It was a week full of stories and reports, both from the cynics and proponents of the American Recovery and Reinvestment Act of 2009. The $780 billion package was signed into law on February 17 and truly is the largest, most unprecedented recovery act in history.The provisions of the bill were changing even up until hours before the House and Senate voted on the bill, but the final provisions were recently posted to NAR’s website. Click here to access the details and learn more about the housing elements that were included: http://www.realtor.org/government_affairs/gapublic/american_recovery_reinvestment_act_home?lid=ronav0019
Also announced this week was Obama’s $75 billion foreclosure prevention plan. The multipronged plan calls for modifying loans for borrowers both at risk or already in default and for allowing those with little or no home equity to refinance into more affordable loans through interest-rate reductions.
Click here to read the details of the prevention plan: http://www.realtor.org/RMODaily.nsf/pages/News2009021901
Obama’s administration said Wednesday that this prevention plan will help up to nine million people avoid foreclosure, by providing government funds to provide incentives to borrowers, loan servicers and mortgage investors to modify loans to affordable monthly payments.
I know many are wondering if this new program will help them. Official guidelines of the plan won’t be unveiled until March 4, at which time we will focus our March Reality Check on the details of the plan and how consumers may take advantage of it. In the meantime, I did find this article on CNN.com which may help in educating yourself: http://money.cnn.com/2009/02/18/real_estate/Obama_foreclosure_plan/index.htm?postversion=2009021911
I realize this is a highly debatable topic right now but what is not debatable is the fact that in order to fix this housing crisis, we must stop foreclosures. Just take a look at this week’s DataQuick release which showcased a further dip in prices due to distressed home sales: http://www.dqnews.com/News/California/Bay-Area/RRBay090219.aspx. Real estate is 20% of the gross domestic product in this country. The only way to fix 1/5 of this country’s GDP is to stop falling home prices and the only way we will do this is to stop people from loosing their homes. This prevention program should help millions of people stay in their home and will hopefully get our country back on track.
The fact is, when consumers feel safe in their homes, feel safe in making their payments and once again feel confident that they will continue to have a roof over their heads, they will begin to put their money back in the economy. They’ll begin to make home improvements. They’ll begin to feel more confident in their future and that consumer confidence will begin to trickle into all areas of our economy. From home improvements to car purchases to vacations—and the jobs and associated spending that these create. What we know is, when consumers feel confident, they spend.
Now I realize for many that statement conjures up far too many negative emotions from the recent past—people who are living beyond their means simply because they think their house is going to appreciate. Fortunately this plan and that of the American Recovery and Reinvestment Act of 2009 provide stipulations that we hope will stop history from repeating itself. Couple that with the fact that lenders have become far more conservative in their lending practices, we should finally be on a level playing field that will safeguard against such an issue.
Now, let’s take a look at this week in real estate:
- East Bay—Berkeley reports that there continues to be lots of buyers out there are some are writing offers. Some are still trying to feel out the stimulus bill, to see if there are enough perks in it for them, to assuage their fears of further price reductions. Consumer confidence is a big issue. If buyer’s jobs are secure, they will write offers. If they fear layoffs, they are hesitating to write. Some are waiting for the magical 4% loans. They will probably be waiting a long time for that product—if it ever happens. Danville shares that more than half of this week’s new sales were neither REO nor short sales. It appears that more sellers are getting realistic about sales prices. The Livermore office reports it had two walk-ins over the weekend and the majority of our new pending sales are short sales. The low end market is where the action is happening. One of the new pendings was at $750,000 while the remaining six pendings were $385,000 and below. Walnut Creek reports inventory is very low. We have fewer REOs coming on the market. Sales seem to be consistent.
- Monterey County—Activity seems to be improving somewhat. We are seeing more floor calls. We have a lot of offers being written and we had a high number of new escrows with 18 last week.
- North Bay—Greenbrae shares that no matter what or where you price a home, buyers want a deal so we are telling our sellers to expect some bargaining and not to be surprised with low ball offers. We saw sporadic attendance over the rainy three day weekend at open houses. Some did quite well while others didn’t with no real pattern. Southern Marin shares that even on the holiday weekend, we saw some good activity. One Agent in our office represented a buyer in a multiple offer situation on a home in Fairfax in the $900,000 range. Listings in the A+ neighborhoods are getting offers immediately as evidenced by a $1.4 million in Sycamore Park. Open houses got some buyers kicking tires, even in the pouring rain. Petaluma shares that inventory in Rohnert Park is dwindling. New inventory is coming on slow. In Rohnert Park, one REO property listed for $219,000 had 25 offers. In East Petaluma, in the $325,000 to $400,000 range, multiple offers are the rule rather than the exception. We are seeing some Westside Petaluma properties in the $475,000 to $575,000 range move very quickly. Only four properties on tour this week for broker’s tour in Petaluma. Sebastopol reports it is seeing multiple offers on short sales and REOs. We saw less activity at open homes over the weekend, probably due to weather. We had two accepted offers on properties in the $600s, after they reduced it from the $700s.
