Buyers always lead the market in real estate, and Sellers always follow. In the fall of 2008, when Lehman Brothers blew up and the Great Recession began, buyers sent the signal well before anyone else realized what had happened. They simply stopped buying homes. Very little happened for 90 days, and then the freeze barely thawed out for the next three years.

Well, as the late Heather O’Rourke said in the 1986 movie “Poltergeist”, “They’re baaaaaaaaaack!”

And with a vengeance. Percent of homes in contract on April 6, 2012, in Marin County for all residential properties is an astounding 54%. I went back to my records and could not find a number like that since fall of 2004.

In plain terms, there are 1,088 homes available right now, and 550 of those are contingent or pending. So more than half the “For Sale” signs you see are on homes that are already probably going to someone.

Yesterday I had six different realtors pull me aside on Broker Tour (or call me) and ask furtively, “What do you have coming on in the next couple weeks? I need ……(fill in the blank).

Demand right now is through the roof, as buyers have awakened from their three year slumber and are ready to buy again. Yes, we are seeing multiple offers. Yes, attractively priced homes are going over asking. And yes, the banks are loaning money to qualified buyers to purchase those homes!

We are starting to see some very slight price appreciation, although it is not quantifiable yet. Overpriced homes don’t sell. But good  family homes, in desirable neighborhoods and great school districts, priced well, are getting a lot of activity. Entry-level priced homes are getting multiples.

In Novato, 65% of available homes are in contract. That is not a misprint - Novato is on fire. In Mill Valley, which has higher price points, 46% of homes are in contract, and in Corte Madera, 50% of homes are already spoken for.

First time buyers are driving this market, as 68% of homes under $750,000 are in contract. That is consistent across most towns. In the mid range, from $750,000 to $1,500,000, 38% of homes are in contract. That is balanced, but very competitive.

And over $1,500,000, 24% are in contract. Great properties in this range do sell quickly if priced right, however- 30 Upland in Kentfield, a  beautiful property on one acre with pool, but in need of all new finishes, drew seven offers and went in to contract well over asking this week. Three of the offers were non-contingent; two were all cash.

If you’d like to help alleviate this crisis in the supply of available homes to sell, let us know. A lucky buyer will no doubt thank you! Call me at 415-378-1414.

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We pride ourselves on not being typical salespeople. You know, the ones who you talk to and no matter what you ask them the answer is always “Its a great time to buy a house!” And 30 seconds later they will tell you, “It’s a great time to sell a house!”

Could it really be both?

The market is clearly picking up, in terms of velocity and pricing. Most notably, the percent of homes in contract is now at 42%. This is one of the leading indicators of market strength. For the past 12 months, it has been steadily been in the 31% to 32% range, and it suddenly jumped five weeks ago. Transactions are also up. Year to date there have been 2,452 sales in Marin, vs. 2,277 last year.

Part of this is a decline in inventory. But it is more than that. I think there is a change going on in market psychology, and buyers are starting to think the time to act is now. Their reasons differ, from fear of prices rising, to worrying about missing amazing interest rates. For some, they’re just tired of waiting and think it is time to get on with their lives.

Part of it is coming from the media, which has been negative for three years:

“It’s an excellent time to buy a house, either to live in for the long term or for investment income.”
- Wall Street Journal, 10/15/11

“Now could be the best time in history to buy a home.”
- Market Watch.com, 10/03/11

“Many buyers who waited for rock-bottom prices know that now is the time to buy.”
- U.S. News and World Report, 11/1/11

“It is important for America to realize that when it comes to housing, now is a time to buy.”
- JP Morgan Market Insights, 10/20/11

There are more, but you get the picture. Whatever it is, it’s different out there right now. People are actively looking for homes, even though it’s cold and the sun is low in the sky. Our open houses have been extremely active this month, at a time of year when I usually make sure I have a really good book to read at an open house.

So does that also make it a great time to sell?

There is also a lot of national press about the next wave of foreclosures, expected to hit next spring. If that happens, prices are expected to drop as the correlation between increasing foreclosure sales and declining home pricing is incredibly strong. But in Southern and Central Marin, the number of foreclosures, or notices of default, just don’t appear that high. It does not look like there is a ton of inventory waiting to innundate the market.

Hence our conclusion: great time to buy, and a great time to sell. Sellers who get out there quickly will be able to take advantage of the lack of inventory. They will get lots of traffic, and probably offers.

What about pricing? Most sources predict minor price increases in the latter half of 2012, in the 3% range, and then small increases after that. That fits the pattern history shows in Marin as well, based on data from the 1991-1993 downturn and 2000 dot-com recession. Expect velocity to increase, i.e. more sellers AND buyers, then pricing to slowly recover.

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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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Employment

Moodys shows that jobs have consistently grown in the Bay area throughout 2011. They project job growth over the next year to be 1.4% over the next 12 months, with larger growth in 2012. Bureau of Labor statistics show Bay Area unemployment is at 10.1%.

However, it the city of San Francisco appears to be vastly different. “The office market in San Francisco is on fire right now”, said Tony Zucker, a commercial real estate agent for Jones, Lang, LaSalle. “Rates are moving up, mainly from social networking and gaming companies.” (this article is actually for Tony - he’s been threatening to buy for a long time!)

