Sharon Kramlich's Marin Real Estate Insight

Real Estate Downturn v2? Probably not.

2011-08-11T11:10:00.000-07:00

August 2011

Since 2008 both the economy and the real estate markets have been put through a roller coaster of both real and perceived threats. It is safe to say with a large degree of qualitative and quantitative hindsight the ’08 crisis as it related to real estate was very real and there is some lingering, although greatly diminished, effects of that today. So what does the current crop of economic news mean to the real estate market?? That is the question we will try to better understand here.

The first thing to do is look at the 2008 market. The cause of the Fall 2008 crisis was predominately driven by two colliding failures:

1. The residential housing bubble finally collapsed deflating values by 25% - 40% depending on the region of the country.

2. Many of our financial institutions were undercapitalized and near a state collapse. Largely as a result of poorly underwritten residential mortgages.

The good news from this is that our country’s economic fundamentals are far stronger today than those present during the Fall 2008 and Spring 2009 financial crisis. We have consolidated our financial institutions into larger and arguably healthier banks due to more internal and government oversight. The Federal Reserve has made access to capital both plentiful and affordable. The residential housing market remains unpredictable; however, new home building is nearly a zero in our GDP so clearly the broader real estate market is not poised for a collapse.

In fact the volatility we are now navigating is not from a lack of economic confidence; it is one of a complete lack of political confidence. To quote Moody’s it is “the risk of political polarization and uncertainty that are among the drivers of our negative outlook”…on the USA and its debt. The Chief Investment Officer shared thoughts illustrating that our underlying real (or adjusted) GDP growth might be 3% v the recently reported 0.8%. Three phenomena seem to have constrained GDP from 3% to 0.8%. They were:

· The disruption in global supply chains as a result of the Japan earthquake (.25%)

· The increasing cost of oil which resulted in reduced consumer spending (1%).

· USA government fiscal policy, or lack thereof (1%).

If we believe the above are somewhat temporary and political rhetoric can be channeled to fiscal responsibility, then we may see GDP increase in the second half of 2011 to over 2%.

While all of this macroeconomic news is interesting, it certainly affects our local real estate markets. In the San Francisco Bay Area, we are a largely supply constrained market. In the six counties Pacific Union serves, only two counties really experienced over building in the pre-2007 housing boom. As a result, inventories are manageable and not causing downward pressure on pricing. Pacific Union (PUI) has representation across all of the Bay Area’s major markets and our regional managers weighed in with the following observations from our San Francisco, Marin and other selected regions:

· San Francisco – The market seems stable with typical light activity as expected in summer. Multiple new escrows in process and mainly in $1.25 to $2.25 million range.

· Marin – High-end of market is performing well. The larger share of sales activity is priced over $2m and all buyers seem stable, committed and feel values are still appropriate.

· Napa – The high-end of market is very active with multiple deal closing in excess of $7m.

· Sonoma – Like Napa there is no evidence of stress in this market as well.

As we look forward hopefully our politicians have read a few recent headlines and now feel the demand for fiscal responsibility to start stabilizing the markets. As for local real estate, as our children return to school we expect to see an increase in listing inventory and increasing units sold through Thanksgiving. Interest rates remain at historic lows (mortgages are “on-sale”) and real estate is relatively inexpensive. While many will retreat and wait for the comfort zone (near the next peak), now is the time to seek opportunity and buy! That said, for those who have high quality homes in good locations that are looking to sell expect price pressure, but nothing like we saw a couple of years ago.

The Cost of Waiting for Prices to Fall

2011-02-24T22:16:00.000-08:00

Reproduced by permission of Adam Wise of MSP Loan

Many purchasers have been sitting on the sidelines waiting for home prices to hit bottom. They want to guarantee that they are purchasing at the best possible price. Like them, we also believe that prices still have some room to fall in most markets. However, we disagree that waiting is a good financial decision. The buyer should not be concerned about housing prices. They should be concerned about cost.

The cost of a house is made up of the price AND THE INTEREST RATE they will be paying. Two different pieces of news released yesterday highlight this point…

Prices
The National Association of Realtors (NAR) released their 4th quarter housing research report. In the release, they reported that home sales rose 15.4% in the 4th quarter over the 3rd quarter. They also showed that prices remained stable during the year. The national median existing single-family price was $170,600 in the fourth quarter, up 0.2 percent from $170,300 in the fourth quarter of 2009. A buyer who delayed a purchase might find solace in the fact that prices have not increased. However, the other news released yesterday paints a different picture.

Interest Rates
The Primary Mortgage Market Survey was released by Freddie Mac which showed that the 30 year fixed rate mortgage was at 5.05%. Frank Nothaft, vice president and chief economist of Freddie Mac said: “Long-term bond yields jumped on positive economic data reports, which placed upward pressure on mortgage rates this week…As a result, interest rates on a 30-year fixed-rate mortgage rose to the highest level since the last week in April 2010.” So prices have remained stable but interest rates have risen dramatically in the last 90 days. What does that mean to a buyer looking to purchase a home this year?

