All We Know is Change

All we know is change. The Dow giveth and the Dow taketh away. The good news is that it went up nearly 500 points Monday and only down 115 today.  In spite of the Dow’s gyrations there continues to be a few more sparks in the wilderness as noted last week.  In February existing home sales were up 5.1% on an annual basis. This was the largest increase since July 2003.  Most of the gain was prompted by increased units in the lower end distressed properties.  Forty-five percent of the sales were foreclosures or short sales.  The largest gains were in the Northeast and the South. Columnist Kenneth Harney reported this past weekend that the Countrywide Mortgage unit of Bank of American is looking to make a strong push in the jumbo loan market. Along with B of A there are other lenders that are jumping in.  This is not to suggest that we will be back to the days of easy money (we don’t want to go there again), but it does mean that the pendulum could be swinging back from ultra conservatism to the middle. This could help by allowing more buyers to purchase homes in the over million dollar price range. Quantitative easing by the Fed is certainly benefiting interest rates for those able to qualify for loans. Conforming mortgage interest rates fell under the 5% level to four and three quarters.

The housing market, like the stock market is up and down. One week sales pick up and the next week they slow. It is like a patient in ICU.  We are moving to health, but at a slow pace. The Bay Area reflects the same trend as the nation with the lower price ranges still dominating the vast majority of sales and many of those sales being foreclosures and short sales.

As we enter the spring market we are seeing an increase in listing inventory, particularly in the high priced counties. At the same time we are seeing more homes in the million to two million dollar range beginning to move. However let me caution that it is the best valued (competitively priced) homes in the most desired areas that are selling. A good example is the Piedmont 4 bedrooms 3 bath home listed at $1.395 mil. that after only 8 days on the market and over 300  visitors through this past weekend’s open homes, received three offers today. A home in Larkspur just listed at $899K also received 3 offers and went over full price in an all cash deal. Buyers are prepared to move, but there motivation is value. Buyers today know the inventory and the prices of recent closed sales.

Yes, sellers need to be more patient in today’s market, but many times it is better to hit the market price rather than wait and endure price reductions. Today’s buyer is willing to wait. A Sonoma listing originally listed at $1.184 mil. had been on the market for 221 days, finally received an offer when the price was reduced over time to $995K. Would the seller have been better off to have listed their home at a more competitive price at the beginning of the listing period and perhaps received multiple offers?  We will never know, but what we have seen is seller’s rejecting offers deeming them too low and then selling their homes months later at prices below the first offer they received—a very difficult lesson learned.

For most listings, we have no shortage of buyers in the most popular areas. I mentioned the Piedmont open house above, but there are others who attracted large numbers of buyers. A Piedmont Ave. Oakland listing priced at $719K had over 200 visitors. Others were into 40 plus groups like the 2bedr. 2 bath SF DuBoce Park listing which had 65 groups, an Oakland Claremont Pines home listed at $2.45mil. had 40 groups, and an SF Pacific Hts. 4bedr/3ba. listed at $1.795 mil. drew 40 groups. These numbers are from homes that are open for the first time. Open home activity usually dwindles after the first or second open as buyers are looking for the next best deal. This being another reason to list the home correctly at the beginning of the listing period.

Buyers should pay attention to my 21 year old daughter who last year graduated from college, is now working full-time and studying to take her real estate license. She is a voracious reader and subscribes to the WSJ, NY Times, and the Economist magazine.  At least once a week she reminds me that this market may be a once in a lifetime chance given the values and interest rates. She says, “I need to get into this market. Dad, you need to help me. I need to buy now”. I am weakening, because she is right. Stay tuned.