With the holidays behind us and a brand new year underway, Realtors, home sellers and buyers are all wondering what 2011 will bring to the Bay Area housing market. After a choppy 2010 that saw strong activity early in the year and a softening in the second half, Realtors are encouraged that recent improvement in the economy could bode well for the housing market.
The real estate market is so closely aligned with the fate of the overall economy, the stock market and consumer confidence. In general, all three of those economic indicators have been recovering in recent weeks. And this week in particular gave housing market professionals reason for encouragement.
In his first appearance before the new Congress, Fed Chairman Ben Bernanke gave a more upbeat assessment of the economy that he has in the past. “We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold,” the central bank chief told lawmakers.
Bernanke and another senior Fed official, New York Fed President William Dudley, said today that leading indicators for the labor market are pointing to a likely pickup in the pace of employment gains over the course of the year.
At the same time, the financial markets have rallied in recent months. The S&P 500 and the NASDAQ have risen 10% and 12%, respectively, over the past three months. Our Silicon Valley companies continue to report strong sales and profits over the past year. All of this undoubtedly is having a positive impact on consumer confidence.
Finally, this past year’s holiday season provided some welcome news for retailers. U.S. retailers posted the strongest revenue growth since 2006. A Thomson-Reuters index of 28 leading retailers showed sales rose 3.1% at stores open less than a year.
But in all likelihood, the road to recovery will continue to be slow and occasionally bumpy. Don’t be surprised to see extremely upbeat economic numbers one month and a small setback the next.
For example, the Labor Department reported that the nation’s economy added 103,000 jobs in December and the unemployment rate dropped to 9.4% last month, its lowest level in 19 months. But the job growth fell short of expectations based on a strengthening economy. And the drop in unemployment was partially due to people dropping out of the labor force.
Nonetheless, despite two steps forward and one back, the overall economy appears to be trending upward. I’m cautiously optimistic the same will be true for our housing market in 2011.
Below is a market-by-market report from our local offices:
North Bay – For December, Greenbrae was up in listings and sales closings, but down in opens (new sales) – possibly meaning less closings in January, but with more homes on the books (taking longer to sell), it may not make a difference in total #’s for January. The year is starting off with great interest in the Marin housing market by consumers. Open houses are crowded, agents are receiving calls, buyers seem to want to buy now, and sellers appear that they are not going to wait any longer to sell. The week of January 10th will be most telling – how much new inventory will come on, how will the buyers respond and how will the market start in 2011. The Previews market is showing some signs of life, particularly in the $2 to $3 million range. We are seeing more listings popping up – great houses at great values. Feels like there is demand there. In Southern Marin, our office promoted on “off market fixer” property in the high $900,000s prior to the plan of putting it on MLS this week. The inventory was so low, it got tremendous activity, got in contract and contingencies were just removed. In our Southern Marin market, the lack of inventory is helping sellers get offers. Even if the offers aren’t at the price the sellers were hoping for, often with negotiating, the deals are still made. The Previews properties are still selling if they are perceived as a big value and are in the desirable neighborhoods. Inventory is decreasing and sales activity steady, our Santa Rosa office says. Santa Rosa closed out the year on an uptick in sales and listings with open houses still reporting decent attendance. It was extremely quiet over the holiday season in Sebastopol.
San Francisco – The usual seasonal slowdown hit many of our San Francisco neighborhood offices the past two weeks. But our Market Street manager says the new year has started off with a renewed energy by both agents and buyers. Clients are getting back in to looking for their “dream” home and we’re determined to help them find it. New listings will be rolled out over the next few weeks instead of waiting for spring. The Noriega office says open houses were few but still well attended. Listings and sales are down as expected during the holidays.
SF Peninsula — Enthusiasm and hopes are high as clients are once again calling, our Burlingame manager says. Well-priced, well-staged homes generate multiple offers at time. Overpriced homes sit. There are 13 active and 13 pending sales in Hillsborough. This is lower than in the past and reflects sales in the last month as well as homes taken off the market for the Holidays. There seems to be renewed activity over the New Year’s weekend. Buyers are coming back into the market already. Over the hills in Half Moon Bay, the local market is steady. Our local manager says the buzz is that the new year will be productive. While the past two holiday weeks have been quiet in Menlo Park, Redwood City and Palo Alto, agents are just starting to see optimistic signs that the new year will bring renewed activity. In fact, our Palo Alto manager says they’re short on inventory of homes for sale – but not short on demand. However, our San Mateo El Camino office reports that they were very busy in recent weeks with active buyers and phones ringing with interest.