- Peninsula—Burlingame shares that we saw an increase in sales and offers being written this week. Hopefully this is an indication of changes in buyer thinking and confidence. Our office prevailed in a five offer multiple in San Mateo which sold over asking. The Menlo Park El Camino office shares that we had slow sales but buyers migrate to the “discounted” properties; hence 50% of our sales were multiple offers. Open houses are robust, however, most buyers are still waiting for a sign that their investment will not evaporate in the coming months. The office also notes that 70% of our inventory is still overpriced. Sellers are slow to come to the reality that no amount of marketing on any property will prop up prices above fundamentally justified levels. Palo Alto reports a relatively slow week. Activity at open houses varies from just a few folks to a couple dozen groups. Activity has been good, but mostly lower end and foreclosures in outlying areas. San Mateo shares that active listings are up13% over 2008. Pending sales are down only 2% from 2008. Solds are down about 29%. New inventory was very light today, putting emphasis on the good properties. Woodside reports that for the first time in all recorded months, there were 0 closed sales in the town of Woodside and Atherton and only one in Portola Valley per the MLS for the month of January. Sales in these towns are generally based on desire not need. The declining prices of the unsold inventory tell the tale—that and the number of cancelled or withdrawn listings. So far this month, we’ve had one sale in Atherton (28% off list price), one sale in Woodside (22% of list price) and one sale in Portola Valley (20% off list price).
- San Francisco—Lakeside reports that the weekend traffic was slow because of the rain and the fact that a lot of the homes on the market have been out there awhile. By Wednesday, three Agents in the office were in contract. The Market Street office shares open house attendance was all over the map. It went from one person coming through to 30 people going through a TIC on Steiner during the height of the rain. In the last couple of days, Agent’s offers are being ratified as buyers and sellers are becoming more realistic about this market. Lombard shares that there was more activity this past week. Weather reduced open traffic. There were still lots of fence sitters, but we saw good value on a condo and a serious price reduction on an apartment building brought multiple offers. Strong down payments are becoming the norm.
- Santa Cruz County—The market slowed down in February as compared with November, December and January. Open house activity continues to be fairly good and well attended depending on area and price of the home. The REO properties especially in south county seem to be slowing down in terms of number of units although the new properties continue to pull multiple offers. The under $300,000 mark, first time buyers or investors with cash are buying up the properties.
- Silicon Valley—The Cupertino DeAnza office reports that we are getting some very nice listings. We hope this will translate into sales. The Los Altos First Street office notes that buyers are coming to open houses and openly commenting that they are waiting and trying to “time the market” for the upswing. At least they are generally feeling that we will have an upswing soon. Our San Jose Almaden office reports 40 groups through an REO open house that was trashed with no power and no plumbing. An offer was written by the Agent and accepted. To give you an idea, currently 70% of the Blossom Valley market is distressed sales. We are seeing 20% in Almaden and 25% in Cambrian. Almaden is the third slowest market (15% pending) behind Saratoga and Los Gatos in number of sales. The low end still appears to be the driving force right now. The San Jose Will Glen office reports that things have slowed up a bit. Again, open houses are busy and the floor calls keep coming in. Several Agents are working with buyers.
- South County—Our Morgan Hill office reports that it seems that this week’s news—as it relates to real estate—has had a positive effect on potential buyers. The fact that the President has signed the stimulus bill coupled with the recent foreclosure prevention plan, has given a psychological boost to buyers, sellers and Agents. In South County, prices continue their downward spiral—but to the benefit of buyers who are seeing try bargains. Agents are reporting great attendance at open houses with buyers showing genuine interest. “Lookie Loos” and “Bottom Feeders” are out—serious potential buyers are in!
Of course time will only tell if all of this legislative action will work and we’ll only know if it does when we are able to reflect on it a year, two or even three down the road. But the fact is we’ve been in a holding pattern for far too long. And our economy, country and people have struggled and lost far too much because of it. The recent passage of these two very important housing initiatives—which include (among other things) the $8,000 first time home buyer credit and the increase in conforming loan limits—should finally put us on the road to recovery.
Until next week,
Have a great one,
JOE BROWN
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