Market Flash

FINGERS CROSSED? YEAH, US TOO

First it was a sigh of relief, then it was a breeze, now it is a roar. Never mind new housing starts, the Federal Reserve, Case-Shiller or the exchange rate with the Chinese Yuan; nothing can stop spring in California!

Statistics:

Statewide: The median resale price of a single-family detached home in California for April was $403,870, a decrease of 32% from April 2007 and 2.6% from last month; but sales activity has increased 2.5% year-over-year. Unsold resale inventory represented a 9.2-month supply, compared to 11.3 months (CAR’s revision; we said ten months at the time) for the same period a year ago. Median number of days till sale was 52 in April, down from 53 for April 2007.

Alameda County: The spring surge catapults Alameda County sales securely into four digits – not quite to the levels of a year ago, but the best total since August. Little slices have been disappearing from the median and add up to a decline of about $100,000 since November.

Contra Costa County: Sales are actually better than they were a year ago while median year-over-year has declined by more than a third.

El Dorado County: Encouraging when you look at the whole picture. Sales, which have been between 130 and 180 for almost every month of the last year, are now smack in the middle of that. While median is declining here as elsewhere, it has only shed a respectable $50,000 since April 2007.

Marin County: Sales are two-thirds of what they were a year ago but are also twice what they were in January. Median for the year has oscillated between $750,000 and $950,000, so the current $800,000 is not bad; and it is also the high median for the month.

Monterey County: Only a slight decline in median for the month. Sales somewhat make up for it with a 50% increase for the month, putting the sales total over 200.

Napa County: Looking pretty good, in a fast rebound from the results of January and February. Both median and sales are at roughly 90% of April 2007 levels, and just as it does in Monterey, this looks somewhat like new money from outside the county. If the wine country is catching its breath, we are glad, because it was suffering – along with the rest of the regional second-home market – for a while.

Nevada County: This county too has weathered a slump, as both sales and median climb back through the levels of last November. Sales are poised to return to triple digits if the recovery of the regional market continues.

Placer County: Median is sliding gracefully, but recent strength in sales and a sales increase of almost two-thirds year-over-year makes Placer County one of this month’s standouts. Actually, the whole Sacramento/Tahoe region is looking like itself for the first time in well over a year.

Sacramento County: Sales year-over-year more than double – a distinction that Sacramento County shares only with San Benito County. Median has declined smoothly every month since last May, but it has still only lost about a third for the year.

San Benito County: After all its struggles, this county comes out on top with a year-over-year sales increase of almost 110%. That comes at a cost of $200,000 loss in year-over-year median, but prices should pick up as the market recovers generally. Sales have not been this high since the summer of 2006.

San Francisco Bay: Median stayed almost steady from March to November 2007, but since then has declined every month and lost almost $110,000 in six months. Sales, on the other hand, are climbing enthusiastically and totaled over 6,000 for April, after being stubbornly below that since the beginning of September. Prices are finally finding the level that will bring buyers back into the market.

San Francisco County: A 50% leap in sales month-to-month means that this county’s sales have actually increased – by a sliver – year-over-year. Considering that year-over-year median has declined by a trivial 3%, we have to say that San Francisco County is in good shape.

San Mateo County: Sales are coming back smartly but still are not quite at the level of a year ago, while median (broadly speaking) has declined steadily since last July and will now have to climb back up through the magic $700,000 mark.

Santa Clara County: Santa Clara County sales are once again showing formidable volatility, nearly doubling month-over-month and climbing from three figures into a firm four figures. Considering that year-over-year median has only declined by about 12%, this is a strong showing that may continue to broaden.

Santa Cruz County: Spring is the prettiest time of year in Santa Cruz and guess what? The county had April’s best month-over-month results for both sales and median. Year-over-year median declined barely more than 10%.

Solano County: A big month-to-month jump brings sales almost within reach of the April 2007 figure. Median has been declining steadily since its recent peak in May and is down $110,000 year-over-year. Again, this looks like a county finally finding the price point attractive to prospects.

Sonoma County: A big jump for the month brings sales even with last July, although they are still a couple of hundred below the 2005-2006 average. Median seems to be perking up a bit and if this recovery keeps going, Sonoma will really be back on track.

Yolo County: Median is down $120,000 or about 40% for the year. But Yolo picked up 40 sales last month for its highest sales total in our records, which go back to 2006.

Interest Rates*: Thirty year fixed 5.95%, 5/1 ARM at 6.18%, 30-year fixed jumbo at 7.18%. The consensus seems to be that, largely because of Ben Bernanke’s understanding of deflation and macroeconomic fluctuations, the Fed has done an excellent job so far of balancing the demands (and they are demands) of lending and of inflation. The “crisis,” or more exactly, the acute phase of the current economic correction, may be largely behind us. But lenders are not about to go out on a limb in the way that they did two and three years ago; apparently, if you want a jumbo loan right now, you will need flawless finances and the longevity to back them up.

Inventory: Sales go up, inventory goes down. That said, we are still looking at a nine-month supply overall, which should be plenty for everybody. If sales keep up April’s pace all the way into summer, though, we may see short inventories as a material factor for the first time in a couple of years.

Overall Assessment: It is June, the weather is warming up and the real estate market appears to be doing the same. Prices have stabilized in many areas, affordability has increased for many individuals and inventory is still strong. All of these factors seem to indicate one thing – that now may be one of the most opportune times in years for fence sitting home buyers to jump into the market before housing begins to swing back up.

*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 June 6, 2008, the “Agency Jumbo” rates are as follows: 30-year fixed with one point is 6.25%, the 15-year fixed with one point is 5.875% and the 5/1 ARM with one point is 5.375% for loan amounts up to $729,750.

