Given what we have endured the last three years, it was relatively optimistic! I took lots of notes, here are the highlights:
-Expect 2.5% GDP growth in 2012, and a continued slow, choppy recovery. The likelihood of this is 65%; likelihood of a double-dip recession about 30%; likelihood of a strong recovery, 5%.
- The 10 year bond is way too low, as are interest rates tied to it. If you haven’t refinanced yet, do it now, we won’t see these rates again for a very long time.
-Unemployment is much worse for high school graduates (18%) than college graduates (4.4%). This is caused by government policy that causes companies to outsource to China.
-Employment prospects in the Bay Area have been and are projected to be strong, with Silicon Valley and San Francisco leading the way, both driven by technology.
- Two of the top five markets for housing sales for 2012 are in the Bay Area: San Jose and San Francisco.
- Rental prices are up 4.2% nationally, but last year were up 14% in San Francisco! This is driven by the children of the baby boom tunring 18 and moving out; it is projected to be very strong for the next four years.
-The Federal Reserve says they don’t want inflation, but their monetary policy (expect QE3 to be announced next year) indicates otherwise. Expect 3-5% inflation in the next few years, which will affect home prices.
- Interest rates will gradually rise through 2012, but not dramatically.
- Home prices will rise about 3%, and then around 3% a year for the next few years.

We believe the tech hiring boom in the City is already starting to drive house sales in Marin County, and expect it to do more so in 2012.

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According to the Wall Street Journal, it…may be! In a recent article, they review the five main drivers of the housing market and how they look for the future. While national in scope, the article has implications for Marin as well.

According to Moody’s Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12% lower than the 1989-2004 average. Inventory is starting to tighten in Marin, at least good inventory.

The article identifies five key factors that will govern real estate sales in the next several years. Today, we’ll cover the first two, demographics and affordability.

Demographics

Household formation declined during the economic downturn as people stayed in school or moved in with family members,  a.k.a. “the boomerang generation.” Nationally, Moody’s Analytics shows the number of new households renting or owning a home dropped to 578,000 in 2008, from nearly 2 million in 2005 right before the peak of the housing boom.

However Moody’s shows household formation increased to nearly 950,000 last year and should average over 1.2 Million over the next decade. All those households will be looking to live somewhere, whether they rent or buy.

Affordability

Housing affordability, as measured by the ratio of median home prices to median household incomes, has fallen below pre-housing bubble levels in just over two-thirds of the country, according to Moody’s. By most measures, renting is still cheaper than buying in Marin, but rising rents are making lots of people question that. Marin rents increased 6% last quarter, and the price of renting a home in a good Southern or Central Marin school district has jumped dramatically the last 12 months.

We have searched for clients looking for good condition 2000 sq ft houses in the Larkspur-Corte Madera School District, and can’t find anything that big in really good condition for under $4000 a month. That’s a reasonably sized mortgage payment, at today’s rates.

The same house would probably sell for about $1,000,000. Put 25% down, get a 5.25% 30 year fixed loan, and the monthly payment with insurance and taxes is about $5500 a month. So it is still cheaper to rent out of pocket, but factor in tax deductions, equity build, and the fact you don’t have to ask the landlord to paint the bedroom, and buying starts to look pretty good!

Next, we’ll discuss employment, credit and buyer psychology, and give you real picture of what is happening in Marin County!

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We’re at the halfway point for the year, and the market is still….stable. Stable transactions, slight declines in pricing, with every town a little different, but in general, there is not a lot of change on a year-to-year basis.

Percent in contract remains steady, at 32%. Inventory is down from last year though, so it is actually harder to find a good house right now than it was one year ago. Last August 2  there were 1628 homes available in Marin; on the same date this year, there were only 1460. Are higher prices on the horizon? Not necessarily, but it certainly looks like the days of excess inventory are ending, as we have been trending below last year’s inventory numbers since the first week of May.

Transactions continue to track almost dead even vs. one year ago at this point. We are currently on track for around 2100 transactions this year, well below the long term average of 2745, but continuing the same steady rate we saw in 2010. That’s good news for the market - given the roller coaster the economy has been on, and the high unemployment rate, stable transaction numbers for the last two years are a positive.

Average sale price, a good long term indicator when measured year to year, is tracking down slightly, at $1,009,205 for a single family home Marin County, a 4.8% decline vs. one year ago. Price paid per square foot is off slightly as well, from $470 to $443. Taken together, these do indicate a decline in pricing, not just a lack of home sales in the higher priced categories.

