Trying to read the tea leaves in this economic recovery is not easy. We’ve come a long way from the depths of the recession early last year, but after a sharp bounce-back over the past year, the housing sector and other segments of the economy seem to now be lurching forward in fits and starts. One day we’re encouraged by economic and housing reports, and the next day scratching our heads over disappointing numbers.
A few examples this past week alone:
· Existing-home sales nationwide fell 5.1 percent in June, but remained nearly 10 percent higher than they were last June, according to the National Association of Realtors. Lawrence Yun, NAR chief economist, said the market shows “uncharacteristic yet understandable swings” as buyers responded to the end of the federal tax credit.
· Closer to home, sales of new and resold homes and condos in the Bay Area inched up 1.3 percent in June from May but fell short of a year ago – down 3.1 percent, according to MDA DataQuick, the La Jolla-based real estate research firm. The median sale price was still 16.5 percent higher than last year, thanks largely to fewer foreclosures re-selling and more high-end activity.
· The mid- and upper-end of the local housing market finally appears to be gaining some momentum. Million-dollar home sales in Silicon Valley, San Francisco and even Lake Tahoe last month surged to their highest level in about two years, according to Coldwell Banker Residential Brokerage’s monthly luxury housing report.
So what to make of all this? First of all, such roller coaster recoveries are not unexpected. Historically, we’ve seen sharp rebounds initially after a recession ends and then slower growth a year or two into the recovery. We’d love to have a strong v-shaped recovery, but that often doesn’t happen.
Additionally, the softening of the housing market nationwide and in the Bay Area was not surprising with the expiration of the federal tax credit. Economists believed that many buyers and sellers pushed their transactions through quickly to meet the deadline, perhaps taking away sales that would have otherwise occurred during subsequent months.
John Walsh, MDA DataQuick’s president, said, “The next few months should be very interesting: We’re about to see how well the housing market can fly on its own. The tax credits no doubt stole some demand from the rest of this year, and soon we’ll have a better sense of just how much.”
Here in the Bay Area, we’ve seen slow but steady improvement from last year’s recessionary depths. While it will undoubtedly take the housing market some time to return to normalcy, it appears we’re continuing to move in the right direction. The question now is whether that growth will continue, and how fast.
The headwinds created by high unemployment and muted economic growth will remain challenging for the housing market. But the market is also being pushed along by strong tailwinds – attractive housing prices, historically low mortgage rates, recovering financial markets and improving stock portfolios of buyers. Only time will tell how it all plays out.
Below is a market-by-market report from our local offices:
North Bay — In Petaluma, there is little or no inventory coming on the market in the under $400,000 range. But agents are starting to see consistent activity above the $500,000 – $650,000 range. Meanwhile in Santa Rosa, prices at the high end continue to erode, however properties perceived as a value do go under contract. Mid level price points are quiet while the lower price points are very active. We are seeing an increase in owner occupied listings. Our Sebastopol office reports noticeably slower activity at open houses. Most agents reported single digit attendance. With summer in session, the Northern Marin office says it’s encouraged by the increase of busy open houses, many with real buying interest. Several listings had additional showings after the weekend open houses. Sales are happening with back and forth negotiating. Even though the Southern Marin market has slowed down, sales seem to be somewhat steady. Normally, late July and August are slow times in Marin. That said, we are still seeing good attendance at Sunday open houses and potential buyers are still lurking in the wings.
San Francisco — The market has been steady in San Francisco, according to our Market Street office. It’s still much quieter in the market than agents would like. However, there has been a small uptick in the number of offers ratified in the last few days. The buyers seem to all be waiting for that elusive great deal. Open house activity has been steady. Our local office reports six multiple offers.
SF Peninsula — There has been a slow down in some areas, according to our Burlingame office. And yet multiple offers are happening every day. Buyers are waiting for that perfectly prepared property in just the right location. There were 12 offers on a new Burlingame listing this week. Last minute lender issues are becoming more common. They are looking for additional inspections, mandating repairs and reviewing disclosures and reports very carefully. In Half Moon Bay, activity remains brisk under $1 million range. But properties must be considered in the best location and best condition. In Menlo Park, agents report that it seems like the market has slowed down. But open houses were excellent this week. The Palo Alto market also is feeling the vacation slowdown. Our local office reports that activity in Santa Clara County has been affected more than San Mateo County as far as volume, number of sales and inventory. Active listings and pending sales in San Mateo seem to be about equal to the same time in 2009, according to our San Mateo office. Closed sales are down about 10%. Open houses are strong in most areas but the condo market is soft. Finally, in Woodside and Portola Valley, the “low” end of the market $2.5 million and under – is coasting along well. But the higher end is slower with inventory building.