The price is the same. It just costs more.
Let’s show you what the news means:

By sitting on the sidelines for the last 90 days a purchaser lost:
• $ 439.78 a month
• $ 5,277.36 a year
• $ 158,320.80 over the thirty year life of the mortgage

The Bottom Line
Even if prices fall another 10% this year, the cost of a home will increase if interest rates go up more than 1%. Buyers should not worry where prices are going. They should be concerned where costs will be later in the year. Work with your local MSP Loan Mortgage Consultant to customize flyers for your buyer's that will illustrate the effect that the still rising interest rates will have on their home purchase.

2010 Was the Year of the Missing Spring

2011-02-01T21:41:00.000-08:00

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

How Low Can Rates Go?

2010-09-28T23:39:00.000-07:00

I have to admit that I really did not see this coming. What am I referring to? Well, mortgage interest rates that is and their recent and dramatic slide. First, a little background on the basics; The Fed has kept the Federal Funds Target Rate at a historically low .25% since the beginning of 2009. That is compared to 6.5% in June of 2000 at the height of the Dot Com market which went down to a then historically low 1% by January of 2004 as we were digging ourselves out of the first recession of the decade. It was that condition, of course, coupled with relaxed regulatory constraints that set us up for the next and bigger Great Recession in late 2007 when the Fed rate topped out at only 5.25%.

Rates Falling Faster Than Gravity
I think it was fair to say that the overall consensus was that as we entered the spring of this year that the country was on a slow but predictable growth curve that would strengthen as we got into the second half of the year. In fact the market saw it that way as well. Below is a chart that shows the 2010 trend for the 30 year fixed interest mortgage interest rate for conforming loans. The valuation of the interest rate started out at just over 5.00% in January and increased as the spring selling season hit its cyclical stride in April when it topped out at 5.10%. But then something happened. Was it the expiration of the first time home buyers credit on April 30th? Perhaps, but that was not a likely big influencer. No, it was unemployment and fears of a double dip recession. Remember the notion that the second half of the year would bring accelerated economic growth? Well, it didn’t happen and the market predicted a much slower demand for loans…which were already tough to qualify for. Hence the rates slid off a cliff and by August were down to its lowest recorded rate ever: 4.43%!! (Source: Freddie Mac Monthly Average Commitment Rate On 30-Year Fixed-Rate Mortgages).

And What Happened to Marin Home Sales?
So what happened locally in the post-April time frame? Before we get into that, it is important to acknowledge that the average Marin buyer qualifies for loans more frequently than the rest of the market. That means that more buyers can actually take advantage of these low rates and get a loan to purchase a house. This is not the case in the broader regional and national market as a whole. The net result is that, despite the expiration of the first time buyer credit and news of impending economic doom in the form of a double dip recession, buyers continued to buy. Before the market headed into its predictable summer slump sales continued to accelerate through May and June as we see in the chart below.

In the chart below we see the above trend mapped against the interest rates trend. Are rates headed down some more? That is something no one can predict but certainly rates are very attractive these days.

So What Will Happen This Fall?
As most of you may know the largest volume of home sales in a year occurs from mid-march to the end of June. That is followed up by a smaller, yet not insignificant, “fall selling season” which typically runs from mid Sept and up to early November. In terms of rates, they very well could continue to be soft through the fall. I also am seeing properties, especially at the higher end of the market, moving as well. If you are looking to upgrade into a new home and you can qualify for a loan, then I think it is safe to say that this is a rare opportunity to secure a loan at a historically low rate. That said, do not be surprised that when you find that ‘must have’ move-in quality home with a view and high end finsished that competition is there to bid up your offer. For those of you who are thinking of selling, the premium is on “done” properties so make the investment to fix things up, stage and put your best foot forward into this unique market.

Sharon Kramlich
Top Producer
Pacific Union Real Estate Estates Division
415-609-4473
skramlich@pacunion.com
www.sharonkramlich.com

Demystifying the “Pocket Listing”

2010-06-07T21:36:00.000-07:00

This may be an observation about human nature more than anything else, but most buyers that I work with always ask to be notified of any new listings that I may know of before it goes on to the MLS. “MLS” by the way stands for Multiple Listing Service and is the centralized system that provides information about all listed properties. You can actually look for listings yourself based on specific criteria on the MLS which can be accessed from a link on the left hand side of my web site. This is a fairly recent development as it used to be that only professional realtors had access to the system. I digress, but the point is that with information in this industry becoming more pervasive so has competition for prime properties as they come on the market. Why do most people ask about these unlisted properties? Why, to get a good deal on a great property of course! Without competition there is always the hope/chance that something special will pop up and a good price can be negotiated.

