As we’ve discussed in past columns, the health of the housing market is very closely tied to consumer confidence. Buyers who are concerned about the future tend to sit on the sidelines while those who believe the economy is improving are more willing to jump into the market and buy a home. So with that, I was encouraged by Friday’s University of Michigan consumer confidence report, which showed this critical barometer rose to its highest level in more than two years (see chart below).
According to the Bloomberg news service, the report shows the slump in stock prices sparked by Europe’s debt crisis is having limited effect on sentiment. “Confidence is heading in the right direction but we still have a long way to go to reach normal levels,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “It’s a pretty encouraging development that consumer confidence hasn’t shown much damage from all the negative news out there.”
Improving consumer sentiment, along with the deadline for the federal homebuyer tax credit, undoubtedly played a key role in a spike in recent home sales, including in the Previews luxury segment of the housing market. Although the push for meeting the deadline of the federal tax credit created an enormous swell of activity in the first-time buyer price points, the sense of urgency seemed to have spread to higher priced markets. Sales activity in the move-up market was definitely stronger.
According to our own Coldwell Banker Residential Brokerage luxury report, million-dollar home sales in Silicon Valley jumped nearly 70 percent in May from a year ago as the region’s high-end market continued to recover from last year’s recessionary lows. A total of 251 homes sold for more than $1 million in Santa Clara County, up from 148 sales in May 2009. Home sales were also up nearly 10 percent from April as well.
Similarly, million-dollar home sales in Marin County – as well as the median sale price – rose sharply last month. Sales were up nearly 48 percent from May 2009’s total while the median sale price of luxury homes reached $1.74 million, up 23 percent from $1.41 million a year ago. When compared with the previous month, May’s median sale price was up 8.9 percent while the number of sales dipped from 65 to 62.
Sellers of luxury properties are also getting a higher percentage of their asking price –95.4 percent in May in Marin County compared to 90 percent during the same period a year ago, and 99 percent in Silicon Valley, as per data received from local MLS statistics. In San Francisco, homes selling for more than $2 million were up 25% in May over prior year. And you’ll notice in the Monterey County report below that Carmel and Pebble Beach have noticed much stronger sales activity in the high end.
While I’m encouraged by the improving market figures, we need to be aware that the market will continue to face strong headwinds on the road to recovery. Among the challenges are stubbornly high unemployment, recent volatility in the stock market and the debt crisis in parts of Europe. The next few months will give us a good indication of how strong the housing market recovery will be without the benefit of government stimulus.
Below is a market-by-market report from our local offices:
North Bay — The Southern Marin office reports that they’ve seen a flurry of activity in listings, sales and closed escrows. The Previews market is picking up as well. Two Previews sales closed this week and three are in contract. After a brief slowdown around Memorial Day, activity in the Greenbrae area has picked up again and is clipping along at a nice pace. We are seeing multiple offers again in the $1M price point and below and, in some cases, in the $1M – $1.5M price range. Greenbrae, Corte Madera, San Anselmo, Larkspur and Fairfax continue to be hot markets. Our Northern Marin office reports that it’s seeing an upswing in activity in the $600 – $800k price range in Novato with a high percentage of homes in contract at this point. Under 600K continues to thrive with over 52% of homes on the market under contract. In Petaluma, sales are steady. It was a soft weekend for real estate because of graduations. But buyers are out in force again. It’s very competitive in the under 400k range, but soft in the 750k – 1.5 million range. Our Santa Rosa office reports that the past two weeks have seen activity across the board dropping by about 50% – sales, open house activity and showings. We have also seen an increase in cancelled escrows. The low end and previously more expensive properties in Sebastopol that are now 50% off their peak are attracting huge crowds at open houses. Over 30 groups at an REO listed at $649k, previously $1.2m another 30 groups at an REO listed at $230k. The market remains exceedingly price sensitive.
San Francisco — Sales are growing slightly in the Lombard market, although May proved to be slower than April. Open houses are still well-attended. According to our Market Street office, attendance was all over the map last weekend at open houses from zero to over 100 groups. The open house with over 100 groups was a condo in the Potrero Hill district and ratified after the first weekend. Some of the listings that are not ratifying quickly are going into contract after a price reduction. In a few instances clients that have been in backup for a while have been elevated due to problems with the original buyers obtaining a mortgage. In the Noriega area, meanwhile, both sales and inventory are decreasing. The month of May was extremely slow even though open houses were well attended. Buyers are once again taking their time since the federal tax credit is over. Agents are saying that buyers are waiting to see if the prices will drop since the tax credit is no longer driving the market.
