It has been one wild roller coaster ride this year. The first part of 2007 took off with a bang, especially in the upper end of our markets. By summer the initial warnings on the sub-prime fiasco, which was about to hit, took the market in a different direction. From August on, the number of sales has been contracting. The strength of any real estate cycle is dependent on how the consumer views their long term economic future. Given the amount of uncertainty and volatility in the equities, bond markets, the blows delivered to the financial sector and the unrelenting barrage of negative media, I am surprised that the market hasn?t come to a total standstill. This economic perspective, the disappearance of easy qualifying financing and the significant appreciation of real estate values has lead us to our current sluggish condition. This brings us to December. Homes are still selling, but at a much more muted rate. Multiple offers are drying up and the sellers that are lucky enough to have more than one offer, are finding that buyers are less willing to go over list price. The first time buyers seem to be making a moderate comeback in the east bay as we saw with a Pinole listing which received four offers and two listings both garnering 2 offers a piece----one a 2 bedr. 1 bath home in the Rockridge area of Oakland listed at $499,000 (sold and closed at $516,000) and the other a 2bedr. 1bath selling after its list price was reduced to $549,000. Open home activity has decelerated. Most have had less than double digit visits. This is not unusual for this time of year. However the current economic doldrums has added to the inactivity. It seems that for the most part, buyers are waiting the market out, the upper end of the marker is still fine, and that sellers are being more realistic about listing their properties at a price which will sell.

January 8, 2008

There are many positive signs with the nice rebound of the stock market due to the Fed lowering their rate, inflation appears to be under check, we are still experiencing job growth (although minimal), interest rates have leveled off and have even come down a bit, and it appears that the sub-prime fiasco can be managed. In spite of these encouraging trends the housing market has entered a period of a stalemate----buyers are in a state of ennui believing prices will drop further and sellers thinking they still can get the price their neighbor received six months ago. Multiple offers have become scarce in most markets with the exception of particular areas in SF and Montclair/Piedmont/Berkeley where 45% of sales were involved in multiple offers. Again showing that short supply in some areas and certain high end markets are still in demand. The gap has widened between marketplaces. Looking county by county it is clear that the first time home buyer markets and those markets that had rapid growth in new home building have become saturated with excessive inventories. The gap has also enlarged between low end and upper end properties. Here is a county by county view by months supply of inventory (MSI) for September based on single family homes only. San Francisco county has a 4.5 MSI---St. Francis Wood has 1.0/Pacific Hts 3.4/Central Sunset 2.3 vs. Bay View 12.5/Excelsior 16.2. Marin county has a 6.6 MSI---Mill Valley 4.5 vs. Novato 15.7. Sonoma county has a 12.5 MSI---Kenwood 5.5 vs. Sonoma (city) 16.3. Napa has an 18 MSI----Calistoga 11.0 vs. American Canyon 29.7. Alameda county has a 10.5 MSI---Piedmont 1.6/Berkeley 3.3/Rockridge 2.6 vs. San Leandro 14.7/Hayward 22.0. Contra Costa has a 17.4 MSI---Moraga 2.6/Lafayette 4.7/Orinda 4.9 vs. Antioch 29.6/Hercules 32.2. The gap also reflects that those counties with the highest median and average prices have been less impacted by the slowing market. Many buyers are now on hold until they feel comfortable that prices have stabilized. Who could blame them when last Thursday?s Chronicle had front page headlines shouting prices still have room to come down based on the California Assn. of Realtors forecast for 2008 projecting a 4% drop in median sales price and a 10% drop in units. What the headlines didn?t say is that there are still a number of markets where sales prices have not dropped such as San Francisco, Marin, San Mateo and Santa Clara counties. The current course correcting market is quite different from previous markets as interest rates are still low and the upper tiers of most markets are still selling. So what does this mean for buyers and sellers? For SELLERS, if you don?t have a good reason to sell---don?t. This is no time to test the market. Why waste your time. For BUYERS, know the values and realize that in the vast majority of areas, there is not a feeding frenzy for homes. Now for those potential sellers in those specific areas with low inventories and high buyer demand, this could be a real opportunity before the market takes off again and more sellers come on the market. The examples are those marketplaces with inventories below 3 months. It is still a sellers? market in some of these areas. If you are a seller that must sell in this market, and are in a market of abundant inventory, you must do everything you can to present your home in a way that outshines your competition and price aggressively. This will maximize your return. Most importantly you will give yourself the best chance of selling your home. The key for sellers is to be competitively priced, no matter where your home is located. Buyers need motivation. Overpriced homes are ignored. Sellers need to be prepared to negotiate. In most cases, if a buyer is willing to write an offer, they are serious about trying to buy your home. For buyers who are waiting for prices to drop, you may be waiting a long time unless you are interested in areas with large inventories and can find those few desperate sellers. Many sellers will just take their properties off the market before giving them away. In half of our markets in the SF Bay Area, prices have not gone down. Appreciation has slowed in some markets to a low single digit. With that said, and with decreasing numbers of multiple offers, buyers have an opportunity they have not had for many years---they can negotiate. Better to be a buyer in a market where others are not buying readily, than find yourself in a market where many buyers are outbidding each other like we saw in 2004-05. That combined with low interest rates can make this current market a boon for savvy buyers. If you are a buyer trying to find a house in the most desirable neighborhoods with little inventory be prepared to find yourself in a sellers? market. You will have to present your best offer, suspend disbelief, just because the headlines say it is a slow market, a few areas are still experiencing conditions similar to those back in 2005. If you want the home, you will have to do what it takes to win. I have seen markets in the past when everything came to a standstill like 1980 when interest rates went to 18% or after the first Iraqi conflict or after the 1989 earthquake or after the dot.com bomb. This is not one of those markets. Yes, that market has slowed, but it has not stopped. There are still opportunities for both buyers and sellers.

