I was at an agent luncheon in Silicon Valley recently and asked my top sales associates what they were hearing out in the trenches. We heard the usual stories of buyers holding off due to fears of the slow economy, or they were waiting for that perfect “screaming buy” to come along before purchasing. And we heard about sellers not listing their homes because they wouldn’t get as much in today’s market as their neighbors did a few years ago. Then Lisa Blaylock, an agent in San Jose, shared with us an intriguing philosophy that got her potential buyers and sellers to look at the market in an entirely different way – and ultimately take advantage of some great opportunities out there.
After Lisa’s clients wrung their hands about the nation’s high unemployment rate, the fragile economic recovery, and other economic stories they had seen on CNBC or read in this morning’s paper, she replied with a simple question: “Ok, but how is your personal economy doing?” After a puzzling look from her clients, she would explain that while the nation’s economy is important, it’s not nearly as relevant to them as their own personal circumstances when it comes to buying or selling a home.
In many cases, Lisa’s buyers had secure jobs with good incomes and strong savings and investments. With home prices easing and mortgage rate at record lows, they were personally in a good position to afford the home of their dreams – perhaps in a better position than they will be in the future when interest rates rise and home prices rebound. Conversely, many of her sellers had a great deal of equity in the home that they had owned for years and would walk away with a good profit. She reminded them why they wanted to sell in the first place – to move up to a larger home, or maybe downsize in retirement, or perhaps relocate to be closer to their grandkids. Her “personal economy” approach must have had an impact on her clients because she’s already sold 17 homes in these first three quarters of 2010.
Lisa’s story reminds us that it’s important for consumers to weigh their own “personal economy” against national and statewide economic headlines in the media when deciding whether to purchase or sell a home. It’s easy to get caught up in the daily drumbeat of economic news. You can’t turn on the TV or the radio, or read a paper without the latest economic minutia. While the majority of “experts” seem to agree that the U.S. economy is recovering, albeit more slowly than we would like, some days it still feels like we’re taking two steps forward and one back. But we can’t lose sight that what really matters in our investment decision isn’t the latest jobless figures or manufacturing orders or even the Case-Shiller index, it’s our own personal circumstances. For many, today can offer an incredible opportunity to make a real estate investment in and around the San Francisco Bay Area.
I’m reminded of the old saying that you make your profit on real estate when you buy, not when you sell. For every seller who has realized a nice profit at the closing table, it must be remembered that profit couldn’t exist had they not stepped up and made the Buy decision when they did. While no one questions that there are economic challenges out there in the market, there are also tremendous opportunities. By the time all of those macro economic concerns have been lifted – when the “all clear” bell rings again – the same opportunities will not be around in terms of prices and mortgage rates. Your “personal economy” may just be the best indicator you have when considering whether to make a real estate move now rather than later.
Now a market-by-market report from our local offices:
North Bay – Marin seemed to do well in September after a really slow August. Agents have been quietly putting deals together, working with their buyers and doing what they can to get deals done and work through ongoing negotiations, our Greenbrae office reports. Persistence is paying off with short sales, and banks seem to be getting their act together and coming to decisions faster than in the past. Similarly, the Northern Marin office says both inventory and sales are picking up. At this week’s Novato Broker’s Tour meeting there were 17 open homes, 3 of which were short sales and 1 REO. However, an REO agent commented that there are many more REO’s coming on the market in the near future. In Sebastopol, the market has been steady with most sales in the lower price range. Our Southern Marin manager says fewer properties have come on the market than is traditional for this time of year. Buyers seem to be slow stepping up to the plate except for REOS, which seem to fly out the door as soon as they come on, as they are normally aggressively priced.
San Francisco — We’re not out of the woods, but agents are feeling better. That’s how our San Francisco Lakeside manager assesses the local mood. Doom and gloom voices have dissipated just a little. Buyers are coming forward for good deals. Our Lombard office reports that there was an increase in inventory after Labor Day, but not huge. Buyers lack urgency and are looking for a bargain, but they’re there when the right property and right price come on. One sale had 11 offers about 10% over asking. On stale listings, baby-step reductions aren’t working. Our Market Street office says that open house activity was all over the map: Great traffic at some, no traffic at others. There is an uptick in ratified deals with quick closes. Finally, our Noriega office says the market has been fairly steady. Open houses are still well attended but buyers are not willing to make an offer unless they perceive that the property is a good deal and is a bargain.