Defining the Pocket Listing
There is actually a mechanism in our business to market properties that do not go on to the MLS and that is called a “pocket listing”. In short pocket listings are when there is a signed listing agreement between the broker/agent and seller to sell a property but without the exposure through the MLS and usually without any other exposure except word of mouth. As a percentage of all listed properties it is minuscule, but that said I am aware of a decent number of pocket listings in prime communities here in Marin. So why do sellers opt for this type of listing? The reasons vary, but the listings typically apply to higher end properties which involve more complex transactions. Reasons why sellers might choose to go this route include;

Testing the market value and interest level of the property.
Sellers might not be 100% ready to sell but if the right buyer is ready, willing and able they would.
There may be a strong desire for privacy and a quiet sale.
Do not want unqualified buyers wandering through their home .
Sellers might be in the process of looking for a home to move to-but not yet found one.

Weighing the Upside and Downside for the Seller
Ultimately, the seller must decide if exclusion from the MLS is in his/her best interests and does not limit exposure on the market. Sometimes sellers ask about treating their property as a pocket listing. People have often heard the term, but don’t always understand either the benefits or downside to having their property sold off the market. When a property is marketed directly to other agents and their buyers I am usually only showing the property by appointment and there are no open house showings.

There are benefits. Perhaps the sellers don’t want to do, or pay for the preparation work involved in bringing the property to market. As their agent, I want the property to show its best and sometimes that means the sellers are looking at some extensive and potentially expensive work to prepare the property for market including; packing and placing their items in storage, dealing with both structural and cosmetic repair work, and staging for their property. Then during the marketing period there’s personal disruptions including multiple open houses a week, evening showings, private showings and often people peering into the windows and ringing the door bell because there is a for sale sign on the property. Or perhaps, it’s a couple with young children and they just can’t tolerate that process, or a seller who just wants to quietly sell without all the neighbors knowing or coming through the home. They want to sell, but they don’t want the public exposure that comes with the marketing of the property. An off the market sale or pocket listing can make sense for them.

What’s the downside? Well, I always tell sellers that they will never know what the property would have sold for on the open market. There’s always a question as to whether they received the highest and best price. But each property sale is a snapshot in time, and perhaps the difference would be small. But if the home had been properly prepared and marketed, would the seller have received a better price? They will never know, and they need to be okay with that. It’s a trade off, but if it works for the client, that’s fine.

So How Many Are Actually Out There?
Let’s start with the top level numbers. In all of Marin County there are 1,095 single family homes currently listed. The actual number of pocket listings is not a known quantity as different firms have different ways of communicating and tracking them. Many firms have no way of tracking them. At Pacific Union we have a means to track internal pocket listings and currently we are tracking 33 pocket listings, which equates to 3% of the market. The average listing price comes in at a whopping $2.7m, which backs up my earlier point about these being typically higher end properties in higher end communities. In the mix is one $10m property with a couple $7m properties right behind. Below is the breakdown by community for the pocket listings available:

Belvedere: 1
Fairfax: 1
Kent Woodlands: 2
Kentfield: 3
Larkspur: 1
Mill Valley: 8
Novato: 2
Ross: 4
San Anselmo: 2
San Rafael: 3
Sausalito: 1
Tiburon: 5

So if you are interested in learning more about pocket listings, feel free to contact me and I’ll be happy to explain more and discuss these unlisted opportunities and your real estate needs. I am always grateful for your referrals.

Sharon Kramlich
Top Producer
Pacific Union International Real Estate/Christies Great Estates
415-609-4473
skramlich@pacunion.com
www.sharonkramlich.com

Marin County Schools Rank at the Top in California

2010-05-17T09:52:00.000-07:00

The results are in and the word is out that Marin’s schools are tops in the state. According to a May 14, 2010 article from the Marin Independent Journal, “Marin had 21 schools with API scores of 900 or greater - including every school in the Kentfield, Larkspur, Lincoln, Mill Valley, Nicasio, Reed Union and Ross school districts - up from 15 last year. The Reed District's Bel Aire Elementary and Reed Elementary tied for Marin's highest score with 951. Other top-scoring schools included Kentfield's Bacich Elementary, Mill Valley's Old Mill and Park Elementary and Novato's Rancho Elementary School.”

Families Are Moving North
Factors such as great weather, a reasonable commute to San Francisco, a beautiful environment and top notch public schools are fueling a mass migration of families north of the Golden Gate. In Mill Valley, for example, every school in the district received a statewide rank of 10. The above mentioned migration is resulting in an unprecedented increase in student enrollment in recent years. The current level of elementary student enrollment is at about 2,700 students which represent an amazing 20% increase from 2006 when it was only 2,288. These increases, though, do not come without a down side. The county schools do not receive additional state funding as a result of such enrollment increases, which when combined with the state budget cuts are causing great pressures on these schools. To counter the budget and associated program cuts in areas such as arts, drama and athletics, many school districts have private fundraising efforts that are counter-balancing these cuts.

It is difficult to know how long parents and the rest of the communities can plug the gap, but for the time being the schools continue to perform and provide a very high quality education. See the Marin IJ chart below to get the specific details about each school from every district in the county.

As always, feel free to contact me about your real estate needs and I am always grateful for referrals.

