This year average sales price in Marin County may actually decline. It would be the first such decline since 1992, and 1991. They didn’t fall far then, just 1.2% and 1.4%. If it declines this year, it would probably be of a similar magnitude.

So will prices start to rapidly increase again? We predict several years of price stability, not rapid increase. Here’s why.

After the decline in 1991 and 1992, average price increased, but very slowly - about 3% annually, or slightly higher than the inflation rate. And just like the period we’re in now, the prior 14 years had seen average price triple.

Marin is a very special market. It really is different, because the supply of housing is fixed. But it can not continuously rise, as housing affordability is directly related to income, employment, and the overall economy.

We don’t pretend to know when the market will turn. But we do believe that when the market stabilizes, pricing won’t come roaring back. Instead, expect it to follow the path established in the late 90s. Prices will stabilize and stay there for a while, as incomes catch up to housing prices, before other macro trends drive pricing up.

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So that started us thinking, what does the bottom of the real estate market look like? Not just from a numbers standpoint, but from a more qualitative standpoint. Here are some of our thoughts, as well as what we think the status is.

1. Real estate news and home values move off the front page of the paper and back into the business section where it belongs.

Status: Not quite there yet. The Marin IJ still insists on making home values front page news. When values stop changing, they won’t be news anymore.

2. People think about their home as a place to live, not an investment, or a piggy bank.

Status: Not quite there yet. We’re talking to lots of buyers every day, and there is still a lot of hope out there for skyrocketing prices once they’re in. Maybe someday, but don’t bet the ranch on it right now.

3. Realtors start buying property for themselves.

Status: Check. We’re among them, as a matter of fact, and have invested in another property with a partner, this time in Mill Valley. One of the other offers was from another realtor, and a third realtor backed out at the last moment. This is what we do for a living. Maybe we’re drinking our own Kool-aid, but we think our instincts are right.

4. Investors and builders start buying.

Status: Check. A recent article in the San Francisco Chronicle stated that investors are starting to jump back into the market. A big Los Angeles based builder just bought a large ranch in Novato for commercial development. The company that purchased the Fireman’s Fund building in Novato just announced plans for a major expansion of space and housing.

5. Despair and negativity are everywhere.

Status: Just about there. They call it capitulation in the stock market. We’re feeling it out there in the housing market too. Lots of properties that were for sale are being rented, and some with long term contracts.

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Someone forgot tell home buyers in Corte Madera. Real estate sales have picked up quite a bit here. For example, 247 Sausalito, asking $799,000:

Four offers, after 10 days, according to the Selling agent. Now in contract.

And 438 Oakdale, also Corte Madera, $850,000:

Four offers, five days, now in contract.

And 4 Wildflower Court? Asking $1,089,000.

Four days, two offers, now in in contract.

And then 215 Chapman just closed at $875,000 - there were five offers on that, asking was $799,000!

What’s going on?

First, they were all well-priced. Second, three were in Chapman Park, one in Madera del Presidio, both highly desirable neighborhoods in town. Finally smart buyers know that this is a good time to buy - we haven’t had a market this good for buyers in a very long time.

Combine that with some realism on the part of Sellers - and you get action. More about some great deals coming soon….

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The news is not good. But it’s not nearly as bad as the headlines.

First, some perspective. There were 40 foreclosures in Marin in the fourth quarter, according to the IJ. There were also 486 sales, according to MLS. In Contra Costa, for the same time frame, there were 1,558 foreclosures, and 1,559 homes sold, according to the Chronicle article. In other words, there were as many foreclosures as there were homes sold.

So for openers, Marin County is much better than other parts of the state. Of course, if the patient is near death, that may not be saying much.

But in absolute terms, the number is small. Will it increase? Probably. Mortgages are going to continue to re-set through this year, and that is going to create more foreclosures.

I don’t want to make light of this. In my last post I talked about low offers, and said in one case I would have counseled the Seller to counter back way over asking price. (That’s one way to find out people are reading your blog by the way, lots of feedback on that). Foreclosures create massive pain, emotional and financial, for everyone.

But it’s not a panic situation in the least. In fact, homes are selling, on average, at slightly over 96% of list price. Is pricing lower? In many markets, yes.  But are Sellers jumping on offers at 80% of list price? Not from what we’ve seen among our listings and buyers, and not according to the MLS data.

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We’ve been tracking percent in contract for over three years now, on a bi-monthly basis. Below 25% is a Buyers Market, and we’ve been there since mid-June.

Things bottomed out in mid-September, when percent in contract was 14%.

It’s been climbing slowly and steadily since then, and now sits at 21%. And it’s not just inventory being pulled from the market, either. There were 171 homes in contract 9/15, and as of 11/15 there are 248. It’s unusual for that number to be trending up at this time of year.

Central and Southern Marin real estate are the strongest markets, lead by Corte Madera and Greenbrae. Novato and San Rafael continue to be the weakest, but there have also been good upticks in activity there.

Most interesting is that homes under $!,000,000 represents the strongest segment, where 22% are in contract. That reverses again what has been happening in the first half of the year.

Why now? Asking prices have certainly come down a bit. Interest rates are historically low. There are some great deals out there, and Buyers are figuring that out. And life goes on - people still need to move, as they get married, have babies get new jobs, etc.

As always, contact me for a full report, or if you’d like to know where the hot deals are right now.

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On the other hand, we’ve been looking at slowing sales and increasing days on market for the last four weeks, so what’s really happening?

Things have definitely cooled off from a month ago, when percent of homes in contract was 30%. It fell to 26% two weeks ago as inventory spiked, but has seemingly leveled a bit, now at 27%. That’s still a balanced market in our book, although getting close to the 25% level that delineates a buyer’s market.