Resale Activity by City

MARKET FLASH – APRIL 2008

LOOKING FOR SIGNS OF SPRING

After several months of reshaping, there are glimmers that the Northern California real estate market is “stabilizing.” While the medians continue to move around, sales have pleasantly picked up in many areas. What does this mean? Well, while we don’t have a crystal ball, we look at the fact that our government has taken steps to try and boost the residential housing market and that buyer and seller expectations are starting to get more in line with the realities of today’s market. The arrival of spring, a traditionally strong season for real estate, has brought with it a sense of optimism too. Combined with historically low mortgage rates, increased conforming limits and plentiful inventory in many areas, the timing may be just right for those looking to enter the real estate market or “move up” to another home.

Statistics:

Statewide: The median resale price of a single-family detached home in California for February was $409,240, down almost 5% for the month and over 26% from February 2007. Sales activity decreased 28.5% from a year earlier. Unsold resale inventory represented a 14.3-month supply, compared to 8.2 months (CAR’s revision) for the same period a year ago; median number of days till sale was 69 in February, up from 66 (CAR’s revision; we said 70 at the time) for the month a year earlier.

Marin County: Median is better than most – meaning, still at a level that it has visited within the last two years – but, even after a February up tick in sales, activity is below the 200 level that seemed ironclad only last fall.

Monterey County: Median and volume have been flat since December, but both are below historical averages.

San Benito County: Median has slid in a year from almost $600,000 to barely over $400,000. Sales are at last February’s level, but at less than half of their peak last July. Sales may recover when summer comes.

San Francisco Bay: Thanks to pockets of strength within the region, median has declined only about 12% for the year; sales year-over-year are down by over a third.

San Francisco County: A bright twinkle as the county’s sales in February were 380 to 375 a year earlier, while median was about $738,000 to last year’s $749,000. Exceptional proportions of cash buyers and overseas buyers are lifting San Francisco serenely above the general turmoil.

San Mateo County: Hard to tell at the moment, because Dataquick has released two vastly different figures for February median. Taking the optimistic one, we find that the county median has declined only a bit over 3% for the year – but sales are half what they were this month a year ago.

Santa Clara County: Santa Clara County’s sales total cycles through several months of four digits, followed by several months of three digits. Right now we are in three digits, not surprisingly, but this summer we may see a switch to four. Median, at $660,000, is barely below last year’s $685,000.

Santa Cruz County: In a recovery from last month, Santa Cruz median jumped almost $100,000 to a sort-of-reasonable $631,000 – only about 5% below last February. Although we don’t have a sales figure for February 2007, we’re guessing it was roughly 200, and now it is 40% of that.

Interest Rates*:

Cutting benchmark interest rates again and again, the Fed – at least temporarily – gives clear priority to helping domestic lenders at the possible expense of international investment; as we’ve been saying for years, this is a balancing act that the Fed may have the leverage to carry off intermittently, but it can’t be sustained forever. To quote (once again) the CAR’s formidable Chief Economist, Leslie Appleton-Young: “The…recent action to reduce the federal funds rate will have little near-term direct effect on the housing market, [but] should result in more favorable real estate finance rates as we move through the year.”

Thirty-year fixed mortgages are exactly where they were last April at 5.81%, 5/1 ARM is at about 5.8% and 5/1 jumbo ARM is at about 6.6%. Rates remain attractive, qualification is a little more difficult and it will probably be much later in the year before the situation changes materially in any direction.

Inventory

In almost all cases, hardly even worth thinking about. We do hear rumors about intensifying competition for really choice properties at the top end of the market.

Overall Assessment

Spring and summer are coming, and when they do, we hope that a fresh surge of interest in well-priced, well-presented properties will come with them. Warm weather and plentiful inventory may combine to exert powerful magic. Affordability is rising for some and the Northern California market glitters. Those who buy now may reap rewards for decades.

*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 April 4, 2008, the 30-year fixed with one point is 6.875%, the 15-year fixed with one point is 6.375% and the 5/1 ARM with one point is 6.125%, on non-conforming loans of $500,000.

MARKET FLASH – MARCH 2008

SPRING REVITALIZATION?

The real estate industry is abuzz with the new FHA loan limits for California finally approved by HUD. All in all, 14 California counties saw their loan limits for FHA, Fannie Mae and Freddie Mac increased to the $729,750 cap. Most were in the San Francisco Bay Area or other parts of Northern California, including Alameda, Contra Costa, Marin, Monterey, Napa, San Benito, San Francisco, San Mateo, Santa Cruz and Santa Clara Counties. The Sacramento area also saw its loan limits increase to $580,000. What does this mean for the Northern California real estate market? Increased opportunity for new and existing home buyers. The purpose of this increase in loan limits is to assist individuals who currently have “jumbo” loans (greater than $417,000) to refinance into lower and more affordable rates and payments. With the traditionally strong spring market just around the corner, the new loan limits may be just the thing to revive the Northern California market. Read on.

Statistics:

Statewide: The median resale price of a single-family detached home in California for January was $430,370, a decrease of almost 10% for the month and about 22% from January 2007. Unsold resale inventory represented a 16.8-month supply, compared to 7.6 months (CAR’s figure) for the same period a year ago. Median number of days till sale was 72 in January, up from 69 a year ago.

San Francisco Bay: Spring and summer monthly sales were 7,000 to 8,000; in September, they declined to roughly 5,000 and stayed there for awhile; now in January they have declined again, to about 3,600. After staying above $600,000 for over two years, regional median is currently at $550,000.

