Buyers in the Marketplace

Local Home Owners:

The number of local homeowners that are able to sell their current homes at a price that will enable them to trade-up or trade-down given the leverage they have amassed on their homes is small. This is almost an absentee buyer group in the current market. However– the ones that have liquidity know what they want (aka: emotion) and will pay up for a home that fits the bill.

Relocating Buyers:

Are a key buyer demographic for current local real estate trends as the number of relocating families are a function of the local economy and job market—which drive home prices. If this group is missing, then the location has experienced greater price declines. These are the best buyers in today’s market as they have urgency: their children need decent schools & the bread winner must hit the ground running to assimilate into their new career roles.

Renters turned Buyers:

Generally these folks were priced out during the exuberance at the top of the market and have waited years to buy a home. They drive a very hard bargain; think more like investors than home buyers; and will grind sellers down on price all the way until the home closes. Their biggest mistake is often purchasing the wrong home for the right price. Their primary source of data is lowest comps they can find, and always use distressed sales as comps.

First Time Buyers

There aren’t many first time buyers in the current market. The biggest structural change is over-leverage relative to incomes. A very close second structural change are demographic variations  in the buyer pool: we are in-between home buying generations with GEN ‘Y’ reaching maturity as home buyers in 5-7 years.  These buyers usually start in the low end of the market and work their way up over time.

Investors:

Are looking for the best deal they can get: scouting for cash flow or capital appreciation thru additions and/or remodel. There is no emotional pull for these buyers; they often buy with cash using other kinds of leverage, and look for distressed opportunities.

The “Job Creators” aka “The 1%”

These buyers typically buy homes at the high end with cash. Even this group’s buying patterns change with the economy even though their purchasing power is not materially affected– which is why the high end of the market is so slow right now. These folks can afford to pay the prices, but they are value-minded unless the home is a MUST-HAVE addition to the family real estate portfolio in which case they move very fast with conviction.

Market Velocity

The velocity of transactions has slowed in recent years both in term of actual unit sales, but also in terms of how buyers research, visit and negotiate for homes. Home buyers today generally take much more time to look for homes, weight their choices and then pull the trigger. The exception is relocating families—they act with conviction and urgency. This group is looking for turn-key homes in decent neighborhoods.

Additionally, demand hits the market in fits and starts. There are long lulls between “flurries” of buying activity. This off-again, on-again nature of demand for homes in Marin County Real Estate occurs in tandem with normal seasonal activity—where more deals are closed during the strong Spring market, and an uptick of sales in the Fall. The “off” patterns seem to generally track downside volatility in stock market indexes; Patterns of buying activity in the last 12 months are not-correlated with stocks nor interest rates.

Buyers won’t submit offers unless the home is a “compelling Value”– price continues to drive sales. Homes need to be aggressively priced to sell during a “flurry” of buying activity—if you aren’t properly priced and you miss a “flurry” you’ll have to wait until the next one which, if the past is any indication—will be several months away; or if the home is over $4m could be many months away.

Home Valuation Trials: Comps & Intrinsic Value

Most realtors advise clients on home valuation information by pulling similar recent market sales (‘Comps”) and comparing them to the subject property. This source of home valuation data is less and less meaningful as similar ‘Comps’ have larger and larger spreads. The result of larger spreads in ‘Comp’ sales is greater confusion as realtors become story tellers: they have to explain BOTH the distress in the market as well as the qualitative/quantitative relative differences across ‘Comp’ samples:

Example:

•              “This homes was a foreclosure”
•              “That home was a short sale”
•              “This seller was sick (divorce, job loss… etc.) and had to sell”
•              “This home was perfect and three families bid it up… etc.

The above explanation happens coincidentally with the normal qualitative comparing of ‘Comps’ such as:

•              “Home A had better sun, but more road noise than Home B”
•              “Home C had a great flat lot but wasn’t updated like home A
•              “Home Z had 17 cats and buyers couldn’t get thru the front door

At some point almost every home buyer becomes exhausted & thoroughly confused by these layers of explanation and resolves to do their own research. This usually results in an online $/SQFT analysis using AVM data from an online real estate site  like Zillow.

