JULY MARKET FLASH
SUMMER IS A-COMIN’ IN
Intro: Spring’s enthusiasm was certainly a relief from the gray, congealed market of last winter. As spring moves into summer, we don’t know quite what to expect—far, far too many factors are in play to encourage confident prediction—but we do know this: those who are prepared will profit most from whatever direction the market does take. Read on.
Statistics:
Statewide: The median resale price of a single-family detached home in California for May was $384,840, a decrease of just over 35 percent from May 2007 and almost 5 percent from last month. Unsold resale inventory represented an 8.4-month supply, compared to 10.7 months for the same period a year ago. Median number of days till sale was 50 in May, almost unchanged from 51 in May 2007.
County Statistics: (Med = median, Ac = activity, MOM = prior/this month, YOY = prior/this year)
| | CurrMed | MedMOM | MedYOY | CurrSls | AcMOM | AcYOY |
| Alameda County | $475,000 | 0.26% | -19.18% | 1,186 | -4.35% | -27.28% |
| Contra Costa County | $387,000 | -2.03% | -34.41% | 1,206 | -4.66% | -11.71% |
| El Dorado County | $365,000 | -3.69% | -25.05% | 191 | 24.84% | 40.44% |
| Marin County | $899,000 | 12.38% | 5.76% | 200 | -7.41% | -44.29% |
| Monterey County | $350,000 | -6.73% | -41.67% | 232 | 9.43% | n/a |
| Napa County | $474,000 | -4.24% | -24.16% | 92 | -8.00% | -17.86% |
| Nevada County | $360,000 | -16.28% | -21.74% | 97 | 5.43% | n/a |
| Northern California | $337,870 | -2.42% | -12.44% | n/a | n/a | n/a |
| Placer County | $338,000 | -3.29% | -20.47% | 489 | -1.01% | 32.88% |
| Sacramento County | $225,000 | -3.02% | -35.53% | 2,028 | 10.16% | 116.90% |
| San Benito County | $332,500 | -12.90% | -43.64% | 40 | -13.04% | 17.65% |
| San Francisco Bay | $517,000 | -0.19% | -21.67% | 6,216 | -1.49% | -23.07% |
| San Francisco County | $799,500 | 4.24% | -4.25% | 484 | -20.00% | -21.43% |
| San Mateo County | $699,500 | 4.40% | -13.64% | 444 | -22.51% | -41.81% |
| Santa Clara County | $630,000 | 0.08% | -12.50% | 1,173 | -18.54% | -46.17% |
| Santa Cruz County | $543,750 | -9.98% | -24.79% | 156 | 2.63% | n/a |
| Solano County | $300,000 | -6.25% | -31.66% | 440 | 2.56% | -7.56% |
| Sonoma County | $414,000 | 0.12% | -20.31% | 409 | -7.47% | -29.24% |
| Yolo County | $308,750 | 2.07% | -27.35% | 212 | 34.18% | 89.29% |
Alameda County: Though down from December, median held up for the month of May. This market may be reaching a price point that’s attractive to the general prospect, since May sales almost equaled April’s surprising surge and are more than double the recent low in January.
Contra Costa County: Median lost a sliver this month and continues at less than two-thirds of its recent record in June 2007. Sales are at levels not seen in the last year, driven by sales of steeply depreciated homes in attractive neighborhoods.
El Dorado County: Sales have exceeded the August 2007 peak of 185 and seem poised to crack 200. Median has lost roughly $100,000 in the last year but has more or less stayed stable since the beginning of this year.
Marin County: Sales seem to have shaken off winter doldrums and returned to the level of fall 2007. Some constraint is exerted by the region’s lowest proportion of foreclosure sales, about 6%, and by still-restricted availability of jumbo mortgages. Median has surged to within a hair of $900,000, but we must remember that Marin’s median has been relatively bulletproof in the current crisis; historical low of $750,000 came in January 2006, and since then it’s scarcely been below $800,000.
Monterey County: Median has shrunk by almost half in a year—from $600,000 last June to $350,000 today. But how much of this is depreciation and how much is due to high-end properties not moving the way they once did, we’re not sure. On the other hand, sales are now at their highest point in our records after essentially doubling since January.
Napa County: Sales have recovered from January’s scary low of 37 and are now flirting with the triple-digit levels of last summer.
Nevada County: Sales have a way to go to match last summer’s levels, but have been increasing without pause since January. Median was holding up well as recently as April, but then declined by $70,000 in May.