Sharon Kramlich
Top Producer
Pacific Union Real Estate Estates Division
415-609-4473
skramlich@pacunion.com
http://www.sharonkramlich.com/

The $2m+ Market Finally Awakens: The Tale of 35 Bigelow in Mill Valley

2010-05-11T21:53:00.000-07:00

For the last 6 months I have been chronicling the slow improvement in the Marin real estate market. If you may recall, about six to nine months ago we saw the sub-$1m market in the northern part of the county show some initial life. Since then we've seen a slow creep of similar improvement south and finally in properties at higher price points. In my last newsletter that trend was showing signs of becoming a reality as homes in southern Marin in the $1m-$3m price range were showing signs of increasing at a rapid rate and edging towards becoming a seller's market. In this edition we'll recap on today's data and then I'll talk about a property that I was listing last year at 35 Bigelow in Mill Valley that initially came on the market in 2008 at $2.85m and just recently sold after the listing price had worked its way down to $2.15m. I think the sale of this property is fairly emblematic of what is happening in the market and I'll provide a case study on the history of the property's 2 year journey from initial listing to eventual sale.

Today’s Market
First, the hot-of-the-press data. I have often called out in recent newsletters the way that we measure buyer or seller markets as being the percentage of homes actively being listed on the market vs those in contract. My last newsletter pointed out that the $1m + market was gaining momentum and recent data is only reinforcing that trend as shown in the chart below. Across the county single family homes in the $1m - $2.5m market space especially are trending up,

Another way that can measure how 'hot' the market is becoming is shown in the chart below. For 13 higher end communities in Marin we're seeing a trend towards a higher volume of active listing, while in parallel seeing a trend towards properties moving off the market faster. While the volume of "Active Listings" is now increasing towards 900, the "Days on Market" (or DOM) metric, which measures how long properties are actually on the market from the time that they are put on the market, is declining rapidly from almost 100 days to just over 90 in a span of only a month. This means that despite the increasing rate at which inventory is being added, demand is strong and outstripping the supply. This phenomenon is exactly the opposite situation from what was going on a year ago as properties languished on the market.

So what to make of all of this? First, as with any data, you have to read between the lines to get the full picture. While it is great to see the DOM decline like it is, it is very likely that a good percentage of those "new" listings are actually listings that came off the market earlier and have come back on. A property's true cumulative DOM would therefore be much higher. That said, I think the buying public is really beginning to see that the continued decline of prices in better communities in Marin are probably over with prices largely stabilizing. Furthermore we are seeing a trend towards higher interest rates for 30 year mortgages in conjunction with a more fluid market for actually getting loans. Combine these factors with a cautiously optimistic economy and its prodding buyers into action and thus the market is seeing a corresponding rise. The scenario above is something I have experience first hand and a real world case study may help illustrate what is happening. Last year I had a listing in Mill Valley that recently went into escrow and in the second part of my newsletter I'll detail its listing history. Read on...

The Triumphant Tale of 35 Bigelow in Mill Valley
This is a wonderful remodeled 4 bedroom/4 bathroom Craftsman style home that has been extensively remodeled and in typical markets would have only been on the market for only a couple of weeks at most. It is located on a street to street block in the highly sought after Blithedale Canyon area just 3 blocks from downtown Mill Valley. It is easily accessed from both West Blithedale and Bigelow streets and overlooks a charming and private garden on one side and majestic redwoods on the other. You can easily walk to school, to many of Mill Valley's restaurants & to hiking trails. It's an easy commute to San Francisco and close to Mill Valley's award winning schools. Like I said, this is a great home in a great location and should be highly valued.

This home initially came onto the market in May of 2008 at $2,85m and at 2,500 sq ft this equaled $1140 per square foot. That was certainly expensive, but given the recent run up in value over the prior 3 years, I can see how the price could have been rationalized. In May 2008 I seem to recall not having that much anxiety about the future of the economy, but like many others I was concerned about where the lending market was heading and the horde of speculators operating in the real estate market. The property came on late in the spring season and no concrete buyer stepped up so the owners took it off the market and made some improvements to property. These included a 2nd main entrance added to access the home from the West Blithedale side, which increased its overall value and appeal. It came back on the market again in the spring of 2009 at a reduced price of $2.4m and that price reduction spurred a lot of traffic at the Sunday open houses. As I hosted those events myself I regularly saw many repeat visitors, but if you may vividly recall that was a very tough time for many people to step up to purchase a new home. On top of that many buyers thought perhaps that prices would continue to decline.

And yes in fact prices did continue to decline as they did at 35 Bigelow and in the market overall. The property came off the market again in late 2009 and came back on this spring at 2.15m and in March finally was sold. That final sale price of $2,149,000 was nearly $700k off of the original 2008 listing price. As I mentioned above, it was not uncommon to see repeat visitors at my open houses and indeed, in the end, the new owners were one of those repeat visitors that obviously were waiting for the best time to go ahead and make their move. Good for them and the above story is being repeated at a number of other listings in Marin.