County Statistics:

San Francisco County: Sales for this county have shown a hectic collection of peaks and valleys as far back as we go, but 262 for January seems to be about half the recent historical average. Median, though, has fallen less than 1% year-over-year and is less than 4% below the three-year average; the typical San Francisco County buyer is probably well-off and may be international, and we have always thought that sales here can depend on a reliable core of cash (or at least high-down-payment) customers.

Alameda County: January’s 494 sales were about a quarter as many of March 2007’s recent peak of 1,840. Median was in the vicinity of $600,000 from the summer of 2006 to the fall of 2007 and since then has dropped off.

San Mateo County: January sales of 237 were down by more than half year-over-year. Median is down more than 10% year-over-year and 11% from the two-year average.

Santa Clara County: Sales in January were 628, less than half of 1,607 a year earlier; not great until we look at January 2006 with 335, or January 2005 with 423. Santa Clara monthly sales are constantly bouncing between a few hundred and somewhere over 2,000, so in context, they are typical. Median meanwhile has lost about 5% year-over-year and, perhaps more to the point, about 8% from the two-year average…not bad.

Santa Cruz County: Now what is this about, with the same county showing both the steepest drop in median and the best – or, well, “least bad” – decline in sales month-over-month? Clearly Santa Cruz will bear watching, as is often true. Median has lost almost 20% from the two-year average and sales are down to double digits.

Interest Rates*: 30-year fixed, 5.90%; 15-year fixed; 5.27%; 5/1 ARM at 5.03% is showing an awfully big discount from 30-year fixed, since not long ago the two rates were almost comparable (remember how we kept complaining?). Nonconforming loans are obviously a different story with 30-year fixed at 6.88% and 5/1 ARM at 5.68%. Rates were headed for the sky for most of January, but the new pegging of the Fed funds rate at 3% – including, bear in mind, the biggest single cut in the history of the rate, 75 basis points in one swoop – will let lenders keep loan rates attractive.

Inventory: Once more with feeling: “In many areas, inventory now and probably for the rest of this year, simply does not have to figure into deliberations.” True last year, true now.

Overall Assessment: Last year we said, “Loans are easy to get and cheap, bargains are plentiful, and those who buy now may reap the rewards of their good luck for years or decades.” Let’s edit that for the new reality: With the conforming loan limits increased through the end of 2008 and bargains almost everywhere, those who buy now will enjoy the comfort of a roof over their heads and a historically strong, long-term investment. A home is an asset and the comfort and security that it brings offers incomparable stability to an entire household. Those wishing to buy a home owe it to themselves to consider the long-term benefits – there may be no time like the present to act.

*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 March 10, 2008, the 30-year fixed with one point is 7.25%, the 15-year fixed with one point is 6.375% and the 5/1 ARM with one point is 6.625%, on non-conforming loans of $500,000.

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.

The Housing Market Revealed

Could Demographics Be the Secret?

If we could see into the future, it would certainly be easier to make those life-changing decisions that keep us up at night. Where is the housing market headed? Should we buy now, or would it be better to wait a couple of years, in case the bubble bursts? While no one has all of the answers, there are predictors we can use to make an informed decision.

The current real estate expansion began when mortgage interest rates fell into the single digits, making housing much more affordable. While this certainly has contributed to home sales, there are additional causes we can isolate. Dr. David Lereah is a best-selling author and the Chief Economist for the National Association of REALTORS (NAR). In a recent interview, Dr. Lereah revealed, "The biggest factor that affects real estate today, and has made it immune to some cyclical changes in the economy, has been demographics." Here's why:

The "Baby Boom" Generation ?
This generation is the largest so far, and their impact has been felt across the nation. Now that Baby Boomers have reached their peak earning years, they are purchasing larger primary residences as well as vacation homes and investment properties. The statistics for 2004 reflect this trend, with 36% of all home sales going toward second homes.

Immigration ?
There has been a large influx of immigrants over the past three decades. According to Lereah, it typically takes at least a generation for immigrants to become fully active in the home buying market.

Children of Baby Boomers ?
This generation, the second largest ever, is now in their twenties and looking to purchase their first homes.

Retirees ?
While the demand for housing is expanding, the supply is decreasing. With advancements in medicine and treatments of diseases, retirees are living longer. This means that they are occupying their homes for more years, which decreases the supply of homes available for purchase.

So if the current market can be explained primarily by the factors we just discussed, how do we know whether it will continue to thrive? Dr. Lereah says, "We are in the Golden Age of Real Estate." Even if the economy should slow and interest rates increase slightly in the coming years, the demand for houses is still strong. The biggest impact that such a change would have is to decrease the rate of price appreciation. The media likes to refer to the real estate boom in terms of bubbles and balloons. In keeping with that analogy, Lereah indicates that local markets may react to higher interest rates by letting some air out of the balloon. The double digit price appreciation we've experienced may decrease over the next year or two to a more typical 4-6% range. This is still a higher rate of return than found in the stock market, all things considered.

OCTOBER MARKET FLASH

Time to Take Advantage

Intro:
The fall season, a time which beckons change, is here. For eager home buyers and sellers wishing to make a change before the New Year, now is the time to take advantage. Despite what is being reported in the news media, real estate in Northern California remains a strong investment and the opportunities are out there. Interest rates remain steady and the demand for well-priced homes remains strong. Read on.

Statistics:

Statewide:
C.A.R. reported the median resale price of a single-family detached home in California for August as $588,970, a 2% increase over the revised $577,300 median for August 2006. The August 2007 median price increased 0.5% compared with July’s revised $586,030 median price. Sales activity year-over-year decreased 27.8%, which is less than last August. Unsold resale inventory in August was sufficient for 11.8 months, compared to – we said 6.8 months a year ago, CAR claims 5.9 months now – of a year earlier. Median number of days till sale was 56, up from 51 a year earlier.

