We've enjoyed the market musings of Pacific Union GMAC Real Estate's bigshot Avram Goldman before, but this week's Goldman Report—forwarded our way by an alert tipster—is really one for the ages. Let's begin at the beginning:
Here comes the sun---Dodadoda---here comes the sun---and I say it’s alright---Little darling it’s been a long cold lonely winter. Little darling it seems like years since it has been here. Here comes the sun---Dodadoda---Here comes the sun---and I say it’s alright--Little darling, the smiles returning to the faces. Goldman continues:
I am sure all of you remember this song (hint: The Beatles). Why so optimistic. Haven’t you been reading the headlines and watching the news Avram? Oil is up to its highest price ever—the dollar is lower than the Azerbaijani manat, we are losing jobs, the only time we see our President is when he is shaking hands with John McCain, and the FBI is investigating all the lenders that put us in this mess. Call me the eternal optimist---I think it is more the pragmatic optimist.
Why so cheerful this week? After reviewing the Bay Area real estate numbers for February there are rays of sunshine. Who knows, maybe the weather has something to do with it. What I can tell you is that in every county the months supply of inventory is down. In fact, there is only one county in double digit numbers and that is Napa. All the other counties are below 8 months and San Francisco is at 3.4 months which is pretty close to a sellers market. Guess the papers missed it. The reason may be they are always looking in the rear view mirror.
No I am not saying we are in the go-go-go periods of 2004 and 2005, but I am seeing signs of stabilization and improvement in some markets. Closed transactions were significantly down over last year for February, very close to the almost 42% in January. It will probably end up in the high 30’s. However, in February, the hardest hit market in the Bay Area, Solano county, saw transactions under contract rise 63.5% over February 2007 (from 255 to 417). Over half the counties were on the plus side for transactions under contract. Joining Solano were Sonoma (+.52%), Napa (+29%) and Contra Costa (+12%). San Francisco (-11%), Marin (-17%) and Alameda (-17%) ended up on the negative side. It is a much improved position from the end of last year and January. Yes, prices have been walloped over the last year, but they appear to be dropping less and stabilizing. In San Francisco prices were actually up over last February.
What is happening? I believe there are several factors. First, sellers that are currently listing their homes are becoming more realistic with pricing and preparing them for this market. Secondly, increasing numbers of sellers whose homes have been on the market for some time are understanding that in order to sell their homes, they will need reduce their list prices to market values. For example, of the 23 listings that went pending over $500k in Oakland/Piedmont/Berkeley, 16 of them were on the market less than 22 days and 100% of those listings that were on the market over 30 days had price reductions. Another factor, particularly in those markets that have had the highest number of short sale and foreclosure properties, are that banks and institutions are beginning to shed these inventories. Lastly, those unmotivated sellers who have been clogging the market with listings that are non-saleable are now leasing them or taking them off the market and waiting for better times.
Demand is backing up and buyer activity is increasing as evidenced by the number of buyers attending open homes. In SF a Pacific Heights 2 bedr 1 ba. listed at $1.587mil was visited by 120 groups, a Parkside 2bedr. 1ba at $665K entertained 75 groups and a 2 unit building in Pac.Hts. $3.745 mil saw 40 groups through.
In Marin we had a San Rafael 3 bedr. 1 bath listed at $595K with 35 groups and a Novato 3 bedr. 2ba. home priced at $799K visited 25 groups. Not to say every open home is active, but the majority is seeing increased traffic. There are still yawners, but most of them have been on the market for some time and are still not realistically priced.
The number of multiple offers in many markets is beginning to increase again. The majority of our offices had multiples. In our Montclair and Berkeley offices 67% had sales with multiple offers, Orinda had 30%, our SF Presidio office had 33% and Sonoma had 25%. The vast majority of these sales occurred with listings that are new to the market as buyers are ready, willing and able if they see value.
If these positive trends continue in March, the remainder of 2008 could be a time when markets begin to recover and move toward a healthier balanced environment.