Overall in Marin County, the bottom for pricing seems to have formed. The average price of a Marin County single family home has once again surpassed $1 million. In addition, for the seventh consecutive quarter (since Q1 ‘09) both the average and median price of a single family home has experienced modest appreciation.
Possibly the most interesting phenomenon is this modest price appreciation (2% per annum) occurring in a market of significantly lower units closed. The number of homes sold in third quarter ‘10 under $1 million fell -16% from the same period a year ago. The number of homes sold over $1 million fell -3% from the same period last year after a -36% drop from Q3 ‘08 to Q3 ‘09. What this tells us is that while the number of sales has slowed dramatically in the past two years, prices have now firmed and we have caught a glimpse of the bottom.
Buyers continue to be cautious and generally only take action on well maintained, well priced homes. Sellers' pricing of their homes remains critical as buyers feel most comfortable when the list price is within 3% - 5% of fair market value.
One of the most interesting buying opportunities today is the increasing availability of mortgages at historically low interest rates. Buyers in today's market have the unique good fortune of acquiring real estate when both the home itself and the mortgage are "on sale". This combination of stable prices and extremely low interest rates provides a unique affordability factor for those in the market.
In this mortgage environment, we are seeing jumbo loans, up to $2 million in loan value, 80% loan-to-value (or $2.5 million purchase price), priced at 5% for a 30 year fixed loan and no points paid at closing. It is only a matter of time before mortgage interest rates and real estate values begin to rise together. And when they do, a 1% increase in interest rates generally equals a $100,000 drop in the price of a home that a borrower can afford.
Looking forward thru Q4 ‘10, we expect stability in pricing, maybe 2% annual appreciation rates, and we expect units sold to remain flat. When the volume (units sold) in local markets increase, the negotiating leverage between buyers and sellers will likely move towards an equilibrium - we do not expect this buyers' market to maintain its strength in the foreseeable future. The ultimate opportunity seems to be stable housing prices, excellent inventory levels and exceptional mortgage interest rates.
If you have any questions or would like a custom market analysis of your home's current likely sales price, please call me at (415) 350-9440. My name is Kyle Frazier. I am a Broker, Certified Residential Specialist (CRS), and Certified Luxury Home Marketing Specialist (CLHMS) with Christie's Great Estates | Pacific Union International Realtors. It is always my pleasure to be of service.