Can you believe that we are just entering the final quarter of the year? Already the weather is turning cooler and the nights are beginning to draw in. Soon the Holiday Season will be upon us and then another year will be over.

So what of the real estate market for 2007 so far in the San Ramon Valley? Lets ignore the hype and just look at the facts. The chart on the left shows real estate sales activity from June 2006 to August 2007. Actual sales activity was fairly steady for the first half of the year then dropped off somewhat in July and August. This is a normal pattern. Remember that people typically take their vacations in July and August when school is out so real estate activity almost always declines then.

Perhaps of more concern to sellers is the fact that inventory levels have steadily been increasing. To some extent, this is due to increased numbers of foreclosures and distress sales. At the end of August there was 14 months inventory on the market and when one considers that anything above 9 months inventory is considered to be a buyers market, it is apparent that buyers must really be able to call the shots in Contra Costa County right now.

Or can they? Look at the second graph (below right). This shows Alamo, Danville and San Ramon for the same period. There are similarities in patterns and trends but the reality is that there was only 5 months inventory at the end of August and this would be considered a neutral market. Just a glance shows that the market this year is much healthier than it was at the same time last year. Still not where we would like to see it of course. In an ideal, balanced market, there will be around 3 or 4 months of inventory.

The fact is, nice homes that are presented and marketed professionally and priced right are selling. So why all the doom and gloom?
Again I blame the media. You can turn on the television any day you like and hear that the real estate market is in a bad way. There are hundreds if not thousands of foreclosures and short sales and we have not even seen the tip of the iceberg yet. This is all absolute poppycock of course!

ALL REAL ESTATE IS LOCAL!

You can't compare the real estate economy in North Dakota with Northern California. You can't even compare real estate in Antioch and Pittsburg with Danville and San Ramon as is well illustrated by the above charts. There is just no relationship!

The reality is that now is a good time to buy a home in our area. Prices are unlikely to fall much lower if at all and trying to pick the bottom (or the top) of any market is a mug's game. Now is particularly a good time if you are trading up as values have declined over the past 2 years and therefore so has the differential.

It's also a good time to be selling provided that your expectations are realistic. There are many overpriced homes on the market which means that a home listed at true market value stands out.

I welcome your comments and questions.

Now that we have put the prime vacation months of July and August behind us we should be starting to see increased activity in the real estate market but unfortunately this does not seem to be the case.

Before going on to that, let me just describe how I see a "normal" year in real estate:

I have found that there are usually two quite well-defined "windows" in the year when most of the activity takes place. The first, and major, window is the period from Easter to Memorial Day. This is almost always when homebuyers are writing offers. A lot of it is related to schools of course - families moving into the area have to have a home under contract before the school district will allow them to register their children in a new school. Many agents will do half their annual business in this period.

The second window is much smaller, the period from Labor Day to Thanksgiving (sometimes even just Labor Day to Halloween). Many people just want to get the kids back to school before buying a home but once they get to Thanksgiving, the Holiday syndrome takes over so many lose sight of that new home until next year.

Now I'm obviously making generalities here. People move at all times of the year for a variety of reasons that are often not discretionary. Even so, I bet if you check the statistics for Pended homes by month in any particular year, you will find that the above is an accurate observation for any primarily residential area. I don't include vacation home areas in this for obvious reasons.

Now accepting the above, we should be starting to see increased activity by now. Yet look at these figures I just drew down from the MLS:

Pended Homes in San Ramon

June     81
July      55
August  65

So far, so good. June was still active and numbers dropped in the prime vacation months of July and August. Now we are half way through September so we should be expecting to see at least 30 and probably 40 or so homes Pended in the month to date.

In actual fact, the figure is just 18. When you consider that there are around 400 homes currently for sale in San Ramon, this really gives food for thought.

Obviously this is a small amount of data and we will have to wait until the month ends to get an accurate picture but regardless of any of these figures, it seems to me that if anybody want to have a good chance of selling their home in San Ramon in a reasonable time, they better make sure to price it very aggressively. Otherwise it will just become another home listed for sale.

