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.
Some high-end Sellers may be saying no to potential contracts on their home as they think by waiting another four to six months (thanks to the stock market’s recent gains) they may get more for their home. Of course every home is unique and each market is very local, but by and large, the higher end of housing probably won’t follow this reasoning. 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 and overall health of our economy. Many analysts are suggesting that our recovery may be “W” shaped rather than “V” so we could be looking at more challenges ahead.
Focusing less on the stock market and more on the level of supply and demand in the particular market and neighborhood will most likely be more helpful. In most markets, the upper-tier price point remains relatively soft; in some cases offers can be few and far between, and may be worth a second look. A few examples: In San Mateo and Santa Clara counties, there’s currently less than a month and a half’s supply of inventory for homes under $750,000. For homes over $3M, there is a 13 month’s supply. In San Francisco, for homes under $1M – there is a 2 months supply of inventory. For homes over $3M, a 14 months supply. That’s not to say buyers should be throwing out unrealistic offers and expecting them to be accepted. The real story here is that across the board we’re seeing very favorable increases in interest and in buyer activity. Sellers may want to consider taking advantage of that interest…before the typical seasonal slowdown. Our agents are making great use of Coldwell Banker’s “Market Trends” tools in MyRECafe –drilling down to particular neighborhoods and particular price-points, and having factual discussions regarding inventory and activity levels with Buyers and Sellers.
For those who focus on the stock market daily, it is probably a better indicator for the economy as a whole rather than a predictor of where real estate is headed. With the DOW closing Thursday at just over 9,300, it doesn’t suggest home values will rise in a direct correlation, but it may mean that the recession is subsiding which would be good news for us all. Now let’s take a look at this week in real estate:
· Peninsula—Burlingame reported the hot price range is under $500,000. These properties are typically short sales and REOs and they are garnering major multiple offers, many times 20 or more. This has resulted in some of our buyers seeking opportunities in the East Bay or further south. Meanwhile, the $800K-1.2M range is lacking in inventory and there is strong demand. Typically we see the inventory drying up at this time of year and then more coming on the market in mid September. Menlo Park Santa Cruz Avenue reported an Atherton sale with a list price of $11,900,000 and sold by our Menlo Park El Camino office. Maybe the high end is loosening up! Open house activity was very busy for mid-August. San Mateo reported the overall mix is balanced with the exception of $2.5mil and up which still lags the market. Woodside reported four sales at $1.8mil plus–that is very good.
· San Francisco—Noriega reported the low end is on fire and it’s not just from first time buyers. Case in point, one REO, fixer property in the Ocean View district listed at $350k received 40 offers. One offer was reportedly $150,000 over asking all cash and the individual did NOT get it. There were 10 all cash offers. It’s very obvious that these all cash offers are not from first time buyers, they are from investors. Maybe the investors are seeing that the market has bottom out and even from them, it’s a good time to buy. Lombard reported a slower week on traffic, opens, new listings and sales. Quite a number of listings are off the market until after Labor Day. Lakeside reported it is like August in Europe: the population as well as the economy has taken the month off. Optimistically looking forward to a return. To rituals in September. Van Ness reported slow but steady. Large sales are still running at a good pace.
· Silicon Valley—Cupertino reports the activity is fantastic! Open houses are very well attended and deals are being made. San Jose Almaden reports there are multiple offers on everything under $400,000 and depending on area up to $600,000. The high end remains extremely slow. Agents are getting creative to help them get their offers excepted. Like paying for moving costs for the sellers. Open houses can, depending on location, be busy. Willow Glen reports median price homes are selling nicely. Multiple offers are plaguing some of our clients’ offers though eventually the buyers are successful in purchasing a home. Saratoga reports short sales and REOs still dominate the market. It seems that lenders are getting a little more serious about approving short sales.
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
Very best, until next week-
Rick
Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
Posted via email from midpenre
