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RSS FeedSan Ramon Real Estate Market Outlook |
Dec. 31, 2008
Categorized in: San Ramon Valley Market Update
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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