The headline featured July’s drop in CLOSED home sales. If you read through the article, however, you will also learn that pending sales (newly ratified purchase contracts) are up to a two year high in July, indicating that sales activity is still strong, and has rebounded after the expiration of the $8,000 Federal Homebuyer’s Tax Credit April 30, 2010. While not all the pending sales will come to a succesful conclusion, it is still a good leading indicator of market activity.

Just a reminder that if you are looking for the latest Sonoma County home sales data, you can sign up for an email subscription to my blog, or check here the first week of every month to see the latest real estate sales trends analyzed here. For an archive of previous months’ data, check out my Scribd Account. If you are wondering, Scribd is an online repository for sharing of documents with social media components. It is to documents what Flickr is to photos.

Posted via email from pambuda’s posterous

The pending sales figures for April 2010 were very high, following several months of increase leading up to the expiration of the $8,000 federal tax credit, only available to homes “under contract” by April 30, 2010.

Throughout much of the country and in Sonoma County, newly pending sales dipped as expected, in May and June, since many people who might have bought in those months rushed to beat the deadline.

Here in Sonoma County, the July’s pending sales numbers are nearly as high as April’s however, probably due to seasonal effects a well as even lower interest rates than last spring.

Sales have not looked so good elsewhere in the US, but seem stronger here in Northern California and the greater Bay Area, a phenomenon we have been accustomed to over the last 30 years. I am concerned about the state of California’s budget woes and their long term impact on our markets, but that is a whole other topic.

Newly pending sales in Sonoma County reflect a couple of trends.

The rate of closed sales is down slightly from 2009 when sales of distressed properties peaked in the late winter.

Days on market continue to decline, reflecting a decline in inventory at the lower price points.

At the current rate of sales, the number of months supply of inventory is hovering around 3 months–a seller’s market– but only for properties priced under $450,000 or $500,000. There are plenty of sellers sitting on high priced (over priced) inventory throughout the county.

The median price is hovering in the low to mid $300,000′s.

The proportion of “bank-involved” properties is declining as an overall percentage of the sales mix. Regular folks have decided that now is as good a time as any in the foresee-able future for them to sell, so we see a greater mix of homes available to purchase.

Rates are ridiculously low, as little as 4.5% for a thirty year fixed mortgage for some credit-worthy folks! (Check out rates UNDER 4% for some 15 year loans!!!)

This means some people who want to move up to a bigger property, or a country property, are feeling more confident this year than last and willing to take that step. What they might lose on the sale of their existing home, they will gain with a good purchase price (at insanely low rates) on whatever they buy.

Here is a look at all the market reports for the last 18 months. Please email or call me if you have any questions or I can help you to figure out how they apply to your particular situation!

August 2010 Sonoma County Real Estate Home Sales Trends (August 2009 to August 2010)

Meanwhile, gardens are in peak bloom, the grapevines have leafed out. My neighbor’s pinot has set fruit I noticed today. The ROSES are in full force. Everywhere you go, from country lanes to in town, there is a riot of roses.

I’ll leave you with a few pictures until my next post.

Looking through a red rose and Russian River Zinfandel to a horse pasture beyond

A view of a Sonoma County horse pasture and vineyard through climbing rose New Dawn

A riot of roses climb the fences along a Sonoma County Driveway

Rick took a look at the percentage of distressed property (euphemistically called “bank-influenced”) sales, which refer to short sales and REO’s or foreclosed properties. The data show at price ranges up to $1 Million, that the percentage that distressed properties make in the market is still very high, but declining as compared to the market bottom of Q1 2009. That is probably because buyers are coming out of the woodwork at the mid and upper ranges, and also because “normal” sellers (that is how agents refer to them in MLS comments!) have probably realized that now is as good a time as any to sell, that prices may have stabilized and we are not likely to see significant appreciation for some time. Also, they may realize it is good to sell when rates are down and buyer tax credits are in place. Inventory continues to be VERY tight and sales are up significantly.