East Bay – Those who worked through the holidays in Berkeley report renewed interest from buyers and offers written. Some of the older listings sold, getting a fresh look from new buyers with not much inventory competing out there. Even the last week of December saw sincere walk-ins during floor time. In Castro Valley, our office was very slow due to the Christmas holiday. Many agents believe that the real estate market will improve slightly in 2011. The year-end retail sales showed a substantial increase from last year and those of us in the real estate field are hopeful that home sales will also increase due to consumer confidence that the economy is improving. Sales activities remain steady with a slight increase, or Fremont office reports. Inventory reduces near the holidays so this may have been a factor due to less inventory. Inventory is up 45% in Livermore, 36% in Pleasanton, and 127% in Dublin while pending sales in those cities are down 25%, 21% and 2%, respectively. Despite these figures, the agents at our office meeting indicated that there were shortages of homes on the market in certain price ranges, and more quality listings were needed in Livermore. Our Oakland office says they were busy closing escrows with lot’s of last minute changes to the demands. There was a big rush to get closings completed in 2010. The local markets slowed down due to the holidays in Orinda, Pleasanton and Walnut Creek. However, the Walnut Creek manager said the office has a “buzz.” The agents are busy showing properties and meeting with clients. With interest rates ticking up a bit, buyers are ready and waiting for new inventory.
Silicon Valley – Our Cupertino office reports that inventory and sales activity have eased in the past couple of weeks. But there is a heavy demand for the few good new listings that are trickling onto the market. In Los Altos, both sales and inventory have started picking up. Our local manager says it’s too soon to tell but he expects activity to pick up quickly this year. The Los Gatos office says that market has remained steady, In San Jose’s Willow Glen area, meanwhile, inventory has been decreasing while sales are steady. Even though we just went through the Christmas and New Year’s, there are people wanting to buy homes. Open houses had a fair amount of traffic. In Saratoga, the last two weeks of the year were very slow, but the local manager is optimistic of increased activity with the new year.
South County – Activity on both the listing and selling side was low during the two weeks of Christmas and New Year, according to our Gilroy office. But agents seem to be positive about an improvement in our market for 2011. We are seeing activity from buyers and banks releasing more properties to our REO agents. During the last seven to ten days of December—it seemed that most office activity came to an abrupt halt, our Morgan Hill office says. Right after the New Year, however, the Morgan Hill office has seen a dramatic increase in business. During the first five days of the New Year this office sold six homes. We have also seen an increase in listings taken—regular as well as short sale and REO properties. Though it may be a little early to declare a turnaround, it is clear that perhaps the market is beginning to gain some momentum and that consumer confidence is on the rise. Here in South County, prices remain attractive and good “deals” abound.
Santa Cruz – Inventory is starting to increase while sales activity has been steady in the Santa Cruz area. December was fairly busy and steady through to the end of the month. There were quite a few closings for this time of the year. The final results for the county are not in, however overall prices were down slightly, as were sales over 2009. Agents are getting off to a great start and starting to get back out there with open houses. The $1 million mark was the Previews benchmark for Santa Cruz County. The once $1.2 home is now $800K and so what one can buy for $1 million in Santa Cruz County these days is a beautiful property on acreage in the country or a way better than average beach property.
Monterey Peninsula – The year wound down but the sales activity continued during the last two weeks on the Monterey Peninsula. While we did not see many new listings coming in, we still had a good number of properties—across the price ranges–going into escrow despite the interruption of the several holiday quiet days. Though the numbers of homes held open were understandably fewer than usual, agents reported a good turnout, particularly in Carmel and Pacific Grove, the two most popular areas for second homes. This kind of activity going on in a normally much slower time portends of good activity starting out the year in January.
That’s it for now. Best wishes on a healthy and happy New Year, everyone!