The national real estate organization reported, “Existing home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, but are 3.5 percent below the 4.91 million unit pace in December 2007.”
In the West, existing home sales jumped 13.6 percent to an annual rate of 1.25 million in December and are 31.6 percent higher than a year ago. However, the median price was $213,100, down 31.5 percent from December 2007.
Here at home, the news only gets better. CAR reported this week that home sales increased 84.9 percent in December in California compared with the same period a year ago. No, that’s not a typo. 84.9 percent. On the flip side, the median price of an existing home fell 41.5 percent, a continued symbol of buyers taking advantage of the large number of distressed properties currently available.
So why the sudden, so drastic surge in sales? There are a few reasons:
- A lot of people who were previously priced out of the housing market can finally buy
- With interest rates under 5%, a buyer’s purchasing power is at its best in more than three decades
- After months of increasing or stable inventory, we are finally starting to see the numbers fall
- Increased consumer confidence (of late) based on the new administration
- We’re seeing a lot more investors coming into the market in addition to first time buyers. Consider the fact that this week alone, one Gilroy Agent represented 10 properties that went into contract. Almost all were investors and the properties were condos in the under $100,000 price range.
So is it too early to call it a trend? Probably. In all honestly, we still have a lot of distressed properties to move through before we can begin to see prices stabilize. At least for the foreseeable future, buyers will probably have the edge but with an 84.9 percent increase in sales year over year and inventories on the decline, we’re finally moving in the right direction. The key to all of this: buyers are ready to buy when they perceive a good value. Until then, they wait.
Now let’s take a look at this week in real estate:
- East Bay—Our Castro Valley office reports multiple offers still seem to be the trend for REOs and offers are being accepted over asking. One Agent reports that her recent offer on an REO property in Hayward was rejected, with the winning bid accepted at approximately 12% over asking. In an interested trend, especially in Castro Valley which was one of the hardest hit by REOs, Agents are reporting that there seems to be less REO inventory available. Is it possible this market is going to be one of the first to rise from the REO short fall? Danville reports almost all of our sales are bank owned. Open houses are well attended and with the media talking about REOs, buyers are looking for bank owned bargains. Walnut Creek is feeling the same effects with 90% of its sales being REOs or short sales. On the contrary, Oakland reports it needs listings. Great listings in this market are getting multiple offers. A new Montclair listing on the market (listed at $678,000) had its first open on Sunday and had 200 groups through. We had requests for 11 disclosure packets.
- Monterey County—While the market on the Monterey Peninsula is a spotty one, Agents are writing lots of offers. Buyers are being tough and we have put 43 properties into escrow since the first of the year. An interesting fact, Carmel has had eight properties listed over $2 million go into escrow in January.
- North Bay—Greenbrae reports that sales all over central Marin are weak, though new homes that appear to be priced well are coming on the market. San Rafael notes that many of the condos listed under $200,000 in San Rafael are seeing multiple offers and are selling over asking. Petaluma notes that inventory is building in all price ranges, especially in the $600,000 plus range. We’re seeing multiple offers in the under $500,000 range. All but one of our open escrows for this week were multiple offers. Santa Rosa also reports some good news noting that a new Agent helped an REO that is old to the market and had 38 groups through. A veteran Agent helped a similar property and picked up a cash buyer looking to buy three properties in the next 60 days!
- Peninsula—Burlingame notes that after last weekend’s very busy open houses, buyers seem very enthusiastic. We are seeing some very attractive properties in the $800,000 range come on the market which should present opportunity to those buyers who have been sitting on the fence. Half Moon Bay notes that several offers are being negotiated and there were six new properties listed that are neither short sales nor REOs. One well-priced REO received at least four offers so buyers are ready to buy when they perceive good value. Palo Alto notes that open house activity has been slow (about 50% of the norm). There does, however, seem to be a bit of momentum in the entry level properties.
- San Francisco—The Lombard office reports that January deals remain dominated by REOs, mostly under $650,000 but one at $1.6 million. The primary market challenges: financing fall-outs and buyer fence-sitting. Our Noriega office reports that sales exploded last week with 10 ratified offers. It has been busy on floor and via online inquiries so it appears that sales are following. City inventory remains at six month lows which is creating bigger demand for available listings. One example, as shared by our Market Street office is that one client lost out on three properties due to multiple offers. Our hope is that this is an indication that more offers are starting to be written and accepted.
- Santa Cruz County—We have had two large sales over $3 million close within the last two weeks. There are still not many sales in the county over the $1 million mark. It is a combination of lack of buyers and lending issues. In the regular market, inventory remains about the same although certain areas of the county—like the west side—have seen significant decreases. Open house attendance is up and there is activity with first time buyers and investors.
- Silicon Valley—Activity definitely seems to be picking up. Our Los Altos First Street office reports that buyers are attending open houses in good numbers, mostly in the lower price ranges. Some price adjustments of 10% create offers. Our San Jose Main office disagrees noting that while open houses are busy with traffic, it isn’t translating into sales. The office reports that many buyers are still sitting on the fence waiting for prices to drop further. Lower priced properties (between $250,000-$550,000) seem to be receiving the most activity.
- South County—The Hollister office reports that list prices continue to decline and cash offers are on the rise. Morgan Hill reports that this week, one Agent put 10 properties into contract. They were all in the Gilroy area and most were under $100,000 condos. The Agent represented several investors who mostly offered cash for the properties.
The bottom line is that while sales are on the rise, we still have many distressed sales that must work their way through the system. With Wednesday’s controversial passing of the stimulus package (with a near party-line vote), we can only hope that the administration’s plan—in what we know is unchartered territory for our country—is successful. The administration needs to move fast to stimulate a spring sales upturn and set the foundation for an economic recovery.
Until next week,
JOE BROWN
Coldwell Banker Residential Brokerage Silicon Valley~Monterey Bay~East Bay
Direct: 408-364-3201
Cell: 408-655-4733
