3. Schools are more important than ever.

The reason many first time home buyers buy is because they have children approaching school age, and Marin public schools are some of the best in California, not to mention free. So areas that represent good value for homes plus good schools are doing better than those that aren’t.

For example, Sausalito schools, as measured by API scores, do not do as well as most of the districts in Marin. Home sales on a unit basis there are off 52% from year to date. On the other hand,Fairfax has good home values, and good schools. Unit sales there are up 16% this year.

San Rafael is also an interesting market. There are two elementary school districts there, Dixie and San Rafael. Dixie Schools have some of the best API scores in Marin. San Rafael Elementary varies pretty widely.

How does that affect home prices? We overlaid the school district maps onto MLS to find out. Right now, in the San Rafael Elementary district, there are 75 three bedroom homes available, with an average list price of $676,399. In the Dixie School District, there are only 22 three bedroom homes available, with an average list price of $856,763.

Interestingly, San Rafael has far more higher end homes available, because they have some very upscale areas. But for the average entry level home, people are asking a premium for Dixie schools.

4. Banks are getting better at short sales.

We are actually seeing short sales close, for two reasons. First, banks are learning how to handle these types of transactions, and are now getting procedures into place that everyone understands.

Second, they are also simply hiring more people to handle the transactions, which is helping to work off the backlog. That’s good news for everyone, because the sooner short sales are worked out of the system, the closer everyone will be to a normal market.

5. Even though foreclosures declined 18% in the second quarter of this year, expect an increase in the last six months of the year.

One big reason for the decline is the state moratorium on foreclosures, which ends in September. Unless a new law is passed that stops them, there is undoubtedly a backlog that is waiting to go through the system.

Price points, we think, will vary widely. No one is immune. For example, Sugar Loaf Drive is one of Tiburon’s most expensive streets. One house is in preforeclosure status there, and a second was recently sold at auction. In both cases, the mortgage amount was over $5 Million.

Part 3 coming soon - who is really control of this market?

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It’s early August. We’re back from vacation. The market is taking is starting to take it’s normal down time for August, so we thought it made sense to revisit the market in depth to try and help our clients understand where the market may turn next. And in our ongoing effort to provide the absolute most up to date, insightful, and accurate information on Marin real estate, we’re continuing to find new ways to look at the wealth of statistics available through MLS, as you’ll see below.

Here’s what we think are the most important trends in the market right now.

1. We believe the entry level market, homes under $750,000, has found a bottom, and may even be seeing a little price appreciation.

We said in January first time home buyers would drive the market, and they are. The government, and the Fed, want people to buy homes. And thanks to the first time home buyers tax credit, low interest rates, and falling prices, they are.

Homes under $750,000 are at a rather astonishing 44% in contract. That is, by our measure, a Seller’s market. It also fits with what we see in the market every day. Solid houses in good school districts are getting snapped up pretty quickly, often with multiple offers (remember those? that’s when more than one buyer wants a house!), as first time home buyers are seizing one of the best buying opportunities in Marin County in years.

But here is why we can really state it is finding bottom. We started analyzing sold price per square foot by quarter, and it has been consistently dropping in this price range for two years - until this quarter. It actually ROSE from $328 a foot, to $340 a foot in the second quarter of this year. One quarter does not a trend make, but that is a significant change in direction that we will continue to monitor, and the first change in direction in two years.

2. Because entry level homes are selling, move-up homes are starting to sell as well.

Move-up homes, which we define as $750,000 to $1,500,000, are now at 23% in contract. That is ALMOST a balanced market!

It makes sense. The activity we are seeing at the entry level is allowing many of those people to take equity out and buy a larger home.

It also helps that Sellers are becoming more realistic. Prices have come down, and Sellers that acknowledge that are able to find willing buyers.

Next:School Systems Are Driving Sales

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In a nutshell, entry level homes are very strong, mid-level home sales are weak, and luxury home sales are very weak.

This continues the trend we’ve seen for the last few months. Statistically, 35% of homes under $750,000 are in contract, which is nearly a Sellers Market. We’re seeing evidence of that at our open home listings, where traffic is very high, even last Sunday when it poured rain all day.

A lot of that strength in Northern Marin is still driven by short sales and REOs. Novato is the strongest market in the county, with 36% of homes in contract. Of available listings, 54% are either short sales or REOs! REOs and short sales are still pretty infrequent in Southern Marin,

The mid-level move up market is less robust, as only 13% of homes from $750,000 to $1,400,000 are in contract. That is clearly a Buyers Market. Paradoxically though, there is a shortage of good inventory in the $1,000,000 range. We have several buyers actively looking in this range, and they are having a tough time finding the right property.

In the over $1,400,000 range, there is very little activity. Only 7.5% of homes are in contract, which is about as low as we have seen.

There are buyers out looking hard in all price ranges. But what seems to be happening in the upper ranges is that Buyers are writing offers well below asking price, and Sellers are not countering or sitting. We know this from our own experience on both sides of the table, but other agents are reporting exactly the same thing. So Buyers have one idea of market value, and Sellers another. When that situation resolves itself, transactions will pick up again in the upper price ranges.

When that will happen is impossible to say. A drop in jumbo mortgage rates, as many are predicting for second quarter, could be the impetus to get things moving again.

(All data from BAREIS MLS)

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Year end numbers are in, and are shocking. In 2008, Marin County experienced the largest drop in average sale price in the 43 years that we have tracking number.Average sale price fell nearly 13%, from $1,220,683 to $1,066,544. The largest drop before that had been in 1992, when average sale price fell 1.4%. Of course, that is way, way below but other parts of California have experienced,but still unprecedented.

