Keep your Powder Dry!

July 10, 2010

Filed under: 2. Marin Update — dwdupont @ 1:49 pm

While the general trend in Marin Real Estate is still down, the last 6 months has seen a significant uptick in activity. The activity started in the lower end of the market back in November and picked up steam in the early part of the year. There were several stretches in Jan – March where over 50% of the homes on the market below +- $1M were in contract. This liquidity enabled many folks with growing families and stable employment situations to trade up into bigger homes; and many people to get out of financially unsustainable living situations.

 Activity in the lower market segments has cooled significantly starting in April, worse in May with a bounce in June.

 The upper market has seen better sales compared to the last 18 months, but still very sluggish compared to the prior 7 years.

 Many clients are asking if we have reached the bottom of the market. I don’t believe we have. There are significant headwinds to growth moving forward.  Next year will likely be difficult for real estate with possibly decreasing prices. The depth of the coming real estate pull back in the 2nd half of 2010 and 2011 will likely be directly correlated with the depth of the stock market pull-back. Keep your Real Estate purchasing power in Cash Equivalents NOT in stocks. Please discuss this with your financial advisors or accountants, and call me with any specific questions.


Pending Home Sales Surge

June 3, 2010

Filed under: Headline News Items — dwdupont @ 7:23 am

As readers have likely seen in the news, pending US home sales rose more than expected as owners took advantage of tax credits and other government housing stimulus (including FHA junk loans that are going to cost tax payers aplenty down the road).

This is great news, unfortunately it is a trailing indicator, not a leading or coincident indicator, of activity in the real estate market. Pending home sales represent months and sometimes years of research, house hunting, negotiation and inspections before a willing buyer pulls the trigger– especially in the market over the last 30 months.

After 5 strong Months from November – March, activity in Marin County started slowing in April and took a dive in May. The first few days of June saw another surge in home buying interest. My instincts are telling me this rebound in interest may be a short lived and at best is dependent on stock market stability.

The real estate market is like no other market I have ever monitored– it changes on a dime. One day/hour/minute everyone wants to buy a home, and the next moment– the doldrums.

The best leading indicator of home buying activity (in Marin) is , interestingly enough, how much I money I spend each day advertising on Google, and related click data on Adwords. Google would be wise to capture this data and publish a leading indicator of home buying activity.

The upshot– the trend in Home buying activity despite the recent uptick, seems to be slowing.

Please read the Marin Update as well.

You can find out more about our practice at www.thedupontgroup.net.

Please call or email me with any questions Dave@thedupontgroup.net 415-867-6611.


Marin County Update

May 20, 2010

Filed under: 2. Marin Update — dwdupont @ 10:21 am

The capital markets play an interesting and pivotal role in real estate markets;

  • Interest rates on mortgages are led by movements of highly complex bond markets.
  • The number of loans that are made are a function of many things—but most importantly: how easy these loans are to be securitized and sold off to investors thereby reducing risk for the bank actually making the loans.
  • BUT….: The stock market (at times) is the most important OF ALL for Real Estate:
    • Stock prices are a leading indicator of activity and prices in the high end of all real estate markets as liquidity events enable trophy home purchases and second, third and fourth homes around the world: homes for skiing, homes for surfing, homes for college kids, homes for wives—aka incremental demand at all price points!
    • Stock prices often lead employments markets which lead activity in the lower echelons of real estate markets. Average & median home prices are fundamentally driven my jobs and incomes in the commutable distance to the property. Stock prices reflect better expectations which drive hiring and firing.
    • Most interestingly of all: Short term movements in stock prices reflect short term changes in attitude of large numbers of people. These same attitudes drive home purchase decisions by large numbers of people.

We all already know that mortgage lending has been difficult. It has eased somewhat, but it’s still tight.

The direction of Marin Real Estate markets will be led by the stock market. If the stock market is supported near 8,500 on the DOW and we bounce around between that level and where we are now (10,300+-) everything will be fine, the bottom of our real estate market will happen sometime in 2010 or early 2011.

