Last weekend, the U.S. Department of Treasury placed Fannie and Freddie Mac, government sponsored organizations, into a conservatorship. The federal government is authorized to take up to an 80 percent stake in the companies, and, as part of its duties under the conservatorship, will review both Fannie's and Freddie's financial condition periodically, as well as provide back up funds into the operations as needed.
Okay, so how does that affect you and me? Well, as I see it, this governmental action will serve to calm the turbulence in the mortgage market, apply confidence in investment in the mortgage market, lower interest rates, and perhaps stabilize declining real estate values. Hopefully, most of these potential effects will occur, but it seems certain that our government has taken extreme action with this intervention to stabilize our economy, and I see that as a proactive and positive position.
San Francisco Bay Area
Surprisingly, the number of units (homes/condos) sold in the 9 county San Francisco Bay Area has declined only 11%. Most of this strength in unit sales is in the 500k or less price ranges. Market growth in this range from this year compared to last is as follows: Contra Costa 111%, Napa 101%, Marin 80%, Solano 76%, San Mateo 74%, Alameda 61%, Sonoma 58%, and Santa Clara 58%. San Francisco had no increase in unit sales in this range; however, the market size typically is less than 10% of all sales.
As I've said previously, the main reasons for the unit sale increases in this market is likely: affordability (more people can buy), REO's and short sales (Lenders are aggressively selling), and interest rates have declined somewhat. So, if your considering buying now, let's look in this price range for bargain and value. Be prepared to recognize value, and if your inclined to take on an REO or Short Sale purchase you'll need patience. Also, REO's are typically fixer-uppers. Brushing up on your painting and cleaning skills will be necessary!
The antithesis of the above described market segment is the over 500k price range. In the Bay Area, every county is down in unit sales in this range for the most recent month. Why? Several opinions are out there: higher jumbo mortgage rates; tighter lending requirements; plethora of choices; and perhaps some Seller psychology. Perhaps, there are Sellers out there that won't sell unless they get there number, or selling is somewhat discretionary. In other words, if they move this year, or next, or never it isn't really necessary. If your in the latter category, this market isn't for you. Want to sell your property? Hire a 1st class real estate marketing company, price your property at market, and seek the guidance of a real estate professional!
The most positive sign for August was the months supply in inventory in the Bay Area counties. Every county in the Bay Area had a declining months supply in inventory! These numbers are determined by using transactions under contract versus active listings. The majority of our counties would be described as balanced markets (4-6 months inventory) with one exception (Napa 7.7 months). Of course, in the Bay Area we are used to a fast selling market, and this 4 to 6 month inventory might appear balanced in other parts of the country. Here, however, it is still recognized as a slow market.
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