SF Peninsula — The usual slowdown around Memorial Day and the endless graduation events always seem to slow down the market this time of year, the Burlingame office reported. There are a lot more listings coming on the market with a great variety in price ranges. Most are beautifully presented and well priced for quick sale. Inventory has also picked up in Half Moon Bay, especially the higher end properties over the $1m price range, although that is still the quietest segment on the coast side market. Menlo Park has had a very good two weeks – good listings and good sales. However, the inventory is beginning to build even in the “meat and potatoes” price range in Menlo Park of $1.4 to 1.9 million. Our Palo Alto office reports that the local market is very strong with half of the homes selling with multiple offers. May was a very active month for closings in Redwood City, but the last week things have slowed down tremendously. Open houses are well attended but buyers appear to be more cautious. In San Mateo, the better priced properties are getting the most attention resulting in multiple offers. Those that are not in good to excellent condition are gathering dust. Finally, the market is picking up in Woodside. The under-$2 million market in Woodside has, indeed, arisen. However the market over $5 million is moribund. There are 19 listings in Portola Valley and Woodside over $5 million and no closed sales over that level.
East Bay – Berkeley reports that agents are busy writing offers, with many multiple offer situations – usually 2-5 offers for each property. Buyers are frustrated and it is still a sellers’ market in the core area. The number of Previews listings was up 11.1% from May of last year and the selling price per sq ft. was up 5.4%, but the average sales price was down to May 2009 and 2008. Meanwhile, our Orinda office reports that they are seeing more inventory of $1 million properties. Higher priced homes are moving at an increased pace, with the Previews market “robust.” The Danville market is remarkably active despite graduation time, during which it usually falls off. Things are steady in Walnut Creek, with good open house activity. Inventory is still very low. In Fremont, inventory is steadily increasing, but sales are not matching the listing increase. Buyers have more inventory to view and appear to be more selective prior to submitting an offer. The Livermore market has remained stable the past two weeks with very little change. But there has been lots of activity the past two weeks in the previews market in Livermore. Active listings have dropped from a high of 30 to 21 with seven new pending sales. This market segment in Livermore has truly been on fire in 2010 as it was practically DOA in 2008 and 2009.
Silicon Valley – The week after Memorial Day was quiet in Cupertino. The market is feeling more active again, but definitely not the frenetic pace of April and May. Most open houses are not as busy as they had been. The market is still very good in Los Altos for new single family home listings that are priced and presented correctly. Warm weather is bringing out more buyers in Los Gatos, with both sales and listings on the rise. Meanwhile, the San Jose-Almaden market is seeing inventory inch up but sales are not keeping pace. REO inventory has become very limited. A home in Saratoga ($1.65 price range) sold for $130k over asking with nine offers. In Willow Glen, open houses are somewhat busy but sales have slowed down a little due to school letting out and graduations as well. Market activity is picking up for median priced homes (700k – 1,200,000), according to the San Jose-Main office. Lower priced homes continue to see multiple offers and generally are selling in 20 days or less. Open houses have been fairly active in all price ranges and buyer interest increasing, mostly due to the low interest rates being offered. Saratoga reports that the market seems to have settled down after the frenzy of buyers trying to meet the tax credit deadlines. It seems to be moving back to a normal market.
South County – Both inventory and sales are slowing down, according to our Morgan Hill office. This week the San Jose Mercury News ran an article in its business section entitled “Five Things to Know About The Housing Market in the South Bay Right Now”. The five elements of the article accurately reflected the state of the local market. 1. Stiff Competition for Some Homes: If a home shows well and is priced right, sellers can expect multiple offers. 2. Obtaining a Loan is More Complicated Than Ever: Underwriting and lender guidelines have changed dramatically in the past three years. 3. Buyers Should be Prepared to Try and Try Again: See Number one Above. 4. Appraisals Can Throw A Monkey Wrench Into A Sale: Getting a home to appraise for sales price is often times the biggest hurdle in closing a transaction. 5. Completing a Short Sale Can Be A Hassle: Though Short Sales seem to be closing faster, the wait for buyers can last as long as several months.
Monterey Peninsula – Activity in the high end is much better this year in Carmel and along the Monterey Peninsula. We’ve seen a number of homes close at much higher prices than last year, including $19 million, $10 million, and $9.5 million. The highest price last year was $7.8 million, the next dropped to $5.5 million. So there are people with the necessary funds — and these sales are usually all cash — who are deciding this is a good time to buy here. We have good open house attendance, lots of active buyers out looking — still looking for value — and we’re seeing more multiple offers of late, even on properties that are not REO’s. Homes that are well located, in good conditioned and priced to sell can go into escrow in less than a week, even some in the $2-3 million range. The area is looking forward to the U.S. Open at Pebble Beach next week. If the weather is good, there are often people at this sort of event who decide they’d like to have a properly here!
That’s it for now. Have a great week!