Well it's been a while since I made a Blog entry. The fact is, I have had a busy year so far, I am pleased to say. Now, I am doen to one listing and two homes in escrow that are coming up to closing so at last I have some time for myself.

So what about the San Ramon real estate market? For me it's been fine this year. Other agents are tearing their hair out with too many listings that won't sell. As I seee it, there are still a lot of overpriced listings. Many sellers (or would be sellers!) still seem to think we are in the 2005 market and are pricing their homes accordingly. Agents who should know better are taking these overpriced listings and complaining that they are not selling. What do they expect?

In my view, an experienced agent has a responsibility to explain the facts of life to a potential seller. The figures are all there in black and white. We all have access to the same data. If the last 6 months comps show a home is worth no more than $800,000 there is no point in listing it for $850,000. I don't really blame the sellers. They don't understand the intricacies of pricing and valuation but agents should educate them.

In the San Ramon Valley, when listings expire, they are re-listed by the original agent 90% of the time at a reduced price. If it is reduced enough, the home sells. Otherwise the cycle repeats itself. With that knowledge many agents are much more concerned about getting the listing at any price rather than telling the seller the truth about value and losing the listing to another agent. The concept of buying a listing is alive and well in our area.

I have been fortunate in that most of my listings this year have come from either referrals or from people who know me because of my farming activities. I see homes for sale in my farm area at inflated prices and it makes me sad. And these are with experienced agents.

In reality, our market is fine provided that a home looks good when it goes to market, is professionally marketed to potential buyers and other agents, both by conventional meand and via the Internet, and is priced right. It really is a neutral market right now. San Ramon has 3-4 months of inventory (single family homes). That would seem to favor neither buyers nor sellers. Sure, July has quitened things down a little. August will probably be the same but we'll be back with increased activity in the fall.

Life is good!

Real estate sales activity was slow in virtually all areas throughout 2006 for reasons that are easy to define.

The superheated market that we experienced for the past few years came to a sudden end in the last quarter of 2005. Multiple offers became a thing of the past and home sales ground to a halt. Most sellers were unwilling to accept that buyers were no longer willing or able to pay the prices being asked for homes, so many sat on the market for a long time. As price is a function of supply and demand, a high level of inventory caused home prices to fall further and the only way to achieve a sale was to price your home at a lower price than similar homes were being offered at. Motivated sellers achieved sales. Less motivated sellers had homes sitting on the market for months and many just failed to sell.

Inventory levels peaked in September and have been steadily reducing since then. Amazingly, they have fallen by almost 50% in just the last 3 months. Even so, sales have not increased noticeably. It is therefore apparent that the reduction of inventory is as a result of people failing to sell their homes and taking them off the market rather than them having achieved a sale.

It can also be seen that the average sale price has fallen over the past few months, although perhaps not so much as one might expect.

Now lets take a look at some year on year figures. Rather than just looking at average sale prices of homes, let us consider average sales price per square foot. As can be seen from the table below, this reveals a telling story.

Average Sale Price/Sq. Ft. - Single Family Homes

Throughout much of 2005 home prices rose at an extremely high pace. This was the time when sellers were frequently achieving a sale within days of listing their homes for sale. And with multiple offers, all above the asking price.

Now, we have seen the inevitable correction. Alamo and Lamorinda have shown resilience, the former having consistently increased in value. Danville and Walnut Creek prices have fallen back to 2004 / 2005 levels while San Ramon prices are even lower than they were 2 years ago. Although I haven’t shown the figures here for the lower priced areas of Concord, Martinez and Antioch etc., I can state that prices in these areas have fallen even further, as a result of excessive inventory in these areas.

But the worst does look to be behind us and we can probably look forward to a more stable time in 2007. Prices appear to be steady and we may even see a little growth but there will be no frenzied buying activity and buyers will be able to consider their options before deciding to make an offer on a home. This is what is supposed to happen in a normal real estate market. If you plan to buy or sell a home this year, I wish you every success.