County Statistics: Click Here

Bay Area:
August median price, at $655,000, is down a sliver for the month, up a respectable 4% for the year. Sales activity is down 25% for the year, about mid-pack. Alameda and Contra Costa counties are holding their medians well. They remain two of the more affordable counties in the Bay Area, with lots of attractive entry-level and move-up housing. Marin County’s huge jump in median, together with the decline in sales of over a third since last year, points to lots of top-end and all-cash purchases. Monterey County median leads this month’s pack for month-to-month, but activity is down almost 38% for the year. Napa, Sonoma, and Solano Counties are showing declines in both median and activity. Some of this may be attributable to a very weak second-home market. San Benito County’s roughly 9% decline in median puts it near the middle of the pack. San Francisco County’s median price continues strong and its year-over-year decline in sales, at less than 14%, is actually the smallest dip for this month. We suspect that cash purchases, and purchases by overseas buyers, are playing a role here as they are in Marin. Santa Clara County’s median price took a slight leap between March and April and since then has been in the range of $713,000 to $720,000, which may be able to hold in the face of generally weak medians; sales activity is down almost 35% from last year. Santa Cruz County’s $669,500 median has dropped from last month’s $720,000, near its historic high.

Sacramento/Capitol Region:
Five zip codes – Granite Bay, part of Auburn, and three areas of Sacramento – had improved medians for August. In sales, Loomis more than doubled year-over-year; Granite Bay was the only community to show an increase in both sales and median; Shingle Springs and parts of Roseville, Sacramento, and Rocklin also posted better sales. El Dorado and Placer Counties are holding their own while Sacramento County continues to experience declines in its median, both month-over-month and year-over-year.

Interest Rates*:
Thirty-year fixed rates are 6.82% nationally, but edging up on 7% in California; other statewide figures are 6.59% for conforming 15-year fixed and 6.21% for conforming 5/1 ARM.

Inventory:
Still plentiful in many areas throughout Northern California. As usual, San Francisco and the Peninsula could always benefit from an increased selection of homes.

Overall Assessment:
With an increase in inventory, emphasis is on curb appeal and staging. Bargain hunting may still be difficult. Prices have cooled in many areas, but sellers still want acceptable return on investment. Remember that a residence is a long-term purchase and that finding the right one is a well-rewarded effort.

*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 October 1, 2007, the 30-year fixed with one point is 6.75%, the 15-year fixed with one point is 6.25% and the 5/1 ARM with one point is 6.375%, on non-conforming loans of $500,000.

SEPTEMBER MARKET FLASH

IT’S ALL IN THE DETAILS

The Northern California real estate market continues to hold steady. Overall, median home prices remain strong and inventory remains plentiful in most areas. Many home buyers and sellers are realizing that in order to successfully buy or sell a home, they have to meet at middle ground. This market has its advantages for home buyers and sellers. Read on.

Statistics:

Statewide:
The median resale price of a single-family detached home in California for July was $586,030, an increase of 3.2% over July 2006, but down from the previous month. Unsold resale inventory represented a 10.7 month supply, compared to 7.3 months for the same period a year ago. Median number of days until sale was 52 in July, up from 48 for July 2006.

Bay Area:

Note: Please Click on the table for a larger image




Many parts of California seem to be leading a charmed life. Of the 13 regions we now track – and incidentally, hello this month to Alameda and Contra Costa Counties – eight have improved year-over-year medians, from Santa Cruz County’s almost 1% to the Bay Area’s almost 7%. Strong prices are concentrated in the most affluent and most developed areas; Northern California as a whole is down almost 10%, which means the rural counties (including the ones we don’t track separately) have to be taking the brunt of the decline. What’s happening is a readjustment in the banking and lending industries, not a recession.

Sacramento/Capitol Region:
Pollock Pines is this month’s Capitol Region standout with sales up 57%, although the median has declined 6.6%. Sales have also increased in Carmichael, Davis, El Dorado Hills, Loomis, Truckee and some areas of Citrus Heights, Roseville and Sacramento proper. Sales are steady in Antelope, Granite Bay and parts of Rocklin and Sacramento; overall, sales are level or better in 18 of the region’s zipcodes, out of 58 with 10 or more sales for July.

Interest Rates*:
The financial community was waiting for the Federal Reserve to cut the Federal funds rate, the most fundamental rate over which it has influence. Instead, the Fed left the funds rate at 5.25%, where it’s been for a long time, cut the (slightly higher) discount rate instead, but then said to the lenders, “C’mon, guys, save yourselves a little money by borrowing directly from us instead of from each other.” This self-promoting behavior from a famously conservative organization is mildly weird, and the upshot is, the funds rate is still at 5.25%, prime is still at 8.25%, and the Fed seems to be protesting deep concern while really not changing very much.

News Media:
Seemingly preoccupied with a single issue – even though subprime lending represented only a sliver of the national assets. Our advice to you is: read, analyze and form opinions.

Overall Assessment:
Not, perhaps, one that you would find elsewhere. We assess this as a market that, although diminished in size, retains some advantages. Since mortgages are now more difficult to qualify for, buyers who walk in ready to arrange loans will be financially solid. Solid buyers, in turn, will appreciate the wide selection that can be made. Remember that the reshaping of this market may have broader implications for potential sellers than for potential buyers. This is a time when care in preparation can make a crucial difference; a fixed-up house will sell more easily than a fixer-upper, staging is more worthwhile than ever and curb appeal is paramount. Discerning buyers are looking for standouts. Buyers and Sellers will all find that success is in the details…because successful details add up!

*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 September 4, 2007, the 30-year fixed with one point is 7.125%, the 15-year fixed with one point is 6.875% and the 5/1 ARM with one point is 6.625%, on non-conforming loans of $500,000.

