With the Labor Day weekend upon us, summer is finally drawing to a close. And as consumers return home from the last of their summer vacations, market watchers are anxious to see if fall brings renewed interest in the housing market.
Most of our offices around the Bay report a fairly quiet market in the last two weeks of August, which isn’t unusual. Buyers seem to be waiting to see what new inventory comes on the market after the holiday weekend, while sellers are busy preparing their homes to go on the market in hopes that buyers will come.
With mixed news on the economic front, buyers continue to be understandably cautious. It’s been a roller coaster of emotions for anyone who’s been following the economic news lately. One day we’re encouraged by a promising new government report on economic growth, the next day discouraged when another study says the economy is slowing.
This week at least brought some positive news on the economic front. First, manufacturing activity here in the U.S. and elsewhere in the world accelerated faster than expected last month, according to the Institute of Supply Management, which surveys purchasing managers. The news was seen as an encouraging indicator that the global economy is not stalling out.
A day later, the National Association of Realtors reported that the number buyers who signed contracts to purchase homes rose 5.2 percent in July after hitting a record low in June. Sales nationally had fallen sharply in the months following the expiration of the government’s home buyer tax credit in April, and economists were expecting that trend to continue for a third straight month.
Finally, we received good news on the job front. The Labor Department said first-time claims for unemployment benefits fell slightly last week, declining for the second straight week. And on Friday, we learned from the Labor Department that private employers hired more workers over the past three months than first thought, lifting hopes for the weak economy ahead of the Labor Day weekend.
As we’ve said before, job growth will be critical to the housing market’s continued recovery. Consumers who land new jobs or become more confident they will hold onto the one they have are much more likely to move forward with home purchases in the months ahead. But with unemployment still hovering at 9.6 percent, we have a long way to go before consumers regain their confidence in the job market.
While the economic recovery has been sluggish, it’s important to keep the news in perspective: all signs indicate that the economy is indeed improving, albeit slower than we’d like. Sometimes we lose sight of that fact with the constant, 24-hour-a-day business news coverage on CNBC or CNN and the talking heads giving us minute-by-minute commentary on the economy.
The Bay Area market continues to face economic headwinds as do markets across the country. But we are faring better than most regions in the country. Additionally, our market is considerably stronger today than it was during the depths of the recession. We’ve come a long way over the past two or three years.
Buyers are hiring agents, attending open houses and making offers. Homes are still selling. But it’s more important than ever for sellers to price their property appropriately for today’s market and make sure their home is in the best possible condition. If they do, buyers will come – sometimes with multiple offers.
One extreme example of this is the property in San Francisco’s Cow Hollow neighborhood that recently drew a whopping 23 offers and sold for more than $1 million – $200,000 over the asking price. While this is the exception rather than the rule these days, it does remind us that there still is a market for homes when priced right.
Below is a market-by-market report from our local offices:
North Bay – Our Greenbrae office reports that “it’s like dead week before finals.” It seems everyone is getting their last week of summer vacation in before Labor Day. Buyers are waiting to see what inventory comes on, and sellers are busy preparing their properties to go on the market. In Southern Marin, both inventory and sales have been slow, according to our local office. But the number of units is up versus year ago, and very similar to number of sales year to date in 2008. The market slow down is not unusual for this time of year. We are aware of and anticipating many new listings coming on in the next several weeks following Labor Day. Inventory is increasing and sales are holding steady, our Northern Marin office says. Up in Santa Rosa, our local office says new sales fell a bit over the past two weeks but the trend of escrows being opened in many different price points has continued. The mid to upper end is seeing more activity. Sales activity picked up the past two weeks, according to our Sebastopol office.
San Francisco — While the San Francisco market continues to hold steady, well-priced homes seen as a great value are still attracting multiple offers, according to our Lakeside office, which was in the running for that Cow Hollow home that received nearly two dozen offers. Our Lombard office reports that it was a very slow August with lots of agents (and buyers?) on vacation. There are mixed reports on whether we’ll have a post-Labor Day listing surge or not. Some listings that were withdrawn during the summer are coming back on the market. And some sellers with listings that haven’t moved for a long time are dropping their prices, and then, in some cases, receiving multiple offers. Open house activity has declined over the last two weeks, our Market Street office says, although the clients that are coming out appear to be serious about purchasing by year end. Private broker showings have declined in the same period. The Noriega office says that activity appears to be picking up. Well priced properties are still getting multiple offers but negotiations during inspection period are brutal. Buyers are negotiating on every detail. Finally, the Van Ness office reports that sales are increasing while inventory remains steady.