My Parting Thoughts
So has the market turned the corner? My personal opinion is yes, but that only means that the market is climbing its way back from a long hard slide. I don't expect to see prices sliding at the rate they did before and I don't expect to see prices rising quickly either. That said, if you have been sitting on the sidelines like the buyers of 35 Bigelow and have had your eye on a high quality property in a great location, now may indeed be a great time to make the deal of a life time. And for sellers it is by far the best environment to list in the last 18 months.

As always, feel free to contact me about your real estate needs and I am always grateful for referrals.

Sharon Kramlich
Top Producer
Pacific Union Real Estate Estates Division
415-609-4473
skramlich@pacunion.com
www.sharonkramlich.com

February 2010: Looking Towards Spring 2010

2010-02-25T22:08:00.000-08:00

February 2010

In recent Marin Insights I have talked about how properties are selling in different regions of the county with those cities with a higher percentage of lower priced properties seeing the highest level of sales volume. In the Fall newsletter I pointed out the average selling price for a home in Mill Valley had fallen below the one million dollar mark for the first time in many, many years. While volume has indeed seen a fair amount of improvement it has come at the expense of property values. While lower price-range properties still account for the majority of sales volume across Marin County, we are beginning to see upper range market segments beginning to show some vigor as the market gets ready for the (typically) higher volume spring real estate season. In this edition of Marin Insight, I’ll be looking at the sales activity for different market segments in recent months and how they related to last year and I will offer some insight into what the market may look like later this year.

The State of the Market
To get an idea of where the market is, we need to understand what the market is doing. The table below illustrates the comparable volumes of active listings for the market segments that the real estate industry tracks. What is noteworthy here is the comparatively large jump in new listings in the higher end brackets of the market. Based on my experience in the market, I see a couple of reasons for this. The first has to do with pent up supply as prospective sellers chose to “ride out the storm” in hopes of a more conducive market emerging in 2010 that would a) be a better financing market enabling buyers to buy an upper-end property and b) be less prone to discounting with the expectation that there will be more buyers in the market than in the previous year or two

So What is Actually Selling?
In past newsletters I have talked about an industry metric wherein the ration of properties in contract vs, the available inventory measures 30% or above is classified as a seller’s market. I have cited this by region and in this newsletter will look at the data by market segment. As the chart below signifies, the sub-$1m dollar properties are still enjoying robust sales activity with about 50% of the available inventory in contract, which is fairly remarkable considering the high volume of supply. What about the rest of the market? The $1m-$2m properties are seeing decent gains with 30-40 properties in contract representing about 21% of the inventory, while in the $2m-4m market roughly 10-15 properties are in contract representing about 17% of the inventory. At the very high end of the market, the $4m+, it is still relatively weak with only 2-3 properties in contract. You have to understand, though, that in the year prior there were NO sales at all in the same period! This brings us to our next point which looks at the change from last year to put these figures in some context.

A High End Market Slowly Digging Itself Out
So we have talked about how the low end of the market has been driving the market for the last year and also seen how the higher end segments are beginning to come to life. But to what extent have they come to life? The chart compares the properties actually in contract this year vs. last year. I could not include the $4m+ segment as last year there were no sales at all meaning that you cannot even compare the increase in percentage terms! That said what we see is that the percentage of change in the low end has remained relatively constant compared to the year previous. Where the biggest jump has occurred is in the $1m-$2m range as buyers are snapping up the highest quality properties that may have even been valued in a higher bracket in years past. The $2m-$4m market is seeing a strong gain. It is in these numbers that we can begin to form some perspective on the coming spring.

A “Better Than Last Spring” Spring
We in the real estate profession are not feeling like it’s going to be a banner spring, but certainly one that will be better than the year previous. As the data points out, we are anticipating a lot more inventory coming onto the market in the year at the higher end price categories and more buyers coming in to shop for them. Like we saw in the sub-$1m sales activity of the last year, buyers will be focusing on the highest quality properties and will expect to have some leverage at the higher end price points. For high-end sellers the good news is that buyers may actually be looking at properties in those segments, but anticipate buyers that are still expecting a deal. As the data points out, it is still a buyer’s market and will likely be so for the high end market throughout 2010. For buyers the capital markets are normalizing which means you may have more purchasing power and homes in the high end of the market are at historic lows. It all points to a chance of a lifetime to purchase a unique and high quality Marin home.

As always, feel free to contact me about your real estate needs and I am always grateful for referrals.

Sharon Kramlich
Top Producer
Pacific Union Real Estate Estates Division
415-609-4473
skramlich@pacunion.com
www.sharonkramlich.com

January 2010: Pacific Union's Q4 and 2009 Year-End Review

2010-02-25T21:49:00.000-08:00

January, 2010

Welcome to 2010! To kick off the year I have Pacific Union's Marin County 2009 fourth quarter and year end review for you. I hope you find the information valuable and I look forward to working with you this year.

Sharon Kramlich
Top Producer
Pacific Union Real Estate Estates Division
415-609-4473
skramlich@pacunion.com
www.sharonkramlich.com

When Will Marin County Real Estate Markets Return To Normal?
We are approached daily by our clients with requests to predict what will happen in our local real estate markets in the near future. To shape our perspective, Pacific Union researched Marin County single family home (SFH) sales and indexed them (on a units-sold basis) to multiple benchmarks including: interest rates (10 Year T-bill), unemployment (SF Bay Area) and an absorbability index (income vs. cost of ownership). We continue to struggle to find direct correlation between Marin County real estate and these available indices.

