As I mentioned in an interview with the San Jose Mercury yesterday, after the financial market meltdown a year ago, high-end home sales dried up during the first half of 2009. Compared to those days, homes sales in higher price ranges are much more active now, pushing up median prices around the Bay. And with relatively few homes on the market in Silicon Valley and on the Peninsula, prices have stabilized and buyers are now competing for good listings.

Half of the sales reported by our Los Altos office drew multiple offers, for example.  One Sunnyvale home listed at $950,000 drew 12 offers and sold for more than $1 million. In Palo Alto, we’re seeing eight to 10 multiple offers for properties that are well-priced.  The San Francisco Van Ness office says some well-priced high-end listings are selling in 10-15 days. The same story is being told in Menlo Park, Southern Marin, Orinda – in fact, most of the Bay Area’s higher-end markets.

We just released our Coldwell Banker Residential Brokerage Luxury Report this week, and it shows million-dollar home sales in Marin nearly tripled last month from a year ago, while the median sale price jumped 25 percent.  The same was true in Silicon Valley, where luxury sales nearly doubled as the median price edge higher.

Now don’t get me wrong. While we’re seeing a promising recovery in many of our markets, we’re still fighting our way back to normalcy. The nation’s economy recovery is still very fragile. And the housing market’s gradual improvement must be sustained over time in the face of a challenged job market.  But the signs are encouraging that all sectors of our local housing market are slowly coming to life again.

Here’s a market-by-market report from our local offices:

San Francisco— The San Francisco market has the buyers – it just needs more sellers! The Van Ness office says that sales activity is very strong in $800k to $1.5M range – frequent multiple offers and selling after just 10 to 15 days for listings priced right. They’ve seen a few very high-end Previews property sales in the past two weeks, plus a fair amount in the $2M to $4M range.  Some older listings still sitting while newer to market are going pending –price and condition is critical. Buyers are definitely out there looking at open houses, the Noriega office reports.  One open house in the Outer Sunset, price in the mid $600,000 drew over 200 people during a three-hour Sunday open house.  They expect to have over 10 offers.  Value properties are definitely flying off the shelf. The Lombard and the Market Street offices say that business has definitely picked up, the majority of offers in some neighborhoods now multiple.  But as with elsewhere in the City by the Bay, agents are frustrated by the lack of inventory.

SF Peninsula— Sales are better than last year and the spring market looks promising in Burlingame, although buyers are taking their time to make a decision or the right inventory is not available now.  The entry-level price for Hillsborough is now very competitive with Burlingame and higher end San Mateo.  There are some excellent buys right now. Menlo Park offices report steady or increasing activity. One property listed for $1,749,000 had six offers and went substantially over the list price.   Well-priced properties are getting a lot of buyer attention with open houses very busy in all price ranges. In Palo Alto, Inventory is low compared to years past.  If well priced, we see eight to 10 multiple offers above list price.  It appears that buyers in Redwood City and San Carlos are thinking we are beginning to see a turn around and now is the time to buy. Properties that show well and are priced right are starting to sell quickly. Things are also heating up in San Mateo, where six out of 10 listings are attracting multiple offers.

Silicon Valley– Both sales and inventory are picking up steam in Los Altos, as half the sales are multiple offers. One new listing in Mountain View priced at $799K had over 165 groups through the first open houses last weekend.  Los Gatos also reports a “dramatic” increase in activity. In San Jose’s Almaden area, entry-level to moderately priced homes are in high demand with nearly all selling with multiple offers.  Prices are rebounding in Blossom Valley. The San Jose Willow Glen office is seeing more listings and buyers. Meanwhile, the San Jose Main office says activity over the past two weeks seems to have slowed a bit, but open houses remain active. Saratoga is still reporting very low inventory, down 28% from last year.

