2008 East Bay Real Estate Predictions

Jim Walberg’s 2008 East Bay Real Estate Update – 4th Quarter!

There is a mixed bag of critical information for Buyers and Sellers to consider for the 4th quarter.

There are MANY factors that are still mixing together that makes it critical for consumers and Realtors to understand the economics of how these factors will impact their decisions regarding Buying and Selling real estate in the San Francisco Bay Area.  And, as you read my report remember that all real estate is LOCAL!  Here are just a few of the factors that will be impacting the 2008 fourth quarter real estate sales in our Bay Area region.

• Mortgage interest rates have been adjusting downward this past week. The markets believe that inflation is not the BIG factor at this time, even though in August it was at a 27 year high. The biggest inflation factor was the price of oil. The speculation on that commodity has cooled down dramatically bringing gas prices down, therefore lower the inflation rates.
• Short Sales and REO sales are bringing down the median price for homes in the Bay Area. What this means is that appraisers are one of the BIG hurdles when purchasing a home, because in some communities there are so many distressed sales that it is the trend impacting those homes for sale that are not in a distressed condition. For example, communities such as Antioch/Brentwood/Oakley are receiving appraisals on any home sale that are based on a much lower median price trend because of the number of distressed sales.
• Positive reports on the housing markets helped regain some confidence in the past week. Preliminary Growth Domestic Product estimates showed the U.S. economy growing at a surprisingly healthy pace while the Consumer Confidence Index posted its second straight monthly gain. However, here is the catch that needs to be watched. The GDP may be a false indicator because most of this gain is generated from exports because of the world taking advantage of the weak dollar. Remember, on Friday the unemployment figures are now up to 6.1% – the highest in five years. So, the GDP is growing but that growth is not creating new jobs.
• All of the housing sales indicators are showing that we may be getting close to the bottom of housing price corrections. However, there is a wild card that may be showing up soon – pay-option adjustable-rate mortgages may show a dramatic increase in defaults in 2009 after the payment option period expires. This could be the second wave of defaults with most of these in higher priced communities.
• Remember that all real estate markets are local! The national averages do not mean anything in the Bay Area, or any other specific geographic area. The local markets are the real indicator to watch. Within a 25 mile radius in the East Bay the markets are as different as night and day. It even gets more specific by city. Some of the communities that are on fire right now are Danville, San Ramon, Dublin, and Pleasanton. The very large sales activities in Antioch/Brentwood/Oakley are still caused by the Short Sale/REO properties that continue to flood the markets. As much as 45% of the sales in these communities are distressed sales. As opposed to Danville where they are 8%. Do you see how “local” the real estate markets really are?

So, how does a consumer filter all of this information into actions?  If you are a Buyer, lock your loan and buy a house NOW.  If you are a Seller that does not need to sell right now, HOLD.  If a Seller needs to sell their home, then price it aggressively, prepare the home in turn key condition and get it SOLD.  A Seller will only hurt their chances for the best price if they do not pay attention to price and condition.  The longer a home stays on the market the likelihood of getting their expected price will decline.  One last thought for the day…there is no BAD market or GOOD real estate markets, there is just THE market we are in.  We are very effective at turning lemons into lemonade no matter what the economic conditions.  Contact me any time with questions, and I welcome your comments about my real estate market observations.  Until next time.

2008 East Bay Real Estate Predictions

East Bay Real Estate Market Watch

One of the key challenges in current market conditions is short term memory!

I am about to get on my soapbox and address one of the key issues that is happening in the East Bay real estate markets – SHORT TERM MEMORY!  There are only a handfull of Realtors who are serving the East Bay who were also here in 1989 – 1994.  Because of that, there is a large population of Realtors who have no memory of largest recession in California history that was taking place in the early 90s.  The defense industry generally left the State.  California’s economy at that time was based on the revenue from the defense industry.  So, when it left, there was a huge income void with California. 

