Good News On Wall Street Doesn’t (Necessarily) Mean Higher Housing Prices on Main Street

I had an interesting chat with one of our Agents recently. She mentioned that many of our sellers in the upper-tier price point are seeing the current strength of the Dow as a sign that their home will probably fetch more in the early part of next year. Academically speaking, there is a belief that there is a direct correlation between the housing market and the stock market.

But from an analytical standpoint, although the stock market and the housing market correlate well, there is a variable time lag. The time lag between housing underperformance and stock market performance can vary widely. The average is 18 months.

What we’re seeing, in some instances, is that some of the upper-tier clients are saying no to potential deals as they think if they wait another four to six months (thanks to the stock market’s recent gains) they may get more for their home. And while I understand the reasoning, I would caution sellers on this strategy. First, what we know is that in a “normal” market (of which this market is anything but), the average lag time between the two is 18 months (not four to six months). It’s also important to point out that we probably aren’t out of the woods as it relates to the volatility in the stock market. Many analysts are suggesting that our recovery will be “W” shaped rather than “V” so we may be looking at more changes ahead.

So while I understand the logic, I would caution sellers on this strategy and would ask them to focus less on the stock market and more on the level of supply and demand in their market and in their neighborhoods. In most markets, the upper-tier price point remains relatively soft so sellers should consider most deals that are presented to them. That’s not to say buyers should be throwing out unrealistic offers. The real story here is that across the board we’re starting to see increases in interest and buyer activity so sellers may want to consider taking advantage of that interest…before it’s too late.

For those who are focused on the stock market, my best advice to you is to look at it more as an indicator for the economy as a whole. With the DOW closing Thursday at just over 9,300, it may not be making housing prices go up, but it may mean that the recession is subsiding which is good news for us all.

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

• Auburn— Quiet this week but Agents are all busy writing offers but it is just hard to get accepted. Buyers are still not believing that the offer on an REO needs to be 10% or more over list price in most cases.
• Dixon/Davis—Not much change from prior weeks. We need inventory. We have lots of buyers and no houses to sell. We have 20 active homes in Dixon! New listings sell in one day with multiple offers.
• Folsom—Buyers are still writing offers on multiple properties.
• North Lake Tahoe/Truckee— Active Listings: The listing inventory for the Tahoe-Truckee market went down slightly last week to 2,367 active listings in the market - 1,677 residential properties and 690 lots and land listed for sale. Active REOs and Short Sales: Of the active listings, there are 147 properties listed as short sales, (6.2%) and 64 properties listed as REO sales, (2.7%). Overall, the Tahoe-Truckee market has less than 9% of its active inventory listed as a short sale or REO. Active Inventory: Based on the current inventory and sales for the previous 30-day period, the market has roughly 23-months of inventory available. Sales Summary: Last Week’s Sales: For the week of August 10th to August 16th there were 22 properties which closed in the market with four of those sold at a price above $750,000. This past week’s closings were up slightly from the previous week. Pending Sales: Pending sales in the market increased to 209 properties which is slightly higher from the previous week. Market Activity Summary: Open house activity continues to be fair to good depending on the location of the open house. We are definitely seeing more tourists in town given the season which certainly creates more real estate interest and activity. Sales Associates are continuing to see more buyer activity and more and more are writing offers than in the previous six-months. Coldwell Banker currently has over 51 homes in escrow scheduled to close in the next 30-60 days. Lake Tahoe and Truckee properties are priced at levels we have not seen in five years and coupled with today’s low mortgage rates present great opportunities for interested buyers. Now is the time to buy!
• Rocklin/Lincoln— Quiet this week but Agents are all busy writing offers, just hard to get accepted. Buyers are still not believing that the offer on an REO needs to be 10% or more over list price in most cases. We are starting to see some land sales. The prices have fallen and as an example a lot in Morgan Creek that originally sold for about $300K sold for under $100K and included paid fees and plans.
• Roseville/Granite Bay— Agents are aggressively working on short sale listings!
• Sacramento Metro— Market seems to have slowed down during the summer months and we continue to see no activity in the move up buyer.
• Sacramento Sierra Oaks—The inventory is very low. A LOT of “frustration” from the Agents in getting appraisals and loans. The whole process is getting bogged down and taking a lot longer.
• Vacaville/Fairfield—First time home buyers, move up buyers and investors are in the marketplace. For those who are fortunate enough to secure a property, the buyers are typically offering more than the asking price. Cash continues to be king, followed by FHA and then VA. With the offers higher than the asking price, appraisals are an issue.

This week I’ll leave you with a few good articles of note:

• Mortgage Applications Increase In Latest MBA Weekly Survey; Mortgage Bankers Association
• Optimism Grips Homeowners: 81% Think Home’s Value Will Increase Or Stay Same In Next 6 Months; RISMedia
• Are New Home Prices, Starts And Sales Rates Nearing Bottom?; RISMedia

Until next week,
Bob Bronswick
Coldwell Banker Residential Brokerage Sacramento/Tahoe

They’re Saying The Worst is Behind Us…But Is It Too Soon to Celebrate?

