It was a busy week for economic news, much of it encouraging. Perhaps the most positive data came out on Friday, showing that U.S. consumers grew more confident in May than a month earlier as declining gasoline prices helped lift Americans’ spirits.
The Thomson Reuters/University of Michigan final index of consumer sentiment increased faster than expected to a three-month high of 74.3 from 69.8 in April. Economists had forecast a reading of 72.4, the same as the preliminary figure issued earlier this month, according to the median estimate in a Bloomberg News survey.
The upward trend is encouraging for those of us in the housing market. As real estate people know all too well, consumer confidence plays a critical role in the housing market. If buyers are positive about their job prospects and the overall economy, they’re more likely to take the leap into buying a home or trading up to a larger one.
Also encouraging: U.S. corporate earnings continue to improve. In a new report, Deutsche Bank said that earnings for the first quarter beat analyst median forecast by a full 50%. Earnings for the three-month period surged 18 percent year-over-year, far exceeding the 12 percent expectation at the beginning of the quarter.
This marked the ninth consecutive quarter of sequential earnings growth. Earnings were driven by cyclical sectors such as Materials (up 55 percent), Energy (up 40 percent) and Industrials (34 percent). Altogether, revenues rose by a healthy 9 percent for the quarter, an indication that earnings were not solely driven by cost cutting, a very good sign.
But despite the overall improvement in the economy and the financial markets, the nation’s housing market overall continues to struggle to gain momentum. Pending sales of existing U.S. homes dropped more than expected in April to touch a seven-month low, the National Association of Realtors reported on Friday.
NAR’s Pending Home Sales Index dropped 11.6 percent to 81.9 in April, the lowest since September. Pending home sales lead existing home sales by a month or two. Economists, who had expected pending home sales to fall 1.0 percent last month, said bad weather in some parts of the country might have affected home shopping.
So what to make of the mixed bag? Overall, the nation’s economic recovery is moving forward, albeit at a modest pace. Nationally, the housing market is fighting to work through the overhang of foreclosed and distressed properties. It’s not easy, and will take time. But it will happen.
However, more than ever, we’re reminded of how much real estate is about location, location, location. Things are far better here in the Bay Area. The overall market is much more stable than elsewhere in the nation, and in some pockets, it’s fairly robust. We continue to have multiple offers in all our offices. Not every property for sure, and not all multiple offers are well over the asking price. But this is a strong indication of Bay Area buyer demand that most of the nation is not experiencing today. In several office visits this week I heard different variations on a common theme: “It seems I get one of two results; either a few multiple offers within first 7 to 10 days, or I’m getting a price reduction 30 days later.” Thoughtful and strategic pricing, combined with staging interior and exterior of property are key elements to having the best chance at multiple offers.
Coldwell Banker Residential Brokerage’s luxury housing market reports out this week continue to show strong demand for high-end properties in particular.
Million-dollar home sales in Silicon Valley continued to improve in April with sales up from the previous month and year ago. A total of 237 homes sold for more than $1 million in Santa Clara County last month – the most sales since last July. Additionally, multi-million-dollar sales also jumped with 42 transactions over $2 million, up from just 32 a year ago.
East Bay million-dollar home sales continued their 2011 rally as well. A total of 105 homes sold for more than $1 million in Alameda and Contra Costa Counties in April, up nearly 17 percent from the 90 sales in March. The median sale price also edged up 1.2 percent last month to $1,275,000. The totals were shy of last year’s figures, however. The one downside in the luxury market this past month was Marin County. After surging in March, luxury home sales and the median sale price in Marin took a breather in April with both indicators down marginally from the previous month and a year ago. Nonetheless, the county’s high-end market has seen good improvement overall in 2011.
Below is a market-by-market report from our local offices:
North Bay – The Greenbrae office reports that inventory is on the rise, but sales activity has been easing a bit in May. Nonetheless, one property on at $975k in Corte Madera received nine offers – a pretty good sign that there are buyers out there ready to go when they see a property they like. This are just starting to perk up again as we approach June. There have been several $5 million properties go into escrow, a good sign for the Previews market. In Northern Marin, our local manager says they have seen an increase in both new listings, many of which are organic, and listing price points. The open houses continue to be well attended by potential buyers looking for just the right property. In Petaluma, the market has been steady and open homes in all price ranges have been well attended, most in the double digits. Buyers are competing with multiple offers in most price ranges. Inventory is coming on strong in the $900,000 to $1.8-million price range. In Santa Rosa, the local market is seeing improving sales and inventory. The pace of new sales and closings is still ahead of new listings and open houses are well attended. Similarly in Sebastopol, both sales and inventory are increasing. Inexpensive inventory continues to sell well. The majority of our sales this past week were below $400k. The number of visitors to open houses for the most part remains in the double digits. Agents report many instances where they are not getting their calls or emails returned by listing agents. We have also seen an upswing in walk-in traffic. Finally, our Southern Marin office reports a steady local market. A number of our Previews listings went into contract in the last two weeks, from $2 million to $3.5 million. Strong negotiating seems to be the name of the game, but ultimately they seem to get into contract.