Once a home buyer resolves to do their own research online using free home valuation data every negotiation suffers. The data is intrinsically inaccurate while also being symptomatic of our times– the distress evident in the spread of home sale data is impossible to read in the numbers found online.

The process of valuing homes in relation to other homes that have recently sold creates momentum in whatever direction prices are moving until there is a strong polarizing catalyst.

The comps tell us nothing about a home’s true worth– only the approximate current market value—and even that is deceiving in this market. Market values are driven by emotion; intrinsic value is a function of the input materials of the house, the lot & location of the house, local job market & fiscal health of the municipality, and the quality of life evident in the communities.

People want to buy homes—it still IS the American Dream. We have to reprogram the way buyers think about home value. It is irrelevant that the home next door was distressed and sold for a pittance– what matters is the intrinsic value of the house relative to what a buyer can purchase it for today. Homes are trading about 14% under their intrinsic value combined with the effect of the lowest interests rates ever creates the best affordability of the decade.

In Conclusion

As of the preparation of this report on Dec. 1st, 27% of the homes currently on the market in Marin are in contract. This is indicative of a healthy real estate market—buyers and sellers are agreeing to prices en-mass. Very similar to last year, this late-season flurry of deals occurred closer to Thanksgiving than Halloween.  The largest difference from last year is the lack of high end deals that statistically “saved”  2010 from being a poor year- particularly for Tiburon & Belvedere prices which are more affected by a few, missing high-end sales.

The biggest statistical change in 2011: Tiburon & Belvedere are both having tough years with average prices down near 20% from ‘10. This is the 3rd -20%+ year for Belvedere since 1960 (’91, ‘09, ’11).

The good news is that San Francisco leads the country in job creation (+15% from trough) so home sales and prices should marginally improve thru Spring  2012 (65% likelihood*). The caveat: if the EU unravels and the financial ‘contagion’ spreads to the US it will force us back into recession (30% likelihood*).(*Ken Rosen)

Earning Your Business

The purpose of this Southern Marin Real Estate Blog is to offer greater insight into Marin County’s local real estate markets than you can find anywhere else– to help you make better decisions for yourselves and your family. The research found in these pages is our competitive advantage in this market. We have yet to find a rational buyer who doesn’t respond to this data; remember most buyers emotionally want to buy a house– they just don’t understand the value proposition. You deserve a agent to represent you on either side of the transaction that has done  their homework.  If you are thinking about listing or buying a home all we ask is that you include us in your interviewing process.

Thank you & Happy Holidays!

Dave DuPont MBA, CFP

Marin County Real Estate Update December 2011 is a post from: Southern Marin Real Estate Blog

The biggest statistical change is after weathering the recession better than all Marin towns, Tiburon has had a very difficult year with SFR prices down near 12%– off 27.5% now from peak 2007 prices which is now in line with most other towns in Marin.

The economy continues to be the biggest impediment to RESI real estate sales. During secular downturns like the one we are currently experiencing or like post WWII period and the mid 1970s – early 1980s, the periods of expansions were much shorter than in periods of secular expansions (sourcewikipedia.org). The 4 recessions of 1949-1961 followed on average just 3.5 years after the last recession; the recession of 1973-75 followed just three years after the previous; and the 1981 recession followed just 1 year after the previous. Given the structural (debt) imbalances currently weighing on the US at the personal, municipal, state and national level—it is highly likely that the this period of expansion is becoming fairly long in the tooth, and given recent economic data regarding employment and stagnating growth combined with falling home prices and rising costs (education, health care, insurance, food, energy/gas etc) it is quite likely that 2012 will see another economic contraction.

How to position yourselves:

Sellers: The effect of the lowest mortgage rates ever (The 10 year interest only is now under 4%) has done very little to add demand to the top half of the market. The market has never been more price dependent—and it is likely heading lower over the coming months. Smart sellers are getting ahead of the market on price.

