San Francisco Real Estate Market Update for the week ending May 17, 2009
NAR Announces Housing Affordability Highest in 18 Years – And Many Offices Report Increased Activity in High End Sales
For months I’ve been sharing that this is one of the best times to purchase a home in decades. This week the National Association of Realtors underscored that fact –stating that nationwide housing affordability jumped 10 percentage points during the first quarter of 2009 to its highest level since the series began 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI). The HOI showed that 72.5% of all new and existing US homes sold in the first quarter of 2009 were affordable to families earning the national median income of $64,000, up from 62.4% during the previous quarter and up from 53.8% during the first quarter of 2008.
Locally, the story is much more dramatic. In the San Francisco-Peninsula area, 32% of all new and existing homes sold in the first quarter of 2009 were considered affordable to families earning the area’s median income of $96,800. That’s up 60% from the previous quarter and up an incredible 146% from a year ago, when the index was a paltry 13%, one of the lowest affordability ratios in the United States.
Follow the link below to get the historical charts and details on North Bay, East Bay, Silicon Valley, and Santa Cruz, as well as many other Metros in the US.
Below you’ll find a few more news stories of interest from the week:
Many of you have asked me questions about the potential changes in the $8,000 first time buyer tax credit (http://www.realtor.org/RMODaily.nsf/pages/News2009051202?OpenDocument). Essentially the U.S. Department of Housing and Urban development announced on May 12th that the Federal Housing Administration would permit its lenders to allow home buyers to use the $8,000 first-time homebuyer tax credit as a down payment. FHA’s approved lenders would be permitted to “monetize” the tax credit through short-term bridge loans. This would allow eligible buyers to access the funds immediately at the closing table. Here is a CNN Money article which explains some of the details: http://money.cnn.com/2009/05/18/real_estate/tax_credit_as_downpayment/index.htm?postversion=2009051912
I must caution that the execution of this is quite complicated and it may take some time before it becomes a reality. By late this week, there were already comments coming out of Washington that this may have been released a bit prematurely, and there is no guarantee that it will be successfully implemented. HUD would need to authorize lenders, non-profits and certain agencies to provide a bridge loan which would then be reimbursed at the time of tax refund. These players are not yet identified. Again, an encouraging and useful tool, but the execution and timing of it have yet to be fully outlined. Watch for more to come.
Most of the news lately has been about the brisk pace of sales at the entry level, where multiple offers are becoming the norm. The median price, although increasing slightly in April over March in the Bay Area, had previously been falling due to the heavy activity in foreclosures at the low end. That said, I thought it important to contrast this with what I’m seeing day to day at the branch office level at the other end of the market. Here is an incomplete list of some of our Coldwell Banker Bay Area closings just this past week:
$7+ Million – Atherton
$5+ Million – Portola Valley
$4.8 Million – San Francisco
$3.2 Million – Santa Rosa
$3 Million – Hillsborough
$2.9 Million – San Francisco
$2.9 Million – Belvedere
$2.6 Million – Los Altos
$2.2 Million – Menlo Park
$2 Million – Los Altos
$2 Million – Monterey
Many more in the $1 to $2 Million range
You won’t likely be reading about this activity in the Chron or the Mercury News – not because I’m not telling reporters about it in recent interviews, but because their focus is elsewhere. I feel everyone should know that besides these recent closings, nearly every office is reporting ratified offers and new Pending Sales in the higher end the past week or so – which is not what we were seeing a few months ago. You won’t hear me calling this a trend (yet) – but it sure is nice to see strong activity and confidence in the high end.
And with that update in tow, let’s take a look at this week in real estate:
- East Bay—Berkeley shares that the market is still fast and furious at the lower price points with as many as 15 offers on some properties. Lenders and sellers are choosing all cash buyers, even if their offer is not the highest. There is some concern that these all cash bargains, usually from investors, are artificially driving down neighborhood value, since the fact that there were ready, willing and able buyers who would have offered more is not taken into account. Buyers are also asking what number to put into their offers for loan/appraisal time. Good question. Some Agents are using the number of days given to them by the buyers’ loan officer, others advising to the check the “until funded” box in the contract. Castro Valley reports The Today show this week featured the Top 5 recovering cities for the country as related to the housing market. SF Bay Area was featured as number 5. It seems to correlate with the market trends that we have been experiencing lately. Short sales remain the market wildcard. In researching a property we recently wrote an offer for, we found that there was a $200,000 spread between the offer prices between two pending deals on the same street, one was REO and the other short sale. Daily operations remain busy. Oakland reports the market is really active in all price ranges. It has been steady now for all of April and now May. I think our spring market has arrived. Most of the multiple offer scenarios are two offers but occasionally one generates a large number and those are usually under-priced homes. Appraisal issues are now cropping up in escrows and they are taking much longer to close. Negotiations are more protracted. Short sales are active in every price range. Even some of the foreclosures coming on the market now seem to be in better Oakland neighborhoods. Orinda reports open homes are heavily attended and multiple offers are increasing. Sales in the luxury market are on the rise.
