Monterey County Home Sales Surge in September

Sales of single-family, re-sale homes in Monterey County were up 226.3% over last September. This is the six month in a row home sales have been up year-over-year. Home sales were down 3.7% from August.

Year-to-date, home sales are up 59.9%.

Nevertheless, statistical home prices continue to fall due to the large number of bank-owned properties being sold. We expect the surge in sales to, eventually, reduce the bank-owned inventory.

The median price for homes fell below $300,000 for the first time since June 1999, reaching $280,500, a decline of 8% from August and a fall of 58.3% from last September.

Inventory was down 30.5% from last September. This is the six month in a row inventory has declined year-over-year.

Our Days of Inventory indicator is at 204 days. In a balanced market, the supply of homes is usually around five to six months.

Condo sales were also strong in September, up 180% year-over-year.

The median price for condos was off 65.1%.

The bank-owned property is clustered in the condo and entry-level home market. They constitute the largest percentage of sales, thereby driving down statistical prices.

The real estate market is very hard to generalize. It is a market made up of many micro markets. For complete information on a particular neighborhood or property, call me.



Click here for current Monterey County Home Sales, City by City.

Click here for our Monthly Market Trends Newsletter.

The "Great Depression?" I think not!

Lately I have been hearing and reading about comparing today's financial wows and the condition of our economy to that of the great depression. While looking around on the web, I ran across this great comparison to the Great Depression...

I think the media is blowing things just a bit out of proportion, don't you?

Mark

Interest rate lowered 1/2 point

FED, WORLD BANKS, LOWER SHORT-TERM INTEREST RATES BY HALF A PERCENTAGE POINT

The Fed, in concert with several world banks today lowered key lending interest rates by half a percentage point in an effort crafted to curb economic damage from the U.S. financial crises that has been spreading across global markets.

The move follows Monday's sharpest declines in several years on Wall Street and Friday's passage of the historic $700 billion Emergency Economic Stabilization Act of 2008.

"Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices," the Fed said in a statement announcing the rate cuts. "The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability. Some easing of global monetary conditions is therefore warranted.

"The Fed's short-term rate now stands at 1.5 percent, and the European Central Bank's rate is 3.75 percent. The joint action to lower the federal funds rates will allow central banks to push for new lending between banks around the world without risk of challenges from banks with relatively higher levels, according to analysts.

The $700 Billion Plan is a First Step for the Economy

I received this in an email this morning from a local lender, Elizabeth Smith. The information is provided by Eugenio Aleman, Ph.D Wells Fargo Economics. I found it very interesting and thought you might too. As always, your comments are welcome.

Mark


The $700 Billion Plan is a First Step for the Economy

It is clear that the U.S. financial market and markets across the world are not working efficiently, and this is a huge risk for the prospects of the U.S. economy and the rest of the world. While many have criticized the size of the expected monetary injection planned by the government, the truth is that estimates of the potential total cost of this financial crisis are larger than the $700 billion requested by the administration. But the administration knows that they will buy these financial instruments at a "fire-sale" price so that means that in many instances the "multiplier" effect of these $700 billion may be very close to $2.1 trillion, just to give an example if the Treasury is able to buy these assets at, let’s say, 30 cents on the dollar. Thus, this is the reason why many argue that if the administration is successful in this process, taxpayers could even make a profit, assuming the administration can sell these instruments back to the market at a price higher than $0.30.

Of course, there is always a risk that this may not happen, but the assumption being made by the administration is that the current problems in the U.S. financial market is a temporary loss of confidence and a tremendous aversion to risk that is making investors too afraid to get back into the financial market. Thus, the current plan is to take all this "toxic waste" from the financial firms, clean them up, improve them and sell them back to the market with an improved risk profile. The biggest risk with this plan today is if the price of homes drops so much that the price paid by the administration ends up being higher than the true value of the assets. Another important risk, and one that cannot be taken lightly, is that investors may just be waiting for the administration to step in so they can make money on the upside. Of course, the argument against this possibility is that nobody wants to wait and see whether this risk is real or not, because if it is, then it will be too late to fix it.

