Let me start with the good news---homes are still selling---they are just not selling at the pace they were 3 months ago. What a difference 90 days makes. Much has changed since the start of the sub-prime and liquidity crisis. It disrupted financial markets, made obtaining jumbo loans more difficult and most importantly changed the confidence factor among potential buyers.
As we review the month of September certain trends (based on residential single family and condo properties) become evident. With few exceptions median and average sales prices have not changed much from last year at this time. The big winners are Marin, San Francisco, San Mateo and Santa Clara counties with gains both in median and average sales prices compared to last September. They have been buoyed by the upper end of those markets being the most active of price ranges. Alameda, Contra Costa and Sonoma counties were off 1-4%. It was Solano that has been hit the hardest with prices down by 12%. Prices have held surprising well.
Absolute inventory numbers vary widely compared to last September. Marin (-13.5%), San Francisco (-5%), and Contra Costa (-6%) were all down from last year at this time. Probably the cause for San Francisco and Marin prices doing well. Sonoma county was flat. Alameda (+8%), San Mateo (+9%), Santa Clara (+12%) and Solano (+11%) were all up compared with last September.
The most significant trend is that pending and sold properties have declined sharply compared to last September. Pending sales by county were off anywhere from 19-43% and closed sales varied from 30-56% off from last September. This was a deep slide given that absolute inventories had not increased hugely and in some cases decreased from last year. Here are the numbers by county—first number is percentage off on pendings and the second is by closed sales: Alameda (-42%/-56%), Contra Costa (-45%/-51%), Marin (-34%/-41%), San Francisco (-19%/-30%), San Mateo -30%/-34%), Santa Clara (-40%/-46%), Solano (-43%/-61%) and Sonoma (-34%/-42%). As Sam Zell, the billionaire property developer and owner said, we don’t have a liquidity crisis we have a confidence crisis. The confidence crisis has had a meaningful effect on our markets. As noted above it usually takes large increases in inventory to prompt sales to fall drastically. This was not the case this time around.
With fewer sales, months supply of inventory has swelled. Most counties find themselves in a buyers’ to a strong buyers’ market environment. Only San Francisco at 4 months supply is still in a balanced market. Marin (6.9) and San Mateo (6.3) counties are on the edge of a balanced and buyers’ market. Alameda (10.7) and Santa Clara (9.1) are in a buyers’ market. Contra Costa (15.3), Solano (18.3) and Sonoma (12.3) find themselves in a strong buyers’ market. Cities within these counties can vary widely. There are number of examples of cities or areas within counties that could still be in a sellers’ market when the overall county finds itself in a balanced or buyers’ market. Or conversely a city or area could be in a strong buyers’ market when the county market is balanced. These numbers could change quickly if a number of sellers decide to take their homes off the market or fewer sellers decide to go on the market to replace listings that have been sold. These numbers have gone up quickly over the past 60 days. As we head toward the end of the year my guess is they will subside.
In spite of the current conditions nearly thirty percent of our sales the past week were involved in multiple transactions. The majority of the multiple offers received two offers. There were two notable transactions, one in the Central Sunset area of San Francisco that received six offers and went 7% over and another in Sonoma listed at $1.395 mil. and garnered 4 offers and went well over list. Again price is critical. In both of these cases the homes were priced exceptionally well. In the case of the Sonoma property, the seller between the time the property was listed and the broker’s open, reduced the price by $100,000. They would not have been in a multiple had they not changed their pricing strategy. Most properties selling in today’s environment are selling shortly after they come on the market or after significant price reductions. The others listings are just sitting.
Open house traffic has slowed. Attractive new listings are still seeing good numbers of buyers. A 3 bedr/1 ba. listing in the Cow Hollow area of San Francisco had a 100 groups through. It has been reported recently that many of the buyers visiting open homes are just beginning their search. This bodes well for the new year as many of these buyers will be prepared to buy.
Hopefully, with more good stories about the economy like the one at the end of last week reporting that employers actually added more jobs in August than previously reported; that there was positive job growth in September; and that unemployment is still at a low 4.7% will bring a greater degree of confidence that we are not slipping into a recession. It will take a while to unwind the damage of the sub-prime fiasco. The good news is that the economy is moving forward and a good deal of the bad weather has passed.
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