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RSS FeedCould The Worst Be Over For San Ramon Valley Home Owners |
Nov. 5, 2008
Categorized in: San Ramon Valley Market Update
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.
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Alamo, Danville (inc. Blackhawk, Diablo), San Ramon
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MONTH
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Total Listings
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Sales Agreed
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Sales Closed
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Average Sale Price
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Months of Inventory
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MAY
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649
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128
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97
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$1,043,904
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5.1
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JUN
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677
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103
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110
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$977,287
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6.6
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JUL
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691
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113
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128
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$1,069,935
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6.1
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AUG
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640
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134
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112
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$951,224
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4.8
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SEP
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609
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102
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112
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$1,008,072
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6.0
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OCT
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609
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90
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99
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$995,604
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6.8
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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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1. RE: Could The Worst Be Over For San Ramon Valley Home Owners
When the media starts to report any increase in prices I believe the market will shift quickly. Right now people are waiting to buy with the belief prices will be lower later, even though prices are great and mortgage rates are low. Once the fear that opportunity may be lost this waiting will start to stop. Consider this analogy, when the price of gasoline is going up I keep my tank full, when it is dropping I let it go empty to fill up, it will be cheaper later. It is a buyer's market now, contrarians will benefit by purchasing now. When the market shifts, I believe it will move fast.