I was driving home from an office meeting this week and was listening to NPR. During the drive, an interesting update came on which mentioned that the Federal Reserve was reporting that the recession is ending and that it would take a step back toward normal policy.

When I got home I decided to Google the news and I found this article on the NYTimes.com website: http://www.nytimes.com/2009/08/13/business/economy/13fed.html?_r=2&partner=rss&emc=rss&src=igw. The article reports, “Almost exactly two years after it embarked on what was the biggest financial rescue in American history, the Federal Reserve said on Wednesday that the recession is ending and that it would take a step back toward normal policy.”

The article goes on to note “Though the central bank stopped well short of declaring victory, policy makers issue their most upbeat assessment in more than a year by saying that the downturn appears to have hit bottom and that consumer spending, financial markets and inventory building by corporations all continued to stabilize.”

Well never one to solely rely on just one institution’s opinion, nor that of just one article, I decided to put my feelers out. I reached out to mortgage broker colleague to get his take and to learn more about what our mortgage colleagues are seeing in relation to the current state of the economy. He had some comments that I tend to agree with noting that “Many are concerned we’re going to have a ‘W’ shaped recovery versus a ‘V’ shaped recovery. We don’t want to proclaim the recession is over, only to see the economy struggle for another year. It’s going to be a long, slow recovery. One month we may have positive economic news and the next, poor economic news.”

Having said that, here is what we tend to be seeing about the market:

• It does appear that the worst of the recession may be behind us.
• In all likelihood, the Fed is going to keep rates relatively low well into next year by continuing to purchase mortgage backed securities and keep the Federal Funds Rate close to zero. It is currently at .25%.
• In terms of conforming loan limits, as of right now, the higher conforming loan limits will end at the end of this year. There is some legislation that is pending to renew the higher loan amount through until November 2010 but as of right now, that is pending. The same holds true for the first-time home buyer tax credit.

Knowing this, what lies ahead? Well I would say it’s positive to know that the worst may be behind us, but in all likelihood there are still challenges ahead. There is still much recovery that needs to take place, so neither sellers nor buyers should be getting too excited with the news. Sellers still need to get a bit more realistic about price and buyers need to recognize a bargain when they see it.

And with that news in tow, let’s take a look at this week in real estate:

• Auburn—Quiet this week but Agents are all busy writing offers, just hard to get accepted.
• Dixon/Davis—No information reported.
• El Dorado Hills—The buyers are waiting in the wings. We have 20 pendings in EDH so far this month for the entire city. Prices are attractive. We had 72 solds last month and lots of activity, just very few new sales. Homes must be priced very aggressive to be considered. Inventory remains at the same level.
• Elk Grove—For the first time in over a quarter the average sales price increased in our zip codes. Typical low inventory challenges prevail, buyers are fighting over property and it doesn’t appear to be getting better anytime soon.
• Folsom—Open house activity good. Closings were down last week. End of summer, always slower.
• Placerville—Inventory has dropped some and activity has slightly slowed. Prices seem to be stabilizing.
• Rocklin/Lincoln—Seems to be a little more quiet than usual with many finishing up vacations and others getting ready to go back to school.
• Roseville/Granite Bay—No information reported.
• Sacramento Fair Oaks—Yes overall the market has been slower. The buyers are still out there looking but the inventory is extremely low. We are seeing more multiple offers and homes going over asking price. We are of course seeing issues with homes appraising. In my office the agents are confident that the market is going to get better. They also keep a positive outlook and share that with their clients and prospects.
• Sacramento Metro—Market seems to have slowed down during the summer months and we continue to see no activity in the move up buyer.
• Sacramento Sierra Oaks—The inventory is very low. A lot of “frustration” from the agents in getting appraisals and loans. The whole process is getting bogged down and taking a lot longer.
• Tahoe/Truckee—No information reported.
• Vacaville/Fairfield—No information reported.

In terms of marketing activity, in general, depending on the price range, most homes are on the market longer with discerning buyers waiting for the optimal home at the optimal price. A well-priced, well-presented home can still fetch multiple offers (especially if it is in the entry-level market), but it’s got to look appealing to the savvy buyers who are doing their homework. There is no sense in overpricing a listing – a buyer won’t even give a home the time of day if they sense the seller is being unrealistic.

Yet at the same time, there seems to be no better time to snatch up bargains in Northern California at all price points. We’re seeing five to 10 percent reductions in properties that are sitting on the market and in many cases the final offers are coming in below those reductions. That’s not to say buyers should throw out ridiculous numbers. Some sellers who don’t have to sell are holding firm, but time is running out for others. So, while it may take longer to get the buyer and seller to agree to terms, deals are happening and with open minds on both sides, we might start to see more positive movement for all.

Until next week,

Bob Bronswick
Coldwell Banker Residential Brokerage Sacramento/Tahoe

One Good Week of News Leads to Another

Following last week’s breaking housing news which revealed that based on the Standard & Poor’s/Case-Schiller 20-city index, home prices in May posted their first monthly increase since the summer of 2006.