North Bay— There is a renewed sense of optimism among agents, reports the Greenbrae office – more properties are coming on the market, more multiple offers and more buyers stepping up to the table.  Buyers now know a good deal when they see one and realize the time to strike is now. Activity is also increasing in Northern Marin, with the majority of the new inventory not distressed.  Properties are still seeing multiple offers when priced well.  Buyers are pouring into open houses in large numbers.  One listing held open last weekend in Novato had over 70 people. It’s still a buyers market in Southern Marin as high end listings have been increasing rapidly (97 listings over $2 million). Santa Rosa reports inventory is still tight with multiple offers the norm in the lower price points – home above $500k are finally starting to be shown and sales are trickling in. Petaluma also is seeing a pickup in activity above $500k.  Most sales remain multiple offers in Sebastopol, with cash and large down payments continuing to beat FHA offers.

East Bay – There are a sea of buyers in Berkeley, but only a trickle of listings for them to choose. Listings are slowly coming in, but most sellers are not listing unless they have compelling reason to do so. It’s a different story in Castro Valley, where they’ve gone from a listing famine to more than they can handle, in all price points. But well-priced homes are still flying off the shelves, many with multiple offers and all-cash.  Danville is seeing both inventory and sales activity gradually increasing over the past several weeks.  Open house attendance has been very good and some buyers seem more optimistic. Ditto for Oakland-Piedmont, as well as Orinda and Walnut Creek, where the best properties are still getting multiple offers and agents are reporting more mid-week property showings. As anticipated, Fremont reports a steady increase of listings as we approach the spring selling season.  Livermore reports a very healthy market in the Tri-Valley area with listings increasing 26% in Livermore, 35.5% in Pleasanton, and 32% in Dublin this year. Pending sales have also jumped 16-24% in local cities.

Santa Cruz – We’re seeing multiple offers on many properties, both lower and mid-range. Our local offices closed two sales over $2 million.  Beach properties well priced continue to draw buyers especially under $1 million.  Inventory levels remain very low and prices are slowly inching upward.  The median price inched up to $500K from $380K a year ago with unsold inventory dropping to 844 single-family homes vs. 1,049 a year ago.  But we’re not out of the woods. Distressed properties including short sales and bank owned units represent about 48% of new inventory, so we definitely are still experiencing a stressed market.

Monterey Peninsula — The beautiful early spring weather is bringing lots of visitors down to enjoy the climate and scenery on the weekends, so our many open houses have increasing activity, especially in Carmel.  Many more consumers telling us this is a good time to buy with prices and interest rates down and still good inventory, except in the REO properties.  Still, buyers are careful in their offers and negotiating, not willing to pay more than their perceived value of the property, so many offers going by the wayside.  We have lots of short sales, still taking many months to get approved and closed – too long for some, generally the first buyer, so the homes are mostly going to the second or third buyer.

South County– The Morgan Hill office has had an interesting first quarter.  January saw sales and listings at an all time low.  The office rebounded in February and March with a large number of sales.  First time homebuyers dominated the market as did cash investors.  Good new for some sellers is that there are very few listings and demand remains very strong.  The consensus among South County Realtors is that prices remain attractive, interest rates are favorable and that there are not many new homes being built in this area – hence demand remains high for re-sale houses.

Keep in mind that the Fed seems to have made it clear this week that they will end their purchase of Mortgage Backed Securities as scheduled. This will likely result in an interest rate increase as investors for these mortgages will need to be enticed.

That’s it for now. Have a great week!

Rick
Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

 Current homeowners can now receive a $6,500 tax credit, while first-time buyers are still eligible to receive an $8,000 credit. 
But act soon, the opportunity of a lifetime ends April 30th, 2010.

First time Home Buyer Credit has now changed 3 times.  The biggest change came in December 2009:
Extends the First-Time Home Buyer Tax Credit of up to $8000 to first-time home buyers until April 30, 2010 under the Binding Contract Rule-“as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until June 30, 2010 to close.
Who Qualifies-First-time homebuyers and current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five (5) consecutive years within the last eight years.
Increased Buyer Income-Under the Extended Home Buyer Tax Credit-effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000-may receive the maximum tax credit.
Price-Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.