Having said this, markets know that this is just the first step in solving this crisis. Markets know that the financial sector needs to go through a full-fledged transformation that would guarantee that this situation does not happen again. The first stage of this transformation has already started with the disappearance of the investment banking firms, be it through mergers, bankruptcy or just because they have asked the Federal Reserve’s permission to become a commercial bank. Furthermore, the Treasury’s package doesn’t mean that the U.S. economy is going to recover growth immediately after the approval by the U.S. Congress. The reason for this is that the $700 billion injection does not include a plan to recapitalize the banking system, which is another reason why the system is not working and also the reason why the Federal Reserve’s policy of lowering the Federal Funds rate has had no effect on the expansion of lending by the financial market. Very few financial institutions are lending today and the reason is that losses have left them in a very delicate capital position. Furthermore, the aversion to risk is so large that firms are unwilling to risk any capital in this market, and many even prefer to stack it under the mattresses or hoard it until things normalize.

Thus, until the system recovers the confidence of the markets and starts to attract fresh capital, it will remain weak and the economy will not be able to recover the strength of years past.

Just Thinking Out Loud

As I have argued in previous reports, the Federal Reserve and the Treasury Department are terribly concerned with a further decline in home prices and have been trying to do everything in their power to try to stop the decline in these prices. Their argument is that until home prices stop declining, the financial crisis will continue to linger. One of the ways they can keep home prices from going down further is by keeping mortgage interest rates down. However, up until the takeover of Freddie Mac and Fannie Mae, they had not been able to achieve that goal, because mortgage rates were still going up even though the Federal Funds rate was going down. After the takeover of the two mortgage giants, mortgage interest rates have come down a bit, but the yield of the 10-year Treasury has increased once again and that is putting, once again, more pressure on long-term interest rates.

A different alternative to attack the problem is to act on the income side of the equation rather than on the price side of the housing equation. Tax cuts could create higher disposable incomes, and this higher income could be used to pay mortgages. The biggest problem with this alternative is that the administration cannot control what the individual is going to do with that extra income. Furthermore, the government may not be in a strong enough fiscal position to offer the permanent tax cut that would be needed. Another alternative may be to unleash untapped household savings. Although our national savings rate is close to zero percent, I should add that the nation’s 401(k) savings are not included in the national savings rate, and this could be counted as an "untapped" source of savings. Could there be a scheme to allow re-allocating a portion of 401k assets from retirement for use as down-payments, thereby encouraging home ownership (a traditional source of retirement income in its own right)? The political hurdles would be daunting, not to mention all sorts of potential unintended consequences. The point is, unless homes get cheaper, or incomes and savings are increased, the fundamental housing supply and demand imbalance will not go away.

Of course, not all is positive with this idea. Homeowners would have to realize that either they will have to work more years than what they were planning to work during their working life, increase 401k contributions in the later part of their working lives, or be able to live with less money than originally planned. Of course, homeowners could implement a combination of all these strategies.

Of course, I still believe that the Federal Reserve and the Treasury should allow home prices to reach a level that will allow demand to recover. And furthermore, once we are out of this financial crisis, home prices are one of the first prices in the economy that could recover, as has been the case in almost every nation that has suffered a credit crisis like the one we are suffering today.
I know right now nobody believes that home prices could possibly recover any time soon. But remember, we were convinced, less than two years ago, that the housing market was a highly liquid market, that home prices were always going to go up, and that interest rates were always going to go down. Thus, my argument that home prices may increase fast in the future may not be so far-fetched!


Elizabeth M. Smith
Private Mortgage Banker
Wells Fargo Home Mortgage
MAC A0921-01026611
Carmel Center Place
Carmel, CA 93923
831.620.6951 Tel
831.238.2140 Cell
831.622.0730 Fax
elizabeth.m.smith@wellsfargo.com
http://www.elizabethmsmith.net

INFORMATION IN THIS REPORT IS THE PERSONAL VIEW OF THE WRITER, NOT NECESSARILY REFLECTING WELLS FARGO & CO. IT IS FOR YOUR PERSONAL USE. THE WRITER DOES NOT REPRESENT THAT IT IS ACCURATE OR COMPLETE. NOTHING IS GUARANTEED. © 2008 Wells Fargo Bank, N.A. All rights reserved.

