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