is currently at .25%.
· In terms of conforming loan limits, as of right now, the higher conforming loan limits will end at the end of this year. There is some legislation that is pending to renew the higher loan amount through November 2010 but as of right now, that is pending. The same holds true for the first-time home buyer tax credit. We need to support this legislation.
Knowing this, what lies ahead? Well I would say it’s positive to know that the worst may be behind us, but in all likelihood there are still challenges ahead. There is still much recovery that needs to take place. A broad-based “U” shaped recovery certainly is preferable over a “W”. Jobs need to continue to stabilize. There needs to be improvement in the secondary mortgage market in order to provide more choices and better pricing for jumbo loans. Home sellers will need to be realistic about price, and buyers will need to be able to recognize a bargain when they see it and take action.

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

· East Bay—Berkeley reports, “We are busy, busy, busy.” Lots of buyers making lots of offers and multiple offers abound. We received anywhere from 4-17 offers on various listings and competed against 2-15 offers on others from Berkeley to Richmond to El Sobrante to San Pablo. Danville reports we saw a real jump in new pending sales this past week. More importantly, Blackhawk, which has been so quiet for so long, had nine new pending sales. And in our office, four new sales this past week were over $1 million dollars! Oakland reports a sudden sense of urgency among buyers. We are doing a lot of approvals and submitting applications. The buyers are out there looking. Properties in foreclosures are coming into better neighborhoods, same for short sales. Still it is August and sales have been a little slow the first week. Seeing some nice listings come on the market.
· Monterey County—August started out where July left off, with lots of Agent activity going on! Pebble Beach and Carmel are bustling with people as the annual Concours d'Elegance comes to town , bringing it with it lots of people--some deciding they'd like a vacation home here! Inventory is decreasing, partly due to sales going up and partly due to properties off market, being rented, etc. Carmel is down to only about 14 months supply (was about 28 months), Pebble Beach is about the same, and Seaside, which has been the REO hot spot, has only 1.3 months' supply!
· North Bay—Greenbrae reports despite the late summertime, open houses were still well attended and buyers are out looking for bargains. Many sellers are saying they want to wait until after Labor day to put their home on the market. Buyers want more choices. San Rafael reports REO inventory is increasing. We continue to see multiple offers in the entry level. One home listed in Novato had 16 offers in the first week. It went into contract $50,000 over asking. All cash offers seem to be the winners of most of the bidding wars. Petaluma reports multiple offers continue to be the norm in the under $300,000 range. We’re starting to see activity in the $500k-700k range with multiple offers on three properties in that price range. Cash continues to be king in the under $300,000 range. One property had 22 offers, the accepted offer was cash and was less than three of the highest offers.
· Peninsula—Burlingame reports the wonderful weekend brought people out of the fog and into the peninsula. We are seeing more multiple offers as inventory is shrinking. The condo market is extremely slow. Menlo Park Santa Cruz Avenue reported one offer was written and accepted from an open house guest! They do work! Activity in a wide range of prices. Buyers that seem motivated to buy. San Mateo reported these market wide stats: Change 2009 VS 2008 same period - active - Belmont N.C., Burlingame +23%, Foster City -15%, Hillsborough +41%, Redwood Shores +15%, San Mateo + 12%, PENDING - Belmont +23%, Burlingame +16%, Foster City +24%, Hillsborough +33%, Redwood Shores -125%, San Mateo +29%. This reflects single family residential only. Higher ends are still a struggle as reflected in Burlingame and Hillsborough.
· San Francisco—Lombard reports a good week for ratified offers in that it wasn't entry - price level dominant. We had sales in the $1.2 & $3m ranges. Multiple counters, addendums and loan delays are the order of the day. The Market Street office reported it has slowed a bit as many buyers are taking a couple of weeks off before the end of summer. Listings are being readied for the after Labor Day increase of inventory that we are anticipating. Open house attendance was great in some instances and disappointing in others.
· Santa Cruz County—No major changes. Inventory is status quo - low end continues to dominate sales. There is a lot of activity below $800K and many times multiple offers. With the low inventory we are seeing prices rising again, slowly. There is definitely a more positive outlook for both buyers and sellers.
· Silicon Valley—Cupertino notes that the low-end is as competitive as ever. San Jose Almaden reports that we’re seeing multiple offers on almost everything under $500K. Inventory remains low. San Jose Main reports an excellent week for sales, mostly lower end and excellent open house activity. Listings continue to be hard to get. Many multiple offers on lower end properties. Saratoga reports we experienced a slight increase in Previews activity with a few sales in the $2.5 mil to 3 mil range last week.
· South County—Gilroy reports our local market continues to struggle with a lack of inventory in the lower end. REO listings are down and multiple offers are the norm. Hollister reports lower priced homes selling rapidly with multiple offers on many. Morgan Hill reports the real estate industry seems to be getting positive signals, almost on a daily basis, that the housing market is out of "intensive care" and has entered the "recovery room.” Demand remains high, but more importantly, our Agents are reporting that the buying public deems to be much more optimistic about the economy in general and housing in particular.
In terms of marketing activity, in general, and with exception of the entry level, most homes are on the market longer with discerning buyers waiting for the optimal home at the optimal price. A well-priced, well-presented home can still fetch multiple offers, but it’s got to look appealing to the savvy buyers who are doing their homework. There is no sense in overpricing a listing – a buyer won’t even give a home the time of day if they sense the seller is being unrealistic.

At the same time, there seems to be no better time to snatch up bargains in the Bay Area at all price points. In the higher end, we’ve seen cases of five to 10 percent list price reductions in properties that haven’t moved, and a final and acceptable offer coming in a little below that. That’s not to say buyers should throw out ridiculous numbers. Certain parts of the Bay Area, after all, have still held their value better than most of the entire country. Sellers who don’t have to sell can hold firm, but there are others who cannot. So, while it may take longer to get the buyer and seller to agree to terms, transactions are happening, and with open minds on both sides, we are beginning to see more positive movement for all.

Until next week,
Rick

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