The Bay Area housing market is seeing the usual year-end slowdown as buyers, sellers and yes – even agents – turn their attention to the holidays, family and friends, and last minute shopping. There are pockets of activity here and there as focused buyers compete for limited inventory, determined to wrap up transactions before 2011 closes for tax purposes. But for the most part, the year is ending fairly quietly as always.
2011 has been a wild rollercoaster ride for the nation’s housing market, the economy, the financial markets and geopolitical events. Volatility is the new normal, as some Wall Street pundits have observed. Still, through all this, there is reason for hope that the real estate sector could see better days very soon.
Economic indicators here in the U.S., as well as corporate financial reports, continue to point higher. The job market, consumer confidence, and consumer spending all continue to show decent improvement as the year draws to a close. All of these indicators are critical for a healthy housing market.
The labor department reported this week that new jobless claims hit a 3-1/2 year low last week, adding further evidence that the economy may be gaining momentum. Initial claims for state unemployment benefits dropped to a seasonally adjusted 364,000, down 4,000 from the previous report. That was the lowest amount since April 2008. In November, the unemployment rate also dropped to 8.6 percent, a two and a half year low.
Also reported this week, a widely followed measure of consumer confidence showed solid improvement. The Thomson Reuters University of Michigan’s final reading on the overall index on consumer sentiment rose to 69.9 points in December from 64.1 the previous month, a sign that Americans are feeling better about the economy’s prospects for 2012.
Finally, the Commerce Department said that the nation’s GDP grew at a 1.8 percent annual rate in the July-September quarter, down from the previously estimated 2 percent. Spending on health care dropped by $2.2 billion to drive the revision slightly lower. But encouraging news in the report showed that spending on durable goods was stronger than previously estimated, an indication that consumers still have a strong appetite to spend their money despite the economic challenges.
While the recent reports all indicate the economy could be gaining momentum, we know that there are still economic headwinds that could slow the economy and the housing recovery – the European debt situation, the squabbling in Washington and the still high unemployment rate. Nonetheless, we’re moving in the right direction. And if we see this trend continue, it bodes very well for our housing market here in the Bay Area in 2012.
Thank you for taking the time to read Weekly Market Watch throughout this year. I really appreciate your interest and your feedback. I hope you have a wonderful holiday season and best wishes for a happy and healthy New Year!
Below is a market-by-market report from our local offices:
North Bay – In Northern Marin County, it is very slow right now. Inventory has been falling in recent weeks. The Market Action Index, which measures Buyers/Sellers’ “Advantage Zone,” shows we are in a strong buyer’s market, which is no surprise to anyone selling real estate in this area. Our Southern Marin office says there are currently 117 properties on the MLS, which have been on the market for an average of 158 days. Total unit sales are up in Southern Marin versus a year ago (YTD) but the last two weeks have slowed down in all price ranges. The number of sales in the $2 million plus range in Mill Valley and Tiburon year to date is down 42% and 35% respectively. Belvedere is equal to a year ago and Sausalito is up 50%. In Santa Rosa, our local office has seen strong activity with 54 ratified offers in recent weeks, including four multiple offers. Sebastopol agents report exceptional activity at open houses for this time of year. Agents are still struggling with appraisals and lender requirements but on the flip side they are also seeing lots of cash sales.
San Francisco – San Francisco Lakeside’s office manager says inventory just keeps dropping. Buyers who are serious are feeling frustrated with few new listings to see and pouncing on properties that meet their need – but only if they are well priced, and then they are not backing off from offering more than the asking price. Our Market Street office is still seeing a flurry of activity as we approach the year-end. One third of contracts saw multiple offers, as demand is still strong and property priced well commands significant interest. One interesting observation is that property that has been on the market for some time that had not previously seen interest is now selling. Three properties in SF all actively being marketed for over 120 days finally saw ratified contracts in December, which speaks to the diminishing inventory versus the pent up demand to buy property here in the city. The Sunset office reports decreasing inventory but steady sales activity.
SF Peninsula — Our Burlingame manager says there is a large group of very “pent up” buyers who are looking for that perfect family home. They are ready to buy, financially qualified and will make an offer as soon as the right home comes on the market. This would seem to be a good indication of an early spring market. It’s a great time to be a seller. The Burlingame North office says they’re seeing the normal holiday slow activity with a slight increase in sales. In the Previews high-end segment, many listings are coming off the market for the holidays although there are still very motivated buyers looking at this time. It appears that there is a lot of inventory waiting to come on in Jan/Feb. Across the hills in Half Moon Bay, some properties coming off the market to refresh the DOM and putting the homes back on in mid-January. Agents are still working at putting last minute offers together. It’s a good time to put an offer in front of sellers. Things have slowed down in Redwood City with both inventory and sales activity easing.
