Newspapers Make Good Rearview Mirrors

Newspapers can serve as a valuable source of information, but when it comes to real estate, they tend to be rearview mirrors. Last Sunday’s front page story by Carolyn Said in the SF Chronicle is a good example. The article titled “Bargain prices bring out investors, novice buyers”, told the story of how buyers are scooping up bargains in the lower price ranges of the market.  The fact is that every month 5,000 buyers are purchasing homes in the Bay Area. We have been talking about this for over four months. It just took a long time for the media to get the story. Don’t get me wrong, I think Carolyn Said is a very good journalist. What frustrates me is that it has taken so long for the newspapers to let the public know what is happening. While in the meantime, they have been writing about how depressed the entire market is and how prices have fallen dramatically.
 
Prices have dropped significantly in the lower ranges as noted in my report over the last year.  Nevertheless, the good news about this kind of story is that when the media begins to write more positively about the market, this generally indicates that we are nearing or are at the bottom of the cycle.  This may not be for the entire market, but surely for the first time buyer price segment. The air has been taken out of the bubble in that segment.  We are not there yet in the mid to high end properties. That is why inventories in the higher price ranges are increasing. Over the next year, the rest of the market will adjust downward and we should reach equilibrium sometime next year.
 
The buyer demand bubble keeps growing. We are seeing our open house traffic continue to increase.  The majority of open homes have double digit attendance.  In all price ranges, many homes are entertaining well past 20 groups.  A $3.995 mil. home in Kenwood attracted over 55 visitors, a SF Noe Valley 2 bedr. 1 ba. home listed at $895K  hosted 50 groups, another SF home in the Marina priced at $1.995 mil. had 45 groups through, and a 2 bedr. 1 bath home in San Anselmo entertained 45 groups.  The buyers are out there, still cautious, but as noted in the article above, when they see value they are moving. 
 
Multiple offers have slowed. Most are in the low range of housing prices—those under $800K. Still amazing given the state of the economy.  One further note. Interest rates have dropped to the lowest point since they started recording them in 1971. I am sure that has helped spur sales. Buyers that are prepared to purchase have the best of both worlds—low interest rates and a market where they are in the driver’s seat.   For those homeowners with adjustable rate mortgages or for those with current mortgages that are at least a percent higher than today’s rate, this could be an exceptional time to refinance.