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Grand Openings & More

At last! The new 10 screen multi-plex in downtown Livermore is set to open tomorrow, and the long awaited renaissance will get a big boost. Other additiions planned for downtown Livermore in the new future is more office space, an ampitheatre, and a FIRE & ICE restaurant. This is certainly a welcome addition to entertainment options in the Tri-Valley area.

Meanwhile, PF Chang's is slated to open on Tuesday at the Stoneridge Mall in Pleasanton, and with the addition of the Cheesecake Factory, gives the Mall a big boost in visibility and traffic. It also gives area diners more choices, and local health clubs more potential clients.

Home Builders Say the Worst May Be Over

As reported on CNNMoney.com, many of the larger national home builders are saying that they are at or near the bottom, and expect the market to be better in 2007.

Toll Brothers reported a sharp drop in fiscal fourth quarter earnings early Tuesday and forecast a big drop in profits for the coming year. But despite that bad news, chairman and CEO Robert Toll said that the market for new homes may finally be leveling off after more than a year's worth of declines.

"Fifteen months into the current slowdown, we may be seeing a floor in some markets where deposits and traffic, although erratic from week to week, seem to be dancing on the bottom or slightly above," said Toll in a statement accompanying the earnings report. "The metro D.C. suburbs of northern Virginia, which was the first market in which we saw activity slow, seems to have stabilized, although at levels much lower than those we have enjoyed over the past few years."

This is certainly a good sign for the stabilization of the housing market. Indeed, the National Association of Home Builders is sounding a similar tune.

Jerry Howard, CEO of the National Association of Home Builders, said a turnaround should begin in the first quarter of 2007. "The market," he says, "is at the bottom now."

Favorable factors contributing to better times will be low (and declining) interest rates, solid wage and job growth and low inflation. Long term demographic trends also spell housing market growth.

Do not, however, expect a return to national, double-digit home-price growth. Those days may be over for a while, according to the NAHB's chief economist, Dave Seiders. Instead, the recovery will be marked by fewer houses sitting on the market. "Inventories will drop," says Seiders, "and prices will stay flat for a couple of years."

He points out that housing prices don't usually overcorrect after a long run up. Instead, "They generally decelerate and then grind along as income grows until they come into balance."

Indeed, the local inventory in the Pleasanton Area has declined, and we have seen an uptick in activity in the past 30 days as buyers have entered the market, mostly looking for bargains. This could be an indication that we could be at or near the bottom locally, and that better days are ahead in the real estate market.

Read the whole article here.

Mixed Signals on Interest Rates Next Year

Are they going up or going down? This is a debate that is all the rage in financial circles as the Fed gets ready to meet on Tuesday to decide on the Federal Funds rate, the benchmark rate that signals the direction of our nation's monetary policy.

The debate is over the economy. Is it heating up, therefore putting pressure on the Fed to raise interest rates in order to keep a lid on inflation? While the unemployment rate in October rose to 4.5% from 4.4%, this is in line with seasonal expectations. Unemployment is still very low, indicating that the economy is strong, along with the demand for labor. The Fed is worried, with good reason, that this will put upward pressure on wages, and therefore upward presure on prices as the cost of producing goods rises. Make no mistake about it, the Fed has said repeatedly and clearly that they consider inflation to be the number one threat to our economy. This seems to indicate that the Fed will err on the side of keeping the Federal Funds rate on the high side.

But wait a minute. Yes the economy has been doing well, but there is certainly concern about the housing market and it's effect on the economy. It seems that every day there is an article about the soft real estate market, and how home builders are reporting sluggish sales. And a recent survey of executives indicates that manufacturing has slowed for the first time in over 3 years, also indicating a slowdown in the economy. Add the recent softness in the auto industry, and you have strong evidence that we might be heading into a slowdown, which would put pressure on the Fed to lower rates to stimulate the economy. To illustrate the point, the 10 year treasury bond, the bellweather inerest rate for long term rates, is curently around 4.5%, down from the 5.25% range earlier this summer. Obviously, bond traders (who make a living studying the economy) feel the economy is headed for a slowdown.

So who is right? Obviously, the economy can not be in danger of overheating and causing inflation, and be slowing down and at risk of tipping into recession at the same time. Clearly one scenario is right... the question is which one? As always, that remains to be seen. Most money managers expect the Fed to leave rates unchanged on Tuesday until they get a clearer indication which way the economy is headed. Stay tuned....

Market Update... holiday shoppers get an early start

They are out there... trying to get a head start on the shopping season and hoping to find some bargains. No, I'm not talking about the throng of christmas shoppers camping out in front of Best Buy hoping to get a DVD player for $79. I'm talking about the Pleasanton real estate market. We have seen a upsurge in buyer activity the past month or so. It appears that buyers recognize that it is a great time to buy homes, and a great time to get a jump on the spring market before other buyers jump in. We have seen more showings and offers being written, with many homes going into escrow.

However, these shoppers are very similar to the "Black Friday" shoppers clogging up the mall on the day after Thanksgiving. They are looking for deals, or more specifically deals that may not be there in the prime spring market. Expect to see an increse in Sales in the Pleasanton area for November, which is a good sign. And you don't even have to fight for a parking place to shop for a house.

Lower price reports indicated inflation in check

Further good news for possible rate decreases. Both the CPI (Consumer Price Index) and the PPI (Producer Price Index) showed declines in October, easing fears of inflationary pressure that could lead to higher rates.

The so called core CPI, which strips out volatile food and energy prices, edged up 0.1 percent, following a 0.2 percent gain posted in September. Economists had forecast another 0.2 percent increase in core prices.

Even some economists who are "inflation hawks" who have been voicing greater concerns about price pressures admitted Thursday's report was a positive sign on inflation.

"This is a very encouraging report. But it's only one report," said Rich Yamarone, director of economic research at Argus Research.

It was the smallest monthly rise in core CPI since February, and it put the core CPI up 2.7 percent on a year-over-year basis. That's down from the 2.9 percent year-over-year gain in the September report, which had been the biggest 12-month increase in more than a decade.

That annual change is closely watched by those trying to determine what the Federal Reserve will do to interest rates in order to battle inflation. While 2.7 percent is a bit above what economists say is the comfort zone for the Fed, there had been a fear that an upside surprise in the core CPI could have taken the year-over-year change to 3.0 or more, which could have brought talk of a new round of rate hikes to battle inflation.

Still, Fed watchers report that they do not expect any decrease in the Fed rate until 2008, as the Fed is always concerned about keeping inflation in check. Look for interest rates to remain much the same, with a chance that they will drift somewhat lower in 2007 as long as inflation stays in check.

Economic News: Jobless Claims Rise...good news for interest rates?

The last week or so has seen indications that the economy is slowing, which will help ease any upward pressure on interest rates. First time jobless claims spiked unexpectedly in the latest report. Nevertheless, the unemployment rate remains at under 5%. But this is certainly good news on the interest rate front, as it indicates that the economy is growing at a manageable rate, and therefore no further rate hikes will be needed by the Fed to keep the economy from over-heating. Here's hoping...

The Cheesecake Factory is Open

In case you have not heard, the Cheesecake Factory is now open at the Stoneridge Mall. And if you could not wait for it to open, you will certainly wait for a table. I got there at 11:30 AM for lunch with some co-workers, and was promptly informed that there was an hour and 10 minute wait. I've heard that the wait for dinner on a Friday or Saturday night gets close to 2 hours. And P.F. Chang's looks like it is coming along, and should be open soon. Gee, I wonder if there is a market for new restaurants in the Pleasanton area???

Bumper Sticker of the Day

So I'm driving to work, and I see this bumper sticker...

I SUPPORT SOLAR ENERGY, AND I VOTE!

Okay... so far no problem with that. It is hard to find anyone who is not somewhat north of neutral on solar energy. Except the bumper sticker was on the bumper of a giant Chevy Suburban. Isn't that a little like seeing a "GUN CONTROL NOW!" bumper sticker on a pickup truck with a rifle rack on it? Maybe it's just me....

Pleasanton Market Shows Mixed Signals in October

The Pleasanton real estate market showed some mixed results in October. For the city of Pleasanton, the inventory of available single family homes dropped for the 3rd straight month, ending at 227 homes available. The peak this year was in July, when there were 244 homes on the market at the end of the month. That is the good news. The bad news is that the decline in inventory was due to normal seasonal factors, and not an increase in sales. In fact, pending sales of single family homes in Pleasanton for the month of October declined sharply from September, coming in at 27 units as compared to 45 in September. Again, this is not unusual for this time of year. But this is the lowest number of pending sales in at least 3 years. And just for the sake of comparison, October of 2005 had 59 pending sales that month. Here is a graph of available inventory and pending sales for Pleasanton since January of 2004 (click on graph to enlarge)



The low end of the Pleasanton market, represented by homes under $1 million, showed results that mirror the market as a whole, with both a decline in inventory and pending sales (click on graph to enlarge)



The Pleasanton mid range market ($1 million to $2 million) also showed declines in both inventory and sales (click the graph to enlarge)



So where do we go from here? This is a value market. Buyers are searching for a good value (price, condition, location) and are quite content to wait if the value is not there. Sellers who price their homes to reflect a good value will have success, and sellers who refuse to adjust to the market realities will have a very difficult time. There is still activity, but the buyer has to be convinced it is a good value or it will never sell.