Currently, the stock market is all important in all price leves: if the stock markets retests the March 2009 lows—that will spell serious trouble.  The ultimate bottom of the stock market correction will signal that the bottom of the real estate market is 6-12  months off:  as it takes time to sell homes when loans are hard to come by, companies aren’t hiring, and everyone has lost money in stocks.

The ultimate scope of the housing correction, and the Great Recession will be determined by stock market price levels over the next 6-18 months.


Belvedere Real Estate Update

Filed under: Belvedere — dwdupont @ 9:47 am

Belvedere homes and home prices are similar to Tiburon (or vice versa). Troubled Belvedere homeowners as well as sellers that simply want to move for ANY reason, have been holding out for 20 months now. But they can’t hold out forever; and we are now finally seeing homes trade at more reasonable prices.

Like every town in the county, loans were taken for a variety of reasons (remodel, vacation, new cars etc) leveraging real estate like it was a Treasury Bond with a guaranteed return. The middle chapters of this story are now complete: these real estate return assumptions were faulty, but the money was already spent (growing our economy at an unsustainable GDP rate). And now after years and years of living in Belvedere, as well as months (or years) spent on remodel with very high input costs (wages & materials), these homes that are finally coming to the market are priced to “get their investment out”. Homes priced this way rarely sell in a declining market where other comparable homes nearby are “priced to sell”.

There are $200,000,000 worth of homes for sale on and off the MLS in Belvedere alone. The longer these homes site on the market, the lower they will sell for. The average list price of a home in Belvedere is $5,000,000.

We have entered a period of much slower growth due primarily to 2 things: the demographic reality of the baby boomer generation on the down slope of its generational spending cycle, and second—a glut of debt on every level: consumer, municipality, state, region and nation.

Homes sold for very high prices in 2005-2007 during the peak spending years of the baby boomers and the peaking lending years by banks. There may be a few homes purchased by buyers at prices where money is less important than finding the perfect house; but most of these homes will likely sell at lower prices. The longer sellers wait to drop their prices the less they will get for their homes.


Mill Valley CA Real Estate Update

Filed under: Mill Valley — dwdupont @ 7:23 am

Mill Valley Real Estate has had a decent 6 months. Activity in the lower market segments really increased, many homes were sold, and families were able to move on with their lives. Like other areas in the area, state & nation many homes were purchased based on assumptions which turned out to be incorrect, and on a financial paradigms that proved faulty:

Example of mistaken assumptions & a broken Paradigm:

  • A lot was purchased with a tear down on it for $995,000 up near the Edgewood area of Mill Valley.
  • At the time everyone said it was a “fantastic deal.”
  • A new 3,250sqft house was built that cost $435/sqft to build during peak market conditions.
  • Additionally the owners spent about $200,000 on hardscape, landscaping and architecture and are into the house for about $2.6m.
  • While it is a beautiful house with a wonderful floor plan for a family, it is of average finish and quality due simply to the cost of materials at the height of the bubble.
  • The family had two incomes, but the husband was transferred back east by his company. He said no, left the company, and started looking for work… but it was slow going.
  • They put the house on the market at $2.7m so after commissions they would be “almost whole” not including any compensation for the endless hours, & marriage and family stress of selecting and designing items.
  • They are now getting offers in the mid $2.2m range.
  • The house will eventually sell near that $2.2 number and after commissions will result in a $400-$500,000 loss…. not to mention all the time and energy wasted with architects, designers and selecting door knobs.

Last year saw a tremendous number of situations very similar to above. Mill Valley average home prices tanked just over -20%. Most of the sales that drove down average prices were in the bottom 2 quartiles of price in Mill Valley– the upper market homes mostly sat and got dusty.

Activity in the upper market however has continued to be sporadic but now there are at least homes selling—the ones priced to sell. All the other homes are priced to “get my money out” — these homes aren’t selling in this market. Sellers are advised to wait 3-5 years to sell higher priced homes as you will have a difficult time getting your money out in this market.

