MARKET FLASH – JANUARY 2008

NEW YEAR, NEW CHANCE

The New Year is finally here and with its arrival comes anticipation as to where the Northern California real estate market will be heading in 2008 following the adjustments seen in the market last year. After the heydays of early 2000, people came to see multiple offers, skyrocketing prices and a lack of inventory as the norm. However, real estate, like many industries, is cyclical and therefore changes are to be expected and quite frankly, are normal.

The one important thing to remember, however, is that over time, California real estate has shown itself to be a strong, long term investment. For buyers anxiously waiting on the sidelines to purchase a new home or are looking to “move up,” 2008 may be the time to do so. Many areas continue to experience generous inventory and modest prices, giving buyers the chance of a lifetime to own a piece of the highly desired Northern California real estate market.

Statistics:

Statewide: The median resale price of a single-family detached home in California for November was $488,640, a decrease of 1.7% from October and almost 12% from November 2006. Unsold resale inventory in November was sufficient for 15.3 months, up from 6.4 months (says CAR) a year earlier; median number of days till sale was 63, a welcome improvement from last year’s 68.

Alameda County: The county median is still paddling around in the “high fives-low sixes,” where it has been for the last two years. Figures for the decline in activity year-over-year and month-over-month should be taken skeptically, since a few days of sales activity were not counted for the month.

Contra Costa County: The median declined roughly another $9,000...not a lot in the context of the total. Sales in Contra Costa County – and Alameda County too – are roughly a third of what they were two years ago.

Marin County: Median has held the ground it gained in October and a little more. Sales are roughly half what they were in May or June.

Monterey County: Rebounded from last month’s low but still shows a median over $100,000 lower than its recent peak in spring 2006. We are still accumulating figures for Monterey, but sales seem to have been fairly steady since summer.

San Benito County: Something bright to report with significant improvement in sales and a real uptick in median. These are not the salad days of 2006, but we can hope that November’s changes signal a gradual return of buyer interest.

San Francisco County: Median is holding up rather nicely, since it topped $800,000 for the first time in May and is still above that. Sales are also respectable, but it is hard to discern a trend because San Francisco sales bounce around a lot – recently they were in the four hundreds, the three hundreds, the six hundreds and the five hundreds in four consecutive months. No matter what the future may hold, San Francisco remains a blue-chip area.

San Mateo County: Median has held in a narrow range for years and now, at $770,000, is still only about 5% below its top; sales in recent months have been drifting steadily lower.

Santa Clara County: One of the most difficult counties to assess because, like San Francisco, it has oddly variable sales – so that November’s sales were half of the county’s sales last December, a familiar story, but also twice what they were in July 2006, which is a lot less typical.

Santa Cruz County: After a slide in late summer, this median has regained about half of what it lost; it is not yet back up with, say, San Mateo or Santa Clara, but it is looking fairly healthy on its own terms. Sales have declined about 12% for the month, actually better than most; we do not have year-over-year sales yet.

Interest Rates*:

It is the end of the year for mortgage rates, and to our surprise, rates went up less in 2007 then they did in 2006; in fact, in 2007 they did not go up at all, until the last week of the year. Thirty-year fixed at the moment is between 5.8% and 6.1%; 15-year fixed is between 5.3% and 5.6%; 5/1 ARM, is in exactly the same range as 30-year fixed.

Inventory:

Probably little effective change, since for most counties, number of homes on the market is about the same and DOM are the same or a little longer. Of course, everything depends on location, and we cannot say whether inventory in a particular neighborhood might be a bit better or worse than it was in October.

Overall Assessment:

Buying a home in the next couple of months may be worth doing – in fact, it may offer an opportunity that will not come again soon. The one enduring truth about California’s residential market is that it is cyclical. As time goes on, more buyers with more dollars will chase fewer properties and the balance will tip slowly toward the seller. In today’s market, the educated buyer with ready financing is in a better position than ever.

*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 January 7, 2008, the 30-year fixed with one point is 6.375%, the 15-year fixed with one point is 6.75% and the 5/1 ARM with one point is 5.875%, on non-conforming loans of $500,000

Why 2008 May Be Your Year to Own a Slice of the Golden State.

The New Year is here and with it brings countless predictions by economists, industry analysts and more regarding the impending 2008 real estate market. While I don’t profess to own a crystal ball, what I can say with definite certainty is that the current market won’t last forever which is why I am here to tell you that 2008 may be your best opportunity to own a slice of the Golden State.

What You May Expect from Real Estate in 2008
Some industry analysts predict that the market will turn around in 2008 believing that the overall economy and job growth will continue to move ahead at a decent pace, core inflation will remain under control, the credit crunch in mortgage markets is showing signs of easing, the supply-demand equation will be better balanced as builders begin to whittle down their excess inventories and that interest rates will continue to be attractive.

I tend to agree with the California Association of Realtors®’ prediction that we will see a moderate decline (between three and four percent) statewide in California home prices next year.

In areas where there is little new housing, where it is hard to build and where there is a wealthy population, I believe there may be little decline. The main reason is that there is limited opportunity for new development in these areas and therefore properties are likely to retain their values.

For Buyers
The current housing market offers a unique window of opportunity for confident buyers. The exciting news is that for the first time in quite a while, the stars are in alignment for consumers: mortgage rates remain attractive and there is a large selection of homes to choose from. Furthermore, if history is any indicator, home prices in California remain strong. Thanks to these important factors, now truly may be the best time to buy.

For Sellers
Homes are selling! They may not be selling at the red hot, multiple offer heydays of 2003 and 2004, but they definitely are selling. For those that aren’t, unfortunately those sellers may not be receiving the counsel they need to get their home sold in today’s market.

Now, possibly more so than ever, you need a qualified Realtor® who can assist you in selling your home. It is usually not enough to simply post your home on the MLS and post a “For Sale” sign in the yard. You need someone who understands the intricacies, inventory and challenges of your local market and someone who knows how to properly position your home so it stands out among the sea of listings currently available.

If you are considering buying or selling your home in 2008, I have the resources, knowledge and experience to properly represent you in today’s market. Contact me today for the expert representation you deserve.