As summer gets into full swing, the Bay Area housing market appears to be taking a bit of a vacation break. While buyers are still out in the market in some communities, in many parts of the Bay we’re seeing the usual summer slowdown with modest open house attendance and fewer sales. Some of this softening is attributed to the time of year and some of it is perhaps due to the end of the federal tax credit.
But the summer hiatus hasn’t impacted all communities equally or even all neighborhoods within those communities. While many offices report very quiet activity, agents in other offices are seeing continued strong interest by buyers looking to capitalize on attractive pricing and record-low mortgage rates.
This schizophrenic market is exemplified by Menlo Park’s observations: “One day, we see a sale and think ‘Wow! How did they ever get that price for this house?” And then the next day we’re saying, ‘I can’t believe that house is still sitting there; it’s a great value.” Down the Peninsula, high-end properties between Palo Alto and Atherton are still selling– some even before hitting the market, with about a third of sales attracting multiple offers. Cupertino declares that sales activity is up with listing inventory decreasing. Similar brisk activity was reported in central Marin County.
In general, the buyers – those who haven’t jetted off to Hawaii or trekked up to Lake Tahoe – are still out looking but they’re being very, very cautious about taking the next step and making an offer. Homes that are well maintained and perceived to be a really good value are indeed selling. But buyers want to make sure they’re getting the best deal, and often are making offers well under the list price.
It’s understandable that buyers are being cautious and are looking for direction, given the macro-economic issues all around us. The economy appears to be on the mend, (depending on the economist, and the reports released on any particular day) but the recovery is slow. The jobs market is still grappling with stubbornly high unemployment, as evidenced by Friday’s jobs report. Some 131,000 jobs nationwide were cut last month, though that was primarily tied to layoffs of temporary census workers. The unemployment rate remained unchanged at 9.5 percent.
Overly negative news media reports haven’t helped the housing market. The press seems to focus primarily on the negative and ignore the overall improvement we’re seeing – the fact that corporate earnings have rebounded significantly, home sales have steadily risen over 2008 and 2009 levels, the credit markets have grown stronger, and the stock market has recovered nicely from last March’s low, making most 401k’s quite a bit healthier. The grim tone of the financial press may be frightening some potential buyers into inaction.
Nonetheless, there are still savvy buyers out in the market. They understand that while we have economic challenges and uncertainty, things have indeed gotten better. And they know that we’re seeing a rare window of opportunity right now with homes priced at very attractive levels and mortgage money available at rates we haven’t seen since…ever. Mortgage rates hit a fresh record low this week with 30-year fixed-rate mortgages averaging 4.49%, according to Freddie Mac. Those who are buying now realize the strong, long-term investment potential of real estate, especially in the Bay Area at today’s price level.
Below is a market-by-market report from our local offices:
North Bay – Sales are holding steady in the Santa Rosa area, although there seems to be a dip in attendance at open houses. Our local office reports an increase in closings above $500,000. Overall inventory in the Petaluma area is decreasing and becoming scarce. Our office reports that about 50% of the closings for the past two weeks were short sales or REO’s. They are starting to see some inventory in the $500k to $700k range. And in Sebastopol, both inventory and sales are picking up. Open houses are well attended but there is lots of buyer hesitancy due to the news. Homes that are perceived to be a “deal” are selling, while those that aren’t continue to chase the market. New REO inventory is non existent. A disproportionate number of transactions are all cash, many with short escrow periods. Meanwhile, in Northern Marin open houses for properties priced around $800,000 are well attended, and homes that are well maintained generate the most interest. Properties at or below $600,000 that show well are hot. Agents are seeing the market pick up a bit in central Marin from early July. Whether people are gearing up for fall or just getting stuff done, there are buyers coming out of the wood work (mostly from San Francisco – perhaps for Marin’s school system) and sellers continuing to put new properties on the market. Finally, our southern Marin office reports that August is always a slow month, and this August is no exception. Schools begin in Marin in two more weeks, so this seems to be the push for last minute vacations before school starts.
San Francisco — The San Francisco Lakeside market has been steady, with the upper end of the market quiet. Nonetheless, nearly half of all transactions reported by our local office were multiple offers. Things are steady in both the Lombard and Market Street offices. Open house and broker traffic has been slowing down a bit, according to the Lombard office, but sales are coming in that are priced well and the properties without flaws. Several of the agents in the Market Street office said that there appears to be a shift in buyers’ attitude in the last week. Many more people are coming in to open homes preapproved and ready to buy. We have to see if it translates into contracts written. Open house activity was far more brink than in weeks past. Meanwhile, the Noriega office reports that depending on the location, open houses are still well attended but there seems to be no sense of urgency on the buyers’ end.
