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

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

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?

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.