Interest Rates: Up is Down, and Down is Up

Okay, so we've seen rates drift downward as inflation has remained in check, and the economy growing at a manageable level. Local Pleasanton area mortgage rates remain in the low 6% range. Many interest rate watchers have been arguing that the Fed is done raising rates for now, and that there is strong political pressure to lower rates to help the slumping housing market.

But the surprisingly strong October jobs report, which showed unemployment at a 6 year low at 4.4%, has once again put pressure on the Fed to keep inflation under control, which may mean we could see more rate increases if this trend continues. So, just to make sure you understand the dynamics here, let's summarize:

Good news about the economy and jobs = upward pressure on interest rates
Bad news about the economy and jobs = downward pressure on interest rates

This is because the Fed, the great manipulator of interest rates (think the wizzard of oz behind the curtain) is mostly concerned with keeping inflation in check. So when the economy shows signs of heating up (lower unemployment, higher energy prices, higher wages, etc) then there is pressure to raise rates to keep the economy from overheating. Conversely, when the economy shows signs of slowing down (increase in unemployment, decreases in energy prices, weak corporate earnings, etc) then there is pressure to lower rates to keep the economy from sliding into recession.

Whenever anyone says "I am waiting for fixed mortgage rates to get under 5%", I often chime in to remind that person that it would be a disaster. The only way long term rates get that low given our current constraints is if we are in a deep recession, and there is no demand for capital. At that point, you would be lucky to have a job to pay for your mortgage.

In the meantime, pay attention to the man behind the curtain...

The best kept secret

Okay, so everyone knows the housing market in the Pleasanton area is soft, and a lot of the media focuses on this issue because it is personal, and impacts everyone in some form or another.

But lost amid the gloom and doom of the housing market is an interesting fact... the U.S. economy is on a tear. Consider the following

* Unemployment just reached a 5 year low at 4.4%
* Gas prices in the U.S. declined again, settling in at $2.18 for regular unleaded
* The Dow just closed at a record all time high
* Interest rates have been drifting downward lately

So yes, we are in a correction in the housing market. And yes, prices are soft. But the economy is doing well, jobs are being created, and personal income is on the rise. It will not be long before these factors begin to assert themselves and the housing market picks up steam again.

Keep in mind that the only way to know that you have "hit the bottom" is when you are past it.

Complaint filed against Zillow.com

By now, virtually everyone has gone to Zillow.com to see what their home is worth. The online home valuation site, which was launched several months ago amid enormous publicity, claims to be able to "zestimate" your home's value with an ever-evolving formula that constantly updates property data. However, as anyone who has visited the site soon finds out, many times their valuation is off the market, sometimes substantially. And now a group has filed a complaint against Zillow.com for falsly representing that their property valuations are accurate.

The National Community Reinvestment Coalition charges that Zillow.com is within 10% of the actual property value less than 1/3 of the time. This has opened a debate about the wider issue of property valuations and alternatives to traditional appraisals, which are expensive and tedious.

Putting aside the specifics of the complaint now before the FTC, the Zillow-NCRC dispute throws light on a simmering tension within the residential real estate market: On the one hand, mortgage lenders are demanding valuation alternatives that are faster and cheaper than traditional, full-blown appraisals. The proprietary technology Zillow uses to come up with its estimates is a form of "automated valuation model."

Many banks and mortgage companies use commercially marketed AVMs for home equity loan valuations and to help spot fraudulent or grossly inaccurate appraisals. Traditional appraisals generally cost anywhere from $300 to $500; AVMs can cost a high-volume lender $20 or less.

On the other side of the issue, professional appraisers are threatened by lenders' push for lower costs and high-tech valuations. Though they sometimes use commercial AVMs as data supplements, appraisers insist that their time-tested, hands-on methods produce the most accurate valuations.

San Diego appraiser Vicky Cassens Zillioux says that "valuing a property for a financial decision is not a game -- and should not be treated lightly by the consumer, lender or the vendor supplying that value." She notes that appraisers are held to high standards of accuracy and legal liability by lenders and regulators, and "a similar level of accuracy should be expected by the consumer at Zillow.com."

Of course, given the current state of the market in the Pleasanton area, there are many sellers and Realtors who are more than 10% off in their property valuations lately.

Courtesy of Ken Harney. Read the whole article here. Please note: Originally, this post said that a lawsuit had been filed against Zillow.com. This is not correct. A complaint has been filed by the group mentioned above.

Bay Area Forclosures Increase

Foreclosures for the Bay Area rose in the 3rd quarter to the highest level in 7 years as the median home price fell. Pleasanton and Tri-Valley sellers have certainly experienced the softness in the market this year, so this should not be a surprise. The increase in foreclosure activity is measured by the number of notice of default filings, which is the first step in a lender foreclosure.

"It's a sign of what's to come more than an immediate danger," said Stephen Levy, director of the Center for the Continuing Study of the California Economy. "The decline in home prices, combined with the number of people who are going to see their adjustable rates jump in the next year, is going to put a lot of added pressure on the market."

Still, economists were quick to stress that even as foreclosure rates have begun to climb, activity remains well below historic levels. It's also important to note that in most cases, delinquent homeowners are able to work with their lender to avoid repossession of their homes.

"It's an increase that appears large, but it's still a very low level of activity," said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. "It may be the first sign of some stress but is probably due to bad underwriting decisions by the lenders."

However, as is often the case, statistics can be misleading. The level of foreclosures have been abnormally low the past few years as low interest rates and strong appreciation have helped keep foreclosure activity in check. So a large percentage increase on a small number is somewhat misleading.

For the whole state of California, foreclosure activity was up 111%.

"In the Bay Area, foreclosure activity is always lower than rest of the state," Karevoll said. "The Bay Area has a higher housing cost than the rest of the state, so the people who buy in the Bay Area have more money and are less likely to go into default."

The higher prices also mean that the Bay Area has fewer entry-level home buyers than places like Sacramento, he said.

Berkeley's Rosen said he thinks Southern California's housing market is in a more precarious position than the Bay Area's.

"The L.A. basin has had very large prices increases and they've had more investor activity," Rosen said. "They're at risk for a bigger correction in both prices and foreclosures than we are."

The biggest cause for concern is having more distressed properties come on the market, swelling the inventory and driving down prices with bargain sales prices.

Read the whole article here.

Pleasanton Luxury Market Update

The Luxury real estate market in Pleasanton showed a slight increase in inventory, with sales levels remaining fairly steady. There remains roughly a 7 month supply of luxury homes in Pleasanton. Click on the graph to enlarge.

The light green bar represents available homes at the end of the month. The dark bar represents closed sales for the month. The red line represents pending sales, or homes that went into contract during the month.

The majority of the luxury home activity in Pleasanton has taken place in Ruby Hill, where there remains an abundant selection of luxury custom homes, most of which are newer. The luxury home market is not as interest rate sensitive as the lower end of the market, as there tends to be more equity involved in the purchase. But uncertainty in the general real estate market locally, and nationally, can impact buyer's perception of value. Look for some decrease in inventory as we enter the winter.

Tri-Valley Luxury Home Market Update - More of the Same

The Tri-Valley luxury home market showed small declines in available inventory and sales in September. Click on graph to enlarge.


The light green bar represents available homes at the end of the month. The dark bar represents closed sales for the month. The red line represents pending sales, or homes that went into contract during the month.

Overall, there remains about a 10 month supply of homes on the market, with longer days on market and some downward pressure on prices.

A Better Perspective

Great article today in the Contra Costa Times about the national housing market. Yes, the real estate market in Pleasanton, Dublin and the Tri-Valley is soft, with price reductions and longer market times. And yes, prices have come down. But this is a healthy market driven correction, not a bust. Consider the following:

* Interest rates are at their lowest level in 6 months, and continue to drift down
* The national unemployment rate just dropped again to 4.6%
* Pending sales were up nationally in Sept by 4.6%
* The economy is strong and expanding (except for the real estate segment)
* Job growth remains strong, especially in the East Bay and silicon valley

A correction in home prices makes housing more affordable, especially if interest rates are trending down. If personal income rises, then conditions are in place for a stable market with moderate appreciation.

Donald L. Kohn, the Federal Reserve's vice chairman, took a stab at that seeming conundrum in a speech Oct. 4 at New York University. His views are worth keeping in mind if you want to put the negative news on home prices and sales in perspective.

