Bernards San Ramon Valley Real Estate Blog

Danville, California

Observations and information of interest to home buyers and sellers in San Ramon, Danville and surrounding areas in Contra Costa's San Ramon Valley. Real estate market updates, happening's and reviews of local area restaurants.

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Bernards San Ramon Valley Real Estate Blog

2008

San Ramon Real Estate Market Outlook

Dec. 31, 2008

Categorized in: San Ramon Valley Market Update

Tagged with: economy, market real estate, san ramon

As we enter a new year in the real estate market, when we look back at 2008 there is no doubt that this was a year we will be happy to see the back of. The economy is struggling and unemployment is also a problem. What positive changes can we reasonably expect to see in the next 12 months?

There is no doubt that 2008 was a challenging year for many people. Nationwide, home prices continued to plummet and short sales and bank owned foreclosures dominated the market. Bad news abounded and the Press appeared to love every bit of it.

Not Bad News For Everybody

I’ve said it before and I’ll say it again. Real Estate is Local. Sure, everybody was affected by the fact that questionable practices by lenders in previous years resulted in the melt-down of the financial markets but it is still true to say that some parts of the East Bay have escaped relatively unscathed when compared to other areas.

Everybody is affected to some extent of course but those homeowners in Lamorinda, for example have seen little erosion in home values, especially when compared to, say, Antioch and Pittsburg, just a few short miles away.

The Big (Local) Picture

Where do we stand today? The Contra Costa Association of Realtors publishes an impressive array of statistics every month for the use of their members. An examination of the end-of-November issue (just published) is quite enlightening. Data covers Contra Costa and Alameda County as a whole.

At the end of November, 375 detached single family homes were listed for sale that month. 268 had sales agreed and there were 220 closed transactions. The relationship between new listings and sales agreed is a key indicator because when we begin to see more sales agreed than new listings, it means that inventory is reducing and we are heading towards a more balanced market.

At the same point a year ago, 410 detached single family homes were listed for sale. 211 had sales agreed and there were 193 closed transactions, so two years ago, more homes were coming on to the market and less sales agreed. Certainly this is a step in the right direction.

Increasing Affordability

The median sales price for a detached single family home was $800,000 a year ago compared with $550,000 today. That is a substantial drop. And the average figures are $857,676 and $661,697. The positive aspect to this is that home ownership is now in reach of more people than before. 55% of families can now afford to buy a median priced single family home compared with 44% a year ago. It is worth noting that 109% can now afford to buy a median priced condo.

The Housing Supply

It is generally considered to be a balanced market when there is roughly a 5 to 6 month supply of housing in any sector. Currently, we have 8 months supply so it is a buyers’ market. Yet in the $300,000 -$500,000 price range there is only a 3.6 month supply. These are mostly condos or townhomes. Activity here appears to be increasing and I have had personal experience of writing offers on such properties that have been rejected due to multiple, higher offers being received.

What Happens Next?

Ah, if only I could answer that question with some degree of certainty. Unfortunately, my crystal ball is no better than anybody else's but I can, and will, give you my personal opinion together with the reasoning behind it.

In the past few weeks I have observed a major upsurge in visitors to my web site who are looking at homes for sale. This is unusual in December although it is common in a normal January and February. I have also had a lot more phone enquiries December than in most months in 2008. Some from potential sellers but most from buyers. From that I conclude that there is a considerable amount of pent-up buyer demand.

Increased Buyer Activity

Interest rates are at historical lows. Amazingly, they will probably drop even further. We also have a new Administration coming to power, which appears to be creating a certain amount of euphoria. Adding all these factors together, I predict that we will see considerably increased buyer activity early in 2009. And because it is human nature to “follow the herd”, I expect this to accelerate as the year goes by.