October 15, 2007

This is a reprint of information from a recent article in the San Francisco Chronicle by Carolyn Said: Bay Area's housing prices buck national trend, Median cost is up 6.6%, driven by strong upscale market, but number of homes sold is down 20%. The Bay Area appears to be shaking off the nation's housing doldrums. Local home prices are still going through the roof, even though far fewer properties are changing hands. That contradicts the national real estate trend of slumps in both price and sales volume. Why does the region's housing seem to defy gravity? It's the wealth effect. "The Bay Area is one of the strongest economies in the country today," said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. "The upper end of the market in the inner areas (San Francisco and the counties closest to it) is doing extremely well. This is a completely different trend than the rest of the country." The median price for an existing single-family dwelling in the Bay Area hit a record $720,000 in April, up 6.6 percent from last April, according to a report released Wednesday by DataQuick Information Services. That happened even though the number of existing homes sold in April fell 19.9 percent to 5,015, compared with 6,263 a year ago. The month was the 27th in a row in which sales volume declined, and April's sales count was the lowest in 12 years. The April average is 9,614. At the same time, Marin County established its own record with a median home price of $1,010,000 -- the first county in California to pass the million-dollar mark, DataQuick said. The median price for a single-family home nationally was $215,300 in March, a 0.9 percent drop from the previous year, according to the National Association of Realtors. The Bay Area numbers come with some caveats, however. The median price is skewed by strong activity at the upper end. Real estate in the region is composed of numerous micro-markets, which vary tremendously. In fact, affluent Bay Area housing markets are getting stronger, while poorer areas are softening. "The volume (of sales) being low tells you that we've lost the bottom 20 to 30 percent of the market that can't qualify for mortgages," Rosen said. Banks have tightened lending standards in recent months since numerous homeowners started defaulting on subprime loans. Subprimes are higher-cost mortgages sold to people with poor credit. Both Rosen and DataQuick analyst Andrew LePage said the Bay Area market is a dichotomy. "There are dual realities emerging here," LePage said. "There is one reality for mid- to upper-priced homes up through the luxury market. In a lot of areas, there are tentative signs of those markets stabilizing and maybe even inching up both in sales (volume) and price." For the Bay Area, he defines mid-priced as $800,000. DataQuick's county breakdowns show that existing-home prices rose in April in the six innermost Bay Area counties -- Alameda, Contra Costa, Marin, Santa Clara, San Francisco and San Mateo -- but declined in the area's furthest-out counties: Napa, Solano and Sonoma. "It's safe to say that the more expensive the neighborhood, the more likely it appears to at least temporarily be stabilizing now," LePage said. "At the opposite end of the price spectrum, in starter neighborhoods, you're more likely to see big sales drop-offs from last year and more significant price declines." Bearing out that thesis, Leif Jenssen, a Realtor with Red Oak Realty, recently cut $20,000 off the price of a 2-bedroom, 1-bathroom home he's selling in Oakland's Maxwell Park, which he considers a starter neighborhood, with home prices from $400,000 to $550,000. "If you search six blocks in either direction from the house, there are 80 houses for sale," he said. "The one right next door, which is a bit smaller, came on the market at $449,000. We were at $495,000 so (we reduced the price) to $475,000." Maxwell Park exemplifies the kind of area likely to suffer from the subprime problems. "It will probably have a fair amount of foreclosures because a lot of people buying in that neighborhood were low-income and didn't have money to put down," Jenssen said. "I see properties out there that say they're bank-owned (which means they have been foreclosed)." Paul Rozewski, a Realtor with Windermere Properties of the East Bay, said he is seeing properties sit on the market longer in places like Hayward and Newark. "The buyer is more in the driver's seat," he said. "It's not something where the buyer can ask for the world and expect to get it, but it's a much more even playing field." But in sought-after, affluent neighborhoods, real estate agents say they are fielding multiple offers, just as they did during the housing boom. "I've got two deals I'm holding in my hand" that received multiple offers and sold for over listing price, said D.J. Grubb, principal of the Grubb Co. in Oakland and Berkeley. "I'm living in the best of all worlds; I'm in a great microclimate -- Berkeley, Oakland, Piedmont, Kensington. My over-$2 million range is absolutely on fire." Nowhere is the market pricier than in Marin County. Payton Stiewe, a Realtor with Sotheby's International Real Estate, is selling what he calls "a great little house" in Mill Valley for close to Marin's new million-dollar median. The two bedroom, 1,300-square-foot house is listed for $1,069,000. Stiewe said that is a bargain price for its location on Lovell Avenue, where larger homes typically sell for several million dollars, and even an empty lot went for $2.6 million last year. San Francisco families moving to Marin for its schools have helped drive up prices, Stiewe said. "I feel our market is immune to decreases in value," he said. "We might slow down a little and just hover, but then it picks up again." The number of homes on the market obviously has a huge impact on prices. In the Bay Area, inventory is up compared to last year but is much less than the inventory levels for California and the nation. Inventory stood at 3.3 months of unsold houses in March, up from 2.3 months last March, according to the California Association of Realtors. The number shows how long it would take to sell the homes on the market at the current sales pace. The group tracks in seven Bay Area counties -- Alameda, Contra Costa, Marin, San Francisco, San Mateo, Santa Clara, Solano. By contrast, California's unsold inventory was 8.7 months in March, almost double the 4.7 months last year. The national index was 7.2 months of inventory in March versus 5.4 months last March, according to the National Association of Realtors. "Any place where there's a lot of new construction, the inventory of unsold new homes weighs down on the existing-home market," Rosen said. That also explains why counties like San Francisco and Marin, where there is little new-home construction, continue to have strong price appreciation. Rosen pointed out that the "extraordinarily high" median price of $720,000 presents a real problem for the Bay Area. "That is more than triple the national average," he said. "Prices this high make it difficult to attract the labor force that we need. We need affordable housing, higher density, in inner locations."