- Monterey County— Slow but steady continues to be the pace here on the Monterey Peninsula, though the market is quick moving just east of us in the under $400,000 REO market. Many properties over $1.5 million continue to be listed; in fact, there are 283 such properties now listed on Monterey Peninsula, from $1.5 to $35 million; yet only 34 such properties have sold since beginning of year, from $1.5-$7.8 million. It’s definitely a buyer’s market in the higher price ranges. We did close $1.6 and $1.9 million properties last week, along with 13 others at $1 million and under.
- North Bay— The Greenbrae office mentions that a flurry of new listings is looking to extend the Spring market well into Summer. Lots of activity in Central Marin in the $1M-1.1M price range. San Rafael tells us that currently there are 174 active homes & 58 condos on the market in San Rafael with 78 homes & 45 condos pending. In Novato there are 148 active homes and 58 condos which is lower than last year at this time. There are 113 homes and 48 condos pending. In Southern Marin the general feeling is that sales are picking up and buyers are getting more serious. Sebastopol states that Buyers are clamoring for low end inventory. 10+ offers are the norm under 300k. Lots of nosey neighbors at open houses have also been reported.
- Peninsula— Things are definitely heating up as the Burlingame office hears more stories of multiple offers & see that the inventory is declining in most areas. Open house attendance is steady. In the Menlo Park area, a couple of higher end sales again which is encouraging. Higher end (over 3.5mil) is beginning to see some movement but higher end inventory levels give buyers a lot of power. Open houses were not as active, most likely due to the heat. Activity seems to be picking up. One Atherton listing was sold list price of $7,995,000. A couple of other high end sales last week both in Menlo & Atherton. For the Palo Alto offices the last seven to ten days has been very busy with multiple offers with prices exceeding upwards of 8-10% over list price on homes from $800k to $3M. I don’t believe it’s a trend, bit it is certainly very busy. We have had high-end sales & closings within ten days in Atherton at $7+M multiple offers @ $2M, multiple offers @ $3M. As many as five to 13 offers per property.
- San Francisco—The Van Ness office tells us the market above 1.5 million continues at a remarkable pace – 8 for this week! For the Market St. office, lots of offers are being written this week, some have ratified, some are still being negotiated, & some were lost out on in multiple offers. Agents sense that the mood of the buyer out now is very positive & very motivated. A Previews property listed at 3.4 million was sold in the first 7 days on the market. Our Lombard office reports that solo offers this week dominated by multiple counter-offers, a number of all cash deals, and some quick deals right on the heels of a price reduction. Again, under $700k a hotter market. As for the Lakeside office, they have stated that the desired impact of the stimulus package seems to be happening. Homes under 600,000 are highly sought after by multiple parties while the higher end properties are still sitting on the market a bit longer & then negotiated down.
- Santa Cruz—The local market continues to plug along; Agents are busy writing offers, trying to get short sales accepted/approved, in general working harder than they ever have. It seems some of the uncertainty is going away and consumer confidence with real estate is on the rise. People are realizing that the window of opportunity is closing, with a lack of inventory, very competitive interest rates and great prices.
- Silicon Valley—Our San Jose Almaden office reports that 11 of 13 sales were distressed this week. Currently Santa Clara Count is experiencing over 50% of its inventory pending. Of course it is all the lowest end of the marketplace. Blossom Valley is above 50%, Almaden has climbed to 30% from 12% in just two short months. One REO last received 25 offers and went 25% above asking price. San Jose Main reports a great week for sales and activity. Excellent open house traffic in all price ranges. Buyer motivation is heating up. Low to mid priced homes seem to be getting the most activity. The San Jose Willow Glen office reported we have slowed up a bit and it may be due to graduations and a holiday weekend. Though floor calls and open houses keep us quite busy.
- South County—We have 187 active San Benito County single family listings. This week we had 15 closed single family transactions, 10 of which were REOs. We had 20 new active listings this week for Hollister. REO listings have picked up a bit this week. Open house activity is not very good probably due to heat this past weekend. Short sale activity is still strong. In Morgan Hill, the market has not changed from last week. Open houses are well attended, inventory of well priced (entry level) homes is decreasing while demand remains high. Agents are busy writing purchase contracts, but multiple offers are very common and prices are being bided upward. Homes that are selling beyond the asking price (due to multiple offers) are, however, facing appraisal issues.
As we head into this long three day weekend I’d like to wish everyone a very happy and safe Memorial Day weekend with family and friends. It’s cold in the City and we’re trying to find the sun, but hopefully many of you will enjoy BBQs, sunshine, maybe a little swimming and (hopefully) a home sale or two.
– Rick Turley