The assumption that someone will eventually come along and buy it doesn’t work in a declining market the way it works in an rising market. In a rising market, the longer you wait the better your chances are regardless of how many days on market. In a declining market the longer you wait for Mr & Mrs. Right, the lower your eventual sales price will be.

While recent data for Mill Valley SFR homes is improving– +8% for the year relative to the last 12 months, this is the kind of bounce you would expect this time of year anyway and so at best we are mildly improving. The likely path moving forward depends on the direction of the stock market as it will lead the employment markets and housing in all price ranges.

One way to hedge price decreases in your home: go short the S&P 500 (this should not be considered as investment advice or financial planning advice). Please speak with your investment advisor and if you don’t have one, please try to find one.

“Jake Schutt at Parallel Advisors (www.paralleladvisors.com) says that first: you should have a financial plan in place and know how you are tracking against your goals. This also puts portfolio gains and losses in meaningful context. Second, a diversified portfolio with the proper allocation will protect you against downturns.”

Recent market data of homes in contract in Mill Valley:

Mill Valley condo prices are seeing a 2% bounce relative to the last preceeding 12 months.


Tiburon CA Real Estate

Filed under: Tiburon — dwdupont @ 7:23 am

Until now Tiburon has weathered the recession with little blood spilled. The reason has more to do with the holding capacity of Tiburon sellers– being wealthier and generally more successful, they can withstand downturns longer than people in other areas; but eventually homes get listed and sold at price levels that make sense given incomes in the area. My data shows that the average homes in Tiburon are trading at over 6 times average incomes when the normal range is closer to 4. We will have more accurate income data in 6 months or so when the Census data is published, but the point is that the paradigm for Tiburon home purchases was recreated during the bubble years and  needs to be redefined.

Tiburon Single Family Homes are in moderate correction mode -2% over the last 3 months versus the trailing 12 months as measured by $/sqft of sold homes. A more positive statistic is that Tiburon average prices are up almost 6% during this time. Either way, the data is at best mixed and is not good as it coincides with the Spring Rush after a very slow year.

Tiburon condos are actually doing MUCH better over the last 3 months +8%, but remember that was after 40% declines in 2009.

Tiburon homes in contract as shown below are a coincident indicator of activity in the market. As you can see measuring this blog to past Tiburon blogs, more homes are selling at lower prices. My guess is that the direction of the market over the coming months will be moderately negative as distressed situations that have been waiting for 18 months for resolution are finally coming to market, or are being repriced to more realistic levels.

The market for Tiburon homes has had a tough week. There following homes have either recently sold or are in contract:

1)      140 Lyford Drive, Tiburon wonderful lot – 5,023 sqft

  • This house sold for $4.4m in 2005
  • Closing Price Today = $3.370m
  • sold for $670/sqft

2)      7 Hillcrest, Tiburon built in 2007 & well appointed – 4,950sqft

  • Sold for $2.950m on 2/24/10
  • Sold for $605sqft

3)      2311 Spanish Trail Rd

  • Sold for $3.030m on 4/30/10
  • $678/sqft

4)      70 Gilmartin Drive, built in 1990 – 5,560sqft

  • Sold 3/27/10 for $3.275m
  • $589$/sqft

5)      490 Ridge Rd. Tiburon, brand new house on a wonderful view lot with a pool $4,111sqft

  • Contingent near $3.3m asking price

6)      616 Ridge Road,–went pending back in December – OLDer COMP

  • Sold at $3.321m
  • $683/sqft

7)      198 Stewart Drive – This sale is over 6 1/2 months old—the Tiburon market has declined substantially since then – OLD COMP

  • Sold for $3.065m 11/5/09
  • $785/sqft

Sausalito CA Real Estate Update

Filed under: Sausalito — dwdupont @ 7:03 am

 Updated 6/3/10

Sausalito Real Estate continues to struggle. The area has been hit severely by the real estate meltdown– worst in Southern Marin by several different metrics: Average & Median price declines, average $/sqft declines, and unit sale declines. There are currently 60 SFR homes (not condos) for sale and only 8 of them are in contract, or 13%. This representsd very difficult conditions and foreshadows additional price contraction ahead as value buyers strong arm sellers.

