A message from Rick Turley, President, San Francisco Bay Area Coldwell Banker Residential Brokerage
“I was driving home from an office meeting this week and listening to NPR. Health Care and Town Hall meetings have been taking the spotlight lately, with the recession and the more recently upbeat Dow Jones moving down a few stories. This in itself is somewhat a good sign. During the drive, an interesting report came on which mentioned that the Federal Reserve, having just finished a two day meeting, was reporting the recession is ending.
When I got home I decided to Google the news and I found this article on the NYTimes.com website: http://www.nytimes.com/2009/08/13/business/economy/13fed.html?_r=2&partner=rss&emc=rss&src=igw. The article reports, “Almost exactly two years after it embarked on what was the biggest financial rescue in American history, the Federal Reserve said on Wednesday that the recession is ending and that it would take a step back toward normal policy.”
The article goes on to note “Though the central bank stopped well short of declaring victory, policy makers issue their most upbeat assessment in more than a year by saying that the downturn appears to have hit bottom and that consumer spending, financial markets and inventory building by corporations all continued to stabilize.”
I put a call into colleague Brendon Riordan of Princeton Capital to get his take on what those in the mortgage industry are seeing in relation to the current state of the economy. Brendon had some comments that I tend to agree with. He noted that “Many are concerned we’re going to have a ‘W’ shaped recovery versus a ‘V’ shaped recovery. We don’t want to proclaim the recession is over, only to see the economy struggle for another year. It’s going to be a long, slow recovery. One month we may have positive economic news and the next, poor economic news.”
Having said that, here is what we tend to be seeing about the market:
- It does appear that the worst of the recession may be behind us.
- In all likelihood, the Fed is going to keep rates relatively low well into next year by continuing to purchase mortgage backed securities and keep the Federal Funds Rate close to zero. It is currently at .25%.
- In terms of conforming loan limits, as of right now, the higher conforming loan limits will end at the end of this year. There is some legislation that is pending to renew the higher loan amount through November 2010 but as of right now, that is pending. The same holds true for the first-time home buyer tax credit. We need to support this legislation.
Knowing this, what lies ahead? Well I would say it’s positive to know that the worst may be behind us, but in all likelihood there are still challenges ahead. There is still much recovery that needs to take place. A broad-based “U” shaped recovery certainly is preferable over a “W”. Jobs need to continue to stabilize. There needs to be improvement in the secondary mortgage market in order to provide more choices and better pricing for jumbo loans. Home sellers will need to be realistic about price, and buyers will need to be able to recognize a bargain when they see it and take action.
Now let’s take a look at our local week in real estate:
- East Bay—Berkeley reports, “We are busy, busy, busy.” Lots of buyers making lots of offers and multiple offers abound. We received anywhere from 4-17 offers on various listings and competed against 2-15 offers on others from Berkeley to Richmond to El Sobrante to San Pablo. Danville reports we saw a real jump in new pending sales this past week. More importantly, Blackhawk, which has been so quiet for so long, had nine new pending sales. And in our office, four new sales this past week were over $1 million dollars! Oakland reports a sudden sense of urgency among buyers. We are doing a lot of approvals and submitting applications. The buyers are out there looking. Properties in foreclosures are coming into better neighborhoods, same for short sales. Still it is August and sales have been a little slow the first week. Seeing some nice listings come on the market.
- Monterey County—August started out where July left off, with lots of Agent activity going on! Pebble Beach and Carmel are bustling with people as the annual Concours d’Elegance comes to town , bringing it with it lots of people–some deciding they’d like a vacation home here! Inventory is decreasing, partly due to sales going up and partly due to properties off market, being rented, etc. Carmel is down to only about 14 months supply (was about 28 months), Pebble Beach is about the same, and Seaside, which has been the REO hot spot, has only 1.3 months’ supply!