SF Peninsula — Sales and inventory are fairly flat in much of the Peninsula. According to our Redwood City office, the local market is pretty quiet with buyers being very cautious. Many buyers are choosing to wait to see what is going to happen to prices. In San Carlos it seems that if the property is priced right and in good condition the buyers are willing to make offers. Open houses are very light in the Mountain View to Redwood City corridor, according to our Palo Alto office. There have been fewer multiple offers but our local office had a good strong week of sales relatively speaking. Our Menlo Park manager reports that market has been fairly steady in terms of sales and inventory. A similar story is being told in Burlingame and across the hills in Half Moon Bay. In San Mateo, over the last two weeks our local office has seen a softening of the market. Buyers are very concerned about the economy slowing down with agents working hard to reassure their clients. Both sales and inventory are decreasing in Woodside as well.
East Bay – The Berkeley market is holding fairly steady, according to our local office. Both buyers and sellers remain edgy for a variety of reasons, well documented in the media. Sellers are not listing unless they have compelling reasons to do so, and buyers still believe prices will decline further and dramatically. Our Oakland-Piedmont office says that sales in August were about the same as last year but the average sales price has gone up. Buyers are still showing up in droves for the perfect house in the perfect location. There were over 100 people at an open house in Rockridge last weekend. The market remains steady, according to our Orinda, Walnut Creek and Pleasanton offices. Buyers are out there looking, but in spite of the record low interest rates are very cautious about making offers. Our Castro Valley office, meanwhile, reports that inventory is increasing and sales are decreasing. In Fremont, short sale transactions are on the rise as is the overall listing inventory. Buyers are taking longer to make their decisions. During the last couple of weeks of August, the real estate market in Pleasanton and Dublin have experienced no major changes in total active listings and total pending sales. In Livermore the active listings have climbed almost 10%, and total pending sales have remained steady.
Silicon Valley – Our Los Altos office reports sales are steady while inventory is increasing. Summer vacations are drawing to a close and agents and clients are becoming more active. Similarly, the market is steady in Los Gatos. But well priced homes are still selling – a $2 million dollar home came on the market and sold within two days. Sales continue to be slow and inventory appears to be on the rise, according to our San Jose Main office. Buyers may be waiting to hear if Congress will be re-instating the first time buyer tax credit, which is a topic of conversation. Open houses this past weekend were slower than normal with minimal traffic thru most. Lower than normal interest rates hopefully will help sales in the upcoming months. The Almaden office says inventory is decreasing and sales are steady. Finally, sales seem to be lagging, according to our Saratoga office, perhaps the continued effect of vacations and the upcoming Labor Day weekend.
South County – Bernice Ross, a columnist for Inman News, recently published an article entitled “Five Ways to Stay Positive in a Down Market.” Her suggestions can be easily transferred to buyers and sellers who are dealing with difficult transactions in the current market place. Staying positive, avoiding negative, self-fulfilling prophecies and responding rather than reacting are several ways that Ms. Ross advises agents (and in turn clients) to cope in these challenging times. The local market in Morgan Hill is mirroring the rest of the Bay Area – down about 25% in both listings and sales. Buyers are looking, but ratified contracts are hard to come by. Our Gilroy office also reports that inventory is steadily increasing while sales are decreasing. The start of school may have distracted homebuyers.
Santa Cruz – Inventory is holding steady, but sales are decreasing, according to our Santa Cruz area offices. The number of closed escrows during the past two months has been significantly lower than previous years. The unsold inventory index is approaching nearly 8 months, with the median price relatively flat, holding around $500,000. Despite the lower prices and interest rates Buyers are behaving with caution and many are changing their minds at the last minute – deciding to wait for prices to go lower. About 45% of the SFR and condo sales are either bank owned or short sales and this continues to have an effect on the overall prices in the market. The over-$1 million market is sluggish with only about 4% of the listings actually selling and closing escrow.
Monterey Peninsula – Sales are continuing at a steady rate of activity and in price ranges across the board. Our local offices are seeing an increase in the number of short sales. Those sales, of course, take a longer time to close, with many of them taking so long that the original buyer drops out and the property is sold to the second or third buyer. Fortunately, some of the lenders, particularly Wells Fargo, seem to be getting more organized with short sale files and are able to approve them more quickly than in the past. However, if there is a second loan (or more) on the property, all bets are off. Those are much more difficult and time-consuming.
That’s it for now. Have a terrific Labor Day weekend!