Spring is in the air: Is the housing market starting to bloom?
March 8, 2010
There are encouraging signs that the Bay Area’s housing market is finally awakening from its long winter slumber. Spring is traditionally when sales perk up as homeowners try to sell in time for a summer move, and buyers get serious about finding that perfect home. But this year we’re seeing strong indications of an early spring selling season, which could bode well for a housing market recovery.
Many of our markets are seeing increasing sales activity compared to a year ago, with open escrows that will turn into closed sales one to two months down the road. Open houses, in many cases, are attracting armies of buyers, many willing to pay cash for homes if necessary. One third of the offers in Menlo Park have been all cash, for example. Multiple offers are becoming the rule, rather than the exception. There have been 14 to 23 offers on Palo Alto properties priced from $1 million to $1.5 million. There are still more buyers than sellers in most areas, which has created a seller’s market in a number of cities. That’s something you just won’t see in the media.
What’s causing the renewed interest in the local market?
One impetus undoubtedly is the upcoming deadline for the attractive federal tax credit for first-time and repeat buyers. Buyers must be in escrow by April 30 and close by June 30 to earn the credit, which ranges from $6,500 to $8,000.
Another reason is the fear that as the Fed begins pulling out of the mortgage backed securities market, mortgage rates will begin to rise from their historically low levels. It’s highly unlikely we’ll see 5 percent fixed-rate mortgages for much longer.
The stock market plays a huge role in our Bay Area housing market, especially in Silicon Valley and in our luxury Previews market. The NASDAQ is nearly double what it was exactly a year ago when the financial markets appeared to be in freefall, creating tremendous wealth for our Previews buyers.
Finally, with money earning just a fraction of a percent in one-year CDs and bonds at historically low yields, more investors are once again looking at real estate as a good investment vehicle to diversify their asset mix and take advantage of an under-valued investment class.
Here’s a market-by-market report from our local offices:
North Bay – In Marin County, low inventory is still the biggest obstacle although the spring market seems to be blooming. In Southern Marin, for example, activity is robust with buyers coming out in mass for Sunday Open Houses. Unit sales and median sales price for January and February 2010 are up substantially in all Southern Marin markets. Greenbrae reports that lack of inventory is resulting in more inquiries on currently listed properties + withdrawn/expired listings. There are lots of buyers ready to write offers on the right properties - at all ranges from entry level condos in San Rafael/Novato @ $200K to multi million dollar properties in Ross, Kentfield, Tiburon + Belvedere. In Northern Marin, the majority of home listings entering the market this week and last have not been distressed. All price points are covered. Inventory is still low, but many buyers are out attending open houses. Further north, in Sebastopol,most sales under $500k are multiple offers. Listings in the west county are slow to come onto the market and when they do if they are properly priced they sell quickly. Petaluma is also witnessing homes in under 500K range attracting a frenzy of multiple offers. And Santa Rosa reports that the spring market is slowly coming to life. Listings are up a bit and one agent reported 45 groups through an open house priced over a million.
East Bay—Berkeleyis starting to see a gradual increase in inventory, while sales activity remains steady with about 20% resulting in multiple offers. Meanwhile, Fremontreports that activity is picking up on the buyer and listing side due to the expiration of the first-time home buyer’s credit in April. In Livermore, home sales are increasing even as inventory remains low. The Livermore real estate market in 2010 remains very healthy. The active inventory decreased in the past two weeks and the total pending sales in Livermore increased. Multiple offers are still the name of the game.
The Oakland-Piedmont office reports more listings are coming on the market, however the best homes are still in great demand. Oakland has an absorption rate of less than 3 months in the prime part of the market. Both sales and inventory are on the rise in Orindawith open homes robustly attended and several homes are selling at list price or above.
Monterey County— Sales activity is picking up on the Monterey Peninsula, including the higher-priced Previews luxury market in Carmel and Pebble Beach. Still buyers are looking for good values and not willing to overpay on a property no matter how much they like it. Lots of negotiating taking place on older homes needing repairs also. Inventory remains low in the REO areas, so that's where we are seeing most of the multiple offers.
Peninsula—Lots of listings are finally coming on the market in Menlo Park. Buyers are out there but still slow to decide and very skittish. PRICE IS EVERYTHING. One third of the sales in February were all cash! Meanwhile in Palo Alto, multiple offers are commonplace as buyers compete for good listings. There have been 14 to 23 offers on properties priced from $1M to $1.5M if the home is priced correctly. Similarly, there is very little inventory in the Redwood City-San Carlos market, but good open house attendance for those people who have listed their home. The market remains steady in Woodside, while things are starting to pick up in San Mateo.
San Francisco— The Lakesideoffice reports that sales are climbing, probably because most of the sales are under a million – a segment very much in demand. The $2 million + market has been heating up, according to the Market Street office. Agents say listings in that price range are routinely getting multiple offers. Part of the reason for the jump in activity, agents believe, is that many buyers that were out looking at this time last year decided to rent for a year and those leases are coming up now prompting the clients to start their searches again. The inventory shortage remains critical, according to the Lombardoffice. They also report that some buyers reluctant to jump back into multiple offers and going way over. Fixer-uppers drawing lots of activity. TheNoriega office says February was very active with lots of pending sales.
Silicon Valley– The Cupertinooffice reports that listings are increasing and there is lots of activity and open homes. The office’s weekend receptionist said that this was the busiest Sunday she has ever seen. About half of the sales are multiple offers as inventory still remains relatively low. Similarly, Los Gatoscontinues to see low inventory, which is challenging for agents. Meanwhile, in San Jose, the Almaden office reports that both inventory and activity is on the rise with nearly all sales resulting in multiple offers. Our local manager reports that you can’t under-price a property – it will sell for more than if you price it at a higher number. Buyers are still motivated by price. The San Jose Main office says activity in the lower price range (600k or less) continues to be strong with multiple offers on most properties. In Willow Glen, buyers are struggling with rejection as many listings result in multiple offers and, of course, only one winner. Most of the listings are selling at or higher than list price. Our Saratogaoffice reports the market seems to be developing as expected for this time of year with the upper end is still lagging
South County– The sales and listing activity in South County defies conventionality. This past month a home listed for more than $2.6 million just closed escrow, another listed for $1.6 million was just sold (for cash). Entry level homes continue to sell very quickly - often with multiple offers. It seems that the middle range properties (those listed between $700,000 and $800,000) linger on the market. A new home sub-division in Morgan Hill just began offering homes listed in the low $600,000 range. The first phase is almost sold out. The market is most challenging for "move-up" buyers but very attractive to sellers of lower priced properties. One would call the South County market a "seller's" market (dependent upon the price range).
One last thought: The financial and real estate markets are often intertwined in the Bay Area, and both are driven by consumer confidence. While our economic recovery is still quite fragile and unemployment is still high, there are growing signs things are indeed getting better. Friday’s better-than-expected jobs report out of the Labor Department was one more macro economic indication that we’re moving in the right direction, along with improved corporate earnings. The stock market is continuing its upward movement, which can only help our region’s consumer confidence.
Will the housing market be next to join the party? Only time will tell.