It is also interesting to note that distressed sales now make up 17% of sales above $ 1 million dollars, where as there were no distressed sales at that price range a year ago. There were also very few sales over a million a year ago! Stay tuned for more later this week and feel free to call me or email with your questions or comments.

Bank “Influenced” Sales as a Percentage of Total Sales

Condominiums Q1 2009 88% Q1 2010 65%

SFR under $500,000 Q1 2009 82% Q1 2010 59%

SFR $500K to $1Million Q1 2009 42% Q1 2010 29%

SFR $1M to $10M Q12009 0% Q1 2010 17%

The federal government currently is offering a credit of up to $8,000.00 if a buyer has an accepted purchase contract by April 30th and closes escrow by the end of June. The state of California is offering a $10,000 credit given over 3 years (BIG NOTE: This credit only can be taken against your state tax liability–if you don’t have $3,300 dollars worth each year, you don’t get the full credit.)

The big question is can buyers get the state and the federal credit? The state credit becomes available May 1st while you must be in escrow no later than April 30 to take advantage of the expiring federal credit. Some people seem to think that by closing escrow on a purchase after May 1st, but initiated before close of business April 30th, you can double dip on these tax credits.

However, when each of us read the bill it seems that the authors did not intend buyers to get both credits. ftb.ca.gov/forms/2009/09_3528.pdf  This has caused a fair amount  of confusion for potential buyers. From yesterday, when we started working on this post, to today, the California State Franchise Tax Board has provided further clarification on their home page.

Tax Credits for New Home Purchase / First-Time Buyer
The New Home / First-Time Buyer Credits are available only for purchases that close escrow on or after May 1, 2010.

It would appear from reading this statement that it may be possible for a limited number of buyers to qualify for both credits. Not only would the terms and timelines of your purchase need to be perfect, but you would need to meet differing criteria for eligibility for each program as they are constructed very differently.

Otilia called the Franchise Tax Board and they recommended that each buyer call to confirm if they are eligible for the state credit.  As always we recommend that you consult your CPA for more clarification. They may need to call the state too! Please feel free to email or call us with any further questions!

Today the national press reported that nationwide, pending sales rose sharply throughout the US. The interpretation is that the soon to expire Federal Tax Credit of $8,000 for first-time and $6,500 for existing home owner tax credits were promoting the increased buyer activity. Interestingly, the article reported that strong sales in the Midwest lead the charge, and that sales have declined in the Western States. As yet further proof that all real estate news is local, the numbers of pending Sonoma County home sales bucked the Western states trend. (Wait till you see the March numbers, coming soon!)

Welcome Otilia!

Don’t forget that the end of the federal home buyer tax credit is in sight. This credit provides $8,000 to first time home buyers. First time buyers are defined as those who have not owned a home in the previous 3 years, so the government’s definition might be different than yours. The credit also provides $6,500 to current home owners.

We have heard nothing about any extensions. Borrowers need to be in contract by April 30 and close by June 30. Click here to find the details of the federal tax credit, or ask your CPA if you qualify.

Also the Federal Housing Administration, or FHA upfront Mortgage Insurance Premium (MIP) is increasing from 1.75% to 2.25% with case numbers issued after April 5. Many first time buyers in the North Bay are using FHA loans since the credit restrictions are not so steep, and the down payment can be as low as 3.5%.

So if your loan is $200,000.00, your MIP would have been $3,500.00 last through April 5th. From today on it will change to $4,500.00. This is not an out of pocket cost. It is rolled into the loan payments, but nonetheless it is an expense of the loan.

There is a lot of talk about how people can take advantage of the newly revised $10,000 California State Homebuyer Tax Credit. We will discuss the pros and cons in our next post! If you can’t wait till then, here is a link to the California State Franchise Tax Board’s latest memo on the revised credits.

Meanwhile–this video does a good job of capturing the flavor of barrel tasting weekend, and has scenes shot last week at Joseph Swan, Bella, Stryker and other Sonoma County wineries.