Town by town, nearly every town is up in number of transactions. Interestingly though, there is an inverse relationship between sales price and transactions. For example, Mill Valley is up 9% in units, but average sales price is down 8.5%. Larkspur single family home sales are down 17%, but average sale price is up 4.3%. We think it shows the importance of pricing in this market: if you really want to sell your home, it must be priced correctly. Buyers can afford to be choosy, and will, and won’t jump on something just because it is in the right neighborhood or school district.

An interesting offshoot of this is that the rental market for single family homes in good Marin County school districts continues to be very tight. This is heightened in July and August, when families are scrambling to get into the right school district in time for the start of the school year. Cautious buyers are willing to rent for a year, or more, rather than risk paying too much for a property.

So despite the gyrations you read about in the paper that seem to show big shifts month to month, Marin continues to chug along in “normal” market mode.

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The sun finally came out last week. We were beginning to think March Madness was what was haunting our Sunday open houses, as it rained, sometimes torrentially, for every single Sunday in March.

Buyers typically don’t like it when it rains. Moving in and out of houses, taking off and putting on your own shoes is hard enough but when there are a couple of small children who need help as well, it really slows down the process. So traffic, which was downright crazy in January and early February, slowed considerably.

Unlike the weather report though, the Marin County Real Estate Market has been stable. There has been a lot of new inventory coming on, but it appears to be getting absorbed by buyers at about the same rate. Percent of homes in contract is now at 32%, which is a balanced market. Inventory has been climbing steadily, and there are now 1,253 homes available. This is a pretty typical pattern for spring.

The main driver of this market continues to be, we believe, families with small children, searching for the quintessential Marin home: three bedrooms, two baths, some flat yard,in a great school district. Walking distance to some kind of shopping or school is a huge bonus. We could sell that home over and over in Southern and Central Marin right now - anything like that priced well moves very quickly.

Price segments are also reflective of this. FOr homes under $750,000, 39% are in contract. This has been consistently strong for months. For homes in the “move up” price range, $750,000-$2,000,000, 38% are in contract, which is a balanced market.

Most individual markets are mirroring the county averages. San Rafael has 36% of homes in contract, and Larkspur has 35% of homes in contract.

Volume is up, and pricing is stable. As of April 8, there were 541 homes sold in 2011 in Marin County, vs. 517 sold in the same period one year ago. Average sale price, which is indicative of which way prices are going, was almost identical - $619,327 in 2011, and $619,776 in 2010.

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Bob Ravasio, Frank Howard Allen, will present recent market sales trends and statistics,explain the home buying process in Marin County and how it works, the most important considerations when buying a home in Marin, and how to get the best deal you can. It will be informative, fun, and will give you the information you need to buy a new home. And it works - four couples who attended our seminar last spring ended up buying homes in Marin in 2010! Please call Bob at 415-945-2482 or email him at bravasio@fhallen.com to reserve your spot. Seating is limited, and we did run out space last year!

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Inventory has climbed in recent weeks, and there are now 1,117 homes on the market. However, the buyers are absorbing that new inventory. Percent in contract remains at 34%, which is still a balanced market, and is consistent with the numbers we have seen over the last six weeks.

Homes under $750,000 continue to be red hot, with 39% of those homes in contract. We are now seeing very strong activity in the mid level move up market as well. Homes from $750,000 to $1,500,000 are now at 34% in contract. Open houses in this price range in Southern and Central Marin continue to be extremely active, as buyers concerned about rising interest rates figure now is the time to act.

Homes over $1,500,000 are at 16% in contract, and we have seen some very large closings recently as well. A Kentfield estate, 70 Poplar Drive,  closed yesterday at $6,215,000. They didn’t get the asking price of $6,950,000, but not bad for a  5,535 square foot house!

We have a number of listings coming on the market in the next few months, but we are never too busy to handle more. We don’t how deep this pool of buyers is, but let us know if you’d like an evaluation of what the market is like for your home. Call Bob at 415-945-2482, in our new Larkspur office!

Source: BAREIS MLS,2010

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We’ll be conducting one of very popular free Home Buyer’s Workshops this Thursday, Feb. 3, at our Larkspur Office at 7 PM. If you are thinking of buying a home in Marin, this will be an extremely valuable hour.

Speakers include Bill Shine, principal at William Shine Co, a large accounting firm in San Francisco. Bill also owns numerous pieces of real estate, and will talk about the tax benefits of home ownership. Gina Kemsley of Terra Mortgage will talk about what to do now to get pre-approved, strategies for locking in the best interest rate, and what types of mortgages are available, including the very popular FHA program, which allows qualified borrowers to buy a home with as little as 3% down.

