Archive for June, 2008
The Goldman Report – June 17, 2008
Just back from my youngest daughter’s graduation at UC Santa Barbara this past weekend. Last one done. Pretty proud father, she completed a double major and minor in three years and graduated with honors. Yahoo. Probably wondering why I mentioned this. Besides being very pleased with my daughter’s accomplishments, the student speaker at the commencement spoke on the topic of “reframing”-the concept of turning a negative perception into a positive one. In other words, it is how we choose to look at things. The sage saying, “Is the cup half empty or half full” is the bottom line.
The financial news over the last several weeks has been all over the place. The stock market is up and down like a seesaw. Lehman Bros. is in trouble and Goldman Sachs beats expectations. In an article this weekend by Kenneth Harney, even the Federal government gets to participate in the negative news announcing that homeowners have lost an estimated $879.6 billion in net equity during the past year. Certainly that sounds alarming; however like I have pointed out in previous reports, appreciation during the housing boom was astronomical. In fact nearly $3 trillion in net equity was realized. An example that Harney uses to illustrate this is the mention of Riverside-San Bernardino houses which lost 13.8% last year in value, but are still up 71.5% since 2003. Still a gain in value of 57.7%.
The media paints the picture that the entire country is suffering. The fact remains that in spite of this down cycle, 56 percent of 292 metropolitan areas surveyed showed positive—though small gains—during the first quarter of 2008. Although California has been one of the hardest hit areas in the country, we still have sections in the Bay Area where prices have leveled or slightly decreased.
Harney’s point is that National numbers–especially on the downside–get all the attention. Yes, those buyers that bought at the peak of the last boom have taken losses, but the majority of homeowners still are doing quite well.
The challenge with the media is that it influences the buying public. In spite of the perception challenges—housing prices are free falling—the reality is buyers are still out there buying. Buyers are value conscious and will not overpay. They are looking for homes that are priced well and presented in pristine condition. If they are not in pristine condition then they are looking for a price that reflects the work they would need to do.
In the current reporting period sales activity remains steady. The only noticeable difference during this period is that the number of multiple offers has fallen off in every county except San Francisco where 25% of the transactions were involved in multiples. The lower and upper price ranges of each market appear to be the most active.
Open house activity has slowed a bit, probably due to June events including graduations, weddings, etc. We are not seeing the 100 plus visitors, however the first time open, well priced and located homes are attracting 40 plus buyers. Most open home activity is still in double digits which is a far cry from the open home activity of the past down cycle markets of the 80’s and 90’s.
Our pending sales for the first two weeks of June were up by a third over the first two weeks of May. Will this continue is difficult to say. Just like the financial markets, the housing market has become much more erratic. We will continue to ride the Wave. To “reframe”, the market is exciting and is filled with opportunity.
Guess the market needs a little hug. Here you go:
http://youtube.com/watch?v=vr3x_RRJdd4
Next week I will be out of town so there will not be a Goldman Report. I know you will survive. Just didn’t want you to be disappointed.
Related Articles:
Probably not as bad as Feds figures make it look
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