We have found a relationship worth noting between the total number of Marin County SFH (supply), the total reposed sales (demand) and the annual rate of appreciation (%). The chart below illustrates the following: Supply, since 1999, increased an average of only .38% per year; Demand (closed sales) averages 2,352 units, or 3.62% of total supply; Appreciation averaged 6.50% over the past eleven years but has decreased -.35% over the past five years.

The rate of demand is a key variable for Marin County real estate. In four of the six years where demand has exceeded the average (3.62%), we have experienced double-digit appreciation. In 2002 and 2003, the demand exceeded the eleven-year average, but we did not realize double-digit appreciation. Demand for SFH in Marin County has fallen 52% since the peak in 1999. Our SFH sales in 2009 are 1,650 Units or 70% of the eleven-year average making 2009 the 2nd slowest year in the past eleven.

In our view, recovery to a normal market (demand of 2,352 units or 3.62% of supply) will require substantive shifts in the overall financial landscape including, but not limited to, stability in financial markets, a strong local employment trend, affordable interest rates and strengthening consumer confidence. It is difficult to predict the future and ''normal'' may return with a somewhat new definition. As for our outlook, we are prepared to do business in current market conditions throughout 2010.

Year-to-date, Marin County continues to see substantial decreases in demand (units sold) vs. 2008. To our benefit we see only pockets (both price ranges and geography) of average or median price erosion (see chart below). We are encouraged to see Marin County QTD volume up in all segments. By contrast, California markets with significant excess inventory (supply) are experiencing prices and units sold down by well over 40% year-over-year.

Pricing a home in this market is clearly our most important role and a significant challenge. We rely on rigorous methods of analysis and proven results to demonstrate our success. How all of these dynamics relate to you, your desired neighborhood or specific home requires a focused analysis similar to the one above. If you have questions or concerns, please do not hesitate to call on me.

Year to Date Key Metrics

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Fall 2009: In Mill Valley the Luxury Market Takes Off

2009-10-27T23:21:00.000-07:00

Fall 2009 Marin Insight Newsletter

In Mill Valley the Luxury Market Takes Off

In our summer newsletter we wrote about how the market was shifting from a buyer’s market to a seller’s market…at least in Northern Marin where affordability was the key driver. In the Southern Marin luxury market it was still largely a buyer’s market, but we thought that for highly desirable areas like Mill Valley we would see the market stabilize and move towards a seller’s market by the end of the year. In this edition we’ll take a look at 2009 and see where market is this fall and weigh in on what the considerations would be if you were considering buying or selling a home in Mill Valley.

The Basics of Economics: Supply & Demand

With the exception of December the median price of a home being sold in Mill Valley in 2008 was almost $1.4m. The median price in 2009 is $992K thus far. Wow! That’s a ½ million dollar drop off in home sale value in one year. In the first quarter of 2009 we also saw a huge drop off in supply as people took their homes off the market and those considering selling held off. In Mill Valley there were nearly 200 homes on the market in September 2008 and by January 2009 is was down to only 125. In conjunction with the rapid withdrawal of supply was a corresponding withdrawal in demand in the first quarter of the year as evidenced by the dramatic fall off in homes going into contract.

Let’s face it, though, Mill Valley is a great place to live and with average selling prices down below $1m for the first time in many, many years you could expect that buyers who could *would* swoop in to make the deal of a lifetime. And they did. From March to June a lot happened: The average selling price jumped up above $1m, inventory flooded back on to the market and deal volume jumped dramatically. As the best-of-the-best properties were sold it was not surprising to see the deal volume subside along with the traditional “summer swoon”.

Was the Spring 2009 a Blip or a Trend?

In terms of unit volume supply and sales, we are clearly seeing a stabilizing market as evidenced by the trend lines moving from summer to fall. One way to measure if the market favors buyers or sellers is to look at the ratio of properties for sale vs. those being sold. At the height of the buying market in 2007 the ratio was about 18%-20% meaning that nearly 20% of the available supply was being sold. That’s a healthy chunk of the available market and was clearly a seller’s market then. Looking back at the 2008 it’s hard to fathom that the ratio in May was a strong 18% and by November it was an unheard of 5%! That’s a 2/3 drop-off in 6 months. 2009 did not start much better and we began the year much like 2008 ended with an anemic 7%. In fact by the end of winter it sunk even lower to 6%.

As we pointed out when looking at the unit volume figures the sales activity quickened dramatically from March to May and we saw a jump to a healthy 14%. What leads us to believe that the buyer’s market is very likely behind us now is that the subsequent ratio has stabilized and in fact if you look at the rate of change in the last couple of months it is increasing and leading the market toward a stronger seller’s market.

What to Do Now?