HURRY IF YOU’RE THINKING OF PURCHASING OR YOU’LL LOOSE OUT ON FREE MONEY!

“The FHA announced changes to its guidelines yesterday. It will raise the minimum down payment required for borrowers with credit rating scores below 580 to 10%, while the down payment for higher-ranked borrowers would stay at 3.5%. The up-front MI premium is also going from 1.75% to 2.25%. HUD is seeking congressional approval to allow it to raise annual mortgage insurance premiums — which are paid out by the borrower over the life of the loan — above the 0.55 percent maximum. Lastly, the FHA also said it was cutting the amount of aid sellers could provide buyers to 3 percent of the purchase price from 6 percent; a move it said could help lessen incentives to inflate appraised home values.”

Still a Buyers Market – HALF MOON BAY through MONTARA,CALIFORNIA with just under half of the listings listed at over 1 Million. The Million plus price range is finally seeing activity.

Active Listings-122 Single Family Homes. 53 listed over 1 Million, 25 listed under $600,000
Pending Sales-30 with 8 listed under $600,000 and 9 listed over $1,000,000.
109 Homes Closed since January 1, 2009 with only 18 that closed over $1,000,000 and 29 under $600,000

PACIFICA, CALIFORNIA
With YTD sales of 214 and active listing at 60, Pacifica continues to be a Seller’s market.

Active Listings-60 Single Family Homes. 11 listed at $900,000 or higher and 27 listed under $600,000.
Pending Sales-34 Single Family Homes with 13 listed under $500,000 and 4 over.  6 Properties went Sale Pending this week with listed prices from $430 to $718,000.
214 Closed Sales since January 1, 2009 with 9 that were listed for over $1,000,000.  82 sales were from homes listed at $500,000 or less. 5 new sales this week betweem $398,000 and $750,000.

ABSORPTION RATE
Absorption Rate is the number of months it takes to sell the current inventory at the present rate of sales.
6 months supply is a balanced market.
Less than 6 months supply is a Sellers market.
More than 6 months supply is a Buyers market

“There’s no question that the government’s first-time homebuyer tax credit has spurred a significant amount of sales this year.  Latest estimates show that some 400,000 additional sales occurred this year due to the first time home buyer tax credit, which is about 8% of all sales this year.

In the latest news, The Senate has reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers.  While its passage remains uncertain, this plan would extend the existing credit for first-time homebuyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners.  The reduced credit would be available to  homeowners who have been in their current residence for a consecutive five-year period in the past eight years.  Lawmakers in Washington also raised the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000.  Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, said the sources. The measure still faces votes in the full Senate and the House.  The U.S. Senate won’t vote until next week at the earliest. ” 

This week, Business Week reported “The broad improvement in the housing indicators in recent months leaves no doubt that the long-awaited housing recovery is finally under way.”  The article went on to report:  “Policy alone cannot explain the 24% gain in existing home sales since January, nor the 22% increase in new-home purchases, the 40% rise in single-family housing starts, and the recent upturn in home prices. The primary driver is historically high affordability. Fixed 30-year mortgage rates are at 5%, a multi-decade low, and prices have plunged a total of 30% since May 2006, based on the Standard & Poor’s Case-Shiller Home Price Index. By that price gauge, homes are well undervalued relative to both rents and aftertax income.”

