Archive for the 'Market updates' Category
Many times I have shared the latest Sonoma County real estate sales statistics for residentialÂ properties.Â These are compiled on a monthly basis by my broker at Coldwell Banker, Rick Laws, based on actual sales data for the entire county as reported on the Bay Area Real Estate Information Services, our multiple listings service.Â The reporting software is Brokermetrics, from Terradatum.Â Â Fellow agent, Craig Curreri, has taken it upon himself to go back to 1990 and summarize this data so that we have a nineteen year perspective on our bit of Northern California wine country real estate values.Â Â
Thanks to Craig for the headline above.Â There is no doubt that this is a very difficult time in real estate for many people.Â It helps to put events of the last couple of years into perspective.Â Thanks Craig and Rick!
My last post this week detailed real estate supply, demand and price trends for Sonoma County real estate.Â The story of last year was bargain basement pricing by the banks looking to clear their inventory of foreclosed homes.Â County-wide the median price dropped 30% year over year through December 2008.Â The bulk of the sales action was in the sub-$500,000 price range and really lower than that. It is possible to find single family homes under $300,000 and even under $200,000 in some cases.Â With conforming loan rates ducking under 5% for thirty year fixed rate loans, first time buyers and investors are snatching up properties at a record pace.Â Condominium sales are just as hot.
Meanwhile, let’s take a look at homes in the mid-range tier of pricing, between $500,000 and $1 million dollars.Â In this range currently you will start to see larger homes, possibly with acreage in communities all over Sonoma County such as Santa Rosa, Sonoma, Glen Ellen, Healdsburg, Sebastopol and Petaluma.Â Â The bulk of the lower priced properties are concentrated along the 101 corridor in Santa Rosa (primarily west of 101) , east Petaluma, Rohnert Park/Cotati and Windsor.Â It is not safe to over generalize about communities if you are looking for property however as we have a wide variation of homes and locales.
Here is a view of supply and demand for Sonoma County homes priced between $500,000 and $1 million dollars.Â The first chart shows the change, or lack of change, in median price over the course of 2008.Â Median price rose a modest 2.5% in this price range.
The reason prices did not drop drastically in this price range was that the supply of new homes dwindled at the same rate as the number of sales, as sellers who did not need to sell retreated. The rate of sales and new listings were cut in half year over year.
There was also a recalibration of pricing above a million and below $500K as properties sought new levels. Clearly there has been a less dramatic softening in prices but the median was left essentially unchanged.Â There was a slight increase in sales at the end of the year and a leveling of new listings coming on the market.Â What do you think this information means for the spring market?
These three graphs tell the quick story of pricing, supply and demand trends for housing in Sonoma County from December 2007 through 2008.Â But the real story for your home depends on the price range for your house and the part of the county in which you live, or seek to live.Â You cannot automatically say that every home in the country dropped 30%.Â The price dropped most steeply in those communities with high rates of distressed housing:Â West Santa Rosa, East Petaluma, Windsor and Rohnert Park/Cotati.
But, on average, and in summary:
The median price dropped 30% year over year.
The number of newly ratified sales contracts grew steadily all year and lead to a 184% increase year over year.
Months supply of inventory dropped dramatically (73%) and steadily all year,Â exceedingÂ the drop in prices.Â
From a very strong buyers market in December ’07, with over 14 months supply of homes at last December’s sales rate, this December saw only 3.7 months supply.Â Six months is considered a balanced market.Â Anything under is a seller’s market–in this case the banks who own nearly half the properties sold.
There was no seasonal dip in newly opened escrows this December as brave (or desperate) buyers and investors sought a home for their cash, literally. Despite the horrendous news in the financial markets, the rate of sales actually increased and the number of new listings continued to decline over the most recent months. Maybe the 2 point drop in interest rates over the last three months has continued to spur buyer activity, and not just at the low end of the market (under $500K–or really under $350K).