That also checks with what he hear about the rental market in the city - apartments are difficult to find, and when they’re available, rent quickly with multiple offers. Recent San Francisco Chronicle articles have also talked about all of the hiring in the city.

Credit

If employment has been the weak spot in the recovery, mortgage interest rates have been the engine keeping things going. Rates continue to flirt with historic lows, and there is plenty of money for borrowers with good credit scores, solid employment histories, and down payments. But for buyers who don’t fit the traditional profile, credit is still difficult to obtain.

According to Gina Kemsley of Terra Mortgage, the biggest issue right now is the change in jumbo conforming loan size, from $729,750 to $625,500. That will force some people into a jumbo loan, which is typically a 1/4 point higher. The resulting increased payment will make it difficult for some buyers to get as much house as they want.

Typically in a recession, prices have fallen but interest rates are high. For example, in the 1990-91 recession, rates were 9.5%-10%. In the dot.com bust of 2000, rates were over 6.5%. This one has been different: rates are at historic lows, and prices are around 25% off their high point.

Psychology

The portion of Americans who believe homeownership is a safe investment dropped to 66% in the first quarter, the same as it was one year ago, but down from 83% in 2006, according to Fannie Mae, the government controlled mortgage company.

What’s not clear is whether that is a long term attitudinal shift or a short term reaction to the economy. The Fannie Mae survey also showed that 87% of people preferred owning to renting, but their reasons for doing so are changing. Access to schools, control over the home environment, and other quality of life issues are seen as the key benefits to home ownership, with building wealth and other financial factors viewed as less important. That checks with what we see in Marin. This market continues to be driven by families with children, looking for great public schools and walkable neighborhoods.

What does the future hold for Marin? Hard to say, but as noted every month for the last six, the market here continues to be stable. Transactions year to date are even vs. last year, average sale price down 3.5%. So despite Greece, stock market gyrations, and political turmoil, people are still buying and selling homes in Marin!

Sources: Wall Street Journal; Fannie Mae National Housing Survey; BAREIS MLS.

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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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There is no perfect answer here for everyone, but this month we are going to discuss the strategy we think is the most advantageous from a financial perspective, which we call “Sell first, buy later.” Not surprisingly by this, we mean put the home on the market, get it into contract, and then put your offer in on the replacement property.

The advantages to this are numerous.

1.You’ll get maximum value from your house on your terms. You can sell your home on your timeframe, and negotiate the best price without having to worry about timing on the other end of the transaction.

2. You’ll know exactly how much cash you are working with to purchase the replacement property. This is especially critical for move up buyers, who often need the equity from their home sale to make the down payment on the new purchase. Assuming a 20% down payment, every $10,000 of cash used for a down payment translates into $50,000, with mortgage, that can be spent on the new home. So an extra $20,000 for your home can give you the ability to spend an additional $100,000 on the replacement property, assuming you wish to do so and can qualify for the mortgage.

3. The offer you make on the new property will be stronger, and you will get better value. If you put the offer in after the contingency period is lifted by the buyers of your home, you’ll have the option of writing the  offer on your new home without a contingency on sale of your existing property. This makes your offer cleaner, less risky, and consequently means the Seller should, in theory, be willing to take less money. Not all sellers will take a contingent on sale offer- and those that do typically want an offer that is at or close to asking price.

Inherent in this approach is some risk. The biggest one is that you, the Seller, can’t find the perfect home to move into once you’ve gotten your home into contract. And the worst case scenario here would be that you can’t find a home you like enough to buy, and end up moving twice, usually into some kind of temporary housing. This can be mitigated in two ways.

First, when the offer is being negotiated, we can negotiate a longer close of escrow, say 45 or 60 days, to give you more time. We can also negotiate a rentback, so that you pay the buyer’s principal, interest, tax and insurance cost for one month to stay in the house an additional 30 days. Combine a 60 day close with a 30 day rentback and suddenly, you’ve got 90 days to find and negotiate for a replacement property. Even in Marin County, this is a lot of time.

The second way is to make the sale of your home contingent on you finding a replacement property. This makes your home sale slightly less attractive, as now the buyers of your home are not certain they will be able to buy your home, so it may cost you a little on the buy end. But if you have already identified a replacement property, this can be a very short contingency period, say seven days, to let you get into contract on the new property.

Is it possible to buy the replacement property, and then sell? Yes, it is, and we’ll discuss that approach in a future post.

Questions about listing your home in Southern or Central Marin County? Call Bob at 415-945-2482.

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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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Our new listing there, 5 Madrono Avenue, is an example of Hidden Valley at its best. The home faces south, and is bathed in sunlight all day. Nearly every room of the home was built facing south, and nearly every room enjoys large sliding glass doors to access the beautiful, wraparound deck (new four years ago) or yard space at street level. The home has 2,312 sq feet of living space and is located on a nearly one-third acre lot. Three large bedrooms, three full baths, a large living room (with vaulted ceilings), and wide, low traffic streets make this a great house for families who want terrific schools, a wonderful community, and easy access to Corte Madera’s Town Center and Village Shopping Center. Priced at $1,179,000.

Watch the video here.

Call me for a private showing at 415-378-1414, or come to our Open House on Sunday, Mar. 20, from 2-4 pm.

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