Weekly Market Watch
August 24-30, 2008

Labor Day is behind us! Let the buyer flood gates open! Well, maybe that is a bit of an over exaggeration but now that the traditionally slow July and August vacation months are behind us, we do anticipate that sales will begin to pick up in September and October. This is typically the time of year in which serious buyers begin to take action—hoping to get into their new home before the holidays.

And now that clients, and our Agents for that matter, have returned from their vacations and are homeward bound, we should see a pretty decent pick-up in sales activity. Of course, only time will tell but if history is any indicator, we are anticipating a more robust September than we saw in July and August.

Overall, the Bay Area housing market is running pretty steady as we head into fall. Certainly there are pockets in which sales activity is thriving thanks to REOs. And in certain markets like San Francisco, the North Bay and parts of the Peninsula, we are seeing a lot of activity in the upper end. But for the most part, generally speaking, the market is moving steady—erring on the side of status quo for a buyer’s market.

Homes are selling. But again, as I’ve said in past editions of Weekly Market Watch, only those homes that are priced right, show well, are in a good location and are seen as a “value” to buyers in this market, are moving in a timely manner. Others tend to sit.

Buyers are perusing. Yes, perusing seems the most appropriate choice of words. In talking with many of our Agents, it is apparent that we’ve successfully driven the message home that this is one of the best buyer’s markets in more than a decade to buy and the good news is that many buyers are starting to get their feet wet through increased open house activity, increased floor calls and even an increase in pendings—with Santa Clara County last week reporting that pending sales were up 121% this week, year over year. Those wet feet, however, haven’t resulted in closed sales quite yet and only time will tell if they do.

So while we wait to see what becomes of the wet feet, let’s take a look at this week in real estate:

· East Bay—Still a lot of activity based on REOs. Short sales are finally starting to get approvals which will help to decrease some of our standing inventory. Lamorinda is reporting that it is “hot, hot, hot!” In fact, the office noted that listings aren’t lasting long and most are seeing multiple offers. Of course this is one of the few Bay Area markets that hasn’t felt the effects of REOs and short sales. Our Walnut Creek office is noting that some REOs in Antioch are receiving 10+ offers, with the accepted offer 10-15% over the asking price.

· Monterey County—This largely second home market enjoyed the benefits of the three day weekend as potential buyers came to Monterey in droves, particularly in Carmel. A number of offers were written over the weekend and we are holding twice as many deposit checks than usual so things definitely seem to be picking up. We put a $3.5 million and a $4.5 million listing into escrow this week.

· North Bay—Our Southern Marin office is noting that activity is picking up with more listings coming on the market. This week, in fact, our Southern Marin office introduced five new Previews listings to the market and put one Previews listing ($2.7 million) in escrow that had been on the market for 400 days. Things are looking better! Sonoma County is still seeing a lot of lower-end, REO activity. One REO out of our Sebastopol office this week received 27 offers.

· Peninsula—Our Half Moon Bay office is reporting that even with the Labor Day weekend, things are still moving briskly. We had 18 homes open over the three day weekend on the coast and Agents reported a lot of serious and motivated buyers. Palo Alto is still feeling the effects of low—painfully low—inventory. But the good news is that they expect that even in the next few days to get some good, quality inventory brought it to spur some more buyer interest.

· San Francisco—Our Lakeside Manager said it best, “We are waiting for the market to heat up. Multiple offers are a result of proper pricing, not market conditions.” This is a good lesson for sellers that if you price your home properly and competitively, you may be able to generate some good, solid interest from buyers. Overall, coming off the Labor Day weekend, things have been pretty quiet in the City. We’re awaiting some exciting new inventory to come on the market in the next two weeks which will move us back into a more normal market for the City.

· Santa Cruz County—No information this week.

