Deirdre Sauvage
Ca. DRE # 00847381
dsauvage@apr.com
The Wall Street Journal ‘s April 22, 2010 article entitled “Tax Deal Lifts Home Sales But Price Pressures Loom” noted the following:
“Tax credits sparked a big jump in home sales last month, as first-time buyers took advantage of low prices and interest rates.
But the longer-term housing outlook remains clouded, with a large inventory of foreclosed homes expected to hit the market later this year.”
The jury is still out regarding the overall outlook for the San Francisco metro area ;however, the article went on to note the following:
“Among metro areas with relatively low rates of delinquent borrowers and for-sale inventories: Boston, Denver, Dallas, Houston, Minneapolis, San Francisco and Washington, D.C.”
The market may be in a transitional period with Federal Tax credits for qualifying homebuyers set to expire on April 30 (property must be in contract by April 30 to qualify).
At the end of the day, job growth and economic factors will determine which metro areas continue to rebound while other areas continue to struggle with high rates of foreclosures. The San Francisco Peninsula real estate market is marked by limited land for development, proximity to San Francisco and of course, Silicon Valley. As we reflect on the first quarter of this year, the question remains : Is the glass half-empty or half-full?
San Francisco Peninsula real estate is characterized by numerous “micro-markets” and today we visit North Los Altos. This area is anchored by shopping, schools and restaurants located within close proximity to San Antonio Road. Main Street is a local hub for shopping and restaurants. Lots tend to be larger than average (see below) and homes range from ranch style homes to newer construction.
The SF Peninsula real estate market is characterized by limited space for new development and growth; therefore, older homes are often purchased and then replaced with new construction. Larger lots can command a premium for new development.
Currently our Multiple Listing Service indicates 19 active class one (single family homes) listings with an average list price of $2,439,158 on an (average) 11,089 sq foot lot. The MLS indicates 16 pending sales as of todays date with an average list price of $1,544,938 on a 12,446(average) sq foot lot. (Information provided by MLS deemed accurate but not guaranteed)
Tomorrow we visit Woodside Glens located close to 280 and downtown Woodside.
As we approach the end of the year, many items such as the first-time homebuyer tax credit are receiving a great deal of attention in the press. I recently received this email update which shed some light on the impact of this tax credit on the housing market:
“It’s On The Table!
There’s no question that the government’s first-time homebuyer tax credit has spurred a significant amount of sales this year. Latest estimates show that some 400,000 additional sales occurred this year due to the first time home buyer tax credit, which is about 8% of all sales this year.
In the latest news, The Senate has reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers. While its passage remains uncertain, this plan would extend the existing credit for first-time homebuyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners. The reduced credit would be available to homeowners who have been in their current residence for a consecutive five-year period in the past eight years. Lawmakers in Washington also raised the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000. Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, said the sources. The measure still faces votes in the full Senate and the House.
The U.S. Senate won’t vote until next week at the earliest. As soon as they do we intend to create a piece that will allow you to communicate the news to your clients.
This week, Business Week reported “The broad improvement in the housing indicators in recent months leaves no doubt that the long-awaited housing recovery is finally under way.” The article went on to report: “Policy alone cannot explain the 24% gain in existing home sales since January, nor the 22% increase in new-home purchases, the 40% rise in single-family housing starts, and the recent upturn in home prices. The primary driver is historically high affordability. Fixed 30-year mortgage rates are at 5%, a multi-decade low, and prices have plunged a total of 30% since May 2006, based on the Standard & Poor’s Case-Shiller Home Price Index. By that price gauge, homes are well undervalued relative to both rents and aftertax income.”
Source: Rick Turley, President, San Francisco Bay Area Coldwell Banker Residential Brokerage.
The final vote has yet to take place. More to follow.
Yesterday The San Jose Mercury News ran the following headline: The bidding wars are back. This is not news to buyers attempting to bid on entry level homes only to be outbid numerous times. Our San Francisco peninsula real estate market continues to be very active.
My weekly email update from Rick Turley, President , San Francisco Bay Area Coldwell Banker Residential Brokerage shed furthur light on current market conditions:
“Good Week of News Leads to Another
Last week we had great housing news with the announcement that May home prices posted their first monthly increase since the summer of 2006 (based on the Standard & Poor’s/Case-Schiller 20-city index).