I just got my hands on all sorts of juicy data and four major price points so you will hear more from me as I analyze the results. The steadily increasing sales continues a trend lead by low-priced REO properties we first noted in February and March of 2008. Meanwhile, here is the quick overview. (Thanks to my broker, Rick Laws, of Coldwell Banker, who is a data geek. He pulls Sonoma County real estate sales data from the local multiple listings service (BAREIS) via the Brokermetrics service.)
Since December 2006:
Pending Sales are up 96%
Closed Sales up 7%
New Listings up 48%
Given the short month, the holiday season and oh yes, the economic meltdown in the news, real estate sales are holding steady as viewed at the end of November, 2008 in Sonoma County California. I will have more detailed information by price points later in the month but here is a quick tidbit of post-Thanksgiving real estate stats. The number of units sold will increase with the final report since there is a several day lag on sales closed at the end of each month while the reporting catches up. This information is provided by Rick Laws, my broker at Coldwell Banker Santa Rosa, and is based upon sales reported via the MLS here by Brokermetrics.
Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Nov 07Â Â Â Â Â Â Â Â Nov 08Â Â Â Â Â Â Â Â Â #Units ChangeÂ Â Â Â Â Â Â Â Â Percent Change
Under ContractÂ Â Â Â Â Â Â Â Â 206Â Â Â Â Â Â Â Â Â Â Â Â Â Â 455Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 249Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 120.9 %
SoldÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 242Â Â Â Â Â Â Â Â Â Â Â Â Â 320Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 78Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 32.2 %
New ListingsÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 474Â Â Â Â Â Â Â Â Â Â Â Â Â Â 370Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -104Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -21.9 %
First thing that jumps out is that there were 120.9 % MORE brave souls who wrote offers on properties in this wild short month of November versus last year at this time.Â The number of closed sales is up at least 32 % year to year as well.Â Â The number of new listings has declined nearly 22 % versus last November, as many people hunker down.Â This makes for some interesting trend lines year over year, as well as expected seasonal declines in units sold as we head into the winter months.Â Â Anecdotally, the buyers are split about evenly between investors and first-time home buyers.Â Units sold are dominated by the low-end of our market, under $400,000.Â
Since the one point drop in mortgage rates just before Thanksgiving really was not much of a factor in November’s sales, it will be interesting to see how that boosts (or not) ourÂ real estate sales for Sonoma County in December.Â Â Stay tuned.
One of the most interesting measures of the tension between buyers and sellers in a real estate market is the “Months Supply of Inventory” figure. What this number tells us is the number of months it would take to sell the existing number of homes for sale at the present rate of closed sales.
Buyers Market or Sellers Market?
Generally six months of inventory is considered to be a market balanced between buyers and sellers. Anything less, and sellers are advantaged in negotiations. Anything more, and the trend favors buyers. Two years ago in Sonoma county, there were 6.2 months of entry level inventory for sale.
When the first wave of foreclosed properties began hitting our market in force in 2007, the inventory piled up to a high point that so few properties were selling, as many more were coming on the market. Consequently, MSI (Months Supply of Inventory) ballooned to a 14.8 months supply, a strongly favored buyers market.
Early in 2008, banks began slashing prices and buyers have been increasingly active ever since. (See my posts under market updates beginning in March to track this trend.) The lower priced properties, driven by foreclosures, have steadily been absorbed by first time buyers and investors.
They have been gobbling up REO’s so quickly that now there are only 2.7 months of inventory available at the current rate of new listings and sales, a strongly favored sellers market.
If you are a buyer interested in purchasing an REO home, it is important for buyers to be prepared for the market realities especially for the most solid homes in the best locations.
1. You must have a STRONG pre-approval. In many cases first time buyers will be competing with all cash investors for the same properties.
2. You may need to make multiple offers on a stream of properties before you land the right one.
3. It ALL DEPENDS. Make sure you have a committed working relationship with a realtor who is knowledgeable about the changing market, and who knows how to present and negotiate your offer(s) in the best light.
Just as sellers have learned (in some cases!) to be realistic, it is important for buyers to do the same. Happy hunting!