Prices To Remain Steady

Will prices increase this year? I doubt it. They may even fall a little further before they start to level out. There will still be many bank-owned foreclosures and short sales on the market and these will continue to hold prices down until the relatively high levels of inventory have been absorbed. Areas where the housing supply becomes balanced will be the first to experience price increases and I anticipate Danville leading the way in that regard. Maybe not in 2009 but certainly in 2010. Then as supply is taken up in other areas, probably from later in 2010, they will follow suit.

Will we see a return to the time where it is a strong sellers’ market and multiple offers abound? I believe we will, although not in the next couple of years. Real estate is cyclical. People have short memories. But we have seen it all before and we will see it again.

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New San Ramon City Center To Be Delayed

Dec. 21, 2008

Categorized in: East Bay Happenings

Tagged with: city center, development, sa ramon

It appears that San Ramon's new City Center will not be completed as soon as expected - yet another vistim of the current financial crisis.

Plans for the office building property on the south side of Bollinger Canyon Road are underway and site preparation will begin next year. Alex Mehran, President of Sunset Development, said recently that the Civic Center portion of the project is waiting for credit markets to settle down before applying for public financing.

This news will certainly be viewed with mixed feelings by San Ramon residents, many of whom opposed the development in the first place although a majority (including me) appear to support it.

Hopefully plans can get back on track some time next year when the financial crisis starts to ease.

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4.5% Mortgage Interest Rates For San Ramon Valley Home Buyers?

Dec. 11, 2008

Categorized in: The San Ramon Valley Economy

Tagged with: interest rates, mortgage, san ramon

Earlier this week it was reported that Treasury Secretary Paulson is considering moves that could result in mortgage interest rates being made available to home buyers as low as 4.5%. The reason for this is to stimulate the economy as a whole and as so much of the economy is related to the housing market, this is obviously a good place to start. So how will this affect the depressed housing market? Let’s look at an example.

The current rate for a 30-year conventional fixed rate loan is approximately 5.75%. This results in a monthly mortgage payment of $2,334.30 for a $400,000 mortgage. At 4.5% on the same loan the payment would be $2,026.74, a saving of $307.56 per month which is not to be sneezed at. This reduced rate would allow many more buyers to qualify for a higher priced home at a lower payment and it would also allow many first-time buyers to afford a home who can’t do so at present. It is suggested that this could result in at least 500,000 more home sales in the short term.

It seems likely that if this does come to pass, then it would be for a set period of time (probably until the end of 2009) and this in itself would impart some sense of urgency. It is also probable that it would be just for home purchase, as opposed to re-financing, and limited to FHA conforming loan limits. Even so, such a move will get things moving again at the bottom end and the ripple effect will gradually be felt in all sectors of the market. This will be a great stimulus Mr Paulson. Let’s get on with it!

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End Of An Era

Nov. 17, 2008

Categorized in: East Bay Happenings

Tagged with: bay, ca, california, east, mudds, ramon, restaurant, san

A few months ago I wrote a Restaurant Review on Mudd's Restaurant in San Ramon. Mudd's has been a San Ramon landmark for 27 years but I was sorry to note that it closed for business last month.

As sad as that is for owner, John Ebert, I, and no doubt many other people, assumed that the retaurant would be acquired by some other restaurateur but alas this was not to be. I read in yesterdays San Ramon Valley Times that the 2.2 acre parcel on which the restaurant stands is to be bought by the San Ramon Redevelopment Agency at a cost of $2 million.

Saddest of all, they don't even know what they are going to do with the restaurant. The parcel was bought so that they could expand the nighboring Crow Canyon Gardens, the city's community garden.

Now I have no problem with expanding the gardens. In fact I think it is great to see the produce that is grown there. My big gripe is that here we have an exceptionally characterful building with a unique ambience that will in all probability never see the light of day again as restaurant premises. Sure, restaurants come and go but Mudd's was different. Certainly it had its ups and downs and, particularly in recent years, John Ebert had difficulty in keeping chefs so the food (and the support by locals) definitely suffered. Nevertheless it seems a shame that such premises wil go to waste.

