The Goldman Report- Weekly Bay Area Real Estate Survey

Mirror, mirror on the wall who can tell us where we fall? Will the market get off the dime or will it linger until summer time?

Here is what we know. Pending sales in December 2007 were off 29% from December 2006. Closed sales in January 2008 were off 39.6% from January 2007 and pending sales were off 24%. What this tells us is that it is taking longer to close transactions and that we are having more transactions falling out of escrow. On the positive side, months supply of inventory has decreased in every county from December 2007 numbers. However, absolute inventories are up in every marketplace from January of 2007, except Marin county.

San Francisco is still the healthiest of markets with only 3.9 months supply of inventory. Also on the bright side is Solano and Contra Costa counties which had been hit the hardest of all Bay Area counties due to the amount of new home growth over the last several years and the number of sub-prime loans taken to finance them. Solano was off only 9.4% and Contra Costa county was off 16% in pending sales versus last January. Could this mean we are getting close to the bottom of this cycle? If this trend continues it would be safe to say we are flattening out.

As I stated in my last report, the housing market is seeing the same kind of volatility as the equity markets. In the last reporting period sales activity had waned. In this report period, sales activity picked up in almost every market. Multiple offer activity also picked up with 20% of our sales being involved in multiple offer transactions. One interesting note is that an REO (foreclosure) property in Napa listed at $397,750 received 13 offers. Buyers today are seeking great value and when the see it, they leap. We are not out of the woods, but at least there is a glimmer of light.

Buyers are still out in good numbers even on the Super Bowl weekend. A SF Lone Mountain 3bedr/ 3ba listing priced at $1.649mil. had 50 groups on Sat. and 40 groups on Sunday and a SF Potrero Hill 3 bedr. /1.5ba home listed at $1.149mil had 60 visitors. Overall open house traffic averaged between 10-20 groups. Buyers remain cautious and are taking their time before writing offers.


Globally most economic news is not encouraging. The stock market took another downward swoop this past week on news of unemployment figures and continuing negative news in the financial sectors. With all the pessimistic chatter, it is difficult to hear or find signs that would point to a change in direction. Last week I shared the good news about the NY Giants winning the Super Bowl. The market just hasn’t caught up with the win---they will.

However on another front there is some heartening news. For the first time in 13 years U.S. company senior executives bought more shares than they sold as reported last week in the Financial Times. Insider purchases by these executives and directors totaled $663 million while sales tallied at $475 million. In the past, periods of net buying by executives and directors have been a signal that the market will rise sharply in the ensuing 12 months.

According to Jim Paulsen, chief investment strategist at Wells Capital Management, “insider buying and selling figures have historically been a good indicator of how the market will perform in the future”.

The last time this occurred was in January 1995. During that year the S&P rallied 34.1%. The last year of the housing down cycle in the 90’s was 1995. The most recent up cycle began in 1996 and continued through 2005 with a short correction in 2001. This year could be the most opportunistic market for buyers in the past 12 years. Just like predicting a recession, by the time it is proclaimed, the economy is already heading in another direction.

Mirror, mirror on the wall will this year be the fairest of them all?