With last month’s deadline for the first-time homebuyer tax credit, much of the news media’s attention has been on the entry level segment of the housing market. But the mid and higher ends of the market have quietly been coming back to life this year, as evidenced by a number of recent reports.
Silicon Valley’s luxury housing market is leading the way, but the trend is being echoed in many Bay Area communities. Santa Clara County had 173 million-dollar properties close escrow in March, nearly double the number a year ago, according to our own Coldwell Banker Residential Brokerage luxury report. High-end homes sold in just 53 days on average compared to 63 in March 2009. In addition, sellers received 99 percent of their asking price on average compared to 92 percent a year ago.
The improvement continued in April in many markets. In Southern Marin, for example, 25 percent of the $2 million and above listings were in escrow in April, up from 18 percent a year ago. Ross, Kentfield, Tiburon, Belvedere and Sausalito – all Previews markets – have shown the biggest gains in recent months. Our Los Gatos office reports three closings in the $2.5 million range in the last two weeks alone. During the first four months of 2010, closings of Preview homes in Livermore have increased by four times over 2009.
It’s too early to declare that the high-end market is back to normal. There are still pockets in the Bay Area where the luxury market is fairly quiet. And even where the Previews segment has rebounded, prices are still under pressure from cautious buyers. Nonetheless, it’s clear that the recovery we’ve seen in the entry level market is gradually working its way up the ladder and helping bring the Previews market back to life.
One of the reasons for the rebound may be our overall economic recovery, which, while fragile, is moving in the right direction. Another reason is improvement in consumer confidence, which has long been tied to home sales. But perhaps the most important reason is the overall gains in the financial markets.
The stock market’s recovery is coming in fits and starts, as we’ve seen over the past couple of weeks due to concerns over Greek’s debt problems and fears that a debt contagion could spread in Europe. Nonetheless, the overall improvement of the financial markets is undeniable. We are well ahead of where we were last year at this time. And as the chart below shows, the housing market’s health closely correlates to the stock market’s health. Nowhere is this truer than in the luxury market and in the Bay Area, home to Silicon Valley and stock options!
So while we still have economic challenges ahead of us, I’m encouraged by the tremendous improvement we’ve seen over the past year. All signals point to a real estate market that is gradually moving back to normalcy, including the luxury end of the housing market.
Below is a market-by-market report from our local offices:
North Bay — The Previews market is showing signs of recovery, according to our Greenbrae office. Sales are up 13% last year in the over $1 million price point. But there is still downward pressure on pricing in this market. The market in Southern Marin has moved from a strong buyer’s market to a slight buyer’s market. A greater percent of listings are pending this month versus last. We’re seeing a number of listings that had been sitting without much activity all of a sudden getting into contract. The Novato market continues to slowly improve, with an increase in the non-distressed sales. Out of 27 active properties, only 12 are either REOs or short sales, with the remaining 15 being non-distressed sales. Santa Rosa has seen a small increase in activity with the tax credit deadline. It is still a very active market at the lower price points, with increasing action above $1 million, and very quiet still in the middle price range. Sebastopol reports very little activity at open homes on Mother’s Day. Lack of low-end inventory is resulting in fewer offers being written. There are lots of desk reviews and second appraisals being called for by lenders on properties above entry level.
San Francisco— Although the local market is still busy, according to the Noriega office, deals are taking longer to close. Extension of financing contingency and close of escrow are very common. The energy level of the agents is very high with lots of excitement in the air. The market is much improved to a year ago. After a strong April, May has started slowly in the Lombard area. The market has seen well-attended open house and busy agents, but reluctant buyers. It could be related to the tax credit expiration. Inventory is low, according to the Market Street office and agents are on the lookout for any new properties that come to the market. Some properties are selling within a few days of hitting the market and others are still waiting for offers.
SF Peninsula— Steady listing and sales activity is being reported in all price ranges in Menlo Park. Lack of good inventory is still the hot topic of conversation. We had two pre-emptive sales this week. Maybe buyers are figuring it is better to strike first rather than face the potential of multiple offers. More high-end listings are coming on the market. Menlo Park and Palo Alto have had a number of sales in the last few weeks over $4 million. Atherton and Woodside and Portola Valley have seen some over $5 million, with Atherton the busiest. There are some new big listings waiting for buyers, according to the Woodside office. All of a sudden we have a few more “pressure” sales appearing. The Palo Alto office reports the local market steady to increasing, while the Redwood City market is seeing lots of activity. Buyers are realizing this is good time to buy, but there still isn’t adequate inventory of homes for sale. April was strong in the San Mateo area, while May is moving a little slower. But all local markets are showing strength.
Silicon Valley– After the frenzy of buyers rushing to beat the deadline for taking advantage of the Federal Tax Credit, the Saratoga market is still very active. The last week in Cupertino was not quite as frenetic as the previous few, but still very busy. Open houses are excellent and multiple offers abound. The difficult part is always dealing with lenders. Inventories are rising and sales steady in Los Altos. Single-family homes in the low $1 millions are moving very fast with multiple offers, but the local condo market is slower than normal. The Los Gatos office also reports increasing sales activity. The Previews luxury market is also improving with three closings in the $2.5 million range in the last two weeks. Sales and inventory are rising in the San Jose-Almaden area, with multiple offers on many homes. The high end of the market is warming up. Inventory is also in the Willow Glen area. There have been a lot of sales due to the influx of buyers.
South County– The April 30 deadline for the Federal Tax Credit has passed, and with the tax incentive no longer an option for buyers, Morgan Hill agents are reporting a slow down in the number of ratified contracts for the first two weeks of May. This phenomenon coupled with the lack of inventory has had an impact on the local market, there continues to be a high degree of interest – though less urgency on the part of buyers to get into contract. In addition, we are witnessing an increase in the average sales price of South County homes – a very encouraging sign.
Santa Cruz – The local market is relatively flat, with prices continuing to edge upward since hitting a low in March 2009. The current inventory of single family homes for sale in the county is 958, down 7% over the same time last year. But there is more inventory coming on the market. New inventory coming on is up about 15% over last year with 287 new listings in the county in April. Closed single family home sales in the month of April were 111, down 15% over April of 2009. But year-to-date sales in the county sales are up 5%.
East Bay – Mother’s Day sure brought out the buyers in Berkeley. One local listing had over 100 visitors! Even on the holiday, some listings had 25 to 35 groups. There’s a real shift going on in Berkeley for the last few years. Although the hill homes were always considered prestigious, more and more buyers want to be able to walk to shopping and other neighborhood features. The market has been steady in Danville. Inventory remains low, and well-priced, desirable homes sell quickly –often with multiple offers. Listings and sales continue to remain strong in Orinda, with closed sales increasing. Castro Valley saw multiple offers in all price points as the tax deadline approached. Higher-end homes are starting to move, but condos are not selling as quickly. Some incredible deals still, especially in Oakland and Hayward. The Oakland office reports that pending escrows are almost 50% short sales, but short sales represent only 10% of the active listings. But the market seems to be reverting back to owner-occupied traditional sales in Fremont, with a decrease in REO and short sale transactions. The Preview’s inventory has increased in Livermore from 22 to 25 listings, with this market segment improving dramatically.
That’s it for now. Have a great week!