The news followed reports showing 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.

Well this week the good news continued. The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending July 31, 2009 showcasing an increase in mortgage loan application volume of 4.4 percent from the week earlier. 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.

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 in which it 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.

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

• Auburn— Lender requirements are very strict and several contracts have fallen out with some of the new regulations.
• Dixon/Davis—No information reported.
• El Dorado Hills— Inventory is stable but buyer activity is slow. School starts in a week or so. Hopefully it will pick up then.
• Elk Grove/Laguna— Very low inventory is persistent. Buyers are everywhere, but it is difficult for first timers and buyers with lower down payments. Cash reigns as king.
• Folsom— Open Houses seem to be slower. Floor has been steady and the quality of the calls has been very good. Activity in the higher priced listings is starting to wake up with one sale this week at $750,000 and another one at $965,000. Quite a few Agents are working with buyers and the attitude seems to be good!
• Placerville—Inventory now has about 25% short sales but very few REOs. We’ve had several walk-ins the last week but it’s still difficult to get them to make a move.
• Rocklin/Lincoln—Agents were pleased to hear that the “noise” we are making in regards to HVCC is being heard and one of the changes so far, is that they will be using appraisers local to that area. This also was highlighted in another real estate publication this week to illustrate the need for us to be more vocal if we want change.
• Roseville Granite Bay—Both listing and sales inventory is steady in our area. We saw six multiple offers this week and double that in ratified offers. An average number of opens: five with moderate traffic. Bank of America REOs are coming in two weeks!
• Sacramento Fair Oaks—Yes overall the market has been slower. The buyers are still out there looking but the inventory is extremely low. We are seeing more multiple offers and homes going over asking price. We are of course seeing issues with homes appraising. In my office the Agents are confident that the market is going to get better. They also keep a positive outlook and share that with their clients and prospects.
• Sacramento Metro—Market seems to have slowed down during the summer months and we continue to see almost no activity in the move up buyer.
• Sacramento Sierra Oaks—The inventory is very low. A LOT of “frustration” from the agents in getting appraisals and loans. The whole process is getting bogged down and taking a lot longer.
• Tahoe/Truckee— Active Listings: The listing inventory for the Tahoe-Truckee market went down last week for the first time in four months to 2,364 active listings in the market - 1,680 residential properties and 684 lots/land listed for sale. Active REOs and Short Sales: Of the active listings, there are 143 properties listed as short sales, (6.0%) and 63 properties listed as REO sales, (2.7%). Overall, the Tahoe-Truckee market has less than 9% of its active inventory listed as a short sale or REO. Active Inventory: Based on the current inventory and sales year to date the market has roughly 23-months of inventory available. Sales Summary: Total Sales 2009 vs 2008: On a year to date (YTD) basis there have been 469 properties sold in the market as compared to 572 for the same period in 2008 which is (18.0%) reduction in sales. For properties sold YTD 2009, 58 were REO’s, (12.4%), and 50 were Short Sales, (10.7%). For 2009, there have been 263 properties sold < $500,000, 156 properties sold between $500,000 and $1,000,000 and 50 properties sold > $1,000,000. Median and Average Sales Prices 2009 Vs 2008: The median sales price for the properties sold YTD in 2009 increased slightly to $453,000 while the average sale price is dropped to $569,834. For the same period in 2008, the median sales price was $515,000 and the average sales price was $718,986 which is an (12.0%) and (20.7%) reduction in price respectively. Last Week’s Sales: For the week of July 27th to August 2nd, there were 22 properties which closed in the market with two (2) of those sold at a price above $750,000. This past week’s closings were up slightly from the previous week. Pending Sales: Pending sales in the market increased to 182 which is slightly higher from the previous week. Market Activity Summary: Open house activity continues to be fair to good depending on the location of the open house. We are definitely seeing more tourists in town given the season which certainly creates more real estate interest and activity. Sales Associates are continuing to see more buyer activity and more and more are writing offers than in the previous six-months. Coldwell Banker currently has over 45 homes in escrow scheduled to close in the next 30-60 days. Lake Tahoe and Truckee properties are priced at levels we have not seen in five years and coupled with today’s low mortgage rates present great opportunities for interested buyers. Now is the time to buy!
• Vacaville/Fairfield—Solano County Coldwell Banker Agents are extremely resourceful. They are taking advantage of this lull in REO inventory and creating business the old fashioned way – by reaching out to their client base and community to help clients buy and sell homes. The agents are on FIRE and excited about this market and the opportunity it presents!

My overall synopsis of the market this week is much like it has been over the last several. Low-end sales have been the strongest segment of the market, an indication that the first-time homebuyers tax credit is contributing to the rise. The clock, however, is ticking on this credit and it may have buyers stepping up their shopping to get their purchases in under the wire. Because it may take as long as two months to close on a home after signing a contract, first time home buyers must act fairly soon to take advantage of the credit. To qualify, they must close on the sale by November 30.

Until next week,
Make it a great one,

Bob Bronswick
Coldwell Banker Residential Brokerage Sacramento/Tahoe