If you are considering buying, it’s safe to say the days of finding a move-in quality, high end home at a bargain price are now largely behind us. There are still good opportunities out there, but it’s likely that a buyer’s leverage is ebbing as we look to the spring of 2010 when demand traditionally picks up. Sellers now have a better market to operate in, but a key component of being successful is smart pricing. As mentioned earlier, in 2008 the average price was $1.4 and is now closer to $1m. Thinking that your 2008 value will stand up in the market today is not a good strategy. Your home will linger on the market and loose appeal if overpriced. As of September there was a 2 year record of 211 properties on the market. So while the desperation that many felt in the earlier part of the year is behind us, the buyer has a lot of choice and will choose the best combination of quality AND price. Be smart and price to get interest and action.

Sharon Kramlich

Top Producer

Pacific Union Real Estate Estates Division

415-609-4473

skramlich@pacunion.com

www.sharonkramlich.com

Is Marin a Buyer’s Market or a Seller’s Market? Surprise! It’s Both!

2009-10-08T22:40:00.000-07:00

For what seems like a long time now, it has felt like we have been in a firm buyer’s market here in Marin. That has and continues to be the case for a lot of the county, but not all of it. If you look at the most recent data, the northern end of the county is in a full fledged housing boom, while the southern end is still an emerging market. To understand what is happening here you need to know what defines a “buyer” versus a “seller” market. The real estate industry’s measure of a seller’s market is when the percentage of available housing inventory is above 35%. Conversely when 25% or less of available inventory is in contract it is a buyer’s market. The range between 25% and 35% is considered a normal market. Now lets see how these figures play out in the various real estate markets across Marin….

Affordability Rules!
The credit market is now considered ‘back to normal’ by most economist’s standards and with low interest rates for conforming loans (that is the key) the past couple of months have been a great time to buy less expensive and/or foreclosed homes. In fact over the last 90 days we are seeing price stabilization in properties up to $700K This is bearing out in the northern end of the county dramatically with more affordable communities like Novato swinging into a strong seller’s market, where the median price of a single family home has jumped from a low of $492K with 9.3 months of inventory in February to $612K and only 2.6 months of available inventory in June. Other more affordable communities like San Anselmo, Corte Madera, San Rafael, Fairfax and Greenbrae are quickly trending in the same direction. The key is that in many of these communities it is very possible to purchase a home with a conforming sub-$729K loan with reasonable interest rates and less stringent loan criteria.
The Luxury Markets and Jumbo Loans
Remember when it seemed that listings in exclusive communities like Ross, Belvedere and Kentfield would sell even before they hit the market…and at a premium!?! Those days are long gone as evidenced by high inventory levels and the percentage of homes in contract at an anemic 10%. To understand why this is happening I’ll quote Pacific Union’s CEO Avram Goldman who had this observation about the higher end of the market;

“There are still challenges in the million dollar plus price range. Inventories are building and days on market are increasing. The million dollar plus market is hampered by lenders’ apprehensions over value. The lending industry feels prices will continue to drop and are requiring larger down payments, solid gold borrowers and, in some cases more than one appraisal. They are also concerned about the potential inventory that will be created when lenders begin to foreclose on homes whose mortgages are currently delinquent.”

When Will the Higher End Emerge? A Look at Mill Valley.

You can count on the fact that as the economy recovers and the housing market gets stronger the trend toward normalization will continue from the left (Novato) to the right (Sausalito) over time. How long that will take is anyone’s guess, but it’s a safe bet to predict that Mill Valley will be the first of the higher end markets to emerge into the “normal” range. As of June the median price in Mill Valley was a relatively high $1,200,000 which is well up from the January lows of $812K. The upswing in prices reflect buyers coming in and taking supply down to a 12 month low of only4.8 months, which is well off of he 16.6 month high from last November.

While the surge in property sales were a welcome trend the corresponding reduction in inventory was probably a factor of those sales along with weary sellers taking their properties off the market and waiting for better days ahead. Although there are no figures to support this, you can bet that there is a good supply of inventory in Mill Valley and other high end markets that are simply waiting to go on the market when sellers feel that they stand a better chance of getting their price. The good news is that this new inventory will filter into the market over time and not flood the market much like what we saw happen in last fall and early this spring. Despite this ‘phantom inventory’ the stage is likely set for Mill Valley to emerge from a “buyer” market and into a “normal” market in a reasonable amount of time.

“When do you think that prices will hit bottom?”

2009-05-12T21:55:00.000-07:00

The questions that we keep hearing over and over again is “when do you think that prices will hit bottom?” and “is it a good time to buy now or should I wait?” On the issue of prices we hear thoughts from clients that range from thinking that they have already hit bottom and are actually on the way up to others think that they will continue to decline for years to come. So what do we think? Good question and the truth is that we nor anyone else can tell you for certain. What we can tell you, though, is that the past often is a good predictor of the future, so we have compiled data from the multiple listings service (MLS) that looks at unit volume and pricing trends over that last 34 years with recession dates superimposed to try and get some answers about what lies ahead. Read on…

Units Sold Analysis

The data below represents unit sales volume on a year by year basis as indicated by the orange bars. The black line represents the moving average while the red bars at the bottom show the recessionary periods over the last 34 years. What is obvious is that recessions indeed influence unit volume sales. The steep drops in ’78-’80, ’88-’91, ’99-’01 and ’05-’07 actually occurred in advance of the actual recessions themselves, which is something to think about in terms of seeing these real estate market movements as a leading indicator of impending economic peril.