The economic factors impacting East Bay real estate are much different today, but the effects are similar in many of our markets – declining prices, tightening of credit for home loans, businesses downsizing, loss of jobs, increased divorce rates, and so on.  So, we are having a similar experience as the early 90s, but for different economic reasons.

Here is a prediction for you to consider…“We will have a similar experience with our real estate in about ten years.”  The reason I predict this is because of short term memories.  Our current economic conditions are complicated, but let’s pretend they are because consumers were hooked into the banks providing a “FREE LUNCH” with mortgage money.  Remember, there are no free lunches!  The mortgage industry was giving money away without any checking to see if the borrower could pay back the money.  One of the aspects of our real estaet market that they were betting upon was the non-stop increase in values that had accellerated to galactic speed in the early 2000s.  There is no way that appreciation spike was sustainable and a house of cards began to crumble with many people standing in amazement as the debris started falling on top of them.  Still the median home price in California has jumped from $450,990 in 2004 to $588,970 in 2007!

Now we have banks and lending institutions that don’t know what to do with the mountain of foreclosures and bank reposed homes.  One of the reasons why there is so much chaos within the banks is because there are very few bank employees, if any, that were at the banks.  So, there is no LONG TERM MEMORY at the banks as to how to serve this current economic consequence of them lending money without any basis of customers paying the loans back.  It took almost two years in the early 90s for the banks to get their act together and figure out how to efficiently and effectively manage the sale of the real estate they were taking back.  Hopefully, it won’t take them that long this time around.

Last week the Wall Stret Journal posted an interview with Mr. Mervyn King, the head of the Bank of England.  He shares a similar opinion I have regarding the short term memory issue and why he is convinced we will have a similar experience in the next ten years.  Regarding this topic, he said, “Optimism takes over.  It’s a natural human instinct to interpret success as a sign of one’s own ability, rather than good luck.”

Here is the GREAT NEWS on May 4th…Interest rates are GREAT!  Inventory is shrinking so Buyers are understanding the urgency to make decisions instead of wondering around hoping they prices will decline further, and the East Bay real estate markets, espcially in the San Ramon Valley are doing very well this year regarding pricing and a lowering of days on the market.  It is time for Sellers to become Buyers as fast as possible.  And it is time for Buyers, to jump in with both feet and buy a home!  As always I welcome your comments.  Until next time…

2008 East Bay Real Estate Predictions

East Bay Real Estate 2008 Predictions

What does the crystal ball for East Bay real estate look like on New Year’s Day!
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So, 2008 has arrived and many of you will be making decisions this month regarding when to buy or sell real estate this year. The word on the street we are hearing is Buyers are saying they are, “…waiting for the bottom of the market…”, before they make buying decisions. The response question is, “What information are you using to determine when the bottom of the East Bay real estate market has arrived?” Buyers typically acknowledge that the only information they are using is from the media. Does that make sense? Not to me? Here are some factors a buyer may want to consider regarding when to buy in 2008:
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• The highest closed prices of the year typically happen with the escrows that close in April and May.
• Mortgage rates for “real buyers” are still at 20+ year lows.
• When you are considering homes in the East Bay which are priced at $1 million or more, the price changes during the past two years has been UP not down! What are buyers waiting for?
• The biggest price values in the East Bay are in east Contra Costa and Alameda counties. The big value price points are in the $500,000 range. (Many of these homes are in a “short sale” or “bank owned” status. Values abound, but a buyer will need to be VERY patient regarding the lengthy of time it will take to actually close the escrow.)

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Well, if you are a Seller, what is the best time to sell your home in 2008? Again, if we are looking at the crystal ball of past statistics, here are some factors to consider:
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• The highest sales price for homes the past several years have been the ones that closed escrow in April and May. This means your home needs to be on the marketing starting mid-January. We are talking about NOW!
• With the above information it is critical to be represented by a Realtor who has demonstrated they know exactly what to do in this entertaining real estate market.
• The homes for sale that have the shortest time on the market must be in “turn key” condition, and staged in a way where buyers have the experience of walking into “their new home” – light, bright and completely uncluttered.