To begin with the fundamental point: Kohn sees no imminent bust or crash in housing at all. It is a "correction" that's under way -- a cyclical rebalancing of a marketplace that got too hot for too long in some parts of the country, and is now heading back toward more "normal" conditions, where prices are more in line with what consumers can afford.

"The reported declines in house prices in a number of areas should help to facilitate the rebalancing of supply and demand in those markets," said Kohn. Not all home sellers have fully grasped the altered realities in their own local markets -- that they've got to reduce their asking prices if they truly want to sell -- so the process is still unfolding. Re-priced houses, in turn, should stimulate greater numbers of potential buyers to get off the sidelines and make offers. The unexpected 4.3 percent increase in the latest monthly number of pending home sales contracts heading for closing nationwide reported Oct. 2 by the National Association of Realtors could be a sign that Kohn's prediction is already taking shape.

Second, said Kohn, the housing correction -- expressed through new home starts -- "may be closer to (its) trough than to (its) peak." Translating from Fed-speak, this means that we appear to be well on our way toward bottoming out and eventually returning to positive growth in new home starts and resales.

Now to interest rates. Today's "unusually low" long-term mortgage rate environment "stands in sharp contrast to some past downturns in the housing market that followed actions by the Federal Reserve to tighten credit conditions significantly." Translation: Affordable mortgage money should help shorten the current housing down cycle compared with credit-squeezed periods in the 1980s, when mortgage rates sometimes exceeded 16 percent for fixed-rate loans.

A final key factor, according to Kohn: "Continuing growth in real incomes should underpin the demand for housing, and as home prices stop rising, help erode affordability constraints."

Add it all up: Lower asking and selling prices on houses are integral parts of the self-correction and should help shorten the whole process. Lower interest rates should make those lower prices affordable to a broader number of potential buyers. That could become an even more important factor if mortgage rates dip below 6 percent in the coming months, as some Wall Street capital market analysts expect.

Read the whole article here.

Job Growth Remains Strong

Wells Fargo economist expects the highest level of job growth in the Bay Area since 2000 this year, although the economy will slow next year due to the softness in the Real Estate Market. This certainly seems to be the case in the Pleasanton area, where the non-real estate sector is strong, but real estate related industries are seeing a slow down.

"All the major metros in Northern California are now adding net new jobs, including San Jose, where positive job growth has been maintained for more than two years," Anderson wrote in a report on California's outlook.

Oakland and Sacramento are "handily outperforming" most of California in job growth. Oakland's payrolls are being boosted by a construction boom that began 18 months ago, but there is significant risk of a slowdown in the near future, given the 61 percent decline in housing permits, Anderson said.

Bay Area housing prices should fare better than the rest of the state, but Sacramento could suffer a harsher drop as investors and speculators exit the city's housing market.

Anderson expects to see moderate job growth over the next 2 years.

Read the whole article here (East Bay Business Times)

It's here.... Zachary's Pizza is open in San Ramon

I know... this is a real estate blog. But frankly all this endless talking about inventory and turnover and mortgage rates and bubbles can get kind of boring. So I thought I'd bring you the latest buzz from the Tri Valley food sector. Zachary's Pizza, an institution in Oakland and Berkeley, has opened in San Ramon on Crow Canyon Road. Now I know you think all pizzas are alike, and I am certainly not an authority on pizza. The only thing I know is that I like to eat it. And the best pizza I have ever tasted is Zachary's.

It is a thick pizza pie, and not at all like the typical round table/Amici's/Straw Hat/California Pizza Kitchen that we have all had a thousand times. It has an incredible flaky crust, and the pizza is inside out, with the cheese and filling in the middle and the tomato sauce on top. And trust me when I tell you.. it is incredible.

So next time you kids ask for Dominoe's or some other run of the mill pizza, do yourself a favor. Jump in the car and high tail it for Crow Canyon Road and eat at Zachary's. There. Now I am a food critic as well.

Stated Income Mortgage Loans May Get Tougher

One of the unique products offered over the past 5 or 6 years are "stated income" loans. Essentially, these loans allowed the borrower to use "stated income" with no verification to obtain their home loan. Conceptually, these loans were designed for self-employed individuals or business owners who had complicated tax returns and income that was difficult to caluclate or document. But as is often the case, what started out as a good idea was soon abused in some circles. We started to see borrowers use stated income loans, even if they were salaried employees. Even worse, many borrowers were very creative in stating their income, often over-stating their income by leaps and bounds in order to qualify for more house than they could realistically afford.

Well, it looks like that practice might be changing. Under increasing pressure due to rising delinquency and foreclosure rates, lenders are tightening up on these "stated income" loans. And now, the IRS is offering electronic verification of borrower's tax return information to make it easier for lenders to spot over-stated income from less than honest buyers.

STARTING MONDAY, it's going to get much riskier to fib about your income when you apply for a home mortgage. That's because the Internal Revenue Service is overhauling a key income verification tool used by lenders -- making it faster and easier to pull up electronically the confidential income tax information of borrowers.

"It could be huge" in spotting fraud upfront -- before it's too late -- said Mike Summers, vice president of www.veri-tax.com, a Tustin-based firm that services 3,000-plus large and small mortgage lenders nationwide. Fraud in mortgage applications is now a multibillion-dollar per year problem, according to the FBI, and falsified income tax filings are an important contributing factor.

Some popular mortgage products themselves open the door to bogus claims about income. Many lenders in recent years have offered "stated income" and other limited documentation mortgages aimed especially at self-employed applicants. Dubbed "liar loans" by industry critics, stated-income mortgage programs allow applicants to bypass standard underwriting requirements for W-2s or copies of personal and corporate income tax records.

Instead, applicants simply assure the loan officer or broker that, yes indeed, we earn enough to qualify for the mortgage, and the transaction proceeds to closing. Often lenders will ask borrowers to fill out what is known as an IRS Form 4506-T along with their other mortgage documents.

That form authorizes the lender or the investor providing the money for the mortgage to obtain transcripts from the IRS summarizing income and tax data for as many as four years. The form must be signed by the borrower and can be used only during the 60-day period following the date of signing.

Until now, the process of faxing in 4506-T requests to the IRS and obtaining transcripts has been paper-driven and nonelectronic -- making income verifications slow and difficult to fit into lenders' highly automated loan underwriting systems. Most lenders have used 4506-T forms as a way to perform quality-control checks on pools of closed mortgages.

But now, with the IRS promising to provide electronic transcript tax data within one to two business days in an electronic format, more lenders are likely to run income checks before closing -- even on loans to applicants who are not self-employed or using stated-income programs.

Read the whole article here.

Pleasanton Market Trends for September

Overall, the Pleasanton real estate market showed some stabilization in inventory, and a small decline in sales activity in the month of September. Interest rates have fallen, and we are seeing more traffic and inquiries from potential buyers, who seem to be exploring the market now that rates are down and prices have softened. The emphasis is on value, and homes that are a good value (price, condition, location) are receiving interest. Homes that are not perceived as values in the market today (poor locations, poor condition, and unrealistic asking prices) are finding the market to be very slow.

Here is a graph of the Pleasanton Market (single family homes only) since January of 2004. It shows active listings (yellow line) and pending sales (red line) for each given month. (Click on the graph to enlarge)



As you can see, inventory has stabilized, and sales dropped slightly in September. If you look at the Pleasanton market for homes under $1 million, you will see a similar trend (click to enlarge)



The midrange market in Pleasanton (between $1 million and $2 million) showed a decline in available inventory and a spike in sales. (click to enlarge)



The high end market in Pleasanton showed continued softness in September, with a rise in inventory and no new pending sales. As always, the high end market is a very deliberate market, as most sellers have the staying power to wait it out, and most buyers are very selective regarding the homes and locations they are interested in.

All eyes are on the Federal Reserve. There is concern on the national level that the slumping real estate market may tip our economy into a recession, so there is increasing pressure on the Fed to lower rates, especially with the relatively tame inflationiery figures and lower oil prices. Here's hoping that will translate into a stable real estate market.

Median Home Price - Fools Gold

An article ran yesterday in the Contra Costa Times that claimed "Housing Prices Stay High in Pockets". The article claimed that some of the affordable areas of the East Bay, such as Livermore and Oakley, were actually experiencing increases in prices.

While most Bay Area home values stagnated or dropped in August, the less expensive pockets of the East Bay saw home prices rise or stay the same, housing analysts reported.

Andrew LePage, an analyst with DataQuick Information Systems, said that it was not uncommon to see higher gains in appreciation in more affordable areas.

"It doesn't surprise me that their median prices are still up; it's a general trend across the state," he said. "But obviously we need to see a long-term study to make a compelling argument."

According to DataQuick's monthly city report for California, housing in established cities in the East Bay burdened with a resale market and little new growth declined the most in value. In Alameda County, housing in Alameda, Berkeley and Emeryville dropped in value while both Oakland and Livermore prices rose. In Contra Costa County, Richmond, Walnut Creek and San Ramon prices dropped while San Pablo, Pittsburg and Oakley sported higher pricetags.