Here is what is happening in San Mateo County

• Peninsula—Half Moon Bay reported it is sensing a slow down with less inventory. MLS tour sheet reflects all the retours, many with price reductions and few new listings.  Menlo Park El Camino reported a bit of a sea change in the market-not much new inventory, only three new listings on tour this week which is very, very low.  Menlo Park Santa Cruz Avenue reported very slow open house activity this last week.  Many listings are receiving price reductions as new inventory is limited.  Pricing is critical.  52% of the listings on the Menlo Park Atherton Broker tour have price reductions and 82% are retours.  Palo Alto Downtown reported the market is generally slow.  We feel like the holiday season has started early.  The activity is reflective of that.  Sales are down in our area.  San Mateo reported a look at its pending sales (SFR) of its six main communities; here is a breakdown of the total and the percentage of short sales plus REOs.  Belmont 31 pending sales (35% SS/REO), Burlingame 27 pending sales (33% SS/REO), Foster city 12 pending sales (18% SS/REO), Hillsborough 22 pending sales (23% SS/REO), Redwood shores 10 pending sales (10% SS/REO), San Mateo 109 pending sales (52% SS/REO).  Most of San Mateo SS/REO is in entry level areas.

“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.

Generally speaking the Bay Area real estate market has seen a bit of a bounce this summer with sales increasing in all categories—from the entry level homes and condos to the high-end market. 

National figures showed June with an 11% increase in home sales and the Bay Area seemed to share that trend with July sales up 15% over July 2008.  As the number of sold units continues an upward trend, price recovery is a bit of a mixed bag depending on the area. The entry level median price is increasing in all counties, due to very little supply against a healthy demand.  The just-under, just-over $1M mark seems to be holding its own, with a few multiple offers out there for the right property in a sought-after community. The higher end properties over $2M have, in the past 30 days, seen more activity than at any time this year, but price remains a critical factor as to which properties seeing this activity actually go into contract.  It seems the higher the price-point, the more critical it is for a very attractive list price.  Sellers who are selling are very realistic about marketing price, and Buyers who are buying are recognizing good value when they see it, and are taking action swiftly. For cash buyers or those with large down payments, this could be a great time to pick up a bargain in the luxury home market. 

This week the National Association of Realtors released its monthly existing home sales report (http://www.realtor.org/press_room/news_releases/2009/08/strong_uptrend?LID=RONav0021) noting “For the first time in five years, existing-home sales have increased for four months in a row, according to the National Association of Realtors®.”  The report went on to note, “Existing home sales – including single-family, townhomes, condominiums and co-ops – rose 7.2 percent to a seasonally adjusted rate of 5.24 million units in July from a level of 4.89 million in June, and are 5.0 percent above the 4.99 million-unit pace in July 2008.  The last time sales rose for four consecutive months was in June 2004, and the last time sales were higher than a year earlier was November 2005.” 

Lawrence Yun, NAR chief economist, said he was encouraged.  “The housing market has decisively turned for the better.  A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,” he said. Ultimately these are all very positive signs for our market and are a strong sign that we are moving in the right direction towards a housing recovery.

A few other interesting articles of note for the week: 

• Home Prices On An Upswing In The Second Quarter Of 2009 According To The S&P/Case-Shiller Home Price Indices; Case-Shiller
• New Home Sales Blast Past Expectations; CNNMoney.com
• The Housing Market: Has It Turned the Corner?; TIME Magazine
• Mortgage Applications Increase In Latest MBA Weekly Survey; Mortgage Bankers Association
• Home Market Shows Signs of Life as Declines Slow; Bloomberg 

Now let’s take a look at this week in real estate: 

