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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April numbers are UP! The market is continuing the trend we’ve seen the last several months, with transactions and average sale price up, days on market down, and inventory building.

There were 204 closed sales in April, a very healthy 40% increase from last April. Average sale price increased significantly as well, to $1,000,682, 17% higher than last year. This is reflective of movement in the higher price categories, which drives the average higher, rather than an increase in pricing. We are, for the most part, seeing pricing hold very steady for the last few months.

In fact, on a per square foot basis, price per square foot this year to date is EXACTLY the same as it was in all of 2009: $445 a foot, for all of Marin County. So prices are not going up - inventory coming on is meeting buyer demand.

Today’s buyers are careful, analytical, and patient. They know the numbers when they walk in to a house. We are getting more questions about cost per square foot than we ever have before at open houses, as the wealth of information available on the internet becomes more widely used. They discuss lot size, comps, lots of data that before was not nearly as important.

They also aren’t afraid to wait, as there are plenty of choices out there. Inventory is pouring on to the market every day right now. Right now there are 1,615 homes for sale in Marin County, which is about as high as we have ever seen. We’ve been involved in several transactions where the ultimate buyer was one who had made an offer, did not come to terms, waited several weeks, and then came back to purchase, as either side changed their position.

The heart of the market is still great family homes in good school districts. Right now, we have 34% of homes in contract in Marin. The lower the price point the stronger the market. For homes under $750,000, 44% are in contract, very strong but down a little from last month. Move up homes, from $750,000-$2,000,000, are at 24% in contract, almost a balanced market. Luxury homes over $2,000,000 are holding steady at 16% in contract, which is better than that market has been in a long time.

Corte Madera and Larkspur continue to be very strong, with 32% and 30% of all homes in contract. Novato is on fire, with 45% in contract. Sausalito still lags the rest of the county with 16% in contract.

Pent up demand, on both the buy and sell side, is driving this market. People’s lives have been on hold while they were waiting for the market to shift, and now that they see signs of life, they are moving!

Source for all data: BAREIS MLS.

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What’s a first time home buyer to do? Well, 60 Heather Way is a great house - and the least expensive single family home in Larkspur. If you want a real walk to town location in Larkspur, this is it. And it meets the criteria for the $8,000 first time home buyers tax credit as it is less than $800,000 - current asking price is $759,000!

It is two bedrooms, one bath, and 956 sq feet of charm, according to an appraisal (not the charm part!). With vaulted ceilings, an expanded and remodeled kitchen, great floor plan with an excellent flow to the large, sunny deck, this south-facing home gets tons of sun and is in one of the best walk to everything neighborhoods in Marin.

Not much to do on this one unless you want to expand (and we have plans drawn by an architect that show how to easily convert to a 4bd/2ba), as the current owners replaced the deck with a trex deck, installed a new furnace, air conditioning, and had custom cabinets built for both sides of the fireplace.

Open Sunday 2-4 pm. Oh, the $18,000 - in escrow by April 30, and if you are a first time home buyer you qualify for the credit. Add in $10,000 for California tax credits - be in escrow by May 1 - and you’ve got tax credits to pay for all kinds of upgrades, not that you need them. See your CPA as individual situations will affect applicability. Call 415-925-3261 for an appointment to see this house, and get ready to walk to school, Rulli’s, the Left Bank, and more!

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Transactions are WAY up - 183 closed transactions in March of this year, vs. 125 last March. Pricing has stayed relatively flat - average sale price is actually down, from $898,176 to $829,796 this year. But the median is up - from $639,176 to $705,000.

What does it all mean? Transactions have been abnormally low for three years. There’s pent up demand now on both the buy and sell side, because people still have babies, retire, and change jobs, even in recessions. So all that demand is finding it’s way into lots of transactions for buyers willing to pull the trigger, and sellers who are willing to price realistically.

This is not a return to the go-go days of 2003 and 2004. Prices are not going up, at least not dramatically right now. But well priced homes in great areas are selling quickly, in all price ranges.  The hotttest trend we see right now is “walkability.” People want to be able to walk to places from their homes, so downtown Mill Valley is hot, as is Larkspur, especially in the $2 Million plus range. In fact, we’re adapting marketing materials for all of our listings to talk about that where appropriate!