Now if I owned a home in Oakley or Livermore, I would be excited. However, this does not match what is actually happening in the markets in both of these cities. Both of these markets are soft, with lots of unsold inventory, price reductions, longer market times, and builders offering incentives to skeptical buyers to entice them to purchase.

My point is simple... Median Home Price statistics have to be the most misleading measure of the relative strength of a housing market available. Yet it is widely published and quoted as the ultimate source of market information. As a broker who is on the front lines, however, I can tell you that drawing any conclusions from this statistic is fools gold.

Here is the problem. Median home price is a measure of the median sales price of homes in a given area for the period of time. It represents the figure where an equal number of sales occured below and above the median home price. It is used in statistics because it eliminates wild fluctuations that would distort a general average figure. For example, if an $8 million dollar home closed in a small city, it would dramatically change the average sales price, but would have little effect on the median home price. But the median home price is really only significant for large data samples (i.e. the whole State of California, for example). I recently tracked the median home price for closed sales in Pleasanton. In March, the median sales price for single family homes in Pleasanton was $800,000. In April, the median home price in Pleasanton jumped to $965,000, a 21% increase. And there in lies the problem. Before you go out and list your Pleasanton home, I can assure you the market value did not go up 21%. Anyone who has their home for sale knows that it was moving the other direction.

Let's say a new high end development opens up in Byron, for example. If all other things remain the same (which, of course, is never the case) you would expect the median home price in that area to increase over the time period where they new homes close, as a higher percentage of home sales will be on the high end of the scale. But this increased competition from the new homes on the market might actually decrease demand for existing resale homes, and there could be an actual decrease in market value for many of the homes in that area. But because a higher percentage of closings are higher end homes, the median home price would be higher, prompting headlines such as "Byron Market Shows Price Increases" and "Appreciation soars in Bryon". But in fact just the opposite could be the case.

So why does the media focus so much on the Median Home Price for it's data on the housing market? For one thing, it is easily attainable. Several sources release data about the Median Home Price, including the National Association of Realtors, the California Association of Realtors, Dataquick, and others. Another factor is the dynamics we have discussed in this article, which can show increases in the median home price even when the market is declining. This benefits the Real Estate industry, which likes to portray the real estate market in a positive light. Lastly, other more telling measures of the strength of the market are much harder to aggregate. You do see statistics released on the supply of unsold resale homes, inventory turnover (number of month's supply of homes on the market), new home sales levels, etc. But none of these statistics can accurately measure the relative value of homes over a period of time. The best measure would be to find homes that closed escrow, and subsequently sold again a year later, or two years later, and determine the gain or loss on the sale of that home. If the home had not been improved since the sale, that would be a good indication of the change in market value. But even this is imperfect, as perhaps there was desperation in one of the sales that skews the value, or the home gets improved during the period of time.

The bottom line is that there is no one statistic that is readily available that can give you an accurate picture of the relative increases/decreases in real estate values. Savvy experts in the field will consider several factors to determine the trend in property values, including resale inventory levels, days on market, inventory turnover, builder sales levels, builder incentives, and % of sales price to asking price for closed sales. By watching all of these market indicators over time you can get a strong sense for the direction of the market. As always, be careful what you read into statistics.

Home Prices Drop Nationally - 1st time in 11 years

And now some breaking news.... home prices have dropped! This is certainly no big news to Pleasanton area residents, who have seen a sluggish real estate market for the better part of a year. But this is the first time there has been an actual decline in the national median home price since 1995.

The National Association of Realtors report on existing home sales showed that the median home price in August was $225,000, down 1.7 percent from a year earlier.

It was the first year-over-year decline in median prices since April 1995, when that measure slipped only 0.1 percent. And it was the biggest year-over-year drop since the record 2.1 percent decline recorded in November 1990, when the nation was in recession.

While month-over-month declines in prices are not uncommon, year-over-year decreases in prices are a more serious sign of a slumping housing market. Even in other recessions, home prices generally have risen year-over-year on a national basis. The median price is the point at which half the homes sell for more and half sell for less.

The decline in home prices follows a period of record sales and very strong sales gains up through the end of 2005. The average price of a home in 2004 was up 9.3 percent from the previous year, and last year the full-year price average was up 12.4 percent.

The downward pressure on prices came from the record inventory of homes on the market in August. The group said there were 3.9 million homes on the market, up 38 percent from a year earlier. That gave the market a 7.5-month supply of homes, also up sharply from the 4.7-month supply available in August 2005, and the average 4.3-month supply throughout 2004.

The last time the group estimated a 7.5 month supply was April 1993.

Here is a graph of the inventory of unsold resale homes nationally. Funny, it looks much the same as the graph of the Pleasanton and Tri-Valley Markets



If you are looking for a great time to buy, now would certainly qualify

Read the whole article here.

Luxury Market Update

The high end home market in the Tri Valley showed continued growth in inventory in August, with sales remaining fairly steady. Here is the latest graph for homes over $1.5 million in the Tri Valley, including Alamo, Blackhawk, Danville, San Ramon, Dublin, Pleasanton, and Livermore. It shows about an 8 month supply of homes on the market given the current sales rate.



Click on the image to enlarge. The light green bar represents the inventory of resale single family homes. The dark green bar represents closed sales. The red line shows pending sales for the month.

There remains strong donward pressure on most homes in this area, with a handful of homes with outstanding ammenities or characteristics (lot size, view, location, etc)seeing strong demand.

In the Luxury catagory (homes over $2.5 million) the market is even softer, with over a 20 month supply of inventory on the market.



This market is somewhat like a middle school dance, where buyers and sellers are lined up at opposite ends of the room, and very few are in the middle actually dancing. Buyers have a lot to chose from right now, and sellers in this market segment have the resources and assets to wait it out. Expect much of the same as we head into the fall.

Tri Valley Market Update

The real estate market conditions in the Tri Valley region remained much the same in August, with high inventories of homes and steady but unspectacular sales levels. Here is a summary graph of the inventory and sales levels for the cities of the Tri-Valley, which includes Alamo, Danville, Blackhawk, San Ramon, Dublin, Livermore, and Pleasanton.



Click on the image to enlarge. The light green bar represents the inventory of resale single family homes. The dark green bar represents closed sales. The red line shows pending sales for the month.

As you can see, the inventory of unsold homes continued to rise, and sales remained steady. These dynamics continue to put downward pressure on prices in most neighborhoods. However, prime properties with unique features that are in demand (views, oversized lots, exceptional ammenities, etc) continue to attract attention from serious buyers.

Dublin Market Update

The Dublin real estate market in August showed a reduction in inventory, which will help to stabilize the market. Right now, there is a 6 month supply of inventory on the market, which is down from June and July. The sales activity has been remarkably consistent this year, while the inventory has recently declined after several months of steep increases.



Click on the image to enlarge. The light green bar represents the inventory of resale single family homes. The dark green bar represents closed sales. The red line shows pending sales for the month.

As you can see, sales levels have been very consistent, although they are down 30 to 40% from last year. The inventory has been reduced because many sellers have become discouraged and taken their homes off the market.

The high end market (over $1 million) in Dublin shows much the same dynamics.



As we enter the fall, we are seeing some hopeful signs. Lower interest rates and the perception of bargains in the marketplace will ultimately draw buyers into the market. And corporate relocation activity has picked up. But still, it is a buyers market, and sellers are finding that they have to swallow hard and sell for less than they had hoped if they want to get their home sold.

Dublin Update - More Development on the Way

Dublin is poised for continued explosive growth, according to Chris Foss, Dublin's Economic Development Director. Dublin has experienced rapid growth for most of this decade, and there are more exciting things on the horizon. Here are some of the projects in the works:

- A new West Dublin/West Pleasanton BART station is planned. It will encompass both sides of I-580, similar to the existing Pleasanton/Dublin station. It will be located South of Dublin Blvd and East of Outback Steakhouse. It will also feature residential and hotel development. The Pleasanton side will be adjacent to Stoneridge Mall. Construction is slated to begin this fall, and be completed in 2009.

- The Elephant Bar, a popular restaurant in Concord and San Jose, will be opening at the old El Torito restaurant site on Amador Plaza Rd near Expo.

- The old Pak 'N Save shopping center has been torn down, and will be a new mixed use residential and retail development called Tralee Village. It will have 103 townhomes, 130 condominiums, and over 35,000 sq ft of retail space

- The old Albertson's supermarket site at the corner of San Ramon Road and Alcosta Blvd will be the site of 56 new townhomes by Braddock & Logan, along with a remodel of the existing retail stores

- The existing BART station in East Dublin will see 4 new residential projects adjacent to the station. There will be one low income project, with 3 high density condo projects slated for construction, up to 10 stories high.