· Silicon Valley—I think we are all going to be glad when everyone is back in school and work, Silicon Valley especially. Certain areas of Silicon Valley are dealing with the challenge of a lack of quality inventory which is driving would-be buyers back on to the fence. There just aren’t enough quality listings to attract buyers to the market. The good news is that many of our Agents have spent their August preparing their clients’ listings for sale and we expect some good inventory to come on the market over the next few weeks. This should help to stimulate things for our Silicon Valley clients as right now, things are pretty quiet.

· South County—The REO market and lower priced homes continue to drive our South County market. We continue to see multiple offers on REOs and short sales.


Now that the Labor Day holiday is over, we have a lot to look forward to. The dog days of summer are behind us and now we can move forward to the more robust Fall selling season. Buyers, start your engines! Sellers, get ready to negotiate, be reasonable and prepared, and don’t forget to remain competitive.

Until next week,

JOE BROWN
President
Silicon Valley~Monterey Bay~East Bay

National stats show market improving

According to a recent Commerce Department report, the US economy shifted into a higher gear in the second quarter of this year. Our gross domestic product (GDP) increased at a 3.3% annual rate. (The GDP measures the value of all goods and services produced within the U.S.) Economists had predicted 1.9% growth in the GDP and were surprised by the additional growth of 2.7%.

How does that growth relate to real estate? Existing home sales rose 3.1% in July, the highest level in five months. Lawrence Yun, National Association of Realtors (NAR) Chief Economist, expects home prices in some regions to increase even more in the near future. Sales have picked up significantly in several Florida and California markets. NAR President Richard Gaylord attributes this to the recently enacted housing stimulus package and predicts a sustained sales uptrend in the months ahead.

I am still seeing well-priced, well-staged homes sell within weeks or months, sometimes with multiple offers. The old adage: "Price it high, watch it die; Price it low, watch it go" has proven itself again. It is interesting to note that savvy real estate owners are selling to leap frog into another home. When all is said and done, knowing how to leverage your real estate asset may bring you the best long-term financial security.

Weekly Market Watch (August 17-23, 2008)

I just received this email from our Coldwell Banker President, Joe Brown, and thought you might be interested in what he has to say about pricing your home in this market and about the state of the markets he covers.

Mark

Weekly Market Watch
August 17-23, 2008

How do you sell in a buyer’s market? The first and most important answer is probably the most painful. Price it realistically.

The fact is, buyers have a lot of houses to choose from right now. If sellers are motivated to sell, they need to be more realistic with their prices. Just because a year ago your neighbor got $700,000 for his home doesn’t mean you’re going to get that same $700,000 today.

Price reduction, price improvement, price adjustment. It doesn’t mater what you call it, but one theme I am finding in many of our markets today is a trend for sellers—who are starting to come to the realization that the market has changed—to reduce their price in order to be successful. Interestingly, often times we are finding that comps should be based on homes that have sold not in the last six months, not even in the last three months, but those that have sold in the last one to two months are the best and most applicable comps for our current market.

Understandably, it certainly has taken a while for sellers to realize the reality of this and the realities of our entire market. After years of double digit price increases, frantic bidding wars and seller control, this buyer’s market has been a tough pill to swallow for many sellers. But now that the pill has gone down, sellers seem to be understanding and are starting to make the adjustments to their listing price.

So the age old question, how do you pick the right price? Well for starters, do it from the beginning. Too many sellers try to test the waters of the market to see if they are able to generate buyer interest in the higher list price. The problem with doing so is that once sellers have to lower their price, buyers immediately begin to wonder “What is wrong with the house?” and “How much lower will they go?” Plus, if sellers are too high, they’ll need to continually reduce the price until they hit that magic number. This really puts sellers at a disadvantage.

To pick the right price, my best advice is for sellers to:
Realize that their Agent is there to help and sellers should be actively seeking their counsel and advice.
Examine their competition.
Thoroughly review pending sales and recent (very recent) history.
Examine days on market.
Review homes that have sold and of those, determine how many had price reductions. Plus, review where the list prices began and where they ultimately ended.