We also learned that sales of newly built and existing homes rose in June for the third consecutive month. New home construction, though still weak, is the best it has been since the fall.
This week the good news continued. As announced by the Mortgage Bankers Association, Mortgage loan application volume increased 4.4 percent compared to the previous week. On an adjusted basis, the Index increased 4.1 percent compared with the previous week and 18 percent compared with the same week one year earlier. In addition, the Refinance Index increased 7.2 percent from the previous week. The Index has climbed about 35 percent above its recent low at the end of June. The seasonally adjusted Purchase Index increased 0.9 percent from one week earlier.
Also interesting to note is this week’s release of the National Association of Realtors’ Pending Home Sales Index revealed an increase of 3.6% during the month. That was 6.7% higher than June 2008. It was the fifth straight month of increases, the first time that has happened since July 2003. The jump was much higher than expected with a consensus of industry experts put together by Briefing.com forecasting an increase of just 0.7%.
NAR’s Chief Economist Lawrence Yun had this to say, “Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who’ve been on the sidelines.” It seems all of these incentives, much like the Cash for Clunkers program in the auto industry, is finally pushing people off of the fence. ”
Summer is here and we definitely have a very busy local real estate market.
Today’s post reviews San Francisco Peninsula real estate market activity in the upper end and entry level price points. The entry level market continues to rebound as a result of low interest rates and first time buyers tax credits. The upper end of the market continues to offer opportunity for the move up buyer.
“Memorial Day is Over…but will it be a typical Summer Real Estate Season?
Memorial Day is behind us and the traditionally moderate summer selling season has begun. Some of our offices are saying that it’s feeling more like a late Spring season right now. Activity is fairly brisk – it goes without saying that the entry level is hot – short on listing inventory and high on Buyer demand, but there is also good activity to report in the mid-to- high end in most communities.
This week NAR announced that existing home sales rose in April with strong buyer activity, as expected, in the lower price ranges. Nationally, existing home sales increased 2.9% to a seasonally adjusted annual rate of 4.68 million units in April from a downwardly revised pace of 4.55 million units in March, but were 3.5 percent below that 4.85 million-unit level in April 2008.
While most of the sales are taking place in lower price ranges, we are seeing increased activity in the mid-priced markets. This is a domino effect; a turnaround begins with the lower price range homes and once that sector of the market is stabilized, we begin to see changes in the mid and upper price ranges. The upper end, while most recently seeing increased activity, still is considered a Buyer’s market. This seems to be fairly consistent in major Metros on both coasts.
Across most of our local MLS’s, there is approximately an average of 14+ month’s supply of homes over $2 million. This is about twice the inventory for the same period last year. Just the opposite has occurred in the <$800k market. Estimating the average month’s supply of homes across several MLS’s in this price range, we are seeing about 3 months or less – which is half of what we had this time last year – and is considered to be a Seller’s market. If you look at the same months where inventory has shrunk in the entry level – you’ll see stabilizing prices, and in some areas, increasing home values. And of course the higher end has seen declining median price as inventory has been building. This appears to be the perfect opportunity for the move up Buyer – they have a fairly captive audience for selling, and are coming from a better position to negotiate on the buying side.
It’s also important to note that investors reacted to concerns about the mounting size of our national debt this week. The yield on the 10 year T-bill increased mid-week as stocks took a hit, and interest rates for mortgages were affected by a ½ to full one percent increase. Since purchasing power decreases with a rise in interest rates, some Buyers will have an increased sense of urgency to get a signed contract on their new home.
You’ll find links to some interesting real estate stories from this week below:
• http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/05/28/financial/f070602D30.DTL&hw=real+estate&sn=002&sc=842
• http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/05/28/financial/f110028D09.DTL&hw=real+estate&sn=003&sc=766
• http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/28/BUJT17S3B2.DTL&hw=real+estate&sn=008&sc=607
• http://sanjose.bizjournals.com/sanjose/stories/2009/05/25/daily47.html”
(Source: Rick Turley, President Coldwell Banker Residential Brokerage San Francisco Bay Area)
Spring has definitely arrived and my email inbox continues to receive numerous weekly market updates. Today’s blog looks at the entry level real estate market:
“Stress Test Reveals More Work to Be Done By Banks- While Entry Level Local Real Estate Market Heats Up!