East Bay – Berkeley agents are still busy showing property, writing offers, saving deals and closing. They’re looking at December as the first month of 2012, time to renew ones energies, create leads, and plan for a great 2012. There is optimism among agents – No exponential leaps, just steady determination and appreciation for the several signs of recovery. The overall active inventory in Livermore hit another low for the year with 208 listings on the market. Total pending sales in Livermore continue to decline with 234 properties in escrow. Only serious buyers and serious sellers are in the real estate market today. In the last couple of weeks the Previews inventory in Livermore has declined from 21 listings to 16 listings on the market. The inventory level of Preview homes in Livermore is very close to low inventory level for 2011. Our Oakland/Piedmont office reports a property offered at $1.95 million that was not on the MLS went into contract within 3 days. The rest of the market activity is slowing down due to the holiday season. Very few new listings are coming on the market now; most are waiting until after the first of the year. Buyers who are attending our open houses are looking but letting the agents know that they are just starting their search, waiting for the new year to buy. The Lamorinda market remains steady, our local manager says. Buyer’s still out there in Pleasanton making offers on the right-priced homes. Inventory is still low. In Walnut Creek, our local manager says there continues to be very low inventory, multiple offers on most properties, and appraisals coming in a little higher on some sales.
Silicon Valley – Our Cupertino manager says both listings and sales activity are down with most buyers and sellers in a holiday and vacation state of mind. Similarly, listings and sales are down in Los Altos but new single-family home listings in good school district continue to draw buyer interest. The high end between $1-$2M is active due to low inventory, but when you move up to $2-5M it slows down to about the same as the previous quarter at 3 months of available inventory. Above $5M is slower but still has activity. Our Los Gatos office says the last two weeks have been very exciting to say the least. Our office recorded the highest residential sale in the history of Santa Cruz County at $7 million, the third highest sale in the history of Los Gatos listed at $15 million and closed an Atherton sale for $6.5 million. The holiday slowdown has hit, according to our Menlo Park manager, with both listings and sales tapering off. In San Jose, the Almaden office manager says there are very few new listings. Those that hit the market are selling within days provided they are priced at or near the most recent sales. People are willing to pay quite a bit more for fully remodeled homes. Recently in a local neighborhood, a turnkey seller got $649K for the same size house that sold weeks later that only had new carpet and paint at $545K. Open houses continue to show lots of activity, according to our San Jose Main office. Many open homes had more than 15 groups over the weekend. Low rates and low inventory are creating excitement in the market. Many of the sales the past two weeks have been “multiple offer” sales in all price ranges. And our San Jose Willow Glen manager reports that even after the Thanksgiving holiday, agents turned in six ratified contracts and there were seven closings delivered on Monday. Our Saratoga manager says the holiday mode is in full swing. Agents are working hard to develop business for next year though.
South County – We are seeing a huge decline in the inventories of Gilroy and Morgan Hill, our Gilroy manager reports. Gilroy only has two months worth of supply. Hollister has seen an increase in inventory, although that community only has about 2.5 months worth of supply. Well-priced homes are getting multiple offers. Prices have stabilized, and South Santa Clara County and San Benito County continue to be a great buy. According to our Morgan Hill manager, 2011 started out very slowly, then, during the mid part of the year, really took off. The last three months, however, showed a sharp decline—revealing a graph that is an almost perfect “bell-shaped” curve. During the last months of this year, homes stayed on the market an average of 150 days before garnering an offer compared to 99 days for May thru August. Inventory remains very low, with only 125 Morgan Hill homes currently listed on the MLS. On the positive side, demand remains high, interest rates are good and agents are reporting fairly good attendance at open houses.
Santa Cruz – Sales for Santa Cruz County continue tracking about the same they have all year. The local market is relatively flat; closed home sales will be up slightly from last year – about 5%. The inventory is down year over year and currently there are about 800+ single-family residences for sale in Santa Cruz County. Agents are struggling to find good inventory for their buyers. And once again, good properties, priced competitively, are selling, some with multiple offers. The overall market has been and continues to be heavily impacted by the number of “distressed properties” which is hovering just under the 50% of the total market. This inventory is impacting pricing on “equity sales” and driving prices downward. The median price for the County is under $500,000 and our median for our three offices last month was in the mid-$400,000’s, down from the mid to high $500,000 last year. We are also seeing more Short Sales in the over-$800,000 price point. On a brighter note, an Aptos Agent sold a property this week for over $2 million – exciting as those sales are few and far between these days.
Monterey Peninsula – Our local Peninsula offices continue to be amazed at the steady pace of activity going on in the marketplace even as we head into the holidays when minds are usually more into holiday activities. Between these appealing prices and the low, low mortgage rates right now, it appears that we still have many folks who feel they should act now in buying homes. They’ve had 28 ratified offers in recent weeks, including two multiple offers.