Remember, in this market especially, sellers are up against a lot of REOs and short sales so now more than ever it is imperative that sellers price their home right from the beginning. The resulting price may mean that they aren’t as motivated to sell right now. And that’s okay. But if they are motivated and want to sell now, they need to be realistic with their pricing, the competition and the realities of today’s market.

So with this new knowledge in tow for all of our would-be sellers, let’s take a look at this week in real estate:

East Bay—REOs continue to fly off the shelf which of course is doing nothing for the average sales price. But activity is activity and we’re glad to see us deplete the REO inventory which will position us well for a market recovery. One issue that is affecting the East Bay and several markets throughout the Bay Area is a lack of quality inventory. Yes we have the REOs. Yes we have a lot of listings that are for sale. But only a portion of those are considered just “ripe” for buyers who are looking for that move-in ready house. Buyers can be choosy right now and they are. They want that perfect combination of value, location and quality and they seem to be waiting until they find it. An interesting note out of Danville this week. REO activity has picked up. In fact, half of our August sales are REOs. The Pleasanton office is reporting that buyers are making offers but typically going 10-15% under list price.

Monterey County—Our Monterey market had a record-breaking 30 price reductions last week. Just to give you an idea, we typically have 12-14 price reduction in this market so last week was more than double. As I said earlier, sellers are getting the picture which is good news for buyers and our overall market. The region reports a good week for new escrows so going into this Labor Day holiday, our Monterey Peninsula market is moving ahead strong.

North Bay—The North Bay goes relatively unchanged this week with REOs driving much of the Sonoma County market. The entry level (under $500,000) seems to be flowing while anything under tends to sit. Our Southern Marin office is reporting increased activity, a real shocker for the end of summer—hopefully a sign of good things to come. A new condo in Shelter Bay priced at $925,000 received an offer after the first broker’s tour (before the Sunday open house) and had two back up offers. This goes back to my earlier reference that the market is in dire need of good quality inventory right now. Once buyers find the quality house at the right price, they’re going to act. It’s all about finding that magic combo.

Peninsula—Activity seems to be rule of thumb this week for the Peninsula. Our Burlingame office is reporting more sales and more offers are being written. It seems that the buyers are beginning to feel confident and are recognizing that now may be the time to buy. The Burlingame office had an REO sale this week. It was priced at $649,000 and garnered 17 offers, selling well above the asking price. For the first time in weeks our Half Moon Bay office is reporting some exciting news noting a sudden surge of buyer activity. Open homes are very busy and Agents are writing contracts with fairly aggressive offers, getting into spirited negotiations. Palo Alto remains quiet due to lack of inventory. Sellers, where art thou?

San Francisco—Our Lakeside office is reporting that things are selling though properties from the $1.2 to $1.8 million mark seem to be languishing. One bright spot in San Francisco remains the upper end with Lakeside noting that the $1.8 to $2.5 million are highly sought after. Our Noriega office is noting that it was a slower week for sales with negotiations often falling out due to pricing challenges.

Silicon Valley—Though buyer activity seems to be increasing as evidenced by increased floor calls and increased open home traffic, we haven’t yet seen that interest translate into closed or pending deals. Having said that, I anticipate that those deals will start to come to fruition in September, once the end of summer activity slows down. Buyers seem to still be waiting for the right signals to move which, going back to my intro, is why effective pricing is imperative in this market.

South County—This market continues to be driven by short sales and REOs. The good and interesting news this week is that after a hiccup in which short sales were falling apart due to lack of bank response, we are seeing short sales finally come together. This is great news for this market which has had its share of trying times.

That concludes my Weekly Market Update. I hope you enjoyed your pricing lesson for sellers. We’re heading into a long, three-day weekend which often means a slowdown for the real estate market. But the good news is that the traditionally busy fall selling season is just around the corner and we’re looking forward to seeing how this year’s fall plays out.

Enjoy your long holiday weekend!

Until next week,

JOE BROWN

President

Coldwell Banker

Residential Brokerage

Silicon Valley~Monterey Bay~East Bay