Crumbling Confidence?

The Conference Board released their report on Consumer Confidence Tuesday.  In researching the long term confidence data, I noted that only once since 1970 has consumer confidence gotten this low without the US going into a full-blown recession.  Hopefully, we’ll avoid it this time, too.  The Federal Reserve is doing what they can.  Congress is trying to come up with a stimulus package.  However, there’s only so much they can do at this point without creating other economic problems (inflation primarliy).

What has this caused in the local real estate market?  So far, prices have not weakened (in fact they’ve continued to rise) due to the fact that more sellers are staying out of the market.  Inventory of homes for sale is very low.  Demand is still greater than supply. 

We’re starting to see weakness, though.  Homes that have negative “issues” or those that are slightly overpriced are taking longer to sell than they were a month ago.  Super Bowl weekend is typically slow (this week there are very few new listings coming to market).  The next two weeks should be very telling in terms of supply and demand. 

Stay tuned.

Steve TenBroeck

Buyers: Do Not Wait

Home buyers should not wait to see whether the conforming limit is raised from $417k to $725k in California.  Although a conforming loan has a lower interest rate (about .75% currently) the increase to the limit is only a proposal at this time and may not be passed in Congress.  If passed the increase may not take effect for 6-9 months as legislation moves forward very slowly in Congress.  Lastly, one can obtain a no cost loan now and refinance into the lower rate later at no cost.   Jeff Stricker

Market Confusion Continues

This past week was brutal!   Last Saturday & Sunday we had the most traffic ever to come through our open houses.  However, on Monday (MLK Day) foreign stock markets crashed.  On Tuesday the Fed dropped the Prime Rate by ¾ of a point.  And by Wednesday, according to several agents, local buyers were retracting their offers to purchase homes.  Then, at the end of the week, Congress came up with a plan to restore confidence and stability in the market.  Here it is, as reported by the California Association of Realtors reported on their website: “Under the terms of the proposed stimulus package, the conforming loan limit — the maximum loan amount that government-sponsored enterprises like Fannie Mae and Freddie Mac may purchase or guarantee on the secondary market — will be raised from $417,000 to as high as $725,000 in high-cost areas.” 

The Senate has not - and several Senators have telegraphed that they may not - sign onto the plan, however.  More should be revealed on Monday.

The increased “conforming rate” would help our local market by greatly increasing the buyer pool for folks trying to sell their condos or lower-priced homes allowing them, in turn, to trade up into our higher-priced market place.

Are we now experiencing a “buyer’s market”?  No.

We continue to get calls from prospective home buyers who believe that it has become a “buyer’s market” in our area.  In order to give one of our buyer clients some specifics re the current market yesterday, I pulled up all the recent entry-level home sales (up to $1.7m) listed on the MLS in Palo Alto and Los Altos that had sold since Sep. 1^st and had a min. of 3bd/2ba.  Here’s what I found:

	Palo Alto	Los Altos
Total Sold since 9/1/07	42	16
Sold in 14 days or less	32	11
Median Sales Price	$1.48m	$1.59m
Avg. Percent of List Price Rec’d	111%	104%
Sold in 15 days or more	10	5
Median Sales Price	$1.41m	$1.56m
Avg. Percent of List Price Rec’d	100%	96%
Current no. of Homes for Sale	28	30
Avg. no. past 10 years	61	47

The bottom line: demand for homes exceeds supply in this market place.  It was reported this week in the SF Chronicle that in 2007 the Bay Area added 54, 000 jobs.  It’s expected, they said, that at least 15,000 jobs will be added in 2008.  While the housing market nationally and in the wider region of the Bay Area may be the slowest since the Great Depression, the housing market from Menlo Park through Los Altos is very strong; homes sell quickly, often with multiple offers.

Home purchases should always be viewed as a long-term investment (5 to 10 years).  The key to real estate success in our area is selection, not timing.  Get professional help.  Select carefully.

Steve TenBroeck

   

Recession?

1-10-08  The stock market is clearly predicting a national recession later this year as most indices have had their worst drop to start a year ever.  What does this mean for local real estate, if anything?  Likely it will mean lower interest rates which will stimulate the local real estate market.  Watch the local Silicon Valley economy (currently very strong), and in particular hiring and layoffs, to determine if a national recession slows the local economy and real estate market.

Jeff Stricker

Relearning an Old Lesson the Hard Way

1-6-08_  Carol Lloyd’s Sureal Estate column in today’s business section of the SF Chronicle gives some excellent examples of what we’ve been talking about this week (regarding drawing conclusions from regional or city-wide sales statistics).  Folks are amazed to find that there can be multiple offers in one neighborhood while in an adjacent neighborhood sellers can’t find a buyer, regardless of how many times they drop their asking price.  This is the point in the real estate cycle when people painfully rediscover what is really meant by “location, location, location”!  That old advice to buy the worst house on the best block you can afford is still the best.

Steve TenBroeck

More on the Local Housing Market

1/3/08  The year starts with the biggest first-day-of-the-year stock market drop and $100 per barrel oil.  What does this mean to the local real estate market?  Not much unless it leads to contraction of the local Silicon Valley job market, leading to reduced buyer demand for real estate.  Watch Valley job levels and regional consumer confidence as leading indicators of where the local real estate market is heading this year. 

A final comment about following national and state real estate statistics:  They are about as effective in understanding the local real estate market as a national or state weather prediction is for predicting local weather.  The chance of their accuracy in your area is minimal.  The Bay Area market, more often than not, behaves differently than the rest of the country.  Our local economy and lack of housing supply are unique. Jeff Stricker

A New Year Resolution

January 2-  Silicon Valley tech stocks were up by 20% on average in 2007 versus 10% for the Nasdaq!Is it any wonder that our local real estate sales were robust and prices went up?  The number of completed sales was down due to a lack of sellers, not a weak market.  Of course, the real estate market was very different (i.e. weak) elsewhere in California.  Resolve in the New Year to ignore state and national real estate statistics.  All meaningful real estate analysis is local in nature.  Jeff Stricker

December Confidence Index Released

The Conference Board released their December Consumer Confidence Index today.  Although confidence in the economy hasn’t worsened (it’s actually up just a tick), consumers are still pessimistic about the future.  How this continued malaise will affect the local housing market remains to be seen.  In the past, whenever confidence dropped the number of sellers increased and the number of buyers decreased.  So far, this has not occurred, locally.  Obviously, homeowners in our area do not need or want to sell.  Inventory of homes for sale has remained at an all-time low this year.

Steve TenBroeck

Finally Beginning to Get It?

At last, some Mercury News reporters have caught on to the fact that when the median and average prices for homes in Santa Clara County are rising or falling not all homes are moving in the same direction.  They have at least been able to distinguish expensive homes from low-priced ones.  What about: condos versus single family homes?… homes on busy streets? …a home’s condition? …good vs.bad floor plans, etc.?  Homes are obviously not homogenous and therefore they appreciate/depreciate at different rates.

Jeff Stricker

Prepare Your Home For the Highest Sales Price

Beware what you read on the web.  Recently an Internet based real estate company examined their sales and concluded that vacant homes sold for less, and conversely occupied homes sold for more.  Wait a minute!  Could it be that the vacant homeowners were more motivated and therefore sold for less?  Or was it because they were using an on-line discount brokerage and shortcutting the preparation and marketing?  Were they too cheap to stage the vacant home so it looked like a model home?  We find that vacant and staged homes definitely sell for the most money - as they are easy for agents to show and show nicely to potential buyers.

Jeff Stricker