Baby Steps

Obama’s Housing Plan certainly has promoted a wide range of responses.  The objective of the Plan is to stabilize housing values by allowing approximately 7-9 million Americans that could potentially go into foreclosure, remain in their homes.  The logic behind it is that if the number of REOs and short sales diminish, then supplies will get in balance with demand and prices should level off.  Will or won’t it work?  That is anyone’s guess.  There is still confusion over who qualifies and exactly how it will be implemented.

Interesting to note that the hottest selling part of the market today is the lower end where most of the REOs and short sales exist.  In many markets, the inventories in this sector are some of the lowest of any price range.   If the plan is successful in achieving its objective by keeping more of these homes off the market, it could have its desired effect.

In the meantime buyers remain cautious and are focused on value.  The trend I discussed last week continues and that is that, the higher end of a few Bay Area markets continue to heat up. This past week in San Francisco alone there were five homes in the $4mil.-9mil. price range that went into escrow. One home listed at $8.9 mil. received 4 offers. All of those homes were on the market less than 25 days.  We are also seeing this trend in the Piedmont and Marin markets.
These sales are increasing our average sales price on a week over week basis.  Our average sales price rose substantially by close to 30%.  However, the majority of sales are still well under the million dollar threshold.

We are seeing an increase of multiple offers in the East Bay, particularly in the Oakland, Piedmont, and Berkeley areas.  A 4bedr/2.5 ba. Oakland home listed at $695K sold over asking with 6 offers.  A Berkeley 3bedr/2ba. home priced at $640K received 3 offers and went over asking.  A Piedmont 5bedr./4.5 ba. listed at $2.55 mil. garnered 2 offers.

As prices have fallen, affordability for buyers has risen dramatically.  In a recent news article on national home affordability, the SF Metro area rose from a meager 5.7% in the 2nd quarter of 2007 to a current 20.5%.  That, combined with the continued low interest rates in the conforming loan sector, has fostered the increased activity in the lower end of the market.

It should be interesting when Mr. Bernanke, the Fed Chief, speaks to Congress in the coming week. The expectation is that he will talk about new tools that the Fed will use to get the economy on track.  The potential good news for the housing market for both buyers and sellers (at least those in the conforming loan limits) is that rates could drop lower, creating greater affordability and motivating buyers to finally make a move.

The market is taking tiny baby steps to improvement.  The buyers are still circling as open house activity is remaining constant with most opens generating between 10-20 buyers. There are larger numbers of buyers at a few listings, particularly those that are open for the first time and primarily at under million dollar homes, as exemplified by the Berkeley 2bedr/1 ba. home listed at $599K that had 66 groups visit.

What I am hearing is that we will be seeing more well-priced, attractive listings hitting the market over the next month or two. Sellers are becoming more realistic in their pricing.  We are also seeing an increase in price reductions from sellers who now realize that it is not 2006.  Both of these factors should have a positive impact on our Spring market.