We’re seeing signs that the Coast has hit the bottom of the Real Estate Market. We are getting some multiple offers on well priced homes in the lower price range. Investors are looking at the Coast for their second and third homes. Doesn’t everyone want a Cottage at the beach? So let’s look at what Rick Turley has to say about Real Estate last week around the Bay Area and his take on the Economy.
“The patient is out of intensive care, but still has a very long road ahead to a clean bill of health.”
by Rick Turley, Bay Area President, Coldwell Banker Residential Brokerage
Those were the words last week from Fannie Mae Chief Executive Officer Michael Williams. The CEO went on to say, “Anyone looking objectively at the economy and the housing market sees hope.”
Another good solid indicator of what I’ve been saying in my weekly updates. The U.S. housing market still has a long road ahead but we are making some definite moves towards a housing recovery. So what’s the challenge? Well for starters, rising unemployment numbers aren’t helping. The United States Department of Labor reported in its September 4 Economic Situation Summary that the number of unemployed persons increased by 466,000 to 14.9 million and the unemployment rate rose by 0.3 percentage point to 9.7%. Just to give you an idea, since the recession began in December 2007, the number of unemployed persons has risen by 7.4 million, and the unemployment rate has grown by 4.8 percentage points.
We also need to couple that with the challenges in the mortgage industry. Bloomberg reported, “The mortgage market is still dependent on government-affiliated programs, with private banks providing just 10 percent of loan liquidity, down from about 60 percent in 2006. Fannie Mae and Freddie Mac are responsible for about 70 percent of all new mortgages, while the Federal Housing Administration accounts for about 20 percent.”
Before we can be truly reformed, we need to get into a position where there is more of a balance between private bank loans and Fannie Mae and Freddie Mac loans. In all actuality, we probably won’t see that for some time.
Having said that, U.S. mortgage applications surged last week with demanding rising to its highest level since late-May as consumers sought to take advantage of the lowest interest rates in months, according to Reuters.
The Reuters article reported, “While home refinancing loans dominated demand, the appetite for applications to buy a home, a tentative early indicator of sales, hit its highest level since early January. The overall trend bodes well for the hard-hit U.S. housing market, which has been showing signs of stabilization.”
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications which includes both purchase and refinance loans, for the week ended September 4 increased 17.0 percent to 648.3, the highest level since the week ended May 29.
These are all very positive indicators that showcase that we are on the right track…it’ll probably be a slow track…but we’re on the right one.
Now let’s take a look at this week in real estate:
- East Bay—Berkeley reported a slow week compared to our brisk start to September. Castro Valley reported our local micromarket is full of challenges. Not enough inventory, hungry buyers with lots of cash, Agents who must navigate the challenges of appraisal problems, short sale bank frustrations and stiff competition for limited inventory. We are seeing more listings out there. They are selling quick, though, often within a week or so of listing. Danville reported a spurt of activity the first week of September and then it got quiet. Inventory and sales activity is down both in our office and in our service area. Fremont reported it seems that the recent Wall Street financial information has made buyers more comfortable and motivated to purchase now that prices are starting to increase and the first time buyer program is ending in November which is another motivator. Walnut Creek reported sales activity has really slowed down. Fewer REOs coming on the market though there is an increase of short sale listings. Multiple offers on most every sale. Orinda reports lower attendance at recent open houses, but the Buyers who do show up are more serious and ready to make offers.
- Monterey County—REOs and Short Sales are continuing on at steady pace, but we are seeing more “traditional” sales than over summer. We’re getting lower on inventory in the hot REO market of Seaside; however, we keep hearing that the release of a large number of REOs there is imminent. With Labor Day holiday last week, our closings were weak, though had one over $1 million and one over $2 million, but had good week for new escrows.
- North Bay—Petaluma reported lots of movement in the $500,000 and above range. Under $300,000 continues to be a frenzy with double digit multiple offers. Cash is king. Santa Rosa concurred noting, too, that cash was king though the Sonoma County market did also note that open houses weren’t as well attended last week as they have been in recent weeks. Sebastopol reported lots of folks out despite the weather. Good attendance in all price ranges but most offers remain in the low end. San Rafael reported the market has slowed in the past few weeks. Inventory is still low. 78 people came through a new listing held open for the first time in Novato in the mid $700s. An offer came in the next day. Greenbrae reported (San Rafael & Corte Madera) had two $1 mil properties come on for the first time last week and had multiple offers by Monday. Activity not as robust as we hoped but lots of new properties coming on the market so perhaps buyers need a chance to digest the new investors.
- Peninsula—Menlo Park El Camino reports Agents are busy. The job of being a real estate Agent right now is very hard but the Agents see some deals are being made. Big loans are still like apparitions. Menlo Park Santa Cruz Avenue reported good activity following the Labor Day Holiday. One Hillsborough listing ($6,500,000) was ratified after one week on the market! Redwood City-San Carlos reported open house activity has definitely picked up. Buyers seem more ready to make offers. Woodside reported Woodside and Portola Valley are extremely difficult markets (especially Woodside). The price point is so high that buyers will not buy and those who are selling are only selling because they have to. EX: just closed a house at $5.6 mil that the owners paid $13 million for in yr. 2000. Very few homes on the market representative of the usual Woodside market.
- San Francisco—Lombard reported the number of houses going pending look OK but mostly entry level prices. Labor Day listing surge is happening in the City: 165 new listings entered. The lower the price the more offers. One REO we got in Hayward yielded 33 offers. The Market Street office reported open house activity was brisk last weekend with 60 groups going through a listing in District 5. 2/3 of the ratified offers were for new construction where good deals are still to be had. This week the only multiple offers came in on a short sale. Prices varied from $300K to $940K. The Noriega office reported Agent activities are high but it’s tough to get deals ratified. Even after deals are ratified, it takes a lot of work and negotiations afterward to keep the deal alive.
- Santa Cruz—August was slower than 2008 in terms of number of sales and overall prices have dropped within the office about $100K since last year at this time. Open house activity is still good and there continues to be a pent up demand for properties as the inventory levels remain low.
- Silicon Valley—Cupertino reported it’s busy and an ever increasing challenge getting those deals closed. Los Altos reported activity is picking up as we head into the normal fall home buying season. San Jose Willow Glen reported things are slowing up a bit. Open houses still draw a lot of crowds. A couple of the sales that have been turned in, have sold over the asking and it appears that the listing prices were set low to attract buyers. Saratoga reported a steady increase in average sales prices over the last six months. Instead of the sales consisting of REOs and Short Sales we’re seeing brisk sales activity up to two million.
- South County—Hollister reported we are seeing great opportunities in establishing client relationships with office floor calls and walk ins this past week. Inventory is still low and first time homebuyers are struggling trying to secure a contract. Some REO Listings have received up to 20 offers. Morgan Hill reported the South County market continues its same scenario–lots of potential buyers and very low inventory. This week the number of total listings in all of Morgan Hill fell to 125 units–an all time low. Employing simple “supply and demand” economics, this situation should result in prices beginning to rise–though none of us has witnessed this phenomenon yet.