The Goldman report 4-21-08

April 20, 2008
Looks like we ride with the stock market or maybe the stock market rides with us.
As stocks had a very good week our market during this period had the highest
number of open weekly sales since the fourth week of July, which was just before
the wheels came off the wagon. Have we hit bottom and now ascending? I think
it is a bit too early to tell. One week does not make a trend. However, what it does
tell us is that for a segment of buyers who have been waiting it was time to dive
in.
Who can blame them. No one knows when the market hits bottom. What we can
observe is that in the lowest price ranges, there has been the largest amount of
activity in more than 8 months. Buyers who have watched prices decline are
sensing that we could be getting close to the basement. Why wait and risk
missing a golden opportunity. The largest single factor in declining inventories
has been these low end properties finally beginning to sell. The banks and other
financial institutions who are handling the short sales and foreclosures have
begun to clear the hurdles so these homes can be sold. Bureaucracies, particularly
financial ones, move slowly. We have been seeing increased multiple offers on
these types of properties in the under $450,000 price point. This combined with
sellers who still have equity and have come to the conclusion that if they are going
to sell their properties they need to come into the year 2008 not 2005; creates
saleable listings. This was certainly the case in Alameda, Contra Costa, Solano
and Sonoma counties which saw the largest drops in months supply of inventory
since the end of last year.
We are even seeing this pattern in Marin county. Last year it was the over million
dollar properties, especially the over $2 mil. properties selling extremely well. This
year and especially since March, the under million dollar sales are dominating.
San Francisco is heating up again. The $1.2-2.1 mil. category is now being
described as hot hot hot. A Parnassus/Ashbury 3bedr./2.5 bath home listed at
$1.695 had 14 offers and went “well” above full asking price. Another SF
2bedr./1ba property in Eureka Valley/Dolores listed at $1.195 mil. received 4
offers and it too brought a final price considerably over asking.
On the other side of the Bay a Kensington 3bedr/1ba fixer property listed at $520K
garnered 14 offers. These double digits multiple offers are rare. Most multiple
offers tend to be 2-4 offers and of those many are at list price or a small amount
under list. What is amazing is that buyers are willing to go well over on properties
that are either priced aggressively or have unique qualities even in these stressful
economic times. Over 25% of our sales in the reporting period were multiple
offers. The bulk of them from San Francisco and Berkeley/Oakland/Piedmont
marketplaces.
Strong open house activity has continued in spite of the beautiful weather. You
figure buyers may want to enjoy the sunny skies. Berkeley open homes have been
in overdrive. A 4 bedr/3 ba. home listed at $1.520 mil. had 135 groups attend.
While a 2 bedr./1 ba. priced at $599K entertained 150 groups. Again San
Francisco is hot on Berkeley’s heels with 100 groups through a Lake District 3
bedr./2.5 ba. home listed at $1.659 mil. Most homes had traffic between 10-40
buyers. Repeat home opens, those opened more than once tend to have the least
attendance.
The pent up buyer demand keeps building. Lenders are making it more difficult
to process loans. They have become over reactive. Asking for increased
documentation and questioning appraisals. In a number of cases they are seeking
review appraisals. We are getting the loans done, but the time and effort can be
daunting. This too will change in time.
In seems counter intuitive that in the darkest of economic times some consumers
are still buying real estate. The wealthy in America see that the best opportunities
in real estate are right now during the sluggish market. What do they know that
others may not. I have attached on the e-mail an article describing what the wellheeled
are seeing in the current market.
At least we can see a few positive signs. If those trends continue we could be
headed to a more normalized market. Look for that happening either during the
summer or as we head to fall. The wealthy understand this. It is a great time for
buyers.
From Avarm Goldman President of Pacific Union