AUGUST MARKET FLASH

HOLDING STEADY

Intro: The Northern California housing market continues to see median prices rise as sales decline, a sure sign that the top end of the market is keeping itself healthy with cash. The fact that medians are holding steady or increasing year-to-date is proof of the strong desire to live, work and play in the region. Read on.

Statistics:

Statewide: The median resale price of a single-family detached home in California for June was $594,260, an increase of about 3% over June 2006 and essentially flat for the month. Unsold resale inventory represented a 10.1 month supply, compared to 6.1 months for the same period a year ago. Median number of days till sale was 52 in June, up from 46 for June 2006.

Bay Area: June median price, at $842,600, is down a little over 1% for the month but still up over 5% for the year; sales are basically flat for the month and down about 21% for the year. San Francisco County median is a remarkable $930,000, almost 5% shy of last month’s record; sales are down 21% year-over-year. Santa Clara County median of $865,000 is flat for the month and up almost 6% for the year; sales are down 1.5% for the month and 18% for the year. Santa Cruz County sales activity rebounded 10% since May, the best showing this month, but is down 22% year-over-year and medians are essentially flat. Monterey Country and region medians are respectable, a little better than level, for both the month and year; sales activity is down 29% for the region and 36% for the County. Sonoma County’s median is 2.4% lower than last year’s, with sales down about 21%. Finally, San Benito County’s median is holding steady while sales are down over 30% for the month and over 60% for the year.

Sacramento/Capitol Region: Sales have increased in some areas of Sacramento proper and parts of Woodland, as well as Davis, Pollock Pines, El Macero and Fair Oaks. Median prices have increased in Rio Linda, Sloughhouse, Lincoln, Loomis, Galt and parts of Sacramento and Roseville. Regionally, year-over-year medians have declined 8.5% while sales have lost 26.5% since June 2006.

Interest Rates*: Thirty-year fixed at 6.87%, 15-year fixed at 6.51% and 5/1 ARM at 6.09%. Now, just as a year ago, the question is one of keeping the economy warm, but not letting it overheat and slip into inflation. The New York Times recently commented, almost wistfully, that at a time like this the famously opaque Mr. Greenspan would have been juggling rates to stimulate the economy, but the oddly laconic Mr. Bernanke may hold the line and let market forces do their best – or worst. After such a long period of a steady Fed funds rate, even a cut from 5.25% to 5% might have symbolic value far beyond its actual impact.

Inventory: In most areas, inventory is not an issue – although there are pockets throughout the Greater Bay Area – San Francisco and Peninsula communities included – that could always enjoy more supply.

Overall Assessment: Seize the day! Sellers should paint, polish and stage to their hearts content; Buyers may have these choices only once in a decade. Mortgages are more expensive and (alas) more difficult to get than we wish they were; but a clear shot at your dream house may be worth the bother of a refi down the line. Northern California is one of the world’s best places to live and not much could change that.

*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 August 1, 2007, the 30-year fixed with one point is 6.750%, the 15-year fixed with one point is 6.500% and the 5/1 ARM with one point is 6.250%, on non-conforming loans of $500,000.

Best Priced Duplex in Willow Glen

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.

Market Flash

JUNE MARKET FLASH

ONE MARKET, MANY CHARACTERISTICS

Intro:
Summer days are just around the corner and as the weather warms up, so does the Northern California real estate market…in certain ways at least. While sales have slowed in comparison to last year, median prices continue to rise – making home investments even more valuable – and most areas are enjoying an abundant supply of available homes for sale. One aspect of the market that is certainly heating up is the million-dollar plus home category where sales are swift. This is one market with many different characteristics. Read on.

Statistics:

Statewide:
The median resale price of a single-family detached home in California for April was $597,640, an increase of 6.2% over April 2006 and 2.1% from last month; but sales activity has declined almost 28% year-over-year. Unsold resale inventory represented a 10-month supply, compared to 5.7 months (CAR’s revision) for the same period a year ago. Median number of days till sale was 53 in April, up from 42 for April 2006.

Bay Area:
April median price, at $843,710, is improved by 7.4% for the month and over 9% from April 2006; sales are down by almost 8% for the month and 19% compared to a year earlier.

The Santa Clara County median price of $868,410 is up 4.6% for the month and a strong 12.1% for the year; sales are down by a hair for the month and 17% from April 2006.

Santa Cruz County, at $744,000, is up 3.5% for the month, 4.5% for the year; sales are down a bit for the month, but almost 25% for the year.

San Benito County median of $587,000 is down slightly over 4% for the month.

And we are adding! – Sonoma County with a current median of $515,000, down slightly for the month but a little over 9% for the year. Sales have decreased almost 17% for the month and almost 24% year-over-year.

Monterey County and region median prices are quite strong with increases of 12% to 13% year-over-year; activity is down for both, with the County at a 36% drop from last year. Perhaps even more than in other regions, rising medians and falling activity mean that entry-level and midrange buyers are constrained by availability of financing, while the million-plus level is doing fine.

Sacramento/Capitol Region:
Led by an 80% sales increase for El Macero, 14 communities and areas showed sales growth in April, including Carmichael, Fair Oaks, Folsom, Lincoln, Pollock Pines, Rio Linda, Truckee, and parts of Roseville and Sacramento. In terms of medians Davis, Elk Grove, Rancho Cordova, Rio Linda and parts of Auburn and Sacramento showed a tiny increase. DataQuick reports meanwhile that regional escrow closings in April were the lowest since 1995. Median prices for new and existing homes ranged from $288,500 in Yuba County to a high of $458,500 in Nevada County, reflecting an overall decline in medians of 3.3% – about the same as 3.4% for Northern California as a whole.