May 17, 2007

We now have a quarter of 2007 under our belts. What does the first quarter look like and what can be said as we enter the rest of 2007. One thing we know for sure is that supply and demand determine the health of a market ---or at least that is what Adam Smith said. It still holds true. The two strongest markets so far this year are San Francisco and Marin. Let?s put it this way--the months supply of inventory at the end of March was under two months (1.9) in San Francisco and a little over two months (2.6) for Marin. All the other counties are between 4-6 months inventory. Listing inventories in Marin are flat from last year and in San Francisco they are down 5%. In the other counties, inventories are up between 13-20%. However the most surprising stat is average sales price this year compared to 2006. In every county except Sonoma (which is down 2.38%) the average sales price is up-- Marin being the most at 15%. Again this is comparing last March with this March. What it also says is the middle upper to upper end of the price ranges are doing well, particularly in the most active markets. It may also say that prices have stabilized from the decreases of last year. Here are the months supply numbers for March by county: San Francisco 1.9 months, Marin 2.6 months, Alameda 4 months, Sonoma 4.8 months, Napa 5.2 months and Contra Costa 6.1 months. A sellers market is under 3 months (under 2 months it is a strong sellers? market), 3-4 months a balanced market and anything over 4 months leans toward a buyers? market. All of these numbers are based on both single family home and condo listings. Open home traffic is still active. Again SF and Marin tended to have the highest traffic. Several homes in SF between the $850,000-$1.6 mil range had well over 100 groups through their open houses. In SF there is a dearth of inventory at most price ranges. Reflecting this is a property listed at $3.4 mil. sold with 3 offers. A two unit (with 2 ? 2 bedr.units and a garden) property listed at $800,000 near Golden Gate Park received 13 offers and went well over its list price. The market in SF is appearing more like 2000. Marin had its share of multiples which included a Kentfield property listed at $2 mil. garnering 7 offers and going well over asking. In Berkeley an elegant $3.5 mil. home which was taken off the market last year came on a solid quickly with 3 offers. It sounds like a mantra, but presentation and price are essential even in active markets to trigger an offer by buyers. A prime example of this is a Larkspur property that was on the market nearly 6 months at the end of last year and beginning of this year and was taken off the market restaged with a new price $1.279 mil and within 10 days had an offer. This speaks volumes as to what is needed to sell a home. What can we expect going forward---I would say more of the same. Although we hear about increasing foreclosures or more short sales---it does not appear to have had a significant effect on our markets. Yes, there will be a few areas in the Bay where prices could still drop. Those areas are the ones with bulging inventories. As long as months supply of inventory stays stable, interest rates remain relatively flat, unemployment remains constant and job growth continues (even at a slow pace), we should have an overall balanced market in the Bay Area. This bodes well for both buyers and sellers.