- The Palo Alto Medical Group/Sutter Health will be opening a 55,000 sq ft medial facility at the corner of Tassajara Rd and Dublin Blvd.

- Kaiser has purchased 58 acres of land East of Tassajara Rd and South of Dublin Blvd for a future hospital/medical clinic

- Lowe's home improvement is planning a store East of Tassajara Rd and South of Dublin Blvd.

- In West Dublin along I-580, they are currently grading for the opening of Schaefer Ranch, a large development by Discovery Homes. It will ultimately have 302 single family homes, a 10 acre sports park, a 5 1/2 acre commercial site, fire station, and 350 acres of permanent open space. The homes will begin construction in 2007

In all, there are over 10,000 residential units planned for Dublin in the next few years, with a majority being planned for East Dublin off Falon Road, as well as the Dublin BART stations. The city of Dublin predicts that the intersection of Dublin Blvd and Dougherty Road will ultimately handle 80,000 cars per day. They are in the process of improving this intersection now, and it will be under construction for some time (it might be best to avoid this intersection for a while).

Pleasanton Market Stabilizes in August

The Pleasanton real estate maket showed stability in August. Inventory, which had been climbing steadily since the beginning of the year, was relatively flat for the month of August.



Pending sales in Pleasanton for the month of August showed a nice increase, certainly welcome news after the drop in July. It seems that more buyers are starting to recognize that there are some very good opportunities in the market place.



The Market Velocity in August, which shows the Number of Month's supply of homes on the market, dipped slightly after a huge jump in July



Overall, market conditions in Pleasanton continue to favor buyers, with price reductions and discounts common on many homes. There is still strong demand for unique homes with exceptional locations, or upgrades, or homes that are priced agressively to attract interest.

The New Reality for Sellers

Great article in the SF Chronicle about the current market, and how sellers are having to adjust their expectations. Certainly in the Pleasaton and Tri-Valley real estate markets sellers are learning the dynamics of a balanced market where buyers have more leverage.

According to La Jolla (San Diego County) research firm DataQuick, Bay Area home sales slowed in July to their lowest levels in 10 years, while prices increased at their slowest pace since 2003. Translation: It's not a seller's market anymore. The only problem? Many sellers don't want to hear that.

"There's a disconnect between buyers and sellers," says Dona Crowder, a former president of the San Francisco Association of Realtors and a broker with Pacific Union-GMAC, "We've shifted to a normal market where buyers can negotiate, where they're no longer in hurry. But some sellers are not aware of the change."

She describes a recent listing in which sellers put their home on the market for $1.75 million but when they got a single offer for $1.68 million, with no contingencies, the sellers turned it down. "We urged them to take it," Crowder said, "but they didn't want to go below 1.7."

She says it's hard to convince sellers on issues regarding pricing because they are often basing their ideas on sales prices from months before. "Pricing is a matter of perspective. Until you have the perspective, you can't see anything."

Eventually, the asking price for the house was reduced to $1.699 million. It received no offers. Now it has been removed from the market and will soon be relisted at $1.599 million.

Read the whole article.

Pleasanton Named Wealthiest Suburb in US

Recent U.S. Census Bureau data shows that Pleasanton has the highest income in the U.S. for cities with populations under 250,000, with a median income of $101,022. Livermore came in at number 3 on the list with a median income of $96,632. Among larger cities, San Jose ranked second with a household median income of $70,921.

This certainly helps explain the dramatic growth of high end real estate developments in Pleasanton and Livermore, as builders cater to high income buyers attracted to the Tri-Valley regiion.

Read the whole article.

National Housing Stats Show Continued Softness

National housing statistics confirm what we already know about the local Pleasanton area real estate market... the market is soft. Nationally, the supply of resale homes is the highest in 13 years, rising to a 7.3 month supply, up nearly 40% from a year earlier.

The increase in supply is due in part to a building boom in 2005, which saw a record number of new homes enter the market. A large percentage of those new homes were intially bought by investors, and home builders have reporting that many of those are now putting those homes up for sale as they attempt to exit the cooling residential real estate market.

"Clearly, there is an uncomfortable amount of supply in the existing home market," said Phillip Neuhart, economist with Wachovia. He said that he expected many discouraged home sellers would soon pull their houses off the market, especially if they are not getting the prices they believe their homes to be worth.

The glut of homes on the market has cooled off if not killed the white-hot home price gains of a year ago.

All regions of the country outside of the South saw a year-over-year decline in median home prices in July, and the South posted only a 3.2 percent year-over-year rise in median home price. Median price is the point at which the same number of homes sell for more and less.

Memo to buyers...this is a great time to buy a house in Pleasanton and the Tri-Valley!

Read the whole article

More Good News on Interest Rates

A report issued on leading economic indicators released today showed that the economy cooled in July. The index dropped .1% in July, while most analysts expected a .1% increase. This is further evidence that the economy is slowing, which is good news for interest rates.

Ken Goldstein, labor economist at The Conference Board, said a slowdown in the housing sector is becoming more pronounced, causing a drag on the economy. He also pointed to higher interest rates, lower consumer confidence and higher energy prices as other factors keeping growth in check.

However, he said it did not appear that the economy was headed for a hard landing.

"The economy is cooling but isn't likely to stall out," Goldstein said.

Goldstein said the essentially flat readings in the leading economic indicator index for June and July suggested continued moderate economic growth through the fall and possibly into the winter.

Investors have been embracing signs that economic growth is moderating since that could relieve inflationary pressures and allow the Federal Reserve to leave interest rates alone. At its last meeting, the Fed stopped raising interest rates for the first time since June 2004 but hinted it could resume tightening if it became alarmed about inflation.

Locally, mortage rates edged down in the Pleasanton area market, relecting the continued feeling that the economy has cooled enough to avoid further rate hikes by the Federal Reserve.

"Mortgatge rates had edged downward in the last 30 days", according to Randy Pickerell with Private Mortgage Advisors in Pleasanton. "Rates on 30 year fixed mortgages have declined about 3/8% in that period, which is great news for buyers" Fixed rates are currently in the 6.5% range, which is historically a very low interest rate.

Long term mortgage rates most closely follow the long term bond market. When the economy cools, there is less infationionary pressure, which keeps long term rates low.

Hmmm.... rates are down, more inventory is on the market, and prices are soft. Sounds like a perfect time to buy a house....

Link to original article

Going Green... The Latest Trend in Real Estate?

Let's face it. With the increasing price of energy, it seems like we have to rob our kid's piggy bank to fill our gas tank anymore. And the latest trend in response to this unfortunate reality is to "go green". For homeowners and new home builders, there are products available which are gaining in popularity that serve to create more energy-efficient homes.

With impeccable timing, the National Association of Home Builders (NAHB) released a report recently outlining the proliferation of new "green" building methods that can help homeowners cut down on energy costs.

Many of the products can be used to retro-fit heating or cooling systems in existing homes, including:

Photovoltaic roof shingles that supplement a home's energy supply by converting sunlight to electricity. The shingles replace any number of the regular asphalt shingles and wires from them are strung through the roof and connected to the home's power grid.

Solar water heaters, which substitute solar heat for fossil fuels and can save more than 50 percent off a home's water heating bill. Solar water heaters circulate water through a system where it is exposed to the sun's heat.

Geothermal heat pumps take advantage of the tendency for underground temperatures to remain constant through the year. It involves drilling or digging deep into the earth and using a heat pump to cool the house in summer and warm it in winter.

Tankless water heaters provide hot water on demand rather than heating and storing it, where it gradually loses heat. This can mean as much as a 50 percent savings in energy use.

Homeowners reluctant to jettison a perfectly good hot water tank can use an insulating wrapper that reduces the tanks heat loss.

High Energy Star rated appliances that operate much more efficiently. The government created the Energy Star system to make it easier for consumers to identify and choose more energy-efficient appliances. New front load clothes washers save energy by using less hot water. New, well insulated refrigerators can keep food cool while using little more energy than a 75 watt incandescent bulb.

Of course, some of the "new" ideas were actually common decades ago.

"A hundred, a hundred fifty years ago, our forefathers used a lot of materials and techniques that are considered green today," said Ray Tonjes, an Austin, Texas green builder. "They oriented their homes toward the prevailing winds, built high ceilings with ventilation, shaded the windows and planted groves of deciduous trees, all to cool houses naturally."

Tonjes says builders abandoned many of these methods when energy was cheap; it was just easier to install central air. With the cost of running those AC systems soaring, builders are starting to pay more attention to the old ways again.

Other worthwhile passive solar features include: large, south facing windows to enable sunlight to penetrate into rooms; using deep roof eaves to shade those same windows during the summer, when the sun is higher in the sky; and, of course, highly efficient and well sealed windows and doors, which can prevent heat or cool from radiating out.