One suggestion is that the restaurant can be turned into a Nature Center. Yes, it would probably make a very good Nature Center but not as good as it was a restaurant.

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Could The Worst Be Over For San Ramon Valley Home Owners

Nov. 5, 2008

Categorized in: San Ramon Valley Market Update

Tagged with: analysis, market, san ramon

To say it has been a tough year for home owners in The San Ramon Valley is something of an understatement, yet here, as in other areas, some have suffered more than others.

Yet even in the more affluent neighborhoods of Danville, Alamo and Lamorinda, home values have fallen significantly in recent months. The question on everybody’s lips (especially potential buyers of course) is “When will prices hit the bottom?”.

Activity Among Detached Single Family Homes

For some encouraging news, take a look at the table on this page. This is an analysis of real estate activity in the southern end of the San Ramon Valley in Contra Costa County over the past 6 months, the area from Alamo to San Ramon. This just covers detached single family homes.

What is immediately interesting to me is that there is no real trend in any of these columns. The total number of homes for sale over this period varies from 609 to 691, a variance of a little over 10%. Now take a look at the actual activity in the market, Sales Agreed. Relating Sales Agreed to Total Listings provides what is known as the Absorption Rate, or in simpler terms, the number of months of inventory.

Months of Inventory is generally accepted as a key indicator in real estate terms. When there is less than 3 months of inventory, this is a strong sellers’ market. More than 6 months and it is considered a buyers market. Anything in between is considered to be neutral.

Alamo, Danville (inc. Blackhawk, Diablo), San Ramon
MONTH	Total Listings	Sales Agreed	Sales Closed	Average Sale Price	Months of Inventory
MAY	649	128	97	$1,043,904	5.1
JUN	677	103	110	$977,287	6.6
JUL	691	113	128	$1,069,935	6.1
AUG	640	134	112	$951,224	4.8
SEP	609	102	112	$1,008,072	6.0
OCT	609	90	99	$995,604	6.8

Are We Moving To A Sellers’ Market?

So what is to be made of that? Two of the past 6 months suggest a sellers’ market. Certainly we appear to be far from a strong buyers’ market so what is really happening?

In reality, there needs to be a “trend” developing to decide what kind of a market we are in. If we saw less than 6 months inventory for a 6 month period, we could safely say that we had an established sellers’ market but as things stand right now, this is not the case. It is possible that we are in the early stages of development of a sellers’ market though. The next few months will show us.

Real Estate Is Local

It has to be emphasized that this analysis relates only to a specific geographical area. I have no doubt that an examination of the same figures for the north end of the San Ramon Valley (Pleasant Hill, Concord and Martinez) would show a very different picture, strongly favoring buyers. Doing the same for Lamorinda would also tell a different story but almost certainly showing that a sellers market was getting established there.

Will Prices Rise?

Does this mean that we can expect to see price increases? Probably not. It generally takes a long-established sellers’ market with low levels of inventory before that becomes a reality. What we probably can look forward to in the near future in areas such as the one in question is a period of stability. Average sales prices will fluctuate a little just as they have over the past 6 months. Home sales will continue around their present rate for the coming months and sellers who price their homes for sale at fair market value will sell them reasonably quickly, say in 30-45 days.

The Effect Of Distress Sales

There has been some suggestion that we can expect an influx of Short Sales and Bank Owned Foreclosures coming on to the market. It is suggested that the re-setting of adjustable rate mortgages to a point where home owners can’t afford the payments make this inevitable. The proponents of this scenario say that this will drive prices downwards as lenders are prepared to agree to low sales prices. In reality, it looks likely that this will not come to pass. Major lenders such as Countrywide and J.P. Morgan Chase have recently placed a moratorium on foreclosures and have stated that they are committed to working with home owners to restructure their loand rather than see them lose their homes. Other lenders are likely to follow suit. It appears that there really may be a light at the end of this tunnel and we will eventually return to a period of stability in the real estate markets.

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