“The End is Near”

Well last week I told you the week would bring some interesting twists to the market. And I was right. New mortgage applications for home purchases and refinancings were up 77 percent from the same week in April 2008.

Mortgage rates continue to average well below 5 percent – 4.7 percent last week on average for 30-year fixed rate loans and 4.5 percent for 15 year loans. Rates like these are a major factor pushing applications.

Nearly 600,000 home buyers have already claimed either the $7,500 tax credit from last year or the $8,000 credit for this year, according to IRS data cited by the National Association of Home Builders.

Also of interest, new home sales have been showing signs of improvement. Last week the Commerce Department reported that March sales were off just 0.6 percent, exceeding analysts’ expectations, after climbing in February.

In other positive trends, interestingly enough, The Wall Street Journal reported this week, “Analysts say: The end (of declines) is near. While new home sales show signs of stabilizing as builders cut back on building and boom-bloated inventories are slowly absorbed, prices of both new and existing homes are still being dragged down by a flood of foreclosures. Still, the experts were optimistic that the federal government's efforts to stem foreclosures eventually will have an effect by the end of this year or early next year; Mark Zandi, chief economist of Moody's Economy.com, even ventured (jokingly) a date when home prices would stop falling—December 15, 2009.”

Also be sure to check out this The Wall Street Journal story that ran earlier this week entitled More Homes in California Are Selling: http://online.wsj.com/article/SB124087905185761701.html

It’s hard to know whether or not the sum of these indicators is equivalent to a recovery but my sense is that the end is near—if we haven’t already passed it here in California (some experts are even saying that we’ve already hit bottom and we’re in slow recovery mode). When the bottom has hit exactly is hard to predict but based on what I am seeing in our offices, based on the statistics that I am seeing on pendings and buyer interest/activity and based on the overall national recovery effort, it seems the prediction by many experts (in late 2008) that we would hit bottom by the middle of 2009 is probably not far off.

Now I do feel it is important to point out, as I referenced in last week’s Weekly Market Watch, much of the recent turnaround is affecting the first time buyer/entry level market. We haven’t yet felt it in the mid-level and luxury end market. For specific news, check out this week’s LA Times article: http://www.latimes.com/classified/realestate/news/la-fi-stonebrook25-2009apr25,0,5952483.story. I point this out mainly because it is important for sellers in today’s market to remember that pricing is key and buyers are looking for a deal. So while changes are starting to take shape, we as sellers still need to be very competitive when pricing our homes so we can attract the largest pool of potential buyers.

Now for those of you who are “timing” the market, I have to caution you on this. The only way you know that the market has hit bottom is when it is on its way up. While certainly housing is one of the biggest and most important investments we will make in our lifetime, it is also important to remember that our home is so much more than an investment. It is where we raise our family, where we create memories and where we plant our roots. So as you try to “time” the market, remember these key facts and make sure that beyond the investment, you are choosing a home that will bring you the happiness you deserve. Because in the end, that is what matters most. Choose the home that is right for you and your family right now and for years to come. Historically speaking, California real estate brings long-term investment gains for almost all homeowners so if you choose the home that is right for you, you almost can’t loose.

Now, let’s take a look at this week in real estate:

• Auburn— There are buyers out there but we are having a hard time getting the short sales closed and buyers are still wanting more with the request for repairs than most sellers want to do. We have had a couple of walk-ins that have led to a listing and a buyer. Energy level seems good. The floor person received several calls with regards to the article in the Sacramento Bee of the homes under $50,000.
• Dixon/Davis—Not much change from prior weeks. We need inventory! New listings have been selling in one day with multiple offers. Lots of buyer calls.
• El Dorado Hills—No information reported.
• Elk Grove/Laguna—We are in a very steady pattern with ample active. Floor calls, open house traffic and short sale approvals are continuing at high levels. REO inventory is very low. We are seeing an increase in regular listings in the last few weeks. All in all the buyers are aware that the deals are there for the taking.
• Folsom— Listing activity for Folsom is very good, but still mostly the lower end. Average list price this week was $482,000. Sales this week were great but again mostly the lower end properties, with an average sale price was only $388,000. Agent attitude is very positive and the business is getting done by a number of the Agents—not just one or two. Twenty five different Agents got a piece of business this week which shows that everybody is busy and the market is going!
• Placerville—No information reported.
• Rocklin/Lincoln—The Agents are busy but frustrated with the amount of offers they are writing for the same buyers and still not getting the home. One of the buyers elected to pay a little more and purchase a home that wasn’t a short sale or REO as he was tired of the games. The comments in the MLS are very creative with Agents requiring the buyer use a certain lender in order to get more closing costs paid by the seller.
• Roseville/Granite Bay—Positive changes coming with more REOs in June and low interest rates. REOs and short sales are selling over price but we have low inventory right now.
• Sacramento Fair Oaks—The Agents in the office are very positive they all are seeing activity in the market place. We are also seeing the “real seller” thinking about putting their home on the market. Actually we have more listings that are real sellers than ever before.
• Sacramento Metro—No information reported.
• Sacramento Sierra Oaks—Inventory remains very low. It seems that in the price range of under $100,000 there are a ton of multiple offers
• Tahoe/Truckee—Inventory Summary: The listing inventory for the Tahoe-Truckee market decreased slightly for the week for the first time in three months. Currently, there are 2,023 active listings in the market with 1,410 residential properties and 613 lots/land listed for sale. Of the active listings, there are 113 properties listed as short sales, (5.6%) and 59 properties listed as REO sales, (2.9%). Based on the current inventory and sales year to date the market has roughly 10-months of inventory available. Sold Summary: On a year to date basis there have been 202 properties sold in the market as compared to 289 for the same period in 2008 which is 30.1% reduction in sales. The median sales price for the properties sold YTD in 2009 was $428,850 while the average sale price was $574,961. For the same period in 2008, the median sales price was $495,000 and the average sales price was $731,591 which is a 13.4% and 21.4% reduction in price, respectively. For the week of April 20th to 26th, there were 13 properties sold with only one above $750,000. Pending sales for the week increased from 112 to 126 for a 12.5% increase and is very encouraging. Activity Summary: Open house activity continues to be slow during this in between winter and summer season in Tahoe-Truckee. Once the summer season hits we should see increased open house activity. Sales Associates are seeing increased buyer activity at all price points and especially on properties classified as short sales and REOs. Coldwell Banker had six properties go into escrow last week with two over $1,000,000 and two between $750,000 and $1,000,000. It is apparent that buyer interest and activity is picking up as there are continued great values in the market. Lake Tahoe and Truckee properties are priced well and present great opportunities for interested buyers. As the summer season approaches, we are anticipating more and more buyer activity.
• Vacaville/Fairfield—Inventory is still down and therefore our buyers are finding themselves in multiple offer situations for every home priced under $275,000. Another issue we have come up against this week is an extremely slow response time from the Asset Managers.

No matter how cynical you are about today’s economy—and trust me, with as much as we’ve all been through over the last few years, I certainly understand—it’s important to point out the positive signs that we are seeing in the local marketplace. All signs are definitely pointing towards a recovery.

Next week I will release my May Reality Check message and I will focus it on why today’s market brings such prime opportunities for savvy investors. I hope you will check it out.

Until then,
Make it a great week,

Bob Bronswick