Every person, buyer, seller, bystander, & non-local Realtor asks the same thing: why is Sausalito down so much more than other areas in Southern Marin? The answer is as follows: Sausalito is as impacted by San Francisco real estate buyers trends as much as it is by Marin County buyer trends. The buyer trends in Marin are: the only real buyers in the marketplace are families with kids. All other buyers are really just kicking tires right now, even though they may think they are serious about buying.

The only people with any urgency to buy right now are families with kids looking for schools. In San Francisco– schools are a real problem: public schools are mediocre, and the good private schools are almost impossible to get your kids into. The same is true for public schools in Sausalito– so families with their offspring are staying on 101 for another exit or two to find a better public school district, larger back yards and warmer afternoons.

SO…. the are very few real buyers in the Sausalito market. Plenty of tire kickers, but almost no real buyers. This likely won’t change until there is clear indication of an improving economic situation.

The Sausalito SFR market is still in a Moderate active decline at -5% over the last 3 months

The condo market in Sausalito is doing better at +1$ over the last 3 months.

SFR & CONDO % in contract as off 6/3/10:


Marin County Real Estate Update

April 30, 2010

Filed under: 2. Marin Update — dwdupont @ 6:53 am

4/22/10: This update only covers Southern Marin Towns: Sausalito, Tiburon, Mill Valley & Belvedere.

The general trend on the surface is similar to 30 days ago– 32% of the homes on the market were in contract then and same is true now. Some of these homes in contract are short sales and 17 of them are Contingent on the sale of another home which means the real number of homes in active contracts is probably closer to 28%. this is still a very good number and is enabling our local economy to self correct, deleverage and families to move on with their lives.

The feeling on the street however is that things have really slowed down in the lower markets while demand has shifted more up market at least relative to the last 12 months. The numbers don’t corroborate this so we will just have to see where things head from here.

The economic data still points to an increasingly stable economic recovery.

This site works in conjuctuion with www.thedupontgroup.net our primary website and if you have any questions please do not hesitate to call me 415-867-6611.


Belvedere CA Real Estate Update

Filed under: Belvedere — dwdupont @ 6:43 am

4/22/10:  The trend is slightly improving here in Belvedere. There are 2 more homes on the market than there was 30 days ago AND 2% more of the homes on the market are incontract.

There are two schools of thought regarding which end of the real estate market leads the area out of weakness. On the one hand– the ultra high end of the market is represented by the ultra successful which have proven their hand in the market place. Some people believe that this market segment leads the area of weakness.

I however, believe that generally the lower end of the market leads the area– that liquidity in the lower end enables home owners to trade up as their incomes and families increase; that this demand trickles its way upmarket until it reaches the higher end. This is what is happening now– as the liquidity in the lower market segments over the last 4+ months is just now reaching upmarket.

To a certain extent both are true depending on the economic circustances (job market) and what is happening with the stock & capital markets.

This site works in conjuctuion with www.thedupontgroup.net our primary website and if you have any questions please do not hesitate to call me 415-867-6611.


Sausalito CA Real Estate Update

Filed under: Sausalito — dwdupont @ 6:35 am

4/22/10- Things are definitely improving in Sausalito! 6 weeks ago there were over 50 homes on the market and none of them were in contract. 30 days ago there was 11% of the homes on the market were in contract and today there are 16% in contract. This is still representative of very weak real estate market– albeit MUCH better that it was.

This site works in conjuctuion with www.thedupontgroup.net our primary website and if you have any questions please do not hesitate to call me 415-867-6611.


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