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