There are also enclosed entryways, which act as air locks, preventing heat or cool from tumbling out of the house whenever anyone enters or leaves. And windbreaks of evergreen trees that block frigid north winds that can chill houses off.

One, more modern, innovation is to insulate foundations, including slab floors, with polystyrene to cut down on heat loss.

An energy audit, which you can do it yourself or hire a professional, help you identify trouble spots that you may not have suspected you had.

With the cost of energy these days, it makes a lot of sense. Or should I say cents.

Laguna Oaks in Pleasanton. A Can't Miss Neighborhood

Pleasanton is known for having an abundance of attractive, upscale neighborhoods that embody the California suburban lifestyle. And few have been as successful as Laguna Oaks in terms of appreciation, desirability, and stability. So what makes it so desirable?

Floorplans. Laguna Oaks was built by Davidon Homes in the mid-1990's. It boasts generous lots (many in the 1/3 to 1/2 acre range) and elegant, attractive semi-custom homes. When they were built, the Davidon Homes offered several options in floorplan configuration, giving buyers the ability to create expanded family rooms, bedrooms/offices, bonus rooms, and other floorplan modifications to suit their taste.

Location. Laguna Oaks is very conveniently located at the intersection of Bernal Ave and Foothill Rd. You are seconds from freeway access, close to downtown, and can get anywhere in Pleasanton and beyond very easily.

Setting. Laguna Oaks captures the special ambiance of the Foothill Road area, with dramatic views of the Pleasanton Ridge and the rolling, oak-studded ranch land along Foothill Rd.

Neighborhood. Laguna Oaks has a very strong social component that is definitely a draw to potential buyers. Lots of families, lots of kids, lots of successful executives, and a lot of social interaction. Many sales occur to friends and acquaintances of existing homeowners in Laguna Oaks, who are often looking for an opportunity to join this community.

Community Facilities. Laguna Oaks has a community pool, cabana, and tennis courts, as well as greenbelts and walking paths that run throughout the development. A great way to meet and interact with other neighbors.

The homes. Laguna Oaks homes are gorgeous. Many boast spectacular upgrades with gourmet granite kitchens, state of the art home theatre, spacious bonus rooms, outdoor kitchens, pools & spas, and a host of other custom features that create demand even in down markets.

Laguna Oaks in Pleasanton will continue to set the standard for well-planned, attractive communities that thrive in any real estate market.

From the Good News Department...

There continues to be good news in the battle to keep inflation in check, which fares well for both short term and long term interest rate increases.

The consumer price index, which measures price increases at the retail level, rose 0.4 percent in July, slightly higher than June's 0.2 percent increase. But with food and fuel prices removed, so-called "core" CPI rose just 0.2 percent, less than the 0.3 percent economists expected.

Combined with Tuesday's producer price index, which showed a decline in core wholesale prices, the data point to a drop in inflation pressures. That would allow the Fed to stop raising rates, which would otherwise threaten economic growth and cramp corporate profits.

"The Fed could not have written these numbers any better to make their case on the economy," said Jack Ablin, chief investment officer at Harris Private Bank. "This, I think, could really help the markets start to move forward."

Let's keep our fingers crossed that we will see continued easing of upward pressure on rates, which will help stabilize the real estate market in Pleasanton and the Tri-
Valley region.

County Wide Statistics Show Drop in Sales

New data on the housing market showed that home sales in Alameda County, which includes Pleasanton, Dublin, and Livermore, dropped by 35% as compared to July 2005. This provides further evidence that the Pleasanton Area real estate market is much slower than the last 3 years. This makes it the slowest July in terms of sales since 1996

Still, DataQuick analysts are quick to say that this does not indicate any market distress.

"These are the kinds of signs we've seen in the past that were associated with severe downturns. ... While the trend is significant, we're not at levels that would suggest something ominous in the market," said Andrew LePage, analyst for DataQuick.

Foreclosures are still relatively low, adjustable-rate mortgages are falling out of favor and down payments seem stable, he said.

In short, there is still activity in the Pleasanton and Tri-Valley market. It is just at a much lower level than the last few years.

At least interest rates look like they will remain stable for now.

Read the whole article.

July Market Trends: More of the Same

The Pleasanton real estate market showed a continuation of recent trends in July. Inventory continued to climb, approaching 250 homes unsold. Meanwhile, Pending sales declined after 6 months of increases. The memo is officially out... the market had changed.

Go to Market Trends in our Resources Section for more detailed information and graphs.

Return of the Relocation Buyer

One of the interesting trends I have noticed in the Pleasanton Real Estate is that there are more relocation buyers in the market than I have seen in a while. The past 3 or 4 years was dominated by move up buyers, as well as buyers from Fremont and the South Bay. Because the market has softened, many potential move up buyers are having a difficult time getting their home sold, so they are not a big factor right now. But I have noticed a steady stream of buyers transferring in from out of state, certainly a welcome sign. Welcome to Pleasanton!

Market Corrections... the Return of Intrinsic Value

OK, so we are not in Wonderland anymore. It is a buyers market now, as we all adjust to the realities of the current real estate market in Pleasanton and the tri-valley, one of the results of the new supply/demand dynamics in the market is the impact of intrinsic factors: location, condition, and price.

In an over-heated market, like the one we just experienced in 2004 and 2005, very little attention was paid by buyers to intrinsic factors in deciding what to pay for a house. In fact, home buyers decisions were based on emotion, specifically scarcity and competition. If a home came on the market, buyers had to make many compromises and overlook many drawbacks because there simply was not many homes for sale, and they were often selling before we could put the sign in the ground. And the scarcity factor prompted many buyers to pay top dollar, regardless of comparable sales. Because at the time, the next house would likely cost $10,000 or $20,000 more, and may not be as nice. The net result of this is that homes with flaws, such as poor locations or poor condition, did not get discounted as much as they should have if the market conditions were more balanced.

Now, sellers with homes that have location issues (located on a busy street, or next to the freeway, or backing up to a shopping center for example) are finding the market to be very rough. The reason is simple. Buyers now have more choices, and so there is no urgency to purchase a home in an inferior location. Let's face it, buyers do not typically say "find me a home that backs up to the freeway! or "I am dying to find a home on a major street!". When there are other choices, buyers will naturally choose better locations. Therefore, homes in inferior locations need to be discounted relative to other homes in better locations. When the price is attractive enough, buyers will buy it. And in this market, discounts for location issues can be as much as 5% to 10% as compared to the same house in a desirable location. Only when the price is low enough will buyers accept the location defects. Often, it is the only house in the neighborhood they can afford. So the choice for buyers is buying a premium neighborhood at a discount (and with a less than desirable location) or buying a home in an inferior neighborhood.

Same with condition. If a home has green shag carpeting and harvest gold appliances, and hasn't been touched in 30 years, it will take a beating in the marketplace unless it is priced to reflect the condition. And the discount is higher today, again because the buyers have plenty of other homes to consider. But when the price is right, these homes will also sell. But the price has to be discounted relataive to other homes in the same neighborhood that are in better condtion.

The conclusion is simple. The laws of supply and demand are not negotiable, and not subject to your input as a seller. And the adjustment mechanism in this market, like any other market, is the price. When buyers have choices, sellers of homes in inferior locations or inferior condition have no choice but to lower their price to make their home a bargain. The only way to prompt buyers to accept flaws in a home is to make it a great deal.

It's Official.... It's a Buyer's Market??

The National Association of Realtors released national home sales data for June, and they have confirmed what we all knew anyway... it is now a buyer's market. Nationally, sales declined about 2% in June from May. June sales were down 9% from June of 2005.

Nationally, inventories continute to rise. For June, rose to a 6.8 months supply, up from a 4.4 month supply in June of 2005.

David Lereah, NAR’s chief economist, said the housing market is flattening-out. “Over the last three months home sales have held in a narrow range, easing to a level that is near our annual projection, which tells us the market is stabilizing,” he said. “At the same time, sellers have recognized that they need to be more competitive in their pricing given the rise in housing inventories. Home prices are only a little higher than a year ago.”

“The change in price performance is directly tied to housing inventories – a year ago we had a lean supply of homes and a sellers’ market, with monthly home sales at an all-time record high,” Lereah said.

NAR President Thomas M. Stevens from Vienna, Va., said opportunities have opened for home buyers. “People who were discouraged by the bidding wars that were so common over the last few years are finding more choices now,” said Stevens, senior vice president of NRT Inc. “Relative to the five-year housing boom, this year is a buyer’s market in much of the country with plentiful supply, along with interest rates which remain historically favorable, so it’s a good time to buy a home.”

For the Pleasanton and Tri-Valley real estate markets, this certainly reflects the state of the market. Inventories have risen, and days on market for existing homes has increased.

But a word of caution. If you are a buyer, don't assume that this means that no homes are selling. While sales levels are off of last year's pace, homes are still selling. In fact, there has even been some multiple offer situations in Pleasanton in the last couple of months. But these are highly desirable, well priced properties that would be in demand in any market. So if you are looking at a home with extensive remodeling, large lot, and prime location, and you assume that you have time to let it sit whle you think about it, you might find it gets sold out from under you.