Buyers: While it is possible, even likely, that home prices will contract further thru the next recession, its isn’t clear that affordability will significantly improve. It is hard to imagine that the appetite for US govt debt—which drives mortgages rates—will not suffer thru the next recession and that when yields reverse direction it will likely be a sharp and quick uptick in borrowing costs. The key is to take your time and find the right home and then act with conviction—try not to get hung up in marginal costs.

The DuPont Group is having another great year having closed almost $20m in sales year to date– focusing on one client at a time. We’ve found that in times of market stress that you can’t be all things to everyone– that you have to pick your clients carefully and stay focused on their needs until they’re resolved.

Interim Marin County Update is a post from: Southern Marin Real Estate Blog

Big Picture:
A distinct surge in positive home buying sentiment appeared in the first few months of 2011 triggered primarily by people wanting the recession to be done with and reacting to each positive media announcement as proof that the “Great Recession” was FINALLY OVER!  Unfortunately, the earthquake and tsunami in Japan, and the revolutions in the Middle East combined with dismal US economic data domestically reversed this media consumer trend and scared the home buying turtles back in their shells.

The current statistics clearly indicated a double dip in prices in Marin County—the severity of which is town dependent: Tiburon is having its worst year on record while Ross, and Kentfield are having quite positive years. This broad based double dip in prices is more reflective of sellers finally accepting the new pricing structure that a general decline in the pricing structure itself.

This double dip in prices combined with rising (energy) prices hint to a potential rough economy for a year or two ahead. I anticipate 5 more years of  challenging real estate market conditions broken up by brief periods of buying activity.

Seller Tips:

• Sellers need to be priced properly, on the MLS, and on lockbox available for buyers to see at a moment’s notice to capture these fleeting spikes of buyer activity.
• The market has never been more price dependent and buyers never more informed and  price conscious. Homes must be priced within a “window of perceived value” in order to garner offers—otherwise the property won’t get many showings and is quite unlikely to sell.
• The typical seasonal trends of strong Springs and slow Summers & New Years have changed and now any time of the year is an equally challenging time list your home for sale. We never know when these spikes of buyer activity will occur and during the Great Recession they have occured sporadically year yound.

Buyer Tips:

• Success for home buyers is dependent on a quick trigger finger. Homes sit until prices fall into the window of perceived value and then they sell very quickly. Don’t lose the deal because of a rounding error in highly charged negotiations.
• Buyers need to price homes by lot value and structure cost in addition to “the comps”. I have recently seen some homes trade for too much and others not enough because of valuation uncertainty.

As you scan the data below please consider that we compile all this data personally. We don’t buy it and paste it here. Your choice to work with us will save you money as the incredible time commitment required to assemble and publish this data each quarter results in much stronger and more dynamic negotiations which ultimately benefit you whether you’re a buyer or a seller.

The DuPont Group is a dynamic real estate team active in Southern and Central Marin communities. Dave received his MBA from Pepperdine University and is a Certified Financial Planner (CFP). Please call or email us anytime for more information.

Marin County Q2 2011 Update is a post from: Southern Marin Real Estate Blog

How do you define “Real Estate Recovery”?

Our definition for the purposes of this update defines real estate recovery as “liquidity, with fairly stable prices”. Put simply: sellers can find buyers; and prices are fairly stable with marginal changes.

The recovery of Marin Real Estate is in stark contrast to other real estate markets that pepper the national map. Where foreclosures are still very high, inventory of homes for sale is very high, where  new homes gather cobwebs, and prices are 30%-60%+ below the peak with no real solution in sight.

Local real estate prices are a function of local labor markets and the future prospects of the local labor markets. The evaporation of manufacturing jobs, and the rise of the service economy has left our more rural economies and tertiary cities with few employment opportunities. Stabilization of  home prices and unit sales is irrevocably bound to the diversification of employment opportunities in those locations

Nationally, “the Recovery” is uneven. In the top metropolitan economies such as San Francisco, New York, Chicago, parts of LA, Seattle,  Dallas and other grade “A” cities, the recovery continues.  Real estate prices are still falling in tertiary cities like Sacramento, Reno, Boise and rural locations.

The commercial real estate market for office space in San Francisco has come alive and is a prelude to increased demand in Marin County in 6-12 months. We went to