As we head into the heart of this year’s spring season, I thought it would be helpful to share what we are seeing from a national perspective in the housing market and point out a few reasons for optimism in the months ahead.
Bruce Zipf, president and CEO of NRT, our national parent company, said this week that our overall business results have managed to exceed expectations, thanks in large part to a surprisingly resilient high-end market.
Our company’s agents across the country closed 32 homes over $10 million in March, up from 10 last year and just six in March 2009. The total number of homes sold over $2 million is up 12%. There was particular strength in the luxury segment of the market in the Northeast, Florida and right here in the Bay Area and in Southern California.
Normally, we judge the strength of the housing market by looking at current sales volume against the same time last year to gain a sense of how things are improving. But we couldn’t properly compare data from this March and April due to the artificial stimulus effects of last year’s Home Buyer Tax Credit. In May, these effects should lessen and give us our first true glimpse of the market’s strength.
Nonetheless, I’m optimistic that we’ll continue to see improvement in the market as we head into the heart of the spring buying season, especially right here in the Bay Area. Many of our local offices report seeing growing momentum from buyers looking to take advantage of mortgage rates while they’re still low, as well as prices that remain affordable.
In a number of our markets, especially in high-end areas on the Peninsula and in Marin and Silicon Valley, we continue to have more qualified buyers than listings. This situation is resulting in multiple offers for many attractive homes, often bidding up the sale price over the asking price. Buyers are coming in with a lot of cash or all cash to win out the competition. My how things have changed since the depths of the recession!
Million-dollar home sales in Silicon Valley surged 24% in March from a year ago as the South Bay’s luxury market continued its strong turnaround. Marin County saw even stronger gains, with sales spiking 55% and the median price 20%. San Francisco’s multi-million-dollar market saw sales rise nearly 14%. It’s often said that the high-end market – the so-called “smart money” – often leads the overall market’s turnaround. If so, this is a very positive sign indeed.
This is not to say that every market around the Bay is experiencing the same strong buyer demand. Certainly a number of communities and even neighborhoods within those communities have more balanced markets, and some homes continue to sit while others sell briskly. But in general, we’re seeing well-presented, well-priced homes selling much better today than they did a couple of years ago.
Another reason for my optimism is that mortgage rates are likely to remain affordable for some time to come. I know a lot of market-watchers were concerned that the Fed could ratchet up interest rates soon in response to inflation fears and the end of the government’s bond-buying program. But Fed Chairman Ben Bernanke largely put those fears to rest in his first-ever press conference this week.
Although Bernanke signaled the end of its $600 billion bond-buying program, as expected, he made it very clear that he isn’t inclined to raise interest rates for a long time unless the inflation outlook worsens. More than anyone, the Fed chairman is very aware that the economy continues to face headwinds in the form of high unemployment levels and a tepid housing market in many parts of the country. While things are certainly getting better, Bernanke isn’t likely to do anything to douse the nascent recovery.
So as we look to May and the summer season before long, there are many reasons to be encouraged that our housing recovery will continue to gain traction – especially here in the Bay Area.
Below is a market-by-market report from our local offices:
North Bay – The market has been steady with spurts of activity here and there, our Greenbrae manager says. Listings are slow to come on the market, so we are still experiencing an inventory shortage in Marin County. That said, sales keep creeping in and we are above targets in open escrows and closed sales. Buyers seem more eager to place offers. Multiple offers are more frequent yet rarely go over asking price. In Northern Marin, our local manager says inventory is increasing but sales activity has eased of late. Our Southern Marin office had the highest closed sales month in two and a half years. A $1.2 home in Kentfield received 7 offers, and an offer over $1.5 did not get the house. The most active area in the market is in the $ 1 million and under category. That said, the Previews market is strong with pending sales ranging from 18% of listings in Mill Valley to 42% in Belvedere (from a very small sample). One of our new Mill Valley listings at $1,795,000 received on all cash pre-emptive offer above the list price. Higher end listings that aren’t in the best neighborhoods are sitting and not getting much activity. Up in Santa Rosa, new open escrow activity is brisk. Open houses continue to be very well attended, and we are still facing a shortage of new inventory. On the upper end of the market, showings are around 1 to 2 a week. Relocation companies are buying homes and dropping the prices to sell, which is hurting the high-end market and leading to price declines. In Sebastopol, the market has been pretty steady. There has been really good attendance at open homes, including on Easter Sunday. We are also seeing more activity in the move up price range between $600k and $1 million.
San Francisco – Our Lombard office says sales activity is on the rise. Agents are very busy and open house traffic is quite good. Some condo listings are languishing and 11th hour loan problems are still prevalent. The San Francisco Lakeside office says some buyers are worrying about prospective interest rate increases but are nervous about prices. Ultimately what motivates them is the desire to settle down if they find the right home. However, picked over inventory makes choosing difficult. Our Market Street manager says the number of sales is down slightly from a year ago during the same period. However, the average sale price is up about 8% from last year at this time. An appropriately priced property continues to move very quickly, often with multiple offers and ratified contracts within a week from listing. Open house attendance over Easter weekend was also very strong. Finally, our Sunset district office says buyers are still cautious but they will act when they see good value. A lot of first time buyers are out there looking, but financing is still a key issue for most of them.