At first glance the overall supply and demand trends for Sonoma County real estate from October 2006 through October 2008 show gentle trend lines that belie the turbulence of our market. The number of units for sale (all residential types and all price ranges) is down modestly (3.9%) from 3284 units then to 3155 units now. The peak was 3608 units for sale in August 2007 with some seasonal trending over the 25 months. The number of units sold has increased by a robust 33% however, to 508 units from 381 units in October 2007.
Days on market for properties in contract has declined from 93 days (peak 112 in January 2007) and the number of properties under contract has grown significantly from 372 to 553. The number of pending Sonoma County home sales is the highest in 4 years. Last year at this time, pending sales were hovering between 166 and 286 units per month! Now they are running 450 to 550. The reason for the change? Banks got aggressive and drastically lowered the list prices of bank-owned (REO) properties creating lots of competitive, interested buyers.
The true story behind any particular home investment is driven by intensely local conditions rather than broad average trends: single family home, country property, vineyard property, fixer or condo. It is absolutely a function of price point with the bulk of the activity under $500,000.
The following graph shows the same trend lines as above(active inventory versus sold listings) for all residential Sonoma County sales under $500,000.Â Since the median home price was nearly $600,000 at the market peak in 2005-2006, very little was available under $500K. Since then, it has declined county wide on average jut over 30%–there’s that word again, on average.Â Â Â While the overall number homes for sale has declined slightly since October 2006, under $500,000. it has nearly doubled.Â The number of units sold in this price range has increased nearly 200% in the last 25 months.Â Bottom line is the banks figured out pretty quickly how to move REO inventory and both investors and first time buyers are competing for the best of these homes.Â Result–inventory is declining faster than it is coming on the market and overall sales velocity has increased, all fueled by the REO bargains.
This week I received thisÂ quick sales snapshot from Rick Laws, my broker at Coldwell Banker.Â Â It provides a 13 month overview of Sonoma County residential sales activity at all price ranges and in all locations county wide.Â Sales activity and area trends vary widely by price and location but this is a quick view based upon MLS dataÂ pulled by Brokermetrics. In about a week I will have more detailed information available covering the various price points and separating out condo activity.
Sonoma County Real Estate Market Dynamics October 2008
Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Oct 07Â Â Â Â Â Â Â Oct 08Â Â Â Â Â Â Â Â # Units ChangeÂ Â Â Â Â Â Â % Change
Under contractÂ Â Â Â Â Â 227Â Â Â Â Â Â Â Â Â Â Â Â Â 604Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 377Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 166%
SoldÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 227Â Â Â Â Â Â Â Â Â Â Â Â Â Â 488Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 261Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 115%
New listingsÂ Â Â Â Â Â Â Â Â Â Â 530Â Â Â Â Â Â Â Â Â Â Â Â Â Â 551Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 28Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 5%
The biggest takeaway here is that this is the first time in over two years that the number of newly opened escrows has exceeded the number of new listings.Â Â Despite everything that happened in the financial markets in October, the number of newly opened escrows was up 166%Â and hit its highest point year over year.Â In addition, the number of closed escrows reached a new high for the year.Â We all know that not every opened escrow will close-but the number of newly ratified sales continues its upward trend, and bucks the national trend.
The tail wagging the dog in this market continues to be the REO (bank-owned) home at the low end with an increasingly high volume of sales under $500,000 for both single family homes and condos.Â Sales through October seem to be driven (this is anecdotal) equally by first time buyers or owner occupants andÂ real estate investors.
Everyone is unsettled these days and no surprise.Â There are a few questions or comments that I am hearing repeatedly from clients and friends.Â The first is the question above.
With a cataclysmic world-wide banking crisis occurring over the last few weeks, I guess that is a logical question to ask.Â Can I still get a home loan today?
Well, home sales are still occurring, especially at the entry-level as indicated in previous posts.Â Jumbo loans are dicier and the larger jumbo loan limits expire at the end of December so we perhaps that is a cause of the flurry of real estate sales activity in our county in the mid-price ranges of $500,000 to $1 million.
While rules have tightened to sometime excruciatingly comical levels (some of the stories I have heard could fill another post or two) the flow of mortgage fundsÂ has continued.Â Kenneth Harney, in the San Francisco Chronicle on Sunday October 19th, gives a good overview of our current state of home lending.