Interest Rates*:

Thirty-year fixed at 6.41%, 15-year fixed at 6.06%, 5/1 ARM at 5.81%. (These may seem high, but we have switched sources for these figures, because many readers felt that the rates we reported were unrealistically low.)

Rates are still attractive although they have gone materially higher in the last couple of months; 6% fixed rates, which not long ago were regarded as a “psychological barrier” are now firmly established and may actually have a slight chilling effect on the market.

Inventory:

There are homes for sale in nearly every neighborhood, at nearly every price point, throughout Northern California. That said, by far the hottest market is million-plus, where the most desirable properties may visit the market for 14 days or even fewer. For the most part, buyers at entry level, in the midrange or in the “ordinary luxury” market, should have an adequate supply of homes to consider.

Overall Assessment:

A situation so complicated that experts are saying, with almost complete unity, “This is not one market; it is a whole bunch of tiny local markets each with its own characteristics, and you have to approach it that way.”

*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 May 29, 2007, the 30-year fixed with one point is 6.25%, the 15-year fixed with one point is 6.00% and the 5/1 ARM with one point is 6.125%, on non-conforming loans of $500,000.

Bay Area Home Sales - April 2007

As we head into the summer period and schools are beginning to wind down for the year, we are seeing the usual increase in inventory. Expect further increase in early summer, as is typical of our cyclical market. There is still no real indicator of a trend happening that is extremely dynamic.

We are part of an area where jobs are very strong and the ability to buy a house is high. The housing affordability index is now at 25% for California (up from 14% no so long ago). This is greatly due to prices decreasing in outlying, less desirable areas of the state. More particular to our local areas would be folks who are deciding that it is time to invest their fortunes in real estate. When one gets a roof over his/her head, stability, and a tax write-off, sooner or later one realizes the excellent investment that real estate is.

A common pattern across all counties in the report, Bay Area Homes Sales, is days on market decreasing. Last year was a slower year and homes tended to take more time to actually sell. This market has been stronger than last year's market. Inventory that sat around from last year should now all be absorbed. Look for the number of days on market to decrease even further.

San Mateo County boasts the highest percentage of list price received at 101.18% average! Santa Clara County is now averaging 100.36%. In all areas reported, since last month, single family home prices have increased, with exception of San Benito County. The average price of condos has decreased in all counties reported, with exception of Santa Clara County

Market Flash

A LITTLE SUNNY WEATHER

Medians are just about holding and the whole situation with the residential market feels more moderate than it did last summer. It will be interesting to see what happens when spring comes, but over a lot of Northern California, the sun is shining even now. Read on.

Statewide: The median resale price of a single-family detached home in California for December was $567,690, up 2.2% for the month and 3.7% over December 2005. Unsold resale inventory represented a 6.8-month supply, compared to 3.6 months for the same period a year ago. Median number of days till sale was 73 in December, up from 43 for the month a year earlier.

Bay Area: December median price, at $725,900, is about 2% below last month and 2% higher than the December 2005 figure. The Santa Clara County median price of $734,950 is almost 5% lower than last month but roughly level with last December’s figure. Santa Cruz County’s median is down a bit for the month. Monterey County’s year-over-year median shows about a 5% decline, but the region is more resilient at a little over 1% down. San Benito County median was $579,000, up 1.5% from a month earlier but down 11% from December 2005.

Sales activity is generally down, with the Bay Area off almost 14% from last year’s high. Santa Cruz is the only County actually posting an increase, of almost 9% for the year. Santa Clara County is down 14.9% and Monterey County is down 16.6% for the year. Sacramento region, compared to December 2005, shows a decline in activity at 25.6%…but that is much better than what the region was doing over the summer.

Sacramento/Capitol Region: Sacramento median price, at $362,660, is down 4.3% from this time last year. Davis, El Macero, Folsom, Pollock Pines, Shingle Springs, Sloughhouse and parts of Rocklin, Roseville and Woodland are up.

Interest Rates*: After climbing jaggedly for almost two months, 30-year fixed rates at 5.85% are easing slightly, but they are still 20 basis points higher than they were at the beginning of December. Fifteen-year fixed and 5/1 ARM are identical at 5.61%. Thirty-year jumbo fixed, at 6.08%, is now unequivocally above six; when that will also be true of conforming loans is a very good question we cannot answer (yet). Many loans that can be written today are still at five-something, and historically, that is a great deal.

Inventory: While inventory is more plentiful than in years past, there is still a limited supply in areas throughout the Bay Area and even Silicon Valley. Expect inventories to pick up as the traditionally hot spring market approaches.

Overall Assessment: Consider the strategic side of home purchase – the potential impact on quality of life, the savings as affordability improves and the excitement of a selection of homes to look at. If you consider every side of the question, it is obvious that this could be a really advantageous time to buy.

*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 February 5, 2007, the 30-year fixed with one point is 6.125%, the 15-year fixed with one point is 5.75% and the 5/1 ARM with one point is 5.875%, on non-conforming loans of $500,000.

Bay Area Home Sales - December 2006

(Click Here for a Larger View)

Mortgage industry pegs 30-year rate at 6.5% by year-end

The Mortgage Bankers Association expects the interest rate on a 30-year fixed-rate mortgage to jump from 6.2 percent to 6.5 percent by the end of the third quarter, as investors lose hope that the Federal Reserve will slash short-term rates any time soon.

In a long-term forecast released this week, MBA Chief Economist Doug Duncan predicted existing-home sales will decline by about 7 percent this year compared to 2006, and that sales of new homes will decline by about 8 percent. Sales in both categories are projected to rebound in 2008 by about 3 percent and 1 percent, respectively, in 2009.