Placer County: Consistent sales of almost 500 demonstrate a welcome recovery from last September’s 216. Median, after being essentially flat for the last half of 2006 and first half of 2007, has declined steadily for the last year and lost a little over $80,000—possibly converging on a new price stability along with the rest of the Sacramento Region.
Sacramento County: Current median of $225,000 is the lowest we’ve ever seen, but the resulting affordability seems to be provoking a recovery. From a low of 751 in January 2007, sales have nearly tripled as of last month and doubled in the last four months. Perhaps prospects and buyers (largely investors) will push Sacramento out of its slump.
San Benito County: After a recent sharp rise, sales have regained the levels of 18 months ago, though median has fallen by a third in the last year.
San Francisco Bay: The Bay Area enjoyed a $660,000 median all last summer, but has fallen $150,000 since then. On the other hand, sales have risen by 50% since February.
San Francisco County: May sales declined about 20% from an April peak but are still at last fall’s levels, even with relatively few foreclosure sales. Median has been climbing steadily since December and is now, again, happily knocking on the door of $800,000.
San Mateo County: Median is down by about $100,000 in the last year. One figure or the other may improve in the near future, but the market must recover more generally for both to improve at once.
Santa Clara County: Even after a slight retreat in April, sales are double what they were in January. As jumbo loans become more available, this situation will improve further. Median has only dropped by about 10% in the last year.
Santa Cruz County: Sales almost doubled between March and April, then built on that gain in May. But a decline of $60,000 in median for the month means a loss of $180,000 for the year. This county is looking a lot better than it did over the winter and there’s hope it will regain the eminence it enjoyed when the market was hot.
Solano County: Sales have nearly doubled in the last three months, driven by foreclosure resales accounting for almost 60% of transactions. On the other hand, median has declined by a third since March 2007. Like many rural counties, Solano will probably participate strongly in the general recovery when it comes.
Sonoma County: Three months of increases have at least brought the median back above $400,000 and a sustained increase in sales has brought activity back to the levels of last summer. Sonoma, together with Solano and Contra Costa counties, is an affordability champ for the region this month. (And incidentally, Sonoma city took CAR’s Most Improved Median in May with a 61% improvement year-over-year.)
Yolo County: Yolo’s loss of over $110,000 in median for the year makes it look superficially like a lot of other counties—but exciting things are happening in the shorter term; since January, sales have doubled while median has actually increased. Happily, this county will have its share in the greening of greater Sacramento.
Interest Rates: 30-year fixed, 6.26%; 15-year fixed, 5.78%; 30-year nonconforming, 7.32%. A spread of more than 1% between 30-year fixed and 30-year jumbo underscores the difficulty of finding loans appropriate to California’s coastal markets. 5/1 ARM is exactly the same percentage as 30-year fixed, which is one reason (the other being borrower wariness about resetting loans) that the proportion of new 5/1 ARMs in the market is dropping.
During the third week in June, Freddie Mac was deeply concerned that if rates rose even slightly on conforming loans, sales would slow drastically as prospects had less incentive to look for bargains. Since then, pressure has eased as 30-year fixed has backed off about 20 basis points, but we all know that’s only a breather. Affordability in Northern California is still so fragile that if inflation—or, for that matter, Federal Reserve conservatism—kicks rates higher, the market’s current guarded optimism may collapse again. Cross your fingers.
Inventory: What you see is what you get. Availability now is unpredictable depending not only on location, but on the type of buyer (first-time, move-up, rental property, overseas) who may be interested in the specific area. Foreclosures are flooding some neighborhoods with properties, but hardly touching others. Overall, inventories still won’t be one of your major concerns, but they’re bound to figure into your calculations more than they did six months ago.
Overall Assessment: Optimism feels so good and for the first time in months, we’re feeling optimistic! Bargains abound, especially in areas away from the coast. The Bay Area’s average monthly mortgage amount has shrunk by 30% since its recent peak two years ago. Thirty year fixed mortgage rates were inching up for a while, but now seem to be retreating towards 6% rather than lunging for seven. In many parts of Northern California, for the first time in years, an attractive home can be called affordable. Remind your prospects of a contradiction that works in their favor: right now they may be facing a very brief opportunity to purchase a home that will suit them for a very long time.
NO MORE STATE TAX ON FORGIVEN DEBT