Read the whole article here.

Market Trends Update: More of the Same

The Pleasanton market in June continued to show inventory on the rise, with sales declining slighty from the month before. More inventory and slower sales has resulted in an increase in days on market for existing inventory, and downward pressure on home prices. Price reductions have become commonplace as discouraged sellers attempt to ignite interest in their homes from seemingly lethargic buyers. Hopefully the Fed will pause their interest rate increases as inflation slows, giving the housing market a break from the pressure of interest rate increases.

Go to Market Trends for More Information

New Cheescake Factory Restaurant Breaks Ground

The Cheescake Factory broke ground recently at Stoneridge Mall, in the parking lot between the Macy's Mens store and the Macy's Womens Store. A P.F. Chang's is planned for the site also.

Part of the Stoneridge mall's parking lot on the west side of Macy's Women's Store has now been blocked off as construction begins on a new Cheesecake Factory, a popular restaurant chain found in upscale shopping centers and business districts. This will be Cheesecake Factory's first Tri-Valley location.


Marion Pavan, Pleasanton's associate planner, said a second restaurant is planned for a site next to Cheesecake Factory by P.F. Chang's China Bistro. Founded in 1993, P.F. Chang's offers a unique combination of Chinese specialties and custom sauces for both for lunch and dinner.

Read the whole article.

Is the Fed Done Raising Rates?

The stock market rallied sharply today after comments by the Fed Chairman Ben Bernanke that indicate that the economy is slowing, which will help keep inflation in check.

The Fed expects economic growth to slow this year and next, which "should help to limit inflation pressures over time," Bernanke said in testimony to the Senate Banking Committee.

The Fed chief, who took office Feb. 1, issued the comments as he presented the central bank's twice-a-year report on the economy and monetary policy.

Bernanke also said the Fed's rate-hiking campaign is starting to have some effect on reducing long-term inflation risks. "We're in a much more normal range of interest rates," he told the panel, referring to the difference in short- and long-term rates in the economy.

This is good news for interest rates, which have been on a steady climb in the past 18 months.

Read the whole article here.

Mortgage Rates Up Again, But Some Good News

First the bad news. Mortgage rates rose again. Average 30 year rates rose to 6.79%, the highest level since May 2002. Last year at this time, the same index was at 5.62%. This indicates that mortgage interest rates are up almost 1 1/4% in the last year.

Now for the good news. Experts expect mortgage rates to stay under 7% for the year, still a historically low rate level.

"Since last week's rate increase by the Federal Reserve came as no great surprise, mortgage rates remained nearly unchanged from the previous week," Frank Nothaft, Freddie Mac vice president and chief economist. said in a statement.

"This is fairly consistent with our economic outlook, which continues to forecast that the interest rate for the 30-year fixed-rate mortgage will gradually drift upward, but should remain under seven percent for the year," said Nothaft.

Further rate hikes by the Fed could help push mortgage rates higher still, though home loan rates are more closely tied to the Treasury market than to the Fed's short-term rate target.

Read the whole article.

So you think your house is small...

A British architect has designed a "micro house" that measures in at a whopping 81 st ft.

It has two bedrooms, a lounge, a dining room, a kitchen and a bathroom, and it is just 9ft by 9ft by 9ft.

The mini-home is already being looked at by a number of local authorities in Britain as way of dealing with short term shortages in accommodation.

It could also be a self-contained home for elderly relatives or teenagers and can be sited in a garden.

Inside the cube, the entrance lobby also doubles as a shower and a toilet.

A double bed folds down over the lounge area which within seconds can be turned into a dining room that can seat four people or even a spare bedroom.

The seats are also storage cupboards and can be cleared away to create a space in which three or four people can dance to the inbuilt surround sound system.

I have always said there are worse things in life than a small house. I might have to re-think that.

Read the whole article here.

End of May Market Report

Inventory of resale homes continues to climb. Inventory levels are now at the highest level in 3 years. Pending sales rose again in May, and continued its modest climb.

For complete market stats, go to the Market Trends in the Resources section of the site.

New Home Depot in East Pleasanton?

Developers are closer to getting approval to build a new Home Depot at the corner of Bernal Ave and Stanley Blvd, across from the McDonald's. Proposed plans would also include a Long's Drug Store, a restaurant, and a handful of smaller retail operators.

News - Friday, June 2, 2006
Home Depot closes in on Bernal-Stanley complex
'Pleasanton Gateway' would include drug store, coffee shop

by Jeb Bing ADVERTISEMENT


A new Home Depot store and garden center proposed for a vacant 14.7-acre site at Bernal Avenue and Stanley Boulevard could be closer to gaining city government approval after developers agreed to scuttle plans for an adjoining gasoline station and to make architectural changes.


Don MacKenzie and Pete Knoedler of Regency Centers, which would develop the land parcel across from McDonald's for its owner, Frank Auf der Maur, said the store is needed on the east side of Pleasanton to serve a growing customer base.


In a second public meeting with the Planning Commission, billed as an unofficial workshop discussion, the Regency representatives said the site would be called Pleasanton Gateway and would include:


A Home Depot building materials store with 106,432 square feet of floor space and a 34,760-square-foot garden center. The store would be open from 7 a.m. to 10 p.m. daily.


A Longs Drugs store with 15,789 square feet of floor space, which would include a drive-through lane on its north side facing Stanley. Except for fast-food restaurants, this would be Pleasanton's first drive through for retail sales.


Three satellite stores with one building totaling 11,500 square feet and two others with 10,000 square feet each. Tenants have yet to be identified.


One 5,000-square-foot, drive through restaurant. No operator has been identified but Regency said it would not be a fast-foot restaurant and more likely a retailer that sells coffee and other beverages.

The developer also discussed plans to widen Stanley Blvd to address traffic concerns. A formal development proposal could be submitted this summer.

Read the whole article here.

Good News on Interest Rates

Lest you think that economic forcasting is easy, here is positive news for interest rates. The latest jobs report came in weaker than expected, easing pressure on the Federal Reserve to raise rates to keep inflation in check.

Employers added fewer workers to payrolls in May as the government's latest reading on labor market strength came in well below Wall Street expectations, raising hopes that the Federal Reserve will stop its course of rate hikes at its June meeting.

There were 75,000 more U.S. workers in May, according to the closely watched Labor Department report. That compares to the revised 126,000 gain in April. Economists surveyed by Briefing.com had forecast that the government's survey of employers would show a 170,000 pickup in payrolls.

The Fed meets on June 29th to decide if further interest rate hikes are necessary.

Read the whole article.

Bad News on Interest Rates

Inflation fears are sparking more talk of interest rate hikes by the Fed, which is not good news for the real estate market.

Consumer prices jumped in April, sparking a fresh round of inflation worries on Wall Street, and economists say the report gives investors and the Federal Reserve good reason to worry.

The Consumer Price Index rose a surprising 0.6 percent in April, the Labor Department reported, compared with the 0.4 percent rise in March. Economists surveyed by Briefing.com had forecast a 0.5 percent rise in the government's key measure of inflation.

Higher energy prices, led by an 8.8 percent jump in the price of gasoline, helped account for the higher inflation reading. Gas prices were up even further excluding seasonal adjustments that government number crunchers make ahead of the summer driving season, soaring 14.5 percent.

While we have seen multiple hikes in short term interest rates, led by the Federal Funds rate, the long term rates have held reasonably steady, leading to an inverse yield curve, where short term rates are actually higher than long term rates. But inflation fears can put upward pressure on all rates, including long term rates where investors have to factor in inflation to their desired return.

Obviously, this is not a positive development for the already sagging real estate market. Some think that every upward move in interest rates is inevitably met by a downward adjustment in home prices to keep housing affordable. Stay tuned...

Read the CNN Money article here.

Pleasanton Inventory climbs, Sales increase

The Inventory of available single family homes in Pleasanton climbed to 179 Homes at the end of April, the highest level in nearly 3 years. Sales (Pending Sales for the month of April) continued on an upward trend, but remained well below 2004 and 2005 levels.

For graphs and more information go to Market Trends in the Resources section of 680Homes.com, or click on the Resources tab above.

Yes gas prices are up, but there is good news also...

The news was filled last week with stories about the high price of gasoline, the record profits of the oil companies, and the impact on consumers. But there was also pleanty of good news about the economy, including

Retail store sales were up 4.1% year-over-year

Same-store sales were up 5.1% year-over-year

Consumer Confidence rose to 109.6, well above the consensus estimate range

The housing bust continues to track the elusive Afghan Winter, as existing home sales rose slightly, when they were expected to decline

This was offset somewhat by a decline in mortgage applications

Durable goods orders were up 6.1%

New home sales soared 13.8% in March, even as prices moderated and supply dropped

Jobless claims sat pretty much where they have been for the last 2 years

Employment cost index was up 2.8% y/y, but we'll need to evaluate that in terms of the productivity index, due out this week

The GDP boomed, conusmer sentiment (a different survey from consumer confidence) held, and the Purchasing Managers' index showed continued strong growth.

