2010 East Bay Real Estate Update: Challenges Facing $1 Million+ Buyer/Sellers

As you have discovered over the years, Jim Walberg is one of the most positive people around.  So, this report is not about positive or negative, it is about reality.  There are still some significant hurdles for Buyers and Sellers to climb over in 2010 in the East Bay real estate markets.  The past two years the biggest price corrections have been focused on the under $1 million price ranges.  The “sweet spot” of our real estate micro-markets has been in the $500,000 to $700,000 price range.  Mortgage companies and the Federal government have designed most of their home loans to motivate sales below $700,000 – at least until the end of April.  At that time the focus will then be under $600,000.  The biggest challenge for Sellers and Buyers of East Bay real estate is still in the price point above $1 million.

The lower priced houses in our region will not get much cheaper in 2010.  However,  there is still room in the higher priced homes for more corrections downward in 2010.  Please don’t shoot the messenger (me), but Sellers of $1 million+ homes in the East Bay who will be selling their homes in 2010 may want to consider preparing their home for sale NOW.  The further we get into 2010 the more downward price pressures will be in play.  The Standard & Poor’s / Case-Shiller home-price indexes are ones I recommend all of us watch to alert us to further price trends in million dollar range.

For example, in the greater San Francisco Bay Area, high end prices are down just 25% in the high-end homes, compared to 39% in the lower priced homes in our regional markets.  Several factors are in play when it comes to the further downward pressure on the higher end home prices;

  • The resetting of adjustable mortgages that allowed Buyers to purchase higher priced homes resetting increasing their monthly payments.
  • The increase in defaults of East Bay homes that are $1 million+ in value causing lower appraised values of this slice of the market.
  • Lender making it more difficult for Buyers to secure loans for this price point because the banks would rather have their mortgage money risked in the lower priced homes than add to their portfolio $1 million+ home loans.
  • Climbing home loan interest rates that are already happening within the first few weeks of 2010.

In the greater San Francisco Bay Area, the percentage of foreclosed or short sale homes in the $1 million+ range in January of 2009 was just above 9%.  That number today is over 50%!  It is not an anomaly any more for foreclosures in this price point, so appraisers are now using these sold homes as comparable sales when they do their appraisal reports to the lenders.  The questions that the Sellers of million dollar homes are facing today are;

  • If I do have equity in my home and I need to sell it this year, do I realize the pricing pressures that are currently in play that will affect its sales price?
  • If I have no equity in my home and if my mortgage is higher than what the home is worth, am I willing to walk away?
  • If I am willing to walk away, am I willing to rent for at least three to five years while waiting to qualify for a home loan again?
  • If I do walk away from my home, am I willing to have a lowering of my credit scores (about 160 point drop for a foreclosure), that will make any future loan I need much more expensive?
  • Home much will my foreclosure hurt my community and neighbors?

I am not the “chief economist” of any financial institution.  However, I am in the trenches everyday of our real estate markets.  My prediction is that we are realistically two or more years away for any sustainable turn around for the $1 million+ real estate markets in the East Bay.  What are your thoughts about things you are noticing in your neighborhood?  Let me know.

About Jim Walberg

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Jim Walberg has been a business owner and Realtor in the San Francisco Bay Area since 1972. His local knowledge and global reach insures the extraordinary results our clients experience. He is proud to connect our San Francisco Bay Area clientele with our international real estate network which is unequaled in professionalism and integrity. His global network of the world's most respected real estate firms ensures that your property will be properly represented to the most discerning clientele. Our daily task is to carefully plan and perfectly execute the local, national and global exposure our available properties need and deserve.

Walberg's results speak for themselves. Since 2005 we have been contacted by customers from 62 countries who are either seeking properties in the San Francisco Bay Area or who need assistance with their global real estate searches. His list of clients include; corporate executives, professional athletes, real estate developers and your next door neighbor. He is standing ready to serve any property needs within the San Francisco Bay Area, and those of our global network.

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  3. [...] “Distressed” homes already make up a large chunk of the local real estate market. Nearly half of the homes sold in the Bay Area between September 2009 and this past February were short sales or foreclosures.  And the market share of Bay Area short sales rose from 15.65 percent in September 2009 to 18.64 percent this past February.  And, we still see some softening of prices in the $1 million+ price range in our region which may cr… [...]

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