April 9, 2007

This commentary is courtesy of our new President, Avram Goldman who has a real sense of the pulse of the market through visits to all the San Francisco Bay Area Pacific Union offices. As you will read, he assimilates great statistical information useful to agents and their clients: "The market is kicking into gear. Buyers are back on the prowl. Over 70% of our offices had multiple offers---almost half had more than a third of their sales involved in multiples. Homes that languished at the end of last year are beginning to sell after their listing prices adjusted to the current market reality. Two properties one in Napa and one in Sonoma both sold when the sellers accepted offers 11-15% under their original list prices. Yes, some sellers are now acknowledging that the market has transitioned. What we should not forget is that prices were rising in high double digit numbers over a three year period. There had to be an adjustment. Sellers are still reaping significant returns from their investment in their homes as real estate is a leveraged asset. In spite of some markets being challenged there are areas where prices have held and in some cases still appreciated during the transition. For example, a 4 bedr. 3 bath unit in Pacific Heights which sold last year came back on the market listed at $1,995,000, under what the seller paid. It received 4 offers and went over what the sellers paid a year ago. Buyers know value and when the see it they move. In this case, the pricing strategy, location and presentation of the property showed that the market in this particular area is still quite healthy. Value is still a function of supply and demand. Given our current inventories many markets are showing signs, as Leslie Appleton-Young, the C.A.R. economist says, the worst is behind us. Although Bay Area units dropped a bit over 20% from 2005 to 2006, this year Leslie is predicting that units will fall off only 7% in California. She stated that the healthiest area in the state is the Bay Area. Our sales should fall off less than the state as a whole. Every county in the Bay Area had less MSI (months supply of inventory) than January of last year except for two. They were Alameda and Contra Costa counties. Here are the numbers by county Marin 3 months, Sonoma 4.5 months, Napa 5.8 months, San Mateo 2.7 months, Santa Clara 2.7 months, San Francisco 2.1 months, Alameda 4 months and Contra Costa 5.8 months. A 3 months supply is considered a balanced market, 2 months is headed to a sellers market and over 4 headed to a buyers market. These are general trends, even in counties there are areas that could be showing opposite trends. It is difficult to generalize as supply and demand in a specific area within counties will determine the kind of market a property will fall in. Buyers are out in force, but are still cautious. Negotiation is still the key to successful sales. In our Sonoma office we had a transaction that finally went into escrow after 13 counter offers. It is important that both sellers and buyers have patience in the process. It is a matter of give and take before both parties can be satisfied. The key is still pricing properly and making sure the house is prepared for the market. Our local economy is still adding jobs. There are only a few counties that are not and they are the ones impacted by the layoffs in the building industry. As sellers tune into to the new pricing reality our market will continue to improve. In most markets we need well priced and staged listings to meet the buyer demand. Here are the numbers by offices: 6 offices reported increasing listing inventories, 4 steady and 1 decreasing---8 offices showed increasing sales activity, 2 steady and only 1 decreasing."

February 12, 2007

