JULY MARKET FLASH

SUMMERTIME HEAT WAVE?

Intro: While many housing markets across the nation continue to experience a slowdown in activity, Northern California seems to be picking up here and there, in little sparks and spots. And with summer here, it might bring the year’s best season for sales. Read on.

Statistics:

Statewide: The median resale price of a single-family detached home in California for May was $591,180, an increase of almost 5% over May 2006. Unsold resale inventory represented a 10.7 month supply, compared to 5.9 months for the same period a year ago. Median number of days till sale was 52 in May, up from 44 for May 2006.

Bay Area: May median price, at $853,910, has shot up by 8.7% from May 2006 and by just over 1% for the month; sales are up by over 14% for the month (part of a pattern of April-to-May gains throughout Northern California) but down by almost 13% compared to a year earlier. The Santa Clara County median price of $858,000, this month’s high for the region, is up over 7% for the year; sales are down less than 10%, also one of this month’s better numbers...Santa Cruz and Sonoma Counties have also held their medians, but sales are down 23% and 17% respectively, from a year ago. San Benito County sales are flat and median is down about 5% year-over-year. Monterey County and region have robust medians, but the region’s sales are down just under, and the County sales just over, 30% for the year. As a nice surprise, however, sales activity for Northern California as a whole has climbed almost 7% compared to May 2006.

Sacramento/Capitol Region: Median for the month has eased as sales activity shows a gratifying jump of almost 10% since April, but sales are down by almost a third compared to May 2006. Nine communities and areas showed sales growth in May, including Davis, El Macero, Folsom, Lincoln, Newcastle, Pollock Pines and parts of Auburn, Roseville and Sacramento proper. Medians are up in several zips in Sacramento and, outside that, Fair Oaks, Granite Bay, Newcastle, Shingle Springs, South Lake Tahoe, Truckee and parts of Rocklin and Woodland.

Interest Rates*: Thirty-year fixed, take your pick, HSH.com says 6.81%, Bankrate.com says 6.29%. Fifteen-year fixed, HSH.com says 6.50%, Bankrate.com says 5.99%. They agree on 5/1 ARM at 5.95%. Some of this is traditional climb in rates before peak selling season, some reflects the disappearance of cheap loans – but these rates are still lower than they were last year at this time. We said then, “We anticipate some psychological resistance to borrowing as soon as 30-year fixed crosses 7%,” and you notice it never did? With the Fed bound and determined to keep the funds rate at 5.25%, and subprime and Alt-A loans vanishing like the smoke they were, lenders are walking a tightrope to keep rates attractive. But prime, which was 8% a year ago, is 8.25% now, so we repeat our mantra: “A fixed mortgage, even at 7%, is some of the least expensive and therefore most effective money you can borrow.”

Inventory: Unsold inventory, having doubled between May 2005 and May 2006, has almost doubled again in the last year. Improved selection will be the single best factor to emphasize when you are marketing properties.

News Media: Local real estate news is emphasizing the fact that the current market has peaks and valleys, and that sales in desirable neighborhoods are reviving. National news continues to focus on ways that the cooling of the housing market may, or may not, have a moderating influence on the broader economy.

Overall Assessment: We are calling this a holding action. At the very top end, cash customers are keeping the market hot – as indicated by the fact that Atherton had 10 sales in May. Middle-income buyers and move-up buyers may be tempted by the tremendous selection that is available, while terms of loans are still reasonable. Summer is here, prices are low, interest rates are not high and inventory is terrific.

*Area interest rates are reported to be as follows:
Sacramento/Tahoe, San Francisco Bay Area and Silicon Valley regions: Princeton Capital reports that as of July 2, 2007, the 30-year fixed with one point is 6.500%, the 15-year fixed with one point is 6.125% and the 5/1 ARM with one point is 6.250%, on non-conforming loans of $500,000.