The 680 Blog

We've Moved!!

2007-03-01T21:01:00.000-08:00

The 680 Blog can now be found at

www.the680Blog.com

Check out our new design and abundant new features!

Grand Openings & More

2006-12-14T08:26:00.000-08:00

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

2006-12-10T10:26:00.000-08:00

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

2006-12-10T10:03:00.000-08:00

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

2006-11-26T12:29:00.000-08:00

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

2006-11-26T12:22:00.000-08:00

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?

2006-11-26T12:11:00.000-08:00

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

2006-11-26T12:00:00.000-08:00

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

2006-11-09T10:29:00.000-08:00

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

2006-11-05T15:04:00.000-08:00

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

2006-11-05T14:39:00.000-08:00

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

2006-11-05T14:20:00.000-08:00

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

2006-11-05T13:56:00.000-08:00

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

2006-10-18T20:40:00.000-07:00

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

2006-10-15T19:09:00.000-07:00

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

2006-10-15T10:49:00.000-07:00

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

2006-10-15T09:47:00.000-07:00

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

2006-10-11T06:46:00.000-07:00

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

2006-10-05T22:40:00.000-07:00

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

2006-10-03T22:24:00.000-07:00

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

2006-10-02T12:17:00.000-07:00

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

2006-09-27T18:44:00.001-07:00

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

2006-09-25T22:32:00.000-07:00

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

2006-09-16T07:38:00.000-07:00

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

2006-09-16T07:36:00.000-07:00

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.