Buyer reticence is apparent. The angst created by the weakening economy, stock losses and the uncertainty of how long and deep the recession will last, has put buyer activity on pause. The re-pricing of asset value across the board whether it be stocks, cars, homes and any other commodity has buyers questioning when is the right time to buy.
Let's call it the Waiting Game for buyers. Fear has not only enveloped the financial markets, it has spread throughout our economy. Prior to the most recent volatility, the housing market experienced a nice bounce in August and September. According to the National Assn. of Realtors, sales in the west were up 34% compared to September 2007 and up from August 2008 by 16.8%. Although units were up, median price dropped 20% due to the majority of sales falling in the lower price ranges.
Many buyers are saying that they are delaying making decisions until after the election and watching for the impact of the bailout program before going forward with a home purchase. Such behavior is reflected in open home activity, which has fallen off in most Bay Area markets with few exceptions. The bulk of open homes are seeing fewer than 10 visitors. There are the anomalies like the SF Lake District duplex listed at $1 mil that garnered 50 groups and the SF Cole Valley 2 unit building priced at $1.85 mil that received 26 visitors.
The number of multiple offers has declined particularly in the lower price ranges. During this report period, just a bit over 10% of the total offers were multiples. Those homes that are in multiples are either value-priced well below the competition and/or presented exceptionally well. A good example of this trend is a SF Inner Richmond 2 bedr. 1 bath Edwardian flat listed for $765K, which garnered 5 offers and sold for well over asking. Other multiples include those in highly desirable areas such as a SF Forest Hill 4 bedr. 3.5 bath home priced at $1.795 mil. that received 3 offers.
Price reductions are becoming more commonplace as motivated sellers are being forced to adapt to current market conditions. Even in areas that have been solid most of this year (i.e. SF Noe Valley), we are beginning to see more listings coming down in price.
Inventories should continue to decline as a number of sellers are now taking their homes off the market or renting them and as is traditionally the case, fewer listings will be coming on the market as we approach the holidays.
Special homes that are unique, which I call trophy homes, are still attracting the well-heeled buyer. Our Piedmont estate property listed at $7 mil. sold in a couple of weeks. If they are priced appropriately, there is no shortage of dollars for these types of properties.
There is good news. Interest rates have fallen over the last four weeks for conforming loans (those under $729,750). The steep slide of values in the moderate price ranges over the last two years combined with these declining rates has increased affordability for first time buyers. We are seeing prices beginning to stabilize in this price sector. Over time, this phenomenon should matriculate upward. However, this will not occur until lenders feel confident enough to price jumbo loans at reasonable levels and with realistic terms. Until this happens, the $1-3 million dollar price range will continue to languish.
In nine days at least one of the causes to buyers' reluctance will be resolved-we will know who will be our next President. President Bush is meeting with G7 leaders this week to review past actions and develop others to try and lessen the volatility in the global markets. There is no magic pill. It will take time. However for contrarian buyers who don't follow the crowd, conditions are ripe with opportunities. As they say, cash is king in markets like this. And you know what they say about the early bird.
Here is a little song about opportunity by Pete Murray. Enjoy.
http://www.youtube.com/watch?v=wbCuvsFMSyE
The Goldman Report
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