We put a great house on the market three weeks ago, priced to sell, and waited for offers. Nothing happened. We had another open house. Still nothing. Then, in the third week, we received three offers in one day! The house went for well over the asking price of $1,049,000.

Our sales office had 31 sales this week, which is a very big number, and nine of those sales had multiple offers. One, a $4MM house in Kentfield, had nine offers!

So what does all of this mean?

Great homes, in great neighborhoods, that are priced well, will sell quickly, in any price range. If not, it’s more of a struggle. There are plenty of expired listings out there. Inventory is high and there is, by Marin standards, a lot to choose from.

Sellers: if you’re motivated and ready, you can sell your home. If you’re not, get ready for a long slog.

Buyers: the 30 year fixed is still around 6 1/4 %; inventory is out there. If you see something that’s really great, get ready for multiple offer time. No one likes it, including the agents by the way - but it is a reality.

Here are the numbers:

Total Available      In Contract      %In Contract

Total                   1,287                   337               27%

Under $1MM         695                       184              27%

$1MM-$2MM         390                       114              30%
$2MM+                203                        39               20%

Average Days on Market: 67

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The sod is going in right now. Most of the plants are in.

This is the living room, it’s shaping up nicely.

Here’s the front of the house:

This shows all of the new plants in the front. Yard is still bare.

There’s workers and stagers everywhere, and still a million things to do, including getting ready for the neighbor’s open house - a special open house for the neighbors, from noon to 1pm, so they can see it. We’re serving hot dogs and lemonade on the deck, something we try to do whenever we’re selling a family home.

More pictures when we’re done.

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We recently listed 23 Gothic in Novato at $1,090,000, a 4/4, 2,895 sq ft house. New a year ago, beautiful construction, an amazing great room and kitchen:

The big drawback for the home was the stairs, and lots of them. That takes a lot of people out of the market for the home as soon as they see them. So we priced it to reflect the stairs, as well as what was happening in the market.

I got a call a little over a week ago from the seller, who wanted to know what we could do to move the home more quickly, even though it had been on market for 21 days. His goals had changed.

We re-computed the analysis we did when pricing it originally. There were 21 homes available in Novato, from $950,000 to $1,150,000 with four bedrooms and at least three baths, and only one was in contract. That’s a lot of competition!

We were priced at $376 a square foot, just a little under the average for available properties at the time. However the average cost per square foot for sold properties in the last 90 days was $367 a foot.

We quickly figured a simple reduction to $1,049,000 would put him at $362 a foot, slightly below the sold comps, and made the change last week.
We got an offer a few days later, and are now in contract.

It’s critical to make your home stand out from everyone else’s in this market, but especially in towns like Novato, which is a Buyer’s Market right now with lots of inventory. It’s not always as simple as price per square foot - but that’s always a great place to start, we believe.

By the way, I ran the data this morning for the parameters above. Cost per square foot for active properties is now $391 a foot, and for sold properties is $367 a foot.

I don’t think that’s an accident. If your home isn’t selling, and you need it to sell - you need to consider what you can do to increase it’s value, and a price reduction is the simplest and fastest way to do it.

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My wife Pat started working with this last week. She has supervised, among other things, painters, movers, landscapers, handymen, carpet installers, and others to get the property ready. The whole house has been repainted, new carpet installed downstairs, the inside decluttered and staged, and the outside completely re-landscaped, all in about 10 days.

Well, almost. Our first showing is the open house, this Sunday. Here’s what the house looks like at 5 pm today:

That’s the owner in the doorway and our best painter, Greg Strohmeyer, trimming out the door. The front looks great.

This is the downstairs bath, where they’re installing a new sink and repainting.

The yard is pretty much a disaster at this point. It still needs a tremendous amount of work, and there’s only two days left. It will be completely planted with flowers and sod by Sunday, though.

Finally, here’s the family room, with the new carpeting that went in today. There was a problem with the first carpeting job. Pat had it all pulled out, and this was re-installed.

It’s actually looking pretty good, all things considered. There are about five or six people working on it at any given time. The real staging takes place tomorrow, I’ll get more pictures then, and try to illustrate how this comes together.

The real point though, is the value this will add to the property. The price for this house will be $1,049,000. I’m sure it will sell quickly, because when this is done, it will be absolutely beautiful, and the kind of house most families with small children are interested in.

More tomorrow…..

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As of 4/15/07, percent in contract was 28%, down slightly from 29% two weeks ago. Inventory continues to rise, now at 1,105 for total homes on the market. When percent in contract is below 25%, it is a Buyers Market; between 25% and 40%, a Balanced Market; over 40%, a Sellers Market.

Kentfield, Larkspur, Mill Valley, and Fairfax all have over 40% of available homes in contract - technically, a Sellers Market. Greenbrae numbers are at 24%, but that number is a artificially low because of the number of condominiums in the sample.

The percent in contract for the county has been relatively steady since the end of January, as the market continues to absorb new inventory relatively quickly. This is exactly the pattern the market followed last year, and then in May and June last year, sales started to slow down faster than new homes became available. We’ll watch closely to see what happens here.

Some key data:

Total Homes Available: 1,105

Total In Contract:           314

Homes Under $1MM:        599

Under $1MM, in contract: 180

$1MM-$2MM, available:     334

$1MM-$2MM, in contract:  95

$2MM-$3MM, available:     172

$2MM-$3MM, in contract:   39

As always, please contact me at bravasio@fhallen.com if you’d like more detail and a complete report.

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