Inventory is very high, as there are now 1,433 homes on the market. But an amazing 31% of those are in contract, which is a balanced market in our book. Here’s a quick rundown on price categories:

Under $750,000 - 43% in contract, SELLERS market.
$750,000-$1,500,000 - 23% in contract, BUYERS market, almost balanced!
$1,500,000 + - 18% in contract, BUYERS market

The numbers in the $1,500,000+ category are the strongest we have seen in quite some time. Jumbo money is getting very affordable again, and that’s the key to this market.

The other big driver continues to be school systems. Corte Madera is strong, with 34% in contract, as is Larkspur with 37% in contract. But Sausalito, which has a pretty good mix of more affordable condominiums as well as high end homes, has only 10% in contract. So it’s not just price driving this, we think good school systems continue to drive demand at this time of year as city buyers look to move to a place where the land is beautiful and the schools have high API scores and are public!

And finally, the comeback player of the year goes to Novato: right now 44% of homes are in contract there. They were the first to decline, the first come back, and hopefully, will be a harbinger of things to come for the rest of the county.

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We are hearing about multiple offers on properties, and then the properties go way over asking price. We represented two clients recently in offers to buy properties in Mill Valley. One was priced at $888,000, and got seven offers. Reportedly, it went for $1.1 Million. Another was priced at $1.35 Million, and got 10 offers.

Here is what happens. Buyers are out there right now, looking hard and anxious to find something. They’ve been waiting a long time, and they want to get the right home. There is not much on the market in the mid range right now that is available and desirable, so when something new comes up, everyone jumps on it.

I believe it is temporary. There will be a huge supply of inventory coming on the market in the next 60 days, as Sellers who have not been able to sell for two years start bringing properties back on the market.

Stay tuned, there are 1,038 homes available in Marin right now, and 34% of them are in contract. The market is shifting to a neutral market from a buyers market.  Our open houses have been very busy, much more so than last year at this time.

Lots of buyers, plus lots of inventory means more transactions, but probably not much change in pricing for patient buyers.

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Our team hosted four of these seminars last year, and we are proud to report that we put NINE buyers into their first home in Marin County last year!

The presentation is geared specifically to first time home buyers, and will cover topics such as:

- An overview of the home buying process, timelines, and a review of current market conditions

- The tax benefits of home ownership, how to qualify for the first time home buyers’ tax credit, including deadlines and income limits.

- How to get the best interest rate and get pre-approved for a loan now

- FHA loans that will allow you to buy a home with as little as 3% down

- Strategies for and advantages and pitfalls of buying foreclosures and short sales

Back by popular demand will be Bill Shine, owner of William Shine Company an accounting firm in San Francisco. Bill advises hundreds of clients on investment in real estate, and owns 23 properties himself. We’ve done numerous workshops with Bill and learn something every time, and we’re sure you will too!

Gina Kemsley of Terra Mortgage will discuss financing options, loan packages, and FHA loans, and how to get the best rates and terms.

Pat and I will discuss search and negotiation strategies.  These filled up quickly last year, and we received lots of great feedback, so we’ve made them even better. If you’re a first time home buyer, this will be a very valuable 90 minutes. And of course, there will be wine, cheese, snacks, and some fun as well.

There are 94 days left to get in to escrow to take advantage of the first time home buyers tax credit.  Get started now and you’ll be ready to pull the trigger when the right home comes along.  Just email to bravasio@fhallen.com for a reservation.

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Here’s the news you’ll be seeing on the front page of the newspaper: average sale price for the year fell to $853,390, a 20% decrease from 2008. That is the largest decline in average sales price in the 43 years of data we have available. And days on market increased, from 85 days in 2008 to 101 in 2009.

So here’s what you won’t read in the newspaper…the seeds of the housing recovery have already been planted, and many people are enjoying the benefits.

1.More people were able to buy their first home last year, and get a foothold in one of the toughest housing markets in the country. The combination of falling prices, low interest rates, and the first time homebuyers tax credit brought first time buyers out in droves.

We are proud to say that our team put NINE first time Marin County home buyers into houses in 2009!

2. The buyers of today are more qualified than the ones doing it five years ago. They’re buying homes the old fashioned way - with healthy down payments, and qualifying for loans at very high standards, with good credit scores and solid income. These are not people who are going to fold at the first signs of a downturn.

3.Despite where we were in January of 2009, when many were questioning the ability of the American financial system to survive, the number of transactions in Marin County in 2009 actually rose vs. 2008. We are still very low by historical standards, at 2,156, but that’s up 4% from last year.