Credit squeeze, credit freeze, credit system seizures: Everybody knows how severe and painful the global financial breakdown has been – with banks unwilling to lend even to other banks.
But what about mortgages and real estate? Can you still get a home loan with less than a 20 or 30 percent down payment? Or with a credit score below 720?
Absolutely. It would be a big stretch to label housing the sunny side of the market at the moment, but there’s a lot more light there than in most other financial sectors. Consider these facts:
— There is no shortage of money available for home mortgages, no freezing of credit to purchase or refinance a house. Why? Because the American mortgage market effectively has been federalized – at least for the time being.
More than 90 percent of new loans now are being made through the Federal Housing Administration insurance program, plus Fannie Mae and Freddie Mac. FHA is owned by the federal government, and Fannie and Freddie are operating under federal conservator-ship.
All three have unfettered access to global capital markets at rock-bottom costs because their borrowings are fully guaranteed by the Treasury.
Ginnie Mae, which is FHA’s pipeline to the bond market, recorded an all-time high of $29 billion in new mortgage-backed securities issued in August.
— Loan terms and credit underwriting standards have been toughened up, but you can still put down 3 percent (3.5 percent after Jan. 1) on an FHA-insured mortgage and 5 percent on certain Fannie Mae and Freddie Mac loan programs with private mortgage insurance.
FHA’s credit standards are generous and forgiving – the agency exists to help people with less-than-spotless credit histories. Fannie Mae and Freddie Mac have raised their credit score requirements over the past year, but buyers and refinancers with scores in the upper 600s can still qualify for loans carrying reasonable rates and fees.
— Despite the global financial system’s quakes, mortgage rates remain low by historical standards. Mortgage giant Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 6.46 percent, and 15-year mortgages are at 6.14 percent.
— Maximum loans through FHA, Fannie and Freddie in high-cost local markets on the West and East coasts continue to be $729,750 through December. In January, the high-cost maximum is projected to dip to approximately $625,000.
— Home prices – pushed by foreclosures and short sales – have rolled back to 2003 and 2004 levels or lower in many of the former boom markets. As a result, growing numbers of buyers are coming off the sidelines, making offers and writing contracts. The pending home sales index jumped by 7.4 percent based on purchase contracts signed in August, according to the National Association of Realtors. The heaviest increases – pointing to higher closed sales in the coming two to three months – were in California, Florida, Nevada and the Washington, D.C., metropolitan area.
Housing and mortgage leaders say consumer worries about the stock market have obscured positive developments under way in real estate, where pricing pain and downsizing have been facts of the life for the past two and a half years.
The market for single-family homes under $400,000 is so strong in Sonoma County that it makes the overall sales rate in the county qualify as a sellers market, with only 4.5 months supply of inventory based at the current sales rate. Â Last September there were 14 months of inventory available county wide.
The fact is that the banks who have foreclosed here are the dominant seller in the county with over 40% of the sales.Â Since last fall they figured out they needed to slash prices in order to get them moving, and the strategy has been successful.Â One lender, Otto Kobler of Maximum Mortgage in Santa Rosa has told me that we are halfway through digesting the major wave of adjusting loans from 2005 which began hitting the market as REO’s last September.
Since March, open escrows month by month have exceeded the sales volumes of the last two years and they continue to climb.Â Real estate investors and first time buyers are snatching up homes at prices not seen since 2002 in some cases.Â Â Condominiums are selling fast with median prices under $200,000.Â The number of newly ratified contracts (open escrows) is increasing rapidly as the number of new listings county wide slows.
These overall market trends are very misleading however as sales volumes and inventories at higher price points are in very different territory.Â The action is at the low end and sellers of more expensive properties are seeing definite declines in volume.Â The market needs to digest the inventory at the lower end to acheive some stability.Â There are some amazing bargains out there for first time buyers and investors.
Listings by Community
- Market updates
- Building and Remodeling
- This and That
- West County
- Country Property
- Horses and Wine Country
- Finance and Lending
- Wine Country Living
- Real Estate 2.0