Duncan expects existing-home price appreciation to slow "significantly" over the next three years, and that median prices should remain relatively flat for new and existing homes. Price gains for both types of housing are expected to be limited to about 2 percent in 2008 and 2009.

With interest rates up and home sales down, total residential mortgage production in 2007 is projected to be $2.39 trillion, a 5 percent decline from an estimated $2.51 trillion in 2006. The Mortgage Bankers Association projects total mortgage originations will decline an additional 4 percent to $2.29 trillion in 2008 and drop another 6 percent to $2.15 trillion in 2009.

Residential mortgage originations for purchase loans could reach $1.33 trillion in 2007 and remain flat in 2008 before edging up slightly in 2009. Residential refinance loans are projected to total $1.06 trillion in 2007 before declining to $957 billion in 2008 and hitting $800 billion in 2009.

Duncan sees the unemployment rate increasing from 4.5 percent to 4.9 percent by the end of the year, but envisions real GDP growth will pick up to an average of 3 percent in 2007, 3.3 percent in 2008 and 3.4 percent in 2009.

The MBA's top economist expects the Fed to hold the short-term federal funds interest rate at 5.25 percent. With financial markets lowering their expectations of an easing in the federal funds rate in the first half of this year, long-term interest rates are on the rise, he said.

Duncan warned that the housing sector could deteriorate more than projected, with sharper declines in single-family housing starts and home sales. If the core inflation remains high, the Fed might be reluctant to bring the federal funds rate down, increasing the risk of recession.

Continued deterioration of the housing sector "could lead to a marked slowdown in consumer spending growth and threaten an economic expansion," Duncan said in a prepared statement. "If so, the Fed could start easing to prevent a recession. However, if core inflation remains elevated or even edges higher, the Fed would likely remain on the sideline, increasing recession risks. We believe the probability for this scenario to be small."

How not to run out of hot water

By Paul Bianchina
Inman News

Running out of hot water before you finish your morning shower is one of life's little irritants. If you have an electric water heater, the answer may be as simple as adjusting a thermostat or replacing a heating element.

Your first task is to check the settings on the thermostats, of which there are two on most water heaters. First, check your electrical panel and locate and shut the circuit breaker that controls the water heater – you're dealing with 240 volts as soon as you open up the water heater, so DON'T TRY AND DO THIS WITH THE POWER ON. There is, however, no need to shut off the water for this first step.

Remove the two access panel covers on the front of the water heater, which are held in place by one or two screws each. Set the panel covers and screws aside and, if present, remove the small insulation blankets inside the access areas. This will expose the thermostats, which are simply two small dials marked in degrees Fahrenheit, with a small adjustable pointer.

First, check to see what number the pointers indicate, and that both pointers are set the same. For the typical residential water heater supplying hot water for bathing, laundry and a dishwasher, the thermostats should be set between 130 and 150 degrees, depending on how much hot water you use and what your personal preferences are. At settings much below 130, you'll have a hard time maintaining a large flow of hot water, and this may be below the minimum temperature recommended by your dishwasher manufacturer. On the other hand, settings above 150 will waste electricity and increase the risk of scalding, especially for small children.

To set the thermostats, simply use a screwdriver to move the pointers until they point directly at the desired temperature. Be sure that both thermostats are set to the same temperature.

To change a water heater element, you first need to drain the water out of the tank. After shutting the power, close the water inlet valve, which is typically located above the water heater on the cold water side (the lines are marked with C and H where they enter the tank). Connect a garden hose to the drain valve on the bottom of the water heater, and route the hose to a convenient location before opening the valve. To help the flow of water coming out of the hose, open a hot water faucet near the water heater, or loosen one of the flexible water lines where it enters the water heater.

When the tank is drained, close the drain valve and remove the access panel covers as described above. Near each thermostat, you will see a fitting that resembles a large bolt head with wires attached to it. Make a note of how the wires are attached, then disconnect them. Using a special water heater element wrench, which looks somewhat like a socket wrench, unscrew the fitting and remove the element. Element wrenches are available wherever the elements are sold.

Water heater elements are rated by their wattage, and are sized to specific tanks. Your best bet is to take the old element to a home center or plumbing supply retailer and have them match you up with a new one. For best results and longest life, it's best to replace both elements at the same time.

To replace the elements, simply reverse the above procedure. Be sure that any gaskets or washers are in place, then screw the element into the tank and tighten it securely. Reconnect the wires in the same configuration as before, then replace the access covers. Make sure the drain valve is shut and that you've retightened any pipes you loosened, then open the inlet valve to refill the tank. Leave a hot water faucet open near the water heater to allow air to purge out of the tank as it fills. Once the tank is full and water is coming out of the faucet, turn the power back on. NEVER turn the power on when the tank is empty or only partially full – that's a sure way to burn out the elements.

Remember, if you're uncomfortable with any of the plumbing or electrical connections, contact a qualified, licensed plumber or electrician.

January Market Flash

LOOKS LIKE UP TO ME

Intro: If you compare the market realities of today with what they were last fall and last summer, you will see that what matters is motion, fluidity, interaction and inter-reaction. What the numbers are saying and what the trends are implying may be very different. Read on.

Statistics:

Statewide: The median resale price of a single-family detached home in California for November was $555,290, an increase of 0.7% from October and 1.4% over November 2005. Unsold resale inventory in November was sufficient for 7.4 months, up from 3.6 months (says CAR) a year earlier; median number of days till sale was 70, an increase from last year’s 39.