Average Sales Price

AnalysisSo what about prices? Common sense could lead one to think that an economy in peril would cause prices to drop at rates similar to unit volumes. In all years past prices only flattened at worst. It is clear, though, that we are not in a situation today that is comparable to past downturns as last year saw the first substantive decline in actual prices for this available data. That said, the moving average tells a different story. The steep run up in prices over the past 5 to 10 years is offsetting the decline so the moving average is showing a flattening profile. If prices in 2009 stabilize we’ll actually only see a flattening of the overall price average trend much like what occurred in the early 90’s.

Summary

So what would lead us to think that perhaps now is a good time to buy? We are seeing (literally) once in a life time price declines and armed with lower interest rate loans qualified buyers are looking for bargains. For the astute buyer they can be found but it is not the rule. In fact for well presented and well priced properties we are even seeing multiple offers occurring. We think that the upcoming spring season will see an increase in listings and we advise buyers to start looking early. For sellers, it may be time to test the waters while keeping expectations in check. We are definitely living in very uncertain times, but one thing is certain and that is significantly lower Marin real estate prices are a once in a life time occurrence.

We look forward to talking to you soon,

April Figures for Marin + Appraisal Changes Coming

2009-05-06T20:26:00.000-07:00

In an effort to keep you infomed we wanted to provide you with some important news about appraisal process chnages and the most recent sales data in Marin County from Q1 of 2009. To view the sales information, just click on the link below.

There is also some additional news about changes in the appraisal process. Effective May 1, 2009 the new HVCC law goes into effect.
Here’s what it does:

Loan officers will no longer order appraisals. Instead they are ordered through appraisal management services. Each lender has a relationship with one or more of these services. Appraisers are, in turn, approved with one or more of these services.

Buyers will pay directly for appraisals upfront. Most likely they will do this through giving the loan officer their credit card info or possibly paying by check in the name of the appraisal service at the time the appraisal is performed. Loan officers cannot take funds from the borrowers OR submit a bill to be paid at escrow.

Appraisal reports will be anonymous at the time they are done. Loan agents will not ever see the reports. Borrowers will eventually be able to obtain a copy but not through their loan officer.

The Rest of the Country Seems to be Stabilizing. What About Marin?

2009-05-05T01:24:00.000-07:00

The Rest of the Country Seems to be Stabilizing. What About Marin?
Consider this recent news article from CNN.com on Tuesday, March 23rd that reflects US existing home sales activity:

“Sales of existing homes have unexpectedly risen in February, recovering from a sharp drop in the previous month, according to an industry report released Monday. The National Association of Realtors said that existing home sales rose last month to a seasonally adjusted annual rate of 4.72 million units, up 5.1% from a rate of 4.49 million in January.”

While this news is generally welcome, there is another figure to consider which is price The month to month change in price saw its first increase, albeit very small, since June of 2008 meaning that for the time being at least the steep drops have taken a rest. So while it is impossible to say if these national figures are signaling a definitive turnaround in the overall housing market, it more probably reflects what Alan Greenspan famously referred to a “structured bottom” back in 2002 when describing the lowest point of the last recession

So what about Marin? Are we seeing sales activities increasing and stabilization of home prices here? For starters we have to expect volatility in the Marin trends as a result of the much lower volumes affecting trend movement. January to February existing home sale volumes declined only a mild 4.48% perhaps signaling a similar trend toward stability. In terms of prices we are seeing a lot of volatility with January prices climbing 15.19% and followed in February by a 14.53% decline. We need to see how prices perform going forward, but we expect to see a bumpy road ahead in 2009 as the market figures out what to do. We think that is unlikely, though, that we’ll have another off-the-cliff year as we did in 2008.

So what to make of all this? Are we seeing sales activities increasing and stabilization of home prices here? For starters we have to expect volatility in the Marin trends as a result of the much lower volumes affecting trend movement. January to February existing home sale volumes declined only a mild 4.48% perhaps signaling a similar trend toward stability. In terms of prices we are seeing a lot of volatility with January prices climbing 15.19% and followed in February by a 14.53% decline. We need to see how prices perform going forward, but we expect to see a bumpy road ahead in 2009 as the market figures out what to do. We think that is unlikely, though, that we’ll have another off-the-cliff year as we did in 2008.

Now the Federal Government is aggressively working to re-start the lending market by buying over $1 trillion of bad debt in partnership with private entities. While that is encouraging we are not out of the woods as danger looms in the form of maturing commercial real estate debt that could see large scale default as well later this year. The government’s swift withdrawal of bad residential as well as commercial debt should play an important role in maintaining this nascent real estate recovery.