Well, what was for some time touted as the "bursting of the real estate bubble" appears to have become a soft landing for the real estate market. In most markets around the country, prices are dropping but they're not plummeting. Homeowners with years' worth of equity will still hold onto much of that equity, and buyers are finding that they have a chance to buy a home again. In the business, we call this a "correction." It's normal and even desirable. However, a cooling market demands some different strategies for both buyers and sellers. Sellers have to avoid the pricing "hangover" from the boom market, when they could throw a For Sale sign in the yard, slap any outrageous price they liked on their house and get twenty offers in as many hours. And buyers must lose their desperation, understand that they are more in control, and realize that the current market is one of shopping for a deal, not throwing money in panic to avoid "losing the house." Tips for Sellers in an Adjusting Market Think hard about if you really need to sell. Don't get so upset by daily market reports of falling prices that you try to unload your property for a long. Repeat after me: real estate is cyclical. Prices will rise again. Consider a longer-term exit strategy, like renting out the property. The rental market has become a bit stronger as interest rates have risen. Being patient and finding creative ways to delay selling your property will help you in the long run. If you MUST sell, focus your money and effort into creating curb appeal. Curb appeal alone can help sell your house. You don't have to follow conventional wisdom that says you must dump tons of funds into redoing the kitchen or bath. The number-one feature of a home in terms of cost versus effect on salability is front yard landscaping. Lay down sod, plant flowers, paint, and put in a flagstone path. Be realistic with your goals for price and timeline to sell. Houses are NOT always selling at asking price and are staying on the market longer than in recent years. Many sellers have not yet come to grips with this new reality. They're asking high prices, then reducing their prices multiple times before pulling their homes from the market in disgust. Don't set yourself up to fail. Choose your asking price carefully. Set your price aggressively compared to your competition and come up with creative incentives to possibly attract a buyer, such as sharing some closing costs or as credit for new carpeting. Tips for Buyers in an Adjusting Market Now is the time to buy! So stick to your price range and negotiate hard to get your home, but don't alienate the seller. You have the luxury of waiting to capture the better deals and then negotiate your terms. If you drive around, you'll see that there is six to eight times the inventory on the market right now as there was a year ago, and homes are taking longer to sell. Take your time, make smart offers, and stick to your guns. Now's may be the time to keep an eye out for pre-foreclosures, foreclosure properties and distressed home sales. When everyone thought home prices would keep increasing, many buyers obtained interest-only, adjustable-rate "creative financing." Some may now owe more than their home is worth and unable to make rising payments. If you're an investor, target markets where speculation has run rampant over the past few years while also focusing on markets that are likely to boom in the next few years. You may be able to buy distressed properties at low prices and properties with appreciation potential at the same time. But, do your homework as only you are making the final decision about projected appreciation and value. In general, the common sense rules apply whether you're buying or selling and whether the market is hot or cool: educate yourself about the market, have specific goals in mind, understand what your financial resources are, and don't make any deal for the short term. In the long term, real estate is always the best investment around.