Bay Area: November median price, at $738,900, is up half a percent for the month and 2.2% from the November 2005 figure; a decline in activity of 11% for the month and 18% for the year – but remember those figures are relative to the unusually strong November of last year. The Santa Clara County median price of $775,000 is flat for the month and up 4% for the year. Santa Cruz County at $719,000 is down almost 5% for the month and about 9% for the year. San Benito County, with a $555,000 median, has declined 7% for the year. Monterey County and region’s medians have declined 3% for the year, which is within the scope of seasonal correction.

Sales activity is a story with some bright spots. Santa Cruz County is up 18% for the month and 9% for the year, so improved affordability has certainly counted for something. Monterey region year-over-year is down 12% in November, but it was down 24% in October and 48% in September, so do not let the general fact of a decline obscure a relative improvement in the situation. Monterey County year-over-year is down 26%, but that is only half the decline of September’s 52%. Northern California as a whole is down 9% in November compared to 14% in October, 26% in September, 31% in August. Most other Northern California regions are holding roughly steady. The numbers and the trends are telling...not opposite stories, but an equivocal story.

Sacramento/Capitol Region: Warming perceptibly. The market in resale properties, which seemed impaired last summer, is mending slowly. Looking at the list of communities and neighborhoods in the region, we find more than 25 whose medians have improved over last year. This market will take some time to bounce back, but we are betting it will not take long. Sacramento has lots of reasons to grow.

Interest Rates*: Last year we wrote “Core rates have been managed in masterly fashion for the last year and a half to two years…Most rates will probably bounce between high fives and low sixes for a while, but adjustable rates are now almost identical to the lower fixed rates – which speaks to a lack of elasticity in the system.” Situation today is much the same, except that rates are paddling around in the high fives, with only non-conforming 30-year fixed barely poking above six. 5/1 ARM is at 5.55% compared to conforming 30-year fixed at 5.72%. So far as rates are concerned, the bedrock conforming 30-year fixed can still be called “substantially under 6%” and that is cause for applause. Conforming 15-year fixed at 5.48% is an increasing favorite with baby boomers who want to pay off their houses while they have earned income to do it. Overall, rates are edging up slowly – we are sensing the complex interaction of a whole bunch of contradictory pressures – but they remain broadly attractive. If the Fed cuts rates in January or February, as many experts foresee, mortgage rates could stop inching up and start inching down.

Inventory: Mean time till sale is at 70 days and what more do you really need to know? You will have an incredible selection of compelling properties. We cannot imagine worrying about inventory at all.

News Media: Overall, reporting seems to be fair and highlighting reasons for optimism, such as normal seasonal adjustments, increasing sales and plentiful inventory for home buyers. The consensus seems to be that after the tremendous surge of increased home prices and sales a few years back, the market is now balancing out. For 2006 as a whole, the news media was surprisingly evenhanded in their take on real estate and seemed to avoid their once typical “gloom and doom” and the “bubble is about to burst” stories of recent years. The news media are grasping the fact that perceptive reporting on the market can even help to direct it.

Overall Assessment: A prospect’s attitude toward this market will depend on circumstance, but for many people, this might be the best time to buy in a decade. Long inventory means generous selection. Almost any mortgage you might want is still under 6%. Affordability is recovering as sellers price to sell. As buyers discover the interlocking advantages of this market, and if – that is, when – more buyers with more dollars chase fewer properties, the balance will tip slowly toward the seller. The message: The sooner you buy, the more chance you will give this market to work in your favor.

Home Sales To Rise Gradually Into 2008

After bottoming in the fourth quarter of 2006, existing-home sales are forecast to gradually rise through 2007 and into 2008, while new-home sales should turn around by summer, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.

Annual totals for existing-home sales in 2007 will be comparable to 2006, says David Lereah, NAR’s chief economist.

“Keep in mind that we were still in boom conditions during the first quarter of 2006 with a high sales volume and double-digit price appreciation,” Lereah said. “We are starting 2007 from a relatively low point, so even with a gradual improvement in sales it’ll be pretty much of a wash in terms of annual totals.”

The good news, he says, is that a steady improvement in sales will support price appreciation moving forward.

2006 Sales Third-Highest on Record

Existing-home sales for 2006 are expected to come in at 6.50 million, the third highest on record, with a total of 6.42 million seen in 2007. New-home sales in 2006 should tally 1.06 million, the fourth highest on record, with 957,000 projected this year.

Total housing starts for 2006 are likely to be 1.81 million units, with 1.51 million forecast in 2007, which would be the lowest level in a decade. Builders are pulling back on new construction to support prices of remaining inventory.

The 30-year fixed-rate mortgage will probably rise to 6.7 percent by the fourth quarter of 2007. Last week, Freddie Mac reported the 30-year fixed rate at 6.18 percent, far below earlier consensus forecasts.

“The current interest rate environment and housing inventory levels present a window of opportunity for potential buyers,” Lereah says.

The national median existing-home price for all of 2006 is expected to rise 1.1 percent to $222,100, and then gain 1.5 percent this year to $225,300. The median new-home price, after rising only 0.3 percent to $241,600 in 2006, is projected to grow 3.0 percent in 2007 to $248,900.

Soft Landing for Housing

“With all the wild projections by academics, Wall Street analysts, and others in the media, it appears that much of the housing sector is experiencing a soft landing,” Lereah says. “Despite the doomsayers, household wealth will not evaporate and the economy will not go into a recession. If you’re in it for the long haul, housing is a sound investment.”

The unemployment rate is likely to average 4.8 percent in 2007, following a rate of 4.6 percent in 2006. Inflation, as measured by the Consumer Price Index, is expected to be 2.2 percent 2007, down from 3.2 percent last year, while growth in the U.S. gross domestic product is seen at 2.5 percent in 2007, compared with 3.3 percent last year.

Inflation-adjusted disposable personal income should grow 3.4 percent this year, following a rise of 2.7 percent in 2006.