The Goldman Report- Weekly Bay Area Real Estate Market Report

The Bay Area housing market had a lift in October. Guess you didn’t read that one. With few exceptions the number of pending and closed sales in Bay Area counties was up in October over September. In most counties sales prices were up or slightly down when compared to last October. Some were extraordinarily up due to the upper ends of the market doing quite well. The counties with the lowest median and average prices took the biggest decreases. Months supply of inventory dropped from Sept. to October in every county. The good news is that some buyers are just ignoring the headlines.

Robert Toll, Chief Executive one of the country’s largest luxury home builders finally said it best in the NY Times last week. He stated the housing market is horrible in most parts of the country—he fears it won’t get better until newspapers stop saying how bad it is. Mr. Toll said this because of the large number of cancellations of contracts in his developments not due to any reasons related to obtaining financing or buyers homes not selling. He goes on to say “that they (buyers) read one too many Times articles deciding now is not the time to buy.”

Can’t wait to read how the local papers will handle the news that closed sales are up from Sept. to October. These stories won’t be written for a few weeks. I am sure they will find a way to turn positive news into a negative.

Half of our offices had at least one multiple offer. In San Francisco a third of our transactions were involved in multiples. We are not seeing the wild over-bidding. These homes sold slightly over, at or slightly under list price. Those that are in multiples are priced exceedingly well as evidenced by an Oakmont listing in Santa Rosa that sold immediately while their neighbor’s home, who has had their house on the market for a good period of time, waits for an offer. I was told that our seller shared with our listing agents that they were chosen because they were honest with their suggested pricing. Sellers need to hear the truth.

I have attached an article by Jonathan Clements that appeared in the Wall Street Journal on November 7th. It clearly illustrates the importance of pricing if a seller wants to sell in this market. It delineates the costs of not selling in a reasonable amount of time. Many sellers become stuck in the value of their home at the peak of the market. Mr. Clements points out that prices across the country on average have only dropped 4.5% from their peak in July of 2006. He also states that the average time to sell a home is 10 months nationally. That means only 10% of the listings sell per month. Those that do sell are the ones that are value priced.

Here is how each county fared for the month of October. The numbers are based on sales of single family homes and condos. As I stated above sales prices for the majority of counties did well. I will give both the median and average sales price percentages. The first number will be median and the second average. San Mateo county lead with +14%/+18.7%, Marin +8.4%/+15%, Santa Clara +7%/+11% and San Francisco +5.4%/+11%. All these counties have the highest prices in the Bay Area. This shows the strength of the upper end markets. There is a great deal of wealth in the Bay Area due to the tech industry, venture capital and export/import businesses. Alameda county (+8%/+4%) although down on median was up on average again reflecting part of the influence from the expense markets in No. Alameda county. Three counties were down Napa slightly at -2%/-.5%, Sonoma
-8.6%/-10.6%, Contra Costa -10.6%/-2% and the hardest hit county Solano at -18.5%/-23%.

Number of closed sales was off significantly year over year for October; however seven of the nine counties were up month over month. The first number given is year over year for October and the second number is month over month Sept. to October. The leader in being least off from last year is San Francisco -11%/+21.5% followed by San Mateo -33%/-1%, Marin -34%/+21%, San Mateo -38%/+9%, Sonoma -40%/+2%, Napa -44%/+31%, Alameda -46%/+8%, Contra Costa -48%/-3% and Solano -56%/-13.5%.

Months supply of inventory (MSI) gives us a picture of the type of market each of our counties are in---seller’s, balanced or buyer’s market. Three months and under is a seller’s market, 4-6 months a balanced market, 6-10 months a buyer’s market and over 10 months a strong buyer’s market. MSI is higher in every county this year compared to last year. I will note that San Francisco and Marin counties were only slightly higher than last year’s supplies. All counties were down in MSI Sept. compared to October which is a positive sign. The only county still considered in a seller’s market is San Francisco at with a 3 MSI. Only San Mateo county at 5.2 MSI is in a balanced market. Santa Clara 7.5 and Alameda 8.7 MSI are in a buyer’s market. Sonoma 10.2, Napa 13.4 and Solano 15.1 MSI find themselves in a strong buyer’s market. As a reminder these are county-wide figures. Within each of these markets there can be diversity. Meaning that in a seller’s market county you may have specific markets that have higher inventories and conversely within a buyer’s market you may find specific markets that have smaller inventories.

Like other financial markets there will continue to be volatility. We have a broad variety of markets. One trend is clear, that our first time buyers markets are most challenged and that our upper end markets appear to have strong resilience. This market offers great opportunity for buyers in those markets with large inventories. There is still plenty of mortgage money out there; however qualifying for loans will be stricter. Actually we will be going back to a more normal qualifying criterion.

It will be a wild ride. The future is difficult to predict, but we have been through real estate cycles before and somehow came through them just fine as we will with this one.