This week the results of the long-awaited Stress Test on US banks were released. What the government hoped to accomplish through this Stress Test was to determine how much capital the banking sector currently has, and what level they deem appropriate to withstand the recession. The result was that 10 of the nation’s 19 largest banks will need to raise a total of $74.6 billion in capital. The Stress Test revealed that banks like Goldman Sachs and J.P. Morgan seemed to be better positioned than Citigroup and Bank of America.
At this point, according to Kiplinger, “The stronger banks will actively do what they can to return any money borrowed from the government to get out from under restrictions on dividends and executive compensation. Their ability to sell common stock to the public is far better than their weaker counterparts, who may have to privately sell stock to investors or raise capital with so-called mandatory convertible preferred shares.”
According to industry analysts, it seems that until the banks get back on their feet, credit will continue to be tight. That leaves the Federal Reserve responsible for filling in the gaps with its own programs aimed at jump-starting lending.
On a brighter note, however, the real estate sector of our economy continues to show some positive signs. USA Today reported earlier this week that “More homes for sale are attracting multiple offers as buyers pursue lower-price homes and banks low-ball asking prices to attract competing bids on foreclosures.” It’s exactly what we’ve seen locally, the entry level home buyer market is fueling this recovery. We forecasted this, and now that multiple offers are the norm in the majority of our entry level markets, some frustrated buyers are scratching their heads and wondering what happened to the buyer’s market. We warned that things could turn on a dime, and it seems in many starter home markets, prices are already on the rise.
Here are some links to some interesting news stories from the week:
• USA Today: More homes get multiple offers; downturn may be nearing end (http://www.usatoday.com/money/economy/housing/2009-05-05-foreclosure-home-sales_N.htm?loc=interstitialskip)
• Business Week: Want to Sell Your Home? Lower Your Price (http://www.businessweek.com/lifestyle/content/may2009/bw2009055_075566.htm?chan=top+news_top+news+index+-+temp_news+%2B+analysis)
• RISMedia: Relocation.com Survey Shows Consumers Moving Further Due to Economy (http://rismedia.com/2009-05-05/relocationcom-survey-shows-consumers-moving-further-due-to-economy/) – This is a good reminder to consumers on why they should choose an Agent who is affiliated with a large, global real estate company that has the breadth and influence to reach the largest pool of buyers.
• NYTimes: Where Home Prices Crashed Early, Signs of a Recovery (http://www.nytimes.com/2009/05/05/business/economy/05turnaround.html?_r=2&hp)
• Realty Times: Real Estate Outlook: Sales Rising in Some Areas (http://realtytimes.com/rtpages/20090505_realestateoutlook.htm) “
(Source: Rick Turley, President, Coldwell Banker Residential Brokerage San Francisco Bay Area)
These articles cited present an interesting look at our current market. San Francisco Mid Peninsula Open Houses continue to be heavily attended with multiple offers becoming more and more likely in the entry level market.
The Sunday (April 26, 2009) issue of The San Jose Mercury News ran a cover page article reporting "Prices More Steady in Communities Less Affected By Mortgage Crisis". The article went on to state that "a Mercury News analysis shows, home prices in some Santa Clara County neighborhoods least affected by the foreclosure crisis have fallen less than 20 percent."
This article underscores the importance of comparable sales data that is current and appropriate for each unique neighborhood .
Market conditions can vary widely by neighborhood and it is important for both buyers and sellers to understand current market conditions in the San Francisco Peninsula/Silicon Valley housing market.
Recently I visited The Allied Arts Guild in Menlo Park to take some photos . The unique shops, architecture, and setting once again reminded me of all the hidden treasures which comprise the San Francisco Mid Peninsula.
As we enter spring, it is a perfect time to visit some of the museums, parks, and local attractions which give our area its unique appeal.
The Peninsula is a collection of diverse cities and neighborhoods, each supporting a unique history .
The beautiful spring weather makes for a perfect time to step away from the computer and enjoy some local attractions. Have young children and want a local adventure? Consider visiting The Junior Museum in Palo Alto. Have fun!