• East  Bay—Berkeley reports some buyers are still not prepared to compete in a multiple offer situation and may not believe this market until they’ve lost out on a few properties.  Castro Valley reports there is very limited inventory in our local market right now.  We had nine homes on Brokers tour during the course of this week, and Agents are hungry for homes to sell.  We had a few properties that hit the market this week and went pending in a matter of days.  Multiples, multiples, multiples.  There is an increase in the number of buyers calling our office looking for agents to help them buy.  We have gotten a lot more floor activity in the past week, despite the drop off in activity due to kids going back to school.  Danville reports all market activity is strong.  Lack of inventory is holding down sales.  Prices at the bottom are firm – prices at the top are still correcting.  Oakland reported we had three nice sales averaging $2 million for the week.  One of them was the property that we had marketed for a year and a half.  The buyer came to an open house (we had over 100 groups through) and bought it all cash for over $2 million dollars and a very quick close.  Everyone feels there is momentum in the market.  We had more open houses last weekend than previous weekends  and they are well attended
• Monterey County—The steady beat of listings and escrows continues the Monterey Peninsula.  We are seeing sales in all price ranges, except the very top over $10 million and those are slow even in the best of times.  One third of our new escrows last week were for properties priced between $1.2 million and $1.9 million.  We see sales in that $1-2 million range really picking up of late. 
• North Bay—San Rafael reported cash is king when it comes to winning the multiple offer game in the entry level market.  Nearby Southern Marin reported every deal requires heavy negotiating and seller concessions and last minute delays in removing loan contingencies.  Sebastopol noted open houses remain well attended. Every escrow has its own special demands, lender conditions, low appraisals, and Agents on the other side that won’t play nice.  Santa Rosa noted REO listings are starting to appear in increasing numbers. A noticeable increase in open escrows from $500,000-$900,000.
• Peninsula—Burlingame noted that activity has picked up a lot, many buyers are getting involved in multiple offers and are beginning to understand that the market has changed and they need to step up to the plate when that perfect property comes along.  Half Moon Bay reported activity has picked up on the coast as seller’s are pricing their properties to sell within one or two weeks, along with the moving of some stagnate listings requiring many counter offers.  Menlo Park Santa Cruz Avenue reported two homes sold last week with multiple offers however neither went over the list price. Open houses were busy averaging 20-25 groups.  Palo Alto reported Inventory is slow to come on the market. Listings and sales are seasonally slow. Looking forward to a brisk after Labor Day market.  San Mateo reported there has been some more intense movement in the $1.2-1.5 range – Hooray!!!
• San Francisco—The Lombard office reported a slow week except for the entry level and REO markets which remain hot, with multiple offers, including a surprising number of all cash. Major price reductions on the upper-end bringing mixed results. More hints of a listing surge post Labor Day.  The Market Street office reported lots of activity the last two weeks.  Back-up offers being elevated, properties that have been on the market for a while getting into contract, and buyers who want to get in to a home before prices go up and be assured of their $8,000first-time home buyer credit. There has been more activity than a normal August with fewer agents in the office taking time off.
• Santa Cruz County—In last four months, the median price in the county has risen 23% or about $100,000 which is a very good sign.  Prices are still down about 14% from where they were a year ago at this time but it is definitely going in the right direction.  Inventory levels are down from a year ago with a 5.5 month supply of single family homes on the market as compared to 8.5 month supply in July/August of last year. Overall, there is improvement which is wonderful!
• Silicon Valley—San Jose Almaden reported a hot low end market continues to fuel sales.  Highest sale last week was $550,000.  Two-thirds of the sales were under $300,000!  The Willow Glen office reported we are seeing a lot more multiple offers on our listings.  Saratoga reported our Previews (luxury end) market is still slow.  REOs and short sales still dominate the market; however there is a slow steady increase in our office’s average sales price. I think this is due to a much healthier market in the $750,000 to $2,000,000 range.
• South County—Sale prices are exceeding list prices on sales under $400K due to lack of inventory.  On REO listings it is typical to have 5-10 multiple offers in that price range. Contingency time frames are usually shortened to strengthen the offer.  Short sale listings are increasing with back up offers in place.  Open houses are well attended and floor calls have been on the rise!  Morgan Hill reported the market remains unchanged for the past several weeks.  There is great demand for entry level homes–multiple offers happen and then there is just one successful buyer. 

Several offices are talking about a post Labor Day surge in new listings.  The Buyer appetite seems to be there, as long as the listings are priced right.  Typically August is the slowest of summer months with vacations taking priority, however this month has seen the best Buyer activity all year long for many offices.

 Please note that next week we’ll take a brief hiatus from Weekly Market Watch for the Labor Day weekend, but we will return the following week. 

Until then,

Make it a good one,

Rick 

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.

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