The economy, quite simply, is on a roll, the stock market is up, mortgage rates are up slightly but still near historic lows, and the housing market has become more balanced. Sounds like a great time to buy a house.

Courtesy of View from a Height Blog

New Home Sales Up Dramatically in March

New home sales rose a dramatic 13.8% in March as compared to February, the largest jump in 13 years. The increase was well above expectations from analysts. This in spite of higher interest rates. But things may not be quite as rosy as this recent data suggests...

But economist Bob Brusca of FAO Economics said last month's drop in new home prices is a sign that the market for new homes isn't nearly as strong as the jump in sales would suggest.

He noted that the report showed an unusual drop in prices from both February and a year earlier, which could be a sign that home builders are cutting prices to move a large supply of new homes now on the market.

"New homes sales sprang back to life like a zombie in a cheap horror flick," Brusca said. "And like that zombie, housing really is dead. Don't let all that twitching fool you."

He said that many of the new homes sold in March were probably built in a stronger real estate market.

And unlike existing homes, where sellers can live until they get an acceptable price, "builders can't live in these houses unless they have a lot of family," he said. "By and large they must finance them at rising interest costs."

Here's the whole article.

And Now for Something Completely Different... 50 Year Loan

Well... it was bound to happen. A new 50 year loan program has been introduced. When you add up the extra interest paid on this loan over the additional 20 year term, it doesn't seem to make a lot of sense. But then again, since having mortgage debt in California can be somewhat of a badge of honor, you might have bragging rites at the next coctail party you attend.

The Methuselah of mortgages has arrived: the 50-year home loan.
Think of it as a mortgage that has been supersized. Like that other supersizer, McDonald's, the massive mortgage was born in Southern California's San Bernardino County. Statewide Bancorp of Rancho Cucamonga began offering the loan in late March, to California residents. Advertisements have yielded a lot of phone calls and "quite a few applications," says Alex Diaz Jr., vice president of Statewide.

Half of first-time home buyers are 32 or older, according to the National Association of Realtors. If those buyers get 50-year mortgages and never refinance or make extra payments, they won't pay off their loans until they're well into their 80s. Would they be crazy to get loans that amortize or pay off the balance over 50 years instead of the standard 30 years? Not at all, Diaz says.

Getting a 50-year loan is a perfectly rational way to avoid an interest-only or payment-option adjustable-rate mortgage, he says.

With an interest-only mortgage, the minimum monthly payment doesn't put any money toward principal. A payment-option ARM goes a step beyond that: In some circumstances, the minimum monthly payment doesn't even cover the interest accrued that month. You make a minimum payment at the beginning of the month, and four weeks later, you owe more than you owed before the payment. This condition is called negative amortization, or "going negative."

Forgive borrowers for thinking that it makes better sense to amortize a loan over 50 years than to get an option ARM or interest-only mortgage.

"Payment-option ARMs and interest-onlies have been so popular, we wanted to come out with a longer-term, fully amortizing loan for people who don't want to go negative," Diaz says.

Here is the whole article.

Economic Activity Surging

3 economic reports out today showed continued strength in the economy. Manufacturing activity was up sharply in April, the strongest showing in 6 months. The Commerce Department reported that total construction spending in March climbed almost 1% to a record 1.99t trillion. Also, consumer spending was up .6% in March, and personal income rose .8% in March, the largest gain since September.

The cloud of inflation, however, tempered the postive economic showing.

An inflation gauge tied to the consumer report revealed inflation accelerated.

The measure showed that prices - excluding energy and food - went up 0.3 percent in March, compared with a tiny 0.1 percent increase in February. Over the last 12 months, these "core" prices rose by 2 percent - considered the upper bound of the Fed's comfort zone for inflation.

The inflation reading didn't include the big run-up in oil prices seen two weeks ago. At that time, oil prices topped $75 a barrel, a record high. Prices have retreated a bit since them.

To fend off inflation, the Fed is expected to boost a key interest rate to 5 percent at its May 10 meeting.

Nevertheless, the economy continues to surge, which is good news for future growth in income.

Read the whole article.

Pleasanton Market Stabilizing

The Pleasanton housing market, after 3 plus years of strong appreciation, has shifted into a stable market with more balance between buyers and sellers. Buyers are not feeling the pressure of multiple offers, and are much more conservative about what they are willing to pay in most cases.

Although home prices are stabilizing, they're not dropping as in other parts of the country, but they're appreciating slowly, if at all, according to Douglas Buenz, a real estate broker whose 680 Team is affiliated with Alain Pinel Realtors.


"The real estate market in Pleasanton is moving at a very deliberate pace right now," Buenz said. "The number of houses on the market at the end of March was 150 single family homes, compared to 120 at the end of February, so we can see that inventory is trending up."


What's really changed in recent weeks, said Buenz, is the buyer's frame of mind. Last year at this time, buyers were outbidding each other for the same house and making offers quickly before another buyer came along and snatched up the home they wanted.


"It's different today," Buenz explained. "Buyers are more cautious and they have the time now to make their decision. They don't have to rush in with an offer for fear they might lose out. That just isn't happening anymore."


Although home sales are significantly slower, houses are selling. A typical house may be on the market for 20-30 days, much less if it's priced right, in excellent shape and appeals to the buyer. Homes that need new carpets, a coat of paint or a kitchen update are taking longer to sell and buyers often want a discount because of the remodeling they'll have to do.

Read the whole article here.

Median Prices Up, Sales Decline

The Median Sales Price for the 9 county Bay Area region rose to $637,000 in March, up from $607,000. The number of sales declined for the 12th consecutive month. Sales were down almost 15% as compared to March 2005.

As usual, these are broad general statistics for the whole region. According to the Chronical, there are still some markets where there is competition for homes, including Pleasanton

Many real estate agents and buyers say well-priced homes in attractive neighborhoods with strong schools are selling for their asking prices, if not above.

Brittany Smith, 29, has been looking for a four-bedroom home in Pleasanton since late summer. The high school special education teacher and her husband, Zachary, put in offers on two homes listed for under $1 million. Even though they did not require the sale of their Dublin townhome as a contingency in their offers, they lost out both times.

Still competitive

"We keep hearing that the market is plateauing in certain areas, but it seems there's a lot of competition in Pleasanton - especially for a house with a yard where you're not looking into someone's kitchen from your kitchen window," Smith said.

Read the whole article.

Meanwhile, the Economy Is on a Roll...

Oh yeah, the economy. With all the speculation about the real estate market, it's easy to forget that the economy is doing very well. The Federal Unemployment rate just dropped to 4.7%, its lowest level in almost 5 years. Over 200,000 jobs were added last month. Consider

Unemployment down to 4.7%.
211,000 new payroll jobs added in March.
Economic growth has now continued for 17 consecutive quarters.
Consumer confidence is at its highest level in 4 1/2 years.
Since January 2001, real after-tax income per person has risen 8.3 percent.
Construction spending is at a record high

Sounds like a great time to buy a house....

Mortgage Insurer Forcasts Higher Probability of Market Decline

PMI, one of the nation's largest mortgage insurers, increased it's forcast of the likelyhood of a price decline in its latest report. The increase was primarily a result of the decline in affordability in the bay region. There are certainly doubts about this forcast, however...

The PMI report does not say that an East Bay price decline is inevitable, the company stresses. The study merely indicates how far out of line appreciation and labor market conditions are compared with long-term historic averages. It notes, for instance, that the portion of a median income absorbed by a median East Bay mortgage has increased 33 percent since 1995.

The good news is that the East Bay's labor market is very strong, a factor that tends to bolster home values. Another positive, at least in relative terms, is that the region dropped two notches on the index, from the fifth riskiest market to the seventh. The Sacramento and Riverside metropolitan areas leapfrogged the East Bay because price appreciation in those locales declined, a common prelude to a market drop.

If the short-term housing outlook remains uncertain, the long term seems clear. Using data from the Office of Federal Housing Enterprise Oversight and elsewhere, PMI found that from 1986 to 2005, families around the country who held on to homes for five years enjoyed positive returns 92 percent of the time. Those who owned their homes for 10 years saw a return on their investment in 99.6 percent of cases.

This aspect of the PMI report didn't focus specifically on the East Bay market, but did evaluate the San Francisco area, which Milner said serves as an appropriate proxy for the region. The return during any five-year period there ranged from a loss of 10 percent to a gain of 50 percent, with a median return of about 33 percent. Those who held on to their home for 15 years almost never incurred losses, with typical gains of between 14 percent and 25 percent.

Read the whole article.