Average sale price is a lousy barometer, but it is the one the media uses, so we like to look at it. More relevant though is that price per square foot fell by 6%, from $604 a foot to $568 a foot.

And there were only 2,075 units sold. That is the lowest number of transactions in Marin County real estate since 1982, and well below the average of the last 42 years of 2,806.

A big part of what is going on here is that the condo market, especially in Novato and San Rafael, is on fire. So with a small number of transactions, a disproportionate number are smaller value condo deals, and that drives the average sale price down.

Some cities actually showed a slight increase in average sale price, like Mill Valley. But a big part of the story there is people are buying bigger homes as property gets redeveloped. Average cost per square foot actually declined in Mill Valley, from $766 foot last year to $718 a foot in 2008. In other words, people are getting more for their money, just as they are just about everywhere in Marin.

Entry level homes are hot throughout Marin. Percent of available homes in contract is an excellent gauge of the strength of the market, and in Marin County last week, the number for the County was 21%, a Buyer’s market.

But for homes under $750,000, that number is 31% - a balanced market. And for homes under $550,000, the level at about which you can get a conventional $417,000 loan, the number in contract is 40%! That is a Seller’s market!.

From what we can tell from reports from other agents,  as well as our own experience, lots of those are first time buyers, not just investors.  We put two buyers into contract in the last two weeks under $900,000, and in both cases, there were multiple offers - one had three offers, one had two. Both were great values, for different reasons - just too good to pass up.

And as prices fall, we are seeing more every day…stay tuned for more deals as they come on market.

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It has been a difficult year for Marin real estate. Total unit sales are off 35% for homes, and 38% for condominiums. Condominium average sale price is down 10%. Some realtors are learning new phrases, like “Did you say one or two shots of espresso in that latte?”

We see stability creeping in, however.

First, the percent of homes in contract has consistently stayed at the 23% level for two months now. That’s almost a normal market, and that number is staying consistent even though inventory is higher than it has been in years.

Second, Novato and San Rafael are two of the strongest markets in Marin County right now, with 27% and 24% of homes in contract. That’s important because these were the first two markets to really start to have problems when the market started to decline. It’s also important because combined, these two towns represent half the inventory in Marin County.

Why the strength here? According to agents who specialize in the area, Novato sellers are adjusting expectations, and pricing accordingly. In other words, they’re further along the learning curve, and adapting to the changing market.

Finally, we’re feeling an upsurge in buyer activity. We’re suddenly getting lots of calls asking about our listings, after a very quiet May. Maybe it’s just that school is out, maybe it’s a blip, but it’s fun anyway!

As always, call if you would like to receive our weekly updated market statistics.

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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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As noted here a few days ago, the Fed rate cut has not affected interest rates.  My good friend Rob Chrisman, who is big hitter at a local mortgage company and issues a great newsletter every morning sent this link, which helps explain the relationship, or more importantly the lack of a relationship, between the Fed’s discount rate and long term mortgage rates.

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Inventory has been climbing, but shrank a bit the last two weeks, as there are 1258 homes available as of 7/15/07. Corte Madera, Larkspur, and Mill Valley are the strongest markets, and let’s just say it’s a tough time to be selling a home in San Rafael or Novato.

Anecdotally, we continue to feel the difference in the marketplace. To be sure, well priced properties sell quickly - our listing at 32 Fern in Kentfield is now contingent, after just 10 days. But in reviewing the hot sheet every morning, the number of price reductions continue to rise; by the end of the week, reductions usually outnumber the number of new listings.

Negotiations that used to take a matter of hours, with agents frantically sending faxes and emails to get signatures on counter offers, now take two or three days.

Buyers are taking their time in most cases, comparing properties to find just the one they want. And lots of properties that are in contract are falling out, as stubborn sellers refuse to negotiate, and frustrated buyers move on to the next deal.

All in all, it’s actually not bad. In fact, it’s great - we’re having a blast. Our business is very strong. My wife just went to war for two days with a title company that was incorrectly charging our client $3000 - and she won. I have clients buying a property that has been on market for a year and a half - they’re paying nearly 25% less than the original asking price. Smart buyers are getting good deals, and if history is any judge, they’ll do just fine.

Marin County - Percent in Contract 23%

Under $1 MM, Percent in Contract 24%

$1mm-$2MM, Percent in Contract 27%

$2MM+, Percent in Contract 15%
For a complete rundown, and comparisons to last year, please contact me at bravasio@fhallen.com. And remember, we’re never too busy to help with any of your real estate needs - call for information, advice, or a market analysis.

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In case you missed the news of the last two weeks, interest rates for mortgages have increased dramatically the the last two weeks. How much?

A conforming 30 year fixed is now around 6 7/8%, and a jumbo is 7 1/8%. That’s almost a half point move from two weeks ago.

What’s this mean if you’re looking at buying a house in Marin County?

First, start looking at other instruments besides the 30 year fixed. Adjustables are starting to make sense again, if you have a substantial down payment and your prospects for increasing income are good. The spread on the jumbo for an adjustable is now almost a full point.

Second, if you’re thinking of buying a home in Marin County, think carefully about your time frame for owning a home. If you’re going to be there for more than a couple years, it still makes sense. Why?

Historically, Marin County prices do not decline substantially. If history is any indication, they rarely do - only twice in the last 41 years. So if you buy now, your chances of massive depreciation are slim.

If interest rates do indeed continue to increase, as many are now predicting, you’re better off locking in now. Selection may be better six months from now - but if prices don’t pull back, and rates continue to climb, you could be priced out of the home you really want.

As always, please contact me for more information or up to date market statistics.

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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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