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There are many consumers and Realtors that are glad to see 2007 come to a close. However, there are many of them who actually had their best year in real estate sales and purchases. Some of the comments of the Realtors who have had a record year in 2007 are:
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• Top Realtor, Ann Marie Nugent said, “People generally will not take the time to properly research and understand their local East Bay real estate market, particularly in these challenging conditions. They need to know I am doing it for them everyday, which is why I did not reduce my marketing spending in 2007. I actually increased it, and it paid off for all of my clients, and it was my best year ever as a Realtor!”
• Another Realtor comment, “I continue to focus on internet advertising since 72% of the consumers in the Bay Area start their real estate search on the internet”.
• Finally, “Because of creating a very successful real estate practice in the early 1990s, I have earned the reputation as an East Bay market expert. I need to really know the local market statistics, so my clients know how experienced and knowledgeable I am.”

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There has never been more opportunities in the East Bay real estate markets than right now! Let me know what your experience was in 2007 regarding the East Bay real estate markets.

2008 East Bay Real Estate Predictions

East Bay’s Real Estate Market Defies What Is Happening Nationally

There are pockets of the East Bay that are a problem but the Tri-Valley is the “star”!
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All we hear is “blood & guts” from the media regarding the real estate markets. Foreclosures, pricing falling like rocks with no end in sight, and the economy in turmoil. Remember that “if it bleeds it reads”. What the consumer does not ever hear is that all real estate markets are “local”, they are not “national”! So, let’s look at the Bay Area’s East Bay’s real estate markets.I am not saying that everything is all roses in the East Bay. There are lives that are being ruined in the East County of Contra Costa – from Bay Point to Oakley. However, if you look at the Pleasanton to Orinda corridor you will discover a very healthy micro-economy compared to anything you are hearing about the national real estate market. This is not to say that there aren’t some price corrections happening today with the BIG run-up in home prices during the past five years. But, a disaster is not happening in real estate in this portion of the East Bay. Maybe in the past two years there has been up to a 15% price adjustment in the Pleasanton to Orinda corridor, but the pricing is impacted even by the neighborhoods in this corridor – even more mini-micro in this market.
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If you look at what region of the nine Bay Area counties have been fueling the it’s economy it has been the East Bay – at one point even more than all of the other regions combined! Our region has added as many new jobs in the past six years as all of the eight other Bay Area counties combined. The diversity of the corporations based in the East Bay has helped insulate our region from most of the effects of the past market down turns in other regions. We expect that to hold true all the way through 2008.
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“Days on the market” is one of the measures of a Buyer and Seller’s market. From Pleasanton to Orinda it varies from five months to ten months. There are parts of the Bay Area where there are 30+ months of inventory on the market! Yikes! A Buyer’s market is typically defined when there are four or more months on the market. So, we can all agree it is a Buyer’s market. But, when is a home is priced appropriately for the neighborhood, it is in turn key condition, it’s location is excellent, it will sell faster than the typical market time. ( We listing a home two weeks ago in Danville with all of these conditions in perfect order and it sold in two days for full price.)
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Obviously, Buyers have much more inventory to choose from today, so Sellers need to remember that Buyers are not using much imagination when they are previewing a home. They want to walk in, empty their moving boxes and start living. Mortgage money has gone up in price the last few month, but there are still some very attractive plans for Buyers that are allowing them to make the home purchases they want. Plus, mortgage rates are still the lowest in the last 20 years!
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So, as consumers are continuing to read the newspapers, we as Realtors – “the local economists”, need to be providing them with the local information about the real estate markets they are considering. It is and always will be a local real estate market, not a national one. Contact me if you would like the detailed real estate information about your specific neighborhood. I am standing ready to serve you! Until next time…