2010 Was the Year of the Missing Spring

As the year ended I decided to look back on the year and try to make sense of what was *not* a normal year by any stretch of the imagination. By that I am speaking of how we in the real estate world look at cyclical trends throughout the year. Take 2009 for example: It looks like how real estate cycles typically play out over the course of any given year. To gauge performance I looked at the percentage of homes in contract as a measure of how the market was absorbing inventory across all 13 major Marin county cities. A measurement of over 35% in contract is usually indicative of a sellers' market. 25% in contract is usually indicative of a buyers' market. 25%-35% in contract indicates a balanced market. If we look at the 2009 numbers we saw a real estate market in the midst of a reasonably strong recovery. That shouldn’t be all that difficult to imagine in contrast to the truly difficult years of 2007 and 2008.

The key sub components of this graph to note is where the buying cycles typically occur. I think we are all used to seeing “for sale” signs going up as the days get longer and the weather gets better in March. This is the official start of the spring selling season and 2009 indeed shows a nice healthy upswing in inventory reduction from March to June much like and other typical year. Then comes the summer lull from June to September and again 2009 does not disappoint in terms of meeting typical expectations. The secondary sales cycle starts in September and runs through October and is usually a weaker upward trend compared to its spring brethren. In 2009, though, that expected trend took and unique turn. A general feeling that the worst of the economic downturn coupled with pent up buying demand and low inventory created an atypical surge in buying that propelled the market into what was beginning to look like a seller’s market for the first time in 3 to 4 years. Maybe both the economy and the real estate market was back on track? Not so fast. Read on…

The Spring 2010 Selling Season That NEVER Happened

Having been in the real estate market for 17 years I am hard pressed to remember a situation that I witnessed in 2010. There was literally NO spring real estate selling cycle this year. As mentioned above, we started the year hopeful, but many realities came home to roost. Let me see if I can rattle of a few of the key drivers that shattered the nerves of anyone considering buying a home this last spring: Huge deficit concerns, a meltdown in European banking across multiple weaker member states like Greece, the fallout from passing the Healthcare bill, the stark reality that job growth will not happen in 2010, the return of home foreclosures, continued war in the middle east and so on and so on. These factors are clearly reasons for people to rationalize sitting tight. The result: A steep decline in activity this last spring that totally eliminated the typical and expected upward sales trend from March through June. Even in 2008 when the market was still reeling from the recent banking collapse we saw this expected upswing, but not this year.

Does a Stronger Fall Mean An Improving Market in 2011?

The fall actually got off to an early start with an early upswing in activity starting in the typically slow June/July timeframe as inventories were being absorbed across the county. Once all of this bad news was digested and most people understood that although things we tough, they actually were getting better (albeit with expectations set that it will likely be very slow but steady) then the market got back in gear. With news that job growth was looking better, European banks stabilizing, inflation well in check and the Fed committing to low interest rates through 2011, the market experienced a stronger than average upswing in the typically tepid Fall selling cycle. One could assert that those buyers that were looking to buy in the fall and deferred in the Spring got back in the market. So as we close 2010, we are almost where we were last year! We are edging up and through a balanced market with trend lines pointing towards a more robust new year. That is what we saw last year and if we have all learned anything it is to expect the unexpected. The overall economy and real estate markets will continue to surprise us in both positive and negative ways, but if/should things actually continue to improve across the board in 2011 with no big surprises disrupting advancement then May/June 2010 may have been the recent bottom. That of course is speculation and I will keep you abreast of where the market continues to go in the coming year.

I’m looking forward to working with you in 2011!

Sharon Kramlich
Top Producer
Pacific Union Real Estate Estates Division

415-609-4473
skramlich@pacunion.com
www.sharonkramlich.com