SF Peninsula — There is much more activity in the upper-end market, our Burlingame manager reports. Burlingame has 13 active listings and nine pending Previews listings. We are seeing a lot of cash buyers and frequent multiple offers as prime locations are always in demand. The true “sweet spot” is in the $1 mill. to 1.5 mill. range. Just about every property is seeing competition and multiple offers if their condition and location are right. The pent up demand of “move up “ buyers is very evident. We had one first open house in Burlingame’s Ray Park with close to 200 attendees. As the weather becomes better we are seeing young families moving south from the City seeking yards and parks for the kids and of course Peninsula schools. Across the hills in Half Moon Bay, the market has been steady with five ratified offers, our local office reports. In Menlo Park, the local market is hearty now. Buyers definitely have their feet back in the water. Good properties carry even more of a premium. Open houses are strong, particularly in Palo Alto. The local inventory is extremely short, resulting in multiple offers on many homes priced up to $5 million. Our Portola Valley-Woodside office says sales in Woodside and surrounding areas have been steady lately, but not as much in the high end – over $5 million. Big sales have been few and far between in recent weeks. In San Mateo, our local manager says the market is heating up with more multiple offers chasing little inventory. One listing had seven offers and five were all cash. Finally in Redwood City, the local market continues to struggle with a lack of inventory. There still is a large number of buyers attending open houses. There have been fewer multiple offers but more in San Carlos than other areas.
East Bay – Sales are picking up in Berkeley, but agents are still working very hard to find the few houses out there and get buyers into contract. Some buyers are still hesitant to write offers and others are waiting. Our Danville office says market activity has taken a real jump in the past 10 days. The overall market in Livermore has remained relatively stable the past couple of weeks with very little change in total inventory of homes on the market or the pending sales. Quality listings are bringing multiple offers in Livermore within a few days of the listing being put on the MLS. Our Oakland-Piedmont office reports a fairly steady market with lots of activity at open houses, including Easter Sunday. A couple of our listings had over 40 groups through. The Upper Rockridge area is hot with most listings receiving multiple offers. Buyer activity is strong with many buyers writing offers, sometimes losing out in a multiple offer situation, but getting right back on the horse and writing an offer on another property quickly. Sales activity is also on the rise in the Lamorinda area. Well-priced homes sell in a flash and most have multiple offers. Some qualified buyers are very interested but still holding off for the best prices. Both sales activity and inventory are climbing in Pleasanton. Homes over $500K are staying on the market longer, but anything under that are seeing multiple offers. Buyers are continuing to look for the best deal. Finally in Walnut Creek, sales are on the rise and buyers are becoming a bit more serious. Inventory is selling very quickly.
Silicon Valley – Our Cupertino office reports that activity is brisk and attractive inventory is in high demand. We are back to having the majority of our sales involve multiple offers. A very original fixer-upper was listed for $988k, got 11 offers, and was bid up about $100K. Activity is strong in Los Altos, our local manager reports. As goes the Dow so goes the high-end market, he said, and the stock market is up. About a third of the sales are multiple offers. The Los Gatos market is steadily improving. The high-end buyers are starting to feel more comfortable writing offers on properties priced in the $3-6 million dollar range. High-end homes that have been sitting are starting to see offers and pending sales are up. In San Jose, our Almaden office says that what started off as a brisk three months has turned into a noticeable slow down in recent weeks. It’s possible that it could be the result of multiple spring break weeks. The Saratoga market seems to be very active, according to our local manager, although the high-end market seems to be calming down a bit.
South County – April is finishing as a strong month, reports our Gilroy manager. Agents are seeing increased activity in open house traffic and clients that have been slow to look for properties or list their homes are now moving ahead with plans. It appears the buying season is officially on. Our Morgan Hill office, meanwhile, says that while March was a great month in terms of sales and listings, April has seen less activity. There have been fewer consummated contracts and fewer listings. Higher gasoline prices have impacted client’s interest in looking at rural or suburban properties (which constitute a high percentage of Morgan Hill listings). But well-priced, well-presented homes still are garnering offers. Optimism continues grow and most agents agree that the market is gaining momentum.
Santa Cruz – In March there was a 12% increase in closed home sales in the county – an encouraging sign. Activity seems to be steady lately and we have seen multiple offers recently on three well priced and staged listings. One home sold in six hours with three offers, going slightly over asking of $1 million. The properties and sellers were well prepared before going on the market and the smart agents are counseling their clients to price well, prepare the property for optimum exposure and selling the home. They understand that slightly under pricing is the key to attracting buyers. There are a few well-priced Previews homes in pristine condition that are selling. Our office recently sold an oceanfront home in Capitola that was listed at $2.2 million in a coveted neighborhood for $1.5 million. In the real estate heyday, the property might have sold for double that. Recently we have seen some very high-end homes on the market as short sales or REO properties, and these prices are definitely impacting overall values. There are many buyers searching for their dream home and now are able to afford to purchase and are doing so.
Monterey Peninsula – Our local offices seem to be enjoying spring fever in sales activity in last two weeks, with more new escrows than usual. The weather has been great and the area has been extra busy with people from out of town. And the more folks visiting the Monterey Peninsula, especially Carmel and Pacific Grove–the weekenders’ favorites–the more sales activity there is. There have been 37 ratified offers, several attracting multiple offers.
Here’s to a few more warm days ahead and a beautiful weekend.
That’s it for now. Have a good week!