November 4, 2006

Too often, Sellers work with their agent and discount their advice and decide to do as little as possible to the house to get it ready for sale, thereby saving money, thinking either the buyers won't notice or care. My friends, the buyers DO notice and DO care and when there is lot's of inventory on the market in your price range, buyer's will gravitate away from you to other homes. Bad impressions are hard to forget.... Sellers, put your best foot forward - be the best priced house on the market in the best condition and represented by an agent affiliated with a company that knows how to market extensively your home for the highest possible price!

July 6, 2006

Well, we are all confused...agents, sellers, buyers, mortgage brokers. Nobody can sense consistent direction, patterns, inventory numbers, etc. Some properties sell fast with multiple offers going over the asking price. Then some, in nice locations, sit, and sit, and sit. They always say, there are 2 reasons a property doesn't sell: price or marketing. I know the agents for the most part in my community are marketing demons! We do everything in print, internet, and open houses that you could possibly do to provide a large pool of buyers with the hopes that one buyer will love the home and write an offer. My company and my peers are experts at marketing. So if it isn't the marketing, what is it? Must be the PRICE! It is more of a guessing game now, then ever before, for a seller to pick an asking price that makes sense. You have to understand that you may not get your neighbors interest level, number of offers, or percentage over asking price that they got from a year or two ago. You may have the house with the golden nails, but, buyers may not want to pay that premium at this time. Buyers are much pickier about deciding which home to pursue. Remember, they are paying more for the home with higher interest rates and they have more to choose from. So the market has really adjusted. It appears that some sellers are the last to recognize this as they hold onto pricing strategies of yesteryear! ok, last year... The best advice, look carefully at the comparable sales from just the last 3-6 months to see how sales have closed in your neighborhood. Pick an asking price which you would truly sell at if you got one strong offer and it was at that price. But, you can't pick an asking price that is unrealistic. This may be very risky and you may find yourself on the market too long with buyers passing you by. Listen carefully to your agent, they really do know the market, the comparables, buyer sentiment, and should have lots of stories to tell you about their experiences with other sellers.

May 19, 2006

This section of my website will be used to write about interesting tidbits of information regarding current market conditions, trends and general real estate gossip! I should qualify the editorials in this section as only being my own experiences and impressions and you should not rely on the content as a basis in any way for selling or buying real estate. It is just one persons opinion and please do your research and due diligence before making any real estate commitments. There, that said, let?s can proceed! Currently, the market feels a bit more balanced then last year. Inventory is a bit low - not a lot of pretty houses on pretty streets... Buyer seem to be a little cautious about writing offers and in general properties are getting fewer offers and not going way over the asking price like they were the previous 2 years. Will that change? Who knows? It is impossible to predict where the market is going; sellers seem to be selling more because they have to in response to life changes versus selling because they think this is the best time to sell. Buyers seem to be buying because they want to, but they are definitely willing to wait for the right house and are more conservative about what they offer. Anyways, that is my 2 cents for what it is worth. Until next time...

April 9, 2006