Thursday, May 7, 2009

Stress Test Reveals There’s More Work to Be Done By the Banks But The Local Real Estate Market Continues to Thrive!

This week the results of the long-awaited Stress Test on the banks were released. What the government hoped to accomplish through this Stress Test was to determine how much more capital the banking sector would need to withstand the recession—much of which was caused by residential mortgages and other consumer loans such as credit cards. 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 lending programs aimed at jump-starting lending.

On a brighter note, however, the real estate sector of our economy continues to show some positive signs—a good symbol that the programs that the government has put in place are helping. 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. Just as I revealed in an earlier blog posting, the first time, entry level home buyer market is fueling this recovery. It’s something we certainly forecasted and it’s finally coming to fruition. Now, we’re seeing, in many markets, multiple offers on starter homes and even some frustrated buyers who are scratching their heads and wondering what happened to the buyer’s market. We warned that the change could come before we knew it and in some price ranges, it might’ve already come and went.

Here are some links to some interesting, positive news stories from the week:

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

  • Auburn—We are getting ready for the Auburn Home Show where we have great Agent participation.
  • Dixon/Davis—We haven’t seen much change from prior weeks. We need inventory! We have lots of buyers and no houses to sell. We have 30 active homes in Dixon! New listings sell in one day, typically with multiple offers.
  • El Dorado Hills—The market is picking up. Inventory remains at the same level but the pending sales have nearly doubled for the last 30 days. We haven’t had multiple offers on our listings but have been in many multiple offer situations with our buyers with as many as 10 offers on properties under $250,000. The upper end, over a million, remains stagnant but the 500 to 850 has picked up. Some of our high end sellers have temporarily removed their homes from the market but plan to go back on in around 30 days. Several short sales we’ve been waiting on for over three months have been approved. Appraisals continue to be a challenge.
  • Elk Grove Laguna—Traffic counts for open houses remain high. Buyers are scooping up the deals. It is highly competitive with multiple offers being the rule. Inventory is painfully low. Waiting for the next waive of REOs to hit. Floor call volume and LeadRouter calls continue to gain momentum. We are very busy.
  • Folsom—The market is crazy for the under $300,000 buyer. Most of our Agents write 5+ offers for a buyer before they get one into escrow! Listings are still hard for us to get, slow but steady. Our well priced homes are selling quickly and the over priced ones have no activity and no offers. Open houses are still good, but not the traffic we were getting a couple of weeks ago. We did sell a home that was held open this weekend to a buyer that came to the open house and fell in love with the property and had to have it! It’s a great time to be in real estate!
  • Placerville—Sales in the Placerville office are ranging from as low as $50,000 to $850,000. Inventory has dropped some. The walk in traffic continues to be active. Our REO inventory is very low and we’re not seeing multiple offers on our listings.
  • Rocklin/Lincoln—Sales are way up and listings are stable. We are getting about five new REOs a day in this area. Competition is fierce in the homes in the low $200,000. We had another short sale wit ha second accepted in just a couple of weeks. We had just a few open houses this week due to the bad, rainy weather but the few we did have received a few good leads.
  • Roseville/Granite Bay—Listings are steady; as is sales inventory. No multiple offers this period, but we did have seven ratified offers. Open homes were five with light traffic (rain, perhaps?). Roseville is still light on the REO/Short Sale inventory. Agents are ready for a strong summer as fresh inventory comes onboard. It’s time to line up the qualified buyers.
  • Sacramento Fair Oaks—Multiple offers are over abundant; it seems every accepted offer we have is a multiple. We had approximately eight homes held open and the Agents seem to have many interested buyers coming through. Overall the Agents are working extremely hard in my office are very positive. We have been working with them to prepare their buyers for the type of market we are in and the waiting periods that are involved.
  • Sacramento Metro—Business continues to be busy in our core areas. We are seeing many short sales but our REO business is slow.
  • Sacramento Sierra Oaks—The inventory is very low—thus activity is low. More inventory would be good for buyers!
  • Tahoe/Truckee Region—Inventory Summary: The listing inventory for the Tahoe-Truckee market decreased slightly for the week for the second week in a row. Currently, there are 2,013 active listings in the market - 1,391 residential properties and 622 lots/land listed for sale. Of the active listings, there are 119 properties listed as short sales which increased slightly, (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 9-months of inventory available. Sold Summary: On a year to date basis there have been 216 properties sold in the market as compared to 318 for the same period in 2008 which is (32.1%) reduction in sales. The median sales price for the properties sold YTD in 2009 was $425,850 while the average sale price was $569,379. For the same period in 2008, the median sales price was $508,000 and the average sales price was $736,302 which is a (16.2%) and (22.7%) reduction in price respectively. For the week of April 27th to May 3rd, there were 13 properties sold with two above $750,000. Pending sales for the week increased from 126 to 133 for a 5.5% increase. Activity Summary: Open house activity continues to be slow during this in between winter and summer season in the Tahoe-Truckee area. 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 three (3) properties go into escrow last week with one over $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—It was a light open house weekend. Our area is ready to burst with REO inventory…when the banks release it! Activity is brisk in the offices. Agents are staying positive and are having honest conversations with their clients about the state of the market. Offers: Must write tens offers for clients to get a property into escrow. We are seeing appraisal problems coming up nowadays.

In a nutshell, this week there was a lot of rain which brought out the serious buyers and kept the lookieloos at bay. If the banks would release the inventory we’d be in great shape. We are having many appraisal problems in a lot of areas. It is supposed to be a great weekend which means that there will likely be lots of activity!

What do we do with this information? Spread the word! It’s one thing for me to talk about a recovering market but it’s another when even the most pessimistic analysts are doing the same. The stories above share the real story. All of our offices are reporting similar stories and as I visit our offices and talk with our Agents, I’m hearing the same scenario: the market is changing.

The window of opportunity has been open and it has been inviting buyers in for months. Now, the buyers are acting and if you were sitting, cooling your jets, it may be time to start your engine! Don’t wait until you’re kicking yourself and saying, “I should’ve bought a lot more real estate.”

Until next week,
Make it a great one,

Bob Bronswick
President
Coldwell Banker Residential Brokerage Sacramento/Tahoe

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