SF Peninsula — According to our Half Moon Bay office, sales activity is sluggish on the coast although listing inventory has picked up. The high end is very slow (over the $1.5m range) although we have had a few, all cash, upper end sales to be used as vacation homes. The Menlo Park market has been fairly steady, with sales good the past couple of weeks. However, prices are still eroding in the upper end of the market. In Palo Alto, our local office reports that the market is generally slow in sales and inventory is quiet. Those that are well priced receive multiple offers. Open houses have been lukewarm – some well attended with 30/40 groups coming through the property. Meanwhile, our Redwood City office says open houses are well attended but buyers are very reluctant to make an offer. Nonetheless, homes are still selling and there are multiple offers were on properties that are in a great location, show well and are priced right. Finally, the San Mateo and Woodside offices report sales activity is decreasing. Buyers seem to be doing more “wait and see” and it’s been more difficult to gain a commitment to write an offer. Open houses still seem well attended.
East Bay – Buyers are out there and making offers, our Berkeley manager says, and there has been a bit more activity than the past few weeks. There were 100 people at a new Berkeley listing this past Sunday priced at $689,000. Meanwhile in Castro Valley, the market has been fairly steady. Our Danville office reports both sales and listings decreasing. But while sales activity is slower compared to what it was a few months ago, sales are in almost all price ranges. In Fremont, there has been a flurry of activity on the buy side now that people are back from vacation and want to purchase before the end of the year. In the Tri-Valley area in the past 30 days, the active inventory in Livermore and Pleasanton has remained stable, while active inventory in Dublin has increased by 15%. Pending sales were down in Livermore and Pleasanton, but stable in Dublin. Our Oakland office reports the average sales price has dropped as sales seem to be coming in from the lower price ranges and not the Previews market. However, there are lots of new listing coming on the market. The number of open houses has increased significantly. Our Orinda manager says local buyers are ready to move although they are taking their time and being very thorough. The Pleasanton office reports reduced buyer activity.
Silicon Valley – In Cupertino, open houses are busy but it’s getting harder to have people pull the trigger. Once in escrow, it is challenging to make the deals stick. But in general, sales activity is increasing. Homes are continuing to sell at a brisk pace in Los Gatos as long as they are priced appropriately, according to our local office. Proper pricing is critical! The San Jose Almaden office reports that inventory is decreasing while sales are on the rise. In Willow Glen also reports that sales activity has picked up a little, although traffic has slowed somewhat at open houses.
South County – Our Morgan Hill office reports that sales activity is steady while inventory is declining. The sales board in the Morgan Hill Office was almost filled up for the month of September. The local market seems to have gotten a “second wind.” There has been lots of activity in the office and agents seem busy and motivated. Perhaps buyers are convinced that interest rates will not go much lower and that prices remain attractive and affordable.
Santa Cruz and Monterey Peninsula – There’s been little change in the overall Santa Cruz market in recent weeks. The median sale price in August is relatively flat from the 09 level of $500,000 to $517,000 in 2010. There are fewer properties under contract from the same time last year, down about 16%. The inventory levels are the same, as are days on the market with the average being about 74 days. The REO market, short sales, and those properties under $ 500,000 comprise nearly 50% of the market. The agents continue to do price reductions on their listings and then receive an offer much less than the newly reduced price. For Santa Cruz, our best weather days are ahead in the next 2 – 3 months and open houses have been well attended especially for those listings closest to the beach. Meanwhile, the Monterey Peninsula market has seen listings holding steady and sales activity increasing, according to our local offices.
Finally, a quick note on the Previews Market: We are seeing an increase in sales in the $1 million to $1.4 million price range, according to our Greenbrae office. Sales considerably above $2 million are fewer, though we are seeing pockets of activity on some great luxury properties that have been deeply discounted and show well. Our Santa Cruz offices say they’ve noticed a definite uptick in the Previews market in the past couple of weeks. Showings have increased and in the last week a new CB $2 million listing went quickly into escrow. In San Francisco, 22 homes sold over $2M in August, a 38% year over year improvement. And in San Mateo County, 36 $2M+ homes sold which was a 100% improvement over prior year. Keep your eye on these numbers. In past recoveries, strong activity in the High End has signaled the full market turn-around.
That’s it for now. Have a great week!