Short Term Outlook :
In the last 44 years, there have been only two years (excluding 2008 & 2009) when average home prices in Marin County have decreased from one year to the next: -1.2% in 1991 and -1.4% in 1992-- after the S&L crisis.
In 2008, Marin County average home prices fell -12.7%. Southern Marin prices dropped only -3.3%. This correction in home prices gained speed in 2009 . Marin County average home prices are currently down -21.4%; Southern Marin prices are down -14.2%. This has more to do with the dearth of high end home sales than anything else.
How far are prices likely to fall? Prices are currently at, or very close, to a bottom. The rebound will be predicated on several key stats-the Bay Area labor market, and the capital markets stability. On a national level, the Case-Shiller home-price index just registered its second straight monthly increase after 30 straight down months.
Employment: Hiring and firing in the Bay area lags the broader US economy. The latest stats show that the SF-San Mateo unemployment rate hit a new low of 9.3%, and CA 11.9%. This helps explain the painfully slow pace of home sales and the buyer reluctance we are seeing in the marketplace. The longer-term prospects for our job markets remain very good with the caveat that Sacramento doesn't drive business out of the state by taxation.
Capital Markets: High end Marin home sales are led by moves of the stock market. The US stock market has rebounded sharply, but to date this rebound has had little effect on either the price or pace of high-end home sales in Marin. This should change soon if we maintain these approximate levels in the S&P. Bond yields and mortgage rates are still quite low considering the amount of Govt. stimulus and the coming inflation, and that has helped create a bottom for the bottom half of the housing market in parts of Southern Marin as buyers lock great rates on 30 year conforming high-balance loans.
Economy & Stagflation: The two greatest longer-term issues facing our national economy are little changed: 1) consumer debt levels are still at levels inconsistent with robust GDP growth. This may serve to keep our jobless rate higher (6-8%) range moving forward. 2) The amount of stimulus in the system indicates future inflation and a secular rise in mortgage rates.
Short Term action plan: If you plan on selling a home to buy another, this should be done sooner rather than later in order to lock in a decent mortgage rate on your new home.
Posted by David DuPont 415-867-6611
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