And current market conditions continue to bode well. Right now 36% of available homes are in contract. That is the highest percentage in several years, at a time when the numbers are typically low.

4.If you find a good house under $750,000, move quickly, because over 50% of the ones available have a contract on them! We expect this trend to stay very strong because anyone qualifying for the first time homebuyers tax credit must be in escrow by May 1. If interest rates stay low, than anyone who can buy will be looking very, very hard at this price point.

5. Interest rates are still great. Conventional loans are still available at 4.75%. Even multi-unit loans are still available through FHA at the 5.5% range. It’s almost like Eisenhower was still President and everyone was still driving a Plymouth!

We’ve gone through a difficult correction. But we’re still a huge fan of Marin County real estate. It is still one of the best places to live in the world, with great communities, wonderful schools, unparalleled opportunities for recreation and a benevolent climate. Housing supply is pretty much fixed, so long term, this is still a great place to buy a home!

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1. Buyers usually get a great deal.

2. Sellers get out from under a crushing load of debt.

3. Old inventory gets absorbed, at a realistic price, which helps the overall market.

Most fulfilling for us has been that in a short sale, the “win-win” that we all search for in a successful transaction takes place at an even deeper level. We’ve successfully negotiated short sales for several clients in the last year that resulted in no definciency agreements to the seller at all. Believe me, when someone is staring down a possible foreclosure and the resulting hit on their credit, and then they end up free and clear of the whole thing with minimal damage, well, it makes all the pain and suffering worth it.

Logically, banks should want a short sale to go through also. This is primarily because by the time the home goes through foreclosure, the home will be worth less from neglect and declining values than if they completed the transaction now.

And it’s not like people aren’t trying. There are currently  257 homes for sale in Marin County listed as short sales as of today, and an astonishing 72% of them are in contract! The price range is from $112,000 to $2,900,000, so in Marin County, short sales are happening everywhere now, even Kentfield!

This home in Kentfield, new construction, originally priced well over $4,000,000, is now a short sale at $2,900,000.

So why aren’t banks moving faster? A conversation with a family member over the holidays finally made the light bulb go on for me. He works in a prominent position for a large bank, and said, “So you want to know why the banks won’t approve these things, even though you and every other knucklehead involved are calling all day, making us add staff just to handle all the calls and tell you we’re working on it? It’s all because of the change the government made to the mark-to-market rules.”

Here it is in a nutshell. When a bank carries a loan for $1,000,000, it does not matter anymore from a bookkeeping standpoint if it is only worth $600,000. In the past, the bank had to change the value to reflect market value, i.e., “mark to market.” Last year that changed.

So even if the loan is in default, and there hasn’t been a payment in a year, the asset is valued at $1,000,000. The day the bank approves the short sale at $600,000, the bank’s assets decrease by $400,000. That’s $400,000 they don’t have anymore to loan to other people, or at a five to one ratio, $2,000,000.

Even though the bank will eventually need to take the loss, they are, in effect, rationing them out gradually, so the effect on capital isn’t too severe. Approve too many too quickly and the bank could suddenly be in violation of federal guidelines for capital reserves.

Short sales are still a great way to get a good deal for those with patience and guts, even in Marin County. But unless government laws change, don’t expect there to be any change in how quickly the process moves. The banks just don’t have an incentive to do it.

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To be eligible, the contract needs to be signed by May 1, 2010. The deal needs to close by July 1, 2010, so if you’re thinking of taking the credit via a short sale, you should be in contract in the next 30 days!

If you have not owned a home or a primary residence in the prior three years, you qualify. If you own a vacation home and have not lived in it for 36 months, you may still qualify.

The credit amount is up to $8000, or 10% of the home’s value, whichever is less, so that includes nearly every purchase in Marin.

There is also an existing homebuyer tax credit, which is new. This is for current homeowners that have lived in their current home for at least 5 years.

Both credits phase out based on income. For single taxpayers, it begins at $125,000, and for couples, $225,000. Talk to your CPA for exact information on your particular situation, and whether or not you qualify.

This is a great opportunity for first time buyers, and we expect it to continue to spur demand in the entry level through the first half of 2010.

We put three first time homebuyers into new homes in November, and will put at least one more in in December. Between Pat, Bob, and Rick, we know the entry level inventory extremely well in Marin. Let us know if you have a friend or family member who is hoping to buy for the first time - with interest rates at historic lows, this is an amazing time to do it!

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