Spring is in the Air

It is not only the blossoms that are blooming; sales are starting to bud too. The pace of sales has quickened over the last week.  Maybe the consumer perspective is changing with the media now indicating that the economy may be showing signs of life. The first week of April home sales compared to last year were up over 30%.  This being the best week since July of last year. Average sales price is still off by 25%. Although the lower end of the market is still experiencing most of the activity, we are seeing some life in the upper end. Over a week’s period we had four sales between 3-4 million dollars.  We are also just beginning to see a lift in sales over the million-dollar threshold.

As we finished the first quarter of the year, there are some interesting observations to note. In those counties where average and median price are down 30% or more, inventory this year versus last is down, pending sales are up, sold homes are up, and months supply of inventory is down.  In those counties (San Francisco and Marin) where median and average prices haven’t dropped by 30% or more, inventories are up from last year, pendings and closed sales are lower, and months supply of inventory is up.  These counties are the only ones where residual inventory (inventory that is on the market over 30 days) is up over last year.  Months supply of inventory is substantially down over last year in those counties with the lowest median and average sales prices.  Those counties whose median prices are under $400K—Alameda ($305K), Contra Costa ($200K), Napa ($334K), Solano ($179K), and Sonoma ($349K)—all with one exception have MSIs under 5 months.  The national average is 9 months. Napa is the only exception with 7.2 months supply. However, when you consider that last year Napa had the highest MSI of all counties in the Bay Area with 18.4 months, they had the largest drop in MSI both in absolute and relative terms of any county.  Marin (10.1 MSI) and SF (7.5) had the two highest MSIs for March.  For San Mateo and Santa Clara whose median sales price are $520K and $415K respectively, months supply were steady or below last year’s MSI.  

In a few counties we are beginning to see price stabilization. Alameda, Marin, San Mateo, Santa Clara, and Sonoma counties have seen a small rise in average price over the last 90 days.  Median price has varied only a few percentage points in each month this quarter in the majority of Bay Area counties.  We could be close to the bottom of price swings. How long will we stay at this level is difficult to predict. This is particularly true of the lower price ranges, which have dominated sales activity in the first quarter.  A recent article in USA Today estimated when each state would see a housing recovery. California was one of a few states to begin recovery in 2009.  The recovery begins with price stabilization. Just to show you how crazy it has become in the lowest end of the market, a 3 bedr. 1 bath home in Oakland listed for $195K received 17 offers.  Most of our multiples offers occur in the under $800K price level. Even in the most challenged real estate market in our lifetime, we are still experiencing multiple offers.  This rarely occurred in past down-cycle markets. I think that the building buyer demand, historically low interest rates, the significant price drops over the last 2 years, and the REO/short-sale markets have created this rare anomaly (opportunity).

Open house activity at all price levels continues to increase as the weather and increasing number of listings come on the market. Most open homes are attracting a double-digit number of buyers. The most popular are bringing in well over 30 guests. This was the case for a Greenbrae 3bedr./3ba. listing priced at $995K which had 60 visitors, a Montclair home listed at $1.650 mil. which had 55 buyers, and the SF Seacliff  6bedr./5ba. listed at $4.580 mil. which entertained 40 groups.

There are plenty more reasons to buy other than the ones mentioned above.  Among them are the Federal government’s $8000 tax credit for first-time buyers and, in addition, the state of California just passed a $10,000 tax credit for new homes purchased this year with fewer restrictions than the feds program. I believe this spring will be a bright spot for home sales after a lackluster first quarter.