SF Peninsula — Activity is steady for the most part on the Peninsula, but there are communities seeing bursts of activity and then slowdowns. Menlo Park is a good example. Stability is NOT the word right now, according to our local offices. It has become a unique day to day market. Volatility is the word right now. Buyers are absolutely out in the marketplace and will buy, according to Menlo Park agents. But they will not buy until they feel it is a “real deal.” There’s not much market motivation except money right now. Our Palo Alto offices report that overall, the market is the usual vacation slow. But higher-end properties between Palo Alto and Atherton that are well priced do move – even before hitting the market. About 1/3 of the sales are multiple offers. The market is holding steady in Redwood City. One remodeled home in San Mateo that was listed at $1,058,850 had 11 offers and sold considerably over the asking price. Our San Mateo office reports that listings and new sales are up about 10% over last month, which closed sales are the same. Buyers are interested if it is priced right and shows well, but not as many looking to make repairs or “deferred maintenance” corrections. Finally, the bulk of the sales in the Woodside and Portola Valley market are under $2 million rather than the upper end of the market.
East Bay – Both inventory and sales remain steady in Berkeley, but agents are a bit frustrated because so many offers are being written for not enough houses in the popular areas with mid-range prices. Our Oakland/Piedmont office reports that sales picked up the last two weeks of the month, but the number of multiple offers has slowed. Many short sales still take a long time to become approved by the banks. Meanwhile, the market seems to have stabilized in Orinda and Pleasanton as summer progresses. In Castro Valley, the local market seems to be slowing down, although there are still plenty of buyers out there. The city has many new listings in the entry level and mid price ranges, and agents continue to see well priced homes go into contract quickly. One home sold within one weekend. The Fremont market has become extraordinarily competitive. Overall inventory has increased substantially and buyers are being very selective about location and price. In Livermore, inventory of distressed single-family properties (REO and short sales) continues to decline. Currently, they account for about 35% of the active inventory. The good news is that 65% of the active detached homes on the market are equity sellers. But as far as attached homes, distressed sales still account for 80% of the inventory. Despite the historic low interest rates available to buyers, agents are finding that the overall real estate market seems to be slowing.
Silicon Valley –Activity seems to have picked up a bit in Cupertino with sales increasing and listing inventory decreasing. Open house traffic is steady with 114 homes held open. In Los Altos, the market has been very slow in most areas. There has been lighter than normal vehicle traffic and open house attendance, maybe due to vacation periods and general buyer hesitation. The Previews luxury market is active up to $1.8M, slowing $1.9M and up, and slower $2.8M and up. Meanwhile in Los Gatos, activity and inventory is holding steady. Our local office reports that the high-end buyers are out shopping for deals. In San Jose, the Almaden office reports that area is seeing steady inventory and sales activity easing of late while the Willow Glenn neighborhood has seen sales increasing and our local office reports agents are quite busy with buyers. There seems to be a slowing trend for sales in Saratoga with vacation mode in full swing. There have been 131 open homes in the area.
South County – The Gilroy market continues it’s same pace as the previous 2 weeks with sales easing and inventory increasing. It appears buyers and sellers are finishing summer vacations and have put home buying to the side for now, according to our Gilroy office. Our Morgan Hill office reports that both inventory and sales activity are decreasing. Compared to two years ago, the South County market has improved significantly. However, the recovery is slow of late and not particularly Agents say that open house traffic remains strong and there is buyer interest, but getting a buyer to make a commitment to purchase is still a struggle. On a more positive note, agents are reporting a much quicker response time on short sale offers — especially with the new “Equator” system.
Santa Cruz – Inventory is increasing while sales are easing as summer takes hold. Year to date the sales are nearly the same as ’09 but there was a big drop in the last two months – overall closed escrows are down 25% in the county. Inventory levels are about the same as a year ago hovering right around 1,000 properties currently on the market. The average days on the market is up about 33% over the same time last year – longer to sell although we are seeing multiple offers on new listings that are well priced under the $700k price point. The upper end continues to be more of a challenge especially country properties as sellers are having a hard time coming to reality with the true current value of the property. The median price is lower than a year ago as we continue to watch prices drop. We are seeing more short sale activity especially in the high end. On a positive note a $4 million oceanfront listing that has been on the market for over a year is scheduled to close soon.
That’s it for now. Have a great week!