East Bay – In Berkeley, there are still many offers being written, but competition discourages some offers. It is still very much a seller’s market in most of the core areas. Open house activity in Oakland/Piedmont is mixed: lots of attendee’s at some and very few at others. The number of multiple offers has declined, both on numbers of offers written and how many houses are getting multiple offers. July has started off with more activity than the beginning of June even with the holiday on the 4th. The Castro Valley market has slowed a bit. The story remains the same: well priced properties are flying off the shelves, although buyers are getting picky these days. There has been an increase in inventory. Short sales are still dominating the market. In Livermore, things are steady. Active listings and total pending sales showed an up-tick. The Pleasanton market was stable, and in Dublin, the active listings ticked down and total pending sales were up. The Previews market in Livermore has remained stable the past two weeks with 25 active listings and 30 total pending sales. Noteworthy is that one new pending sale is a $5,750,000 listing. If this property closes, it will be the highest closed sale in Livermore in several years.
Silicon Valley – There is lots of new inventory coming on line in Cupertino. The low end of the market is still very competitive, but everything else needs to be priced just right to get any attention. Open houses continue to be busy, with 140 open homes over the past couple of weeks. Los Altos and the surrounding communities seem to be on vacation, according to our local office. Traffic on our roads and businesses is reduced and open house attendance is down. It is slowing a bit in the $1-$2M range and remains slow above $2M. Meanwhile, the market has been steady in Los Gatos. Properties are continuing to sell when priced correctly. The key is pricing. The upper end of the market is steadily improving. A home that sold off the market in Monte Sereno – a 3,000 square foot fixer upper – listed for $2 million sold for $2.15 million. In the San Jose Almaden area, there has been a noticeable downturn in the market as far as listings go. The higher end (over $1 million) in Almaden is a lot slower. Sellers Buyers appear to be patient or unsure if prices will go down again. Meanwhile, sales are picking up in the Willow Glen area. Some of the sales are selling over listing price due to multiple offers. In Saratoga, the market seems to be unpredictable. One day there’s exceptional activity only to have a few days where agents are wondering where business is.
South County – The local market continues to be mixed, according to our Gilroy office. Open house traffic has increased and buyers seem to be taking interest again with lower interest rates. However, buyers are very cautious and there doesn’t appear to be a sense of urgency unless the home is a great buy. Developers for two new Morgan Hill sub-divisions are reporting lots of interest and brisk sales. One sub-division (of which Coldwell Banker is the exclusive listing broker) reported three sales just last week. Builder incentives coupled with phenomenally low interest rates make a new home purchase in South County very attractive. Sales activity for existing homes, however, has slowed during these past several weeks.
Santa Cruz – Prices are slowing inching upward in the Santa Cruz area with the median price continuing to rise over the past year from $483,000 to $507,000. The inventory levels remain about the same as 2009 with about a 7.5 month supply, slightly down from last year. The number of closed transactions for June 2010 was down about 21% for the same month last year. Properties are on the market about 70 days, which is relative short period. However, it is only the very well priced listings that are selling. In the county there were 149 closed transactions in June and a large percentage of those were distressed sales either bank owned or selling short, close to half. There are some incredible values here if the buyer is patient and willing to find the right house.
Monterey Peninsula – With the US Open and the 4th of July over, the Monterey Peninsula is not as bustling with people as it’s been and the market seems to have quieted somewhat. However, the total units sold for the first half of this year compared with last are excellent with at least a 20% increase in most areas and a sizeable increase in sales of the high-priced properties over $3.5 million. Though sales have increased, the prices have not in most areas, like Carmel, which saw a 20% increase in sales but prices have dropped from $1.66 million to $1.4 million average price. Still, Pebble Beach jumped a whopping 60% in sales and the average price rose from $1.79 million to $2.42 million. And Carmel Valley had almost a 50% increase in sales with the average price also rising, from $805,000 to $977,000.
Taking a look over all Bay Area counties, we have a continuing decline in Months Supply of Inventory. For single family homes, San Francisco, San Mateo, and Santa Clara counties are in approximately the same inventory shape with 3.5, 3.4, and 2.9 months supply respectively. Marin has a little more inventory with 5.4 months, and Sonoma is showing 4.5 months supply. Contra Costa and Alameda counties have the current lowest inventories in the Bay Area at 2.8 months- a strong sellers market at the entry level- but it would be a different story if we were only looking at homes over $1.5M. San Benito county is low at 3.3 months supply. Santa Cruz and Monterey counties are coming in at 5.8 and 4.2 months.
These numbers in general speak to a fairly healthy balance, and certainly slanting to a Seller’s market in the lower price points. As always, the devil is in the details. For the most part our entry levels price points will be <2 months, while the luxury markets over $2M will generally be greater than 5 months supply.
That’s it for now. Have a great week!