Bob Ravasio will review market data,  talk about the current market situation and pricing,  how the home buying process works in Marin, communities, and how to get the best deal in Marin.

We believe the market has stabilized in Marin, as we are currently in a balanced market - last night 33% of available homes were in contract, the highest level in several years.

If you would like to attend, email Bob at bravasio@fhallen.com or call 415-945-2482 for more information. These usually fill up quickly, and space is limited. Our new office is in downtown Larkspur, 545 Magnolia, right next to the historic Lark Theater. No obligation ever. Wine, snacks, and fun served!

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We monitor percent of homes in contract as a way to guage market strength. Below 25% in contract is a Buyer’s Market, and 25 to 35% is a balanced market. On August 2, 2010, 24% of homes were in contract. That number has been steadily rising, and has now been holding steady at 30% since mid December. Inventory increased this week as well, and there are now 1,027 homes available for sale in Marin.

Affordability is driving a lot of this strength. San Rafael is now a Seller’s Market, as 49% of homes are in contract! San Anselmo and Mill Valley are near the county averages, with 28% and 30% in contract, respectively. Novato is also very strong, with 42% in contract.

We expect inventory to begin building shortly. We have several new listings that will be ready soon in Larkspur and Mill Valley, probably just in time for spring! Watch for our year end report next week.

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After a difficult 2009, Marin real estate sales throughout the first half of 2010 have been showing increasing signs of strength. Here are seven key indicators that make us optimistic about the market:

1. Transactions are up dramatically, increasing 21% through mid-August vs. same period last year. There have been 1,445 sales so far this year, vs. 1,190 last year for the same period.

2. REO’s and short sales as a percentage of overall sales are declining. They represent 19% of all sales so far this year. Although this number is historically very high for Marin, it is down dramatically from last year, when 24% of all sales were distressed properties.

3. Average sale price has increased 11%, from $834,123 to $925,026. Average sale price is a good indicator of the general direction of the market, and reflects that higher priced properties are beginning to sell more now.

4. Multi unit properties are selling again, now to all cash buyers. There were seven multi unit closings in Marin in the last 45 days. Most of them - and all of the big ones - were to all cash buyers. One of them was our listing, 11 Hillside, and the Seller’s rationale was pretty simple: he felt it was time to move money out of the stock market and into real estate, as prices have come down and his returns would be higher.

5. Average days on market is heading down, from 98 days on market in 2009, to 91 for properties year to date.

6. Luxury properties, above $2 Million, are moving again. Unit volume almost doubled in this segment this year, as 113 properties have sold, the highest being $14,000,000.

7. Price per square foot is up slightly, from $458 per foot to $471.

Increases are being seen in almost all towns, although the increases skew to more affordable markets. Fairfax sales are almost double what they were last year, as is Greenbrae. Novato is way up, as is Mill Valley. The only town showing a decrease in sales is Ross, but the number of transactions per year there is so low - 12 so far this year - that it is really a statistical anomaly.

Inventory continues to build. There are now 1,622 homes on the market for sale, and 24% of them are in contract. Technically, that’s a Buyers Market, and that level has held steady for the last few weeks. August is typically a slow sales month, with volume traditionally picking up again in September. We’ll let you know if that pattern holds in the next few weeks.

Source: Bareis MLS 8/15/2010

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Here’s more evidence that this is a great time to buy because of this the phenomenon. The Housing Affordability Index, tracked by the National Association of Realtors, is at it’s highest level since it’s inception in 1989!

The index measures whether or not a typical family could qualify for a mortgage loan on a typical home. A typical home is defined as the national median-priced, existing single family home. The typical family is defined as one earning the median family income as reported by the US Bureau of the Census. The prevailing mortgage rate is the effective rate on loans closed on existing homes form the Federal Housing Finance Board. All of these components are combined with underwriting standards to determine if the average family can qualify for a mortgage.

For the quarter just ended, the index is at 177. That means that a family earning the median income has 170% of the income necessary to qualify for a conventional loan covering 80% of the price of a median priced single family home!

In other words, relative to income, housing is the cheapest it has been in a very, very long time. Back in the crazed market of 2005, the index was barely above 100, so the average family could barely afford to buy a home.
Obviously, Marin is different, in that home prices and incomes here skew much higher than the national average. But if someone were to track and compute all of the data, it is likely that the same would be true for the Marin market as well. Average sale price has declined significantly, and while income has fallen as well, it hasn’t declined as rapidly. The Marin affordability index is probably at its highest rate in years as well!

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