A few updates before I get started. First – as you know, and as I wrote about a few months ago, statistics can lie. Or at least be confusing (I was never deceptive!). For a long time the only market data I could get on a detailed local basis was week over week – based on my gathering of local data.
But since I’ve been writing this newsletter for well over a year, I now have YEAR OVER YEAR data – a much more accurate “snapshot” of our local market. So it will be formatted the same, but the data will be better. When you see % changes it’s from this time last year, not two weeks ago! Next. . .
My Fortune Teller says:
Real Estate: It’s time to buy again. Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.
My Fortune Teller in this case is Fortune Magazine. A few weeks ago “The Return of Real Estate” graced the cover of Fortune Magazine. I grew up on Fortune and Time Magazine. My dad thought it was quite impressive that these two magazines were my favorite weekly reading as a ten year old (little did he know that more often than not I just read the “people” column, or the “what’s hot/what’s not” section).
Still – I am a strong believer in the written word of these weekly news magazines. So this cover caught my eye when I saw it in an airport newsstand. I bought it and read every word, between Oakland and Dallas.
So is Real Estate Back in our little world? I’m not sure it ever crashed here. Prices crashed – that’s for sure. But they needed to. 2003-2006 experienced a run-up that was nuts – the bubble.
Back in the day I was the Queen of multiple offers – I was in dozens of multiple offer situations, which drove up prices, and I almost ALWAYS prevailed with the winning buyer. In one case representing a buyer who offered $150,000 over the asking price (it’s my only transaction I wince at – but my clients insist they love their home, they know they paid top dollar, but are going nowhere anytime soon – they put 30% down and were able to refinance with a good appraisal recently. They are ok – weeehu!).
So while the hey day is over (thank goodness!), and prices are down, I’m not sure “crash” is the right word to describe what happened here. All that makes it equally hard to determine if “it’s back”.
Alamo’s median home price dropped below the $1MM mark in March, for the first time since 2003. The average home price in Alamo hit $1MM in 2003 and has held there or above for the past eight years. So in March we were above 2002, but below 2003 average home prices. An anomaly? Maybe. Only time will tell, and I will comment when I get April data. Still I think that is a really telling statistic.
You’ve heard me say that asking “How’s the Real Estate Market?” is similar to asking “How’s the weather in the United States?” In truth we could even bring that analogy to our Northern California Market – 46° in Pacifica, 109° in Danville.
But according to the Fortune Magazine article there are two major Climate Zones in the US: “non-distressed markets” and “foreclosure markets”. While we have micro climates of “foreclosure markets” in the Bay Area (like Tracy and Mountain House), and Fortune agrees that no cities went untouched by the collapse in prices over the past few years, the “San Francisco suburbs” are a non-distressed market.
I believe that. While inventory is way down – there are either distressed homes for sale, or good homes that sell quickly for top dollar. A great example is my top ten pick from a few weeks ago on St. Andrews Lane. Beautiful home in Round Hill Country Club priced at $1.6MM – which seemed CRAZY high for the square footage. Pending in less than ten days! Good house (which there are too few off) maybe priced right? Who knows, it sold.
Alamo has held at 6-10 Bank Owned properties for the past two years. Maybe the banks ARE sitting on massive numbers of defaulted homes – so our number may double, triple, quadruple from .002% of our homes to .008%. Oh no!! Prices may continue to drop because of this and other factors, but they won’t CRASH.
My final point is this – I believe we are in recovery because the balance between renting and buying is starting to tip. When renting becomes as expensive – or close – as buying, renters should start buying. The Rental market is crazy. Every day in my Rockcliff e-mail I get notes titled “Rental needed. . .”.
Renters are paying $3,000 – $6,000 to rent a nice house in our area because of the schools; because they are waiting; because they lost their home (and their credit) but maybe not their income. The rental market is hot, hot, hot. You can buy now for what you can rent for. And that’s a dollar on dollar comparison – not even considering the tax implications of buying v. renting. So that says to me, people should be ready to start buying again.
And interest rates will be going up. . .oh, sorry, I said “my final point” above. So I won’t go into interest rates now, but that is another strong indicator that it is time to buy (or sell, as all those buyers need something to buy).