San Francisco – Sales activity is improving, our Lakeside office says. Inventory of quality well priced homes is low and sells right away when it comes on the market. Homes in questionable condition, or short sales, sit unless they are bargain priced. Buyers complain they would like to buy but can’t find the right place at the right priced, then go in droves for multiple offers when something good comes on the market. Our Lombard manager also says the local market is on the rise. There has been good open house traffic and an improving number of sales through May. Each sale takes a realistic seller and a buyer not always looking for a bargain – just the right price. The Sunset office says that market has been stable. Open houses are well attended. There seems to be more negotiations from beginning to closing. Buyers are more demanding in terms of price and condition of the property. Deals are taking much longer to close with re-negotiation after inspections. Finally, our Van Ness office reports both sales and inventory on the rise. There were 32 ratified offers in recent weeks, five of which attracted multiple offers.
SF Peninsula — Our Burlingame office says that more expensive homes are starting to move – many off market deals being made. First multiple offer on $4 million dollar property (had six offers). Still having all cash deals on high end. Across the hills in Half Moon Bay, the market has been steady in terms of both sales and new inventory. Our Menlo Park office is starting to see investor groups (both local and off shore) buying big-ticket properties in both Menlo Park and Atherton. This is a fairly new trend. Many investors believe that real estate is a safe haven for money as other instruments are producing such low returns. We are in a very healthy market and sellers are, for the most part, in control. Our Redwood City office says that everything is very quiet locally, with both listings and sales activity very slow. There are still many buyers on the fence, our San Mateo office says, pointing to traffic counts at open houses. Buyers are still walking and talking but many still aren’t moving forward, possibly out of fear of the unknown future and possibly because there isn’t enough quality inventory in their view.
East Bay – Sales activity is on the rise, reports our Berkeley office. Agents are suddenly feeling quite busy, writing and presenting offers for new clients and for those who have been fence sitting. Our local brokers’ tour was five pages this past week, up from the two, three or four previously this year. Castro Valley sales are increasing while inventory activity has been steady. Both sales and inventory are on the rise in Livermore, although it varies depending on market segment and week. Total pending sales have increased by 12% in Dublin in the past six weeks and have been stable in Livermore and Pleasanton. Inventory has increased by 13% in Livermore and 23% in Pleasanton, but dropped by 16% in Dublin. In Orinda, things are definitely picking up. Inventory is increasing and homes that have been on the market for some time are selling. Buyers are aggressively pursuing good deals with some homes selling at or above asking price. Our Pleasanton office reports that buyers are out there but if homes are not priced right at fair market value they are going to sit on the market longer. Finally, our Walnut Creek office says that sales activity in general has been decreasing lately. But when a well-priced, beautifully stage listing comes on the market, it will receive multiple offers, not necessarily much above asking price. This occurs in most every corner of our market. In East Contra Costa County, Antioch, Pittsburg, Brentwood, etc, there’s multiple offers on most listings causing prices to increase slightly.
Silicon Valley – The momentum seems to be slowing a bit in Cupertino. The best properties are still getting lots of attention, but there is less of a sense of urgency for the majority of the market as inventory continues to increase. Our Los Altos manager reports that both sales and inventory are improving. The market is doing particularly well in the good school districts and in single-family homes, while condo sales remain slow. The local market is picking up steam, according to our Los Gatos manager. A listing in Saratoga priced at market value just under $2.2 million went pending in seven days with four offers over list price. They are continuing to see a high influx of buyers coming from the Pacific Rim with large down payments looking for good schools. There is still a lack of good inventory for buyers, especially in the entry-level markets. Palo Alto remains an extremely strong market with multiple offers in excess of 10% to 20% over list price, in many cases. The scarcity of inventory makes it extremely hard for buyers to get into the market right now. The Woodside upper end is still slowing warming up. Other sales are pretty good in the area, but buyers are still cautious. In the San Jose Almaden area, inventory is on the rise while sales activity has tapered off. Inventory has risen in the last 45 days from 79 active listings to 111, while the number of pending sales has decreased. The same can be said for Blossom Valley and Cambrian markets as well. Now more than ever, coming out at the right price is most important. We are seeing price reductions on properties that in Feb or March would have sold. Buyers appear to have taken a “wait and see” approach. The story is echoed in Willow Glen, where listings appear to be sitting a lot longer and listing prices are being reduced as well, according to our local office. Our Saratoga manager says the market has been steady, although transactions seem to be more difficult to hold together.
South County – Market activity has been slightly up from the previous two weeks, according to our Gilroy office. Open house activity is greater with buyers ready to make offers vs. “just looking.” Morgan Hill agents have managed to put 42 homes into contract so far for the month of May. Sales vary from $1.2 million to as low as $175,000. Demand remains high in all price ranges and well-priced, well-maintained homes get lots of attention from the buying public. About 40% of the business in South County still involves a short sale or an REO Property. Savvy listing agents, however, have learned to navigate through the short sale process in a more expeditious manner—streamlining response times and closing these kinds of sales faster. Though the word “recovery” is over-used, it does seem that the local real estate market is headed in the right direction.
Santa Cruz and Monterey Peninsula – Sales activity continues to be steady throughout Santa Cruz County. Through April, countywide, sales are currently on pace to exceed last year as evidenced by the 16% increase in closed units through April, year over year. Inventory levels are on par with inventory in 2010 with average days on market being slightly longer at 99 days vs. 74 last year. The properties that are priced well, staged, and in desirable areas are selling, although the median price from the same time last year is down about a $100,000. Memorial Day officially kicks off the Santa Cruz Summer Season and we do have an influx of vacationers who visit this beautiful area, fall in love, and buy. The next 3 months should be very busy for our agents. On the Monterey Peninsula, the local housing market on the Peninsula has seen inventory increasing and sales activity steady. There have been 34 ratified offers, many of them multiple offers, in recent weeks.
That’s it for now. Have a good holiday weekend!