- North Bay—Greenbrae reports despite the late summertime, open houses were still well attended and buyers are out looking for bargains. Many sellers are saying they want to wait until after Labor day to put their home on the market. Buyers want more choices. San Rafael reports REO inventory is increasing. We continue to see multiple offers in the entry level. One home listed in Novato had 16 offers in the first week. It went into contract $50,000 over asking. All cash offers seem to be the winners of most of the bidding wars. Petaluma reports multiple offers continue to be the norm in the under $300,000 range. We’re starting to see activity in the $500k-700k range with multiple offers on three properties in that price range. Cash continues to be king in the under $300,000 range. One property had 22 offers, the accepted offer was cash and was less than three of the highest offers.
- Peninsula—Burlingame reports the wonderful weekend brought people out of the fog and into the peninsula. We are seeing more multiple offers as inventory is shrinking. The condo market is extremely slow. Menlo Park Santa Cruz Avenue reported one offer was written and accepted from an open house guest! They do work! Activity in a wide range of prices. Buyers that seem motivated to buy. San Mateo reported these market wide stats: Change 2009 VS 2008 same period – active – Belmont N.C., Burlingame +23%, Foster City -15%, Hillsborough +41%, Redwood Shores +15%, San Mateo + 12%, PENDING – Belmont +23%, Burlingame +16%, Foster City +24%, Hillsborough +33%, Redwood Shores -125%, San Mateo +29%. This reflects single family residential only. Higher ends are still a struggle as reflected in Burlingame and Hillsborough.
- San Francisco—Lombard reports a good week for ratified offers in that it wasn’t entry – price level dominant. We had sales in the $1.2 & $3m ranges. Multiple counters, addendums and loan delays are the order of the day. The Market Street office reported it has slowed a bit as many buyers are taking a couple of weeks off before the end of summer. Listings are being readied for the after Labor Day increase of inventory that we are anticipating. Open house attendance was great in some instances and disappointing in others.
- Santa Cruz County—No major changes. Inventory is status quo – low end continues to dominate sales. There is a lot of activity below $800K and many times multiple offers. With the low inventory we are seeing prices rising again, slowly. There is definitely a more positive outlook for both buyers and sellers.
- Silicon Valley—Cupertino notes that the low-end is as competitive as ever. San Jose Almaden reports that we’re seeing multiple offers on almost everything under $500K. Inventory remains low. San Jose Main reports an excellent week for sales, mostly lower end and excellent open house activity. Listings continue to be hard to get. Many multiple offers on lower end properties. Saratoga reports we experienced a slight increase in Previews activity with a few sales in the $2.5 mil to 3 mil range last week.
- South County—Gilroy reports our local market continues to struggle with a lack of inventory in the lower end. REO listings are down and multiple offers are the norm. Hollister reports lower priced homes selling rapidly with multiple offers on many. Morgan Hill reports the real estate industry seems to be getting positive signals, almost on a daily basis, that the housing market is out of “intensive care” and has entered the “recovery room.” Demand remains high, but more importantly, our Agents are reporting that the buying public deems to be much more optimistic about the economy in general and housing in particular.
In terms of marketing activity, in general, and with exception of the entry level, most homes are on the market longer with discerning buyers waiting for the optimal home at the optimal price. A well-priced, well-presented home can still fetch multiple offers, but it’s got to look appealing to the savvy buyers who are doing their homework. There is no sense in overpricing a listing – a buyer won’t even give a home the time of day if they sense the seller is being unrealistic.
At the same time, there seems to be no better time to snatch up bargains in the Bay Area at all price points. In the higher end, we’ve seen cases of five to 10 percent list price reductions in properties that haven’t moved, and a final and acceptable offer coming in a little below that. That’s not to say buyers should throw out ridiculous numbers. Certain parts of the Bay Area, after all, have still held their value better than most of the entire country. Sellers who don’t have to sell can hold firm, but there are others who cannot. So, while it may take longer to get the buyer and seller to agree to terms, transactions are happening, and with open minds on both sides, we are beginning to see more positive movement for all. ”
“Until next week,
Rick “
I noticed that the Coast statistics were not indicated in Rick’s update. Check back tomorrow morning for a complete look at the Coastal Communities in the Monday Morning Market Update.