Today’s blog takes a look at recent market activity updates emailed to me over the past week concerning mortgage activity in the San Francisco Mid Peninsula real estate market:
“With about $100,000,000 in loans that we’re actively working on, combined with the fact that we have six, local purchase transactions scheduled to close tomorrow, I think that it’s safe to say that there’s a frenzy of mortgage activity happening with zero signs of slowing down anytime soon. Combine this with the fact that the Mortgage Bankers Association’s index for purchase transactions was up a whopping 11%, marking the fifth week in a row of consistent gains. Refinances, as you might imagine, were also up another 3.2%.
So what happens when so much demand for mortgages begins to outstrip the supply of money for mortgages? Rates rise. So, if purchase activity continues to climb as the spring and summer markets are upon us, and you add the refinance activity as well, it’s a tough goal keeping rates low. As such, if you or anyone you know is looking to refinance or purchase a home, doing so sooner than later is recommended…
Logically, the two big reasons that purchase activity has picked up has been due to both great prices and great rates. When one analyzes the difference of buying a home last year versus this year, they see that doing so now is cheaper by about 22%, when combining both a 15% reduction to values and an 18% reduction in rate (5.6% to 4.6% on rate)! Buying a historically lucrative investment at a 22% discount is pretty strong motivation. What’s more is that the purchasing power of last year’s buyer has also increased 22%, presuming that their income has remained stable. Begs the questions of whether it’s really going to get any better than this for would-be homebuyers.
Oh, and just a reminder to all you homeowners out there, property taxes are delinquent if payment is not postmarked by April 10, 2009.
Kindest regards,
Eric
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Eric T. Trailer, Principal
Absolute Mortgage Banking
2nd Floor
Palo Alto, CA 94306”
My thanks to Eric for continuing to provide insightful commentary on our local San Francisco Mid Peninsula real estate market.
Monday morning always brings interesting information and the following email shed some interesting perspective on first time home buyers credits and pending sales:
"As I was reading through the headlines and news updates over this past week, I was amazed that it wasn’t properly pointed out that when the existing home sales were released on March 23 (up another 5.1%), that right there in black and white, the median and average price of existing homes in the US was UP in February. That’s right, February’s median price was $165,400 versus $164,800 for January AND the average US price for February was $269,900 versus $256,200 in January. Ladies and gentlemen, that’s technically means that we bottomed out in February. “But we need two months for a trend…” some (okay, many) may say, and that is a reasonable response. But when one takes a look at February’s Pending Home Sales Index for February, one sees that buying activity continues to be very strong, up 2.1% nationwide, with the West continuing to lead the way at 89.6. Combine the above with the fact that we are pre-approving or actively working on more purchase transactions for more people in the last thirty days than we have in the last seven months, and it appears very likely that March will follow February to officially set the upward housing price trend to mark the proverbial “bottom”.
Has anyone recently asked you, “If three friends and I want to buy a house together, and we’re all first time home buyers, can we each take advantage of the $8,000 Federal tax credit?” If you have.. and you weren’t sure how to answer, you may want to point them to IRS Form 5405 which seems to allow for the four referenced above to EACH take advantage of the $8,000 credit. “And if my three friends and I want to buy a NEW home to take advantage of the $10,000 CA state tax credit.., can we get that too?” Well, CA seems to be more specific on their Form 3528-A that the max credit per purchase is $10,000… Still, any amount of additional tax credit from the state is obviously better than nothing. Please, please contact a professional tax advisor to guide you properly on anything tax related, as I’m just a mortgage guy.
Regarding mortgages, we had a very big day yesterday with the Financial Accounting Standards Board easing up and clarifying the rules associated with mark-to-market accounting. This has been a necessary first step in helping to stabilize the banks and further free up lending. And we’re not just talking about conforming lending (up to $729,750 in loan amount), we’re talking about NON-conforming lending, which is so critical for our housing market locally. Bloomberg’s article yesterday covered it best, and what really opened my eyes was a question that came to mind as I read the article, “What if suddenly we had $5 trillion dollars to lend and investors began lining up to buy reliable, non-conforming mortgage-backed securities?”
Kindest regards,
Eric
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Eric T. Trailer, Principal
Absolute Mortgage Banking
2nd Floor
Palo Alto, CA 94306"
My thanks to Eric for providing this interesting insight. Please remember to consult with a tax professional regarding first time buyers home credits as this post is not meant as a substitute for professional tax advice. Spring has definitely arrived and for many buyers this is an outstanding opportunity to enter the San Francisco Mid Penisula Real Estate market.
