Across the Great Divide

Although average sales price has been increasing since the beginning of summer, it is once again showing a decreasing trend with the vast majority of sales under the million dollar mark. 

The deep divide is reflected in Marin, which is one of the highest priced counties in the Bay Area. In July there were 1210 single family listings—621 under a million of which 38% of them were in escrow, 359 in the one to two million dollar range of which 19% were in escrow, and 230 over two million of which only 7% were in escrow. If you looked at all of the listings over one million, only 14.6% are in escrow or about one in seven listings.

There are many reasons why this could be occurring.  Loans over the conforming limits are still more difficult to obtain, as lenders continue to require larger down payments, interest rates continue to be higher than conforming loans, and lender appraisals make for more challenging negotiations. Many sellers on the market are still testing the waters because either lower asking prices would put them under water or they think that their homes are unique and unusual, believing that buyers would be willing to overlook comparable homes that have sold for less.  Today’s WSJ article confirms these observations.

As I tour new listings around the Bay Area, I find that only about 10% of these new listings over a million dollars have a real chance of selling at or near their asking prices.  The others will wallow on the market, many having to reduce their prices until they finally have a willing buyer.  Some sellers receive offers which they consider too low and they reject them. Ironically, over time the list price falls below the offer price.  Had the seller taken the initial offer, they could have saved time, money, and stress.

Once such listing that I toured was on the market over a year ago at $2.5 mil. They were presented an offer of $2.2 mil. The seller felt it was too low, so they declined the offer. Subsequently they took their home off the market and rented it. Now the sellers have decided to put it back on the market once again, listing it for $1.9 mil.  Unfortunately we see this pattern far too often. 

The bulk of sales in most market places fall below the $700K mark. The vast majority of multiple offers are in the lower price ranges where there is strong activity for well priced homes such as the Berkeley 2 bedr./1ba. home listed at $495K receiving 15 offers or the Oakland 4bedr./4ba. home priced at $600K garnering 7 offers. First time buyers are excited by the price declines that have occurred over the last 2 years.  As I have reported previously, many homes in the over million price range require more air to be let out of their prices.  The upper end is not immune to price declines, it has just been slower in coming.

I want to make it clear that there are exceptions to all rules. There are still properties in the over million dollar range that are attracting multiple offers. These are usually homes in areas of great demand that are priced well and are staged impeccably. 

Not every home in the lower price ranges is selling like hotcakes.  There are many listings that sit as sellers and/or lenders have unrealistic price points or refuse to make the necessary repairs and/or stage in order to make these homes more appealing.

Although there are some positive trends in the economy, the housing market will continue to slog along. Homes will continue to sell, but only those that accommodate market realities. We will be selling more homes in the second half of this year over last year for the same period, with the bulk in the lower price ranges.  The upper end will struggle until listing prices become more realistic, lenders are assured that values have stabilized and therefore willing to lend more freely, and more consumers begin to feel that the worst is behind us.  It will happen; it is only a matter of time.