Mixed Reports on Housing as the Real Estate Market Continues to
Grapple with Summer Slowdown, Economic Concerns
This may have been another quiet vacation week for many Bay Area residents, but it was a busy week on the housing front with several key market reports out last week. Coldwell Banker Residential Brokerage released its latest luxury home reports, which continued to show improvement in the high-end markets from Marin County to San Francisco to Silicon Valley. However, DataQuick’s report on the overall housing market indicated a greater-than-expected summer slowdown in home sales.
Million-dollar home sales and the median sale price in Silicon Valley rose again in July over last year, although sales were off from June’s two-year high level. Sales were up 8 percent from July 2009, the sixth straight monthly year-over-year sales improvement. The median sale price also rose last month to $1.36 million, up 5.7 percent from last year and 4 percent from June’s $1.31 million median price. The only down note last month was that sales were off from June, a drop that was anticipated following the expiration of the federal tax credit deadline.
Million-dollar home sales and the median sale price were also up in Marin County over last year, although, like Santa Clara County, sales were off from June. A total of 55 homes sold for more than $1 million in July, up more than 22% from July 2009 when 45 properties changed hands. It was the ninth straight monthly year-over-year sales improvement for the high-end market in Marin. The median sale price also rose last month to $1.6 million, up 5.7 percent from last year and 12.3 percent from June’s $1.425 million median price.
As noted in my last report, San Francisco’s luxury home market has also been gaining momentum. Luxury home sales in The City surged in the second quarter to their highest level since 2008.
A total of 76 homes sold for more than $2 million during the quarter from April through June, up 31 percent from the same period a year ago and nearly double the 44 properties that sold in the first quarter this year. The median sale price also edged higher in the second quarter reaching $2.91 million, up 2.2 percent from the first quarter’s median of $2.85 million, and up 1.4 percent from second quarter 2009’s median of $2.87 million.
While the high-end market is showing signs of strengthening, the overall market definitely slowed last month after a strong showing in the first half of the year. DataQuick reported that Bay Area home sales dropped to the lowest level for a July in 15 years as the economy softened and the housing market adjusted to life without federal home buyer tax credits. The median sale price dipped below the prior month and rose only slightly from a year earlier, the real estate information service said.
Last month a total of 6,773 new and resale homes closed escrows in the nine-county Bay Area, down 19.1 percent from June and 22.8 percent from July 2009. It was the slowest July since 1995, when 6,666 homes sold. Last month’s sales were 28.8 percent lower than the July average of 9,515 transactions since 1988, when DataQuick’s statistics begin.
So what to make of all this? First of all, much of the drop was the result of the expiration of the federal homebuyer tax credit in June. Many buyers and sellers accelerated their transactions to meet the deadline, deals that otherwise might have occurred in July and August. But on top of that, uncertainty about the job market and the overall economy is undoubtedly playing a role.
On one hand, record-low mortgage rates and very attractive pricing on homes continue to get the interest of buyers. Low rates and prices are opening the door for many buyers who just a few years back would not be able to afford a home. And the situation is also enabling buyers to move up to larger and more desirable homes than they could have in the past.
But inexpensive mortgages and competitive home prices are not enough of a motivation for buyers who have lost their job or fear that they will in the months ahead as the economy fights to regain momentum. Once we see improvement in the economic and employment picture, I think you’ll see the housing market move back toward normalcy.
Below is a market-by-market report from our local offices:
North Bay – The Santa Rosa market seems to be picking up. Open escrows have increased in the past two weeks. What is most encouraging is that price points of those escrows cover the full range of prices, not all clumped at the bottom. The Petaluma market has been steady, and multiple offers continue for some homes. One property in Rohnert Park priced about $200k had 15 offers. Meanwhile, our Sebastopol office reports that this was the slowest two week period for both listings and sales that they can recall. School starts this week so agents are hoping that buyers and sellers are preoccupied and will return the market once they get the kids settled in. Our Greenbrae office says there is a lot of buzz about properties coming on the market after Labor Day, and buyers waiting for more inventory. We currently have about a six month inventory in Marin – up a bit from previous months, no doubt because summer has slowed a bit.
San Francisco — Our San Francisco Lakeside office reports that both inventory and sales activity is steady with about half of the sales resulting in multiple offer situations. Our Lombard office says that open house attendance is up from prior 2 weeks, but buyers are still showing reluctance and many sellers are not responding to the market. Entry level homes still are the most active market. Our Market Street office says that open house attendance has been schizophrenic. They saw some open homes with as little as three groups but another in the Central Sunset district for a home just under $1million that had over 100 groups through this weekend. Offers are ratifying but with more and more counter offers. It doesn’t seem out of the ordinary to have between 5 and 7 counters before the deal is put together. A lot of the buyers are just starting their search and are very sure of what they want and are willing to wait until they find just the right home. It appears that things are picking up, both in listings and sales, according to our Noriega office. Transactions are taking much longer to close and a lot of re-negotiation of the price is taking place before contingencies are removed.
SF Peninsula — Inventory is decreasing and sales activity has been steady in Burlingame. Across the hills in Half Moon Bay, August has been slow on the coast. Weather might be a factor. Sellers are holding off marketing their property until after Labor Day. Similarly in Menlo Park, the market has been very slow as we head toward the end of the summer vacation season. That story is echoed by our Palo Alto office. In San Mateo, inventory is increasing and sales are decreasing. Buyers are reluctant to move forward in spite of great mortgage rates. Economic conditions are a big influence – both Job security and uncertainty in the economy. Our Woodside office reports more movement in the under $2 million market as more houses have slipped to that level in the lower end Woodside areas.
East Bay – Many Berkeley agents and clients are still away, but those who are here in August are making deals and selling houses. Overall, inventory is decreasing while sales activity is increasing. The Previews market, however, hasn’t budged much compared to last year. In Orinda, the current inventory seems to be moving with very little new inventory coming on the market. Our Oakland-Piedmont office says August seems slower than July, and multiple offers have dropped off significantly. The market also seems to have slowed in Pleasanton. Our Castro Valley office reports that the market continues to present challenges. New listings do produce a lot of activity and as always, if priced right, they will sell. But buyers are becoming very picky and are holding out for the best offer. Despite this, there is still a huge influx of buyers for those deals that fell out, and we are enjoying a lot of new sales lately. Open houses are still well attended. The Danville market is holding steady. They have seen surprisingly strong open house activity and there are sales in most price ranges. A nice single family home in San Ramon priced at $549,000 got 8 offers almost immediately. In the Tri-Valley area, Pleasanton, Dublin, and Livermore all had closed sales declines in July vs. the same month last year. Pleasanton closed sales were down 10.53%; Dublin was down 27.5%; and Livermore was down 38.75%. Inventory has increased in all three cities.
Silicon Valley – Buyers and agents are slowing returning from summer vacations and our Los Altos office is seeing more attendance at open houses and agents on tour. Inventory is steady and activity is picking up. Sales are fair under $2M and then slowing the higher you go. Things are steadily improving, according to our Los Gatos office, and open house activity has been strong over the last two weeks. Meanwhile, our San Jose Almaden office reports that sales are flat for homes that have nothing special to offer. Prices seem to have rolled back a few percent while inventory grows. Like any market, well priced, exceptional homes sell quickly. The market seems a bit slow, according to our San Jose Main office, but there are signs of more activity at weekend open houses. Things are similarly slow in the San Jose Almaden area, probably due to school reopening and people taking last minute vacations. But open houses still have quite a bit of traffic. In Saratoga, meanwhile, after what seemed like a lag in the business due to vacation and kids going back to school, it seems like the market is picking up again.
South County –There has been a considerable drop in home sales from what they were during the first and second quarters of this year. Agents concede, however, that interest among potential buyers remains high but it is very difficult to get a buying commitment. Traffic at open houses is strong, and many open home visitors indicate that they can financially afford the purchase, but for the most part there is a “wait and see” attitude. High unemployment and economic uncertainty (along with negative media) certainly have had an impact on our local market.
Santa Cruz – Overall inventory levels are down about 13 percent from 2009. Year to date sales were tracking about the same as 2009 until June when we noticed a 21% drop in closed sales. July (countywide) also reflected that same decline. Average days on the market is about 70 for properties up to $1 million, indicating that properties that are priced well are still selling quickly. Currently there is about a five month supply of inventory. Agents continue working harder than ever with short sales, REO business, and the lender guidelines that add new challenges to the escrow process. The Previews high-end market is slow, down about 33 percent in July vs. last year. One property listed at $1.9 million has had two offers at $1.6 million and a recent offer at $1.4 million. On the bright side – there are also some cash buyers out there searching for that unique beachfront property and are willing to pay cash for the right property.
Monterey Peninsula – The gloomy, drippy weather of late seems to have cast a bit of a pall over the real estate market in the last few weeks. In what is usually a busy time for us, with lots of potential buyers coming to the Monterey Peninsula to visit and perhaps look for a second home, the summer has been quieter except for the weeks preceding the U.S. Open in June and the Concours d’Elegance, which was last week. Fortunately, last week did show a little jump in activity. In fact, twice as many properties went into escrow as the week before, including a couple of very nice Previews-type properties. Generally, the best time of year here--for weather and real estate--is September and October, and we believe we can look forward to the same this year.
One final note: It has always been a fact that real estate is all about location. But more so than ever in this choppy market, we’re seeing micro climates when we take the temperature of the Bay Area housing market. Our market has always varied city by city. Now it’s zip code by zip code and even neighborhood by neighborhood. Buyers know where they want to be and are willing to pay for it. There are many desirability factors, from a neighborhood’s quality of life, restaurants and parks to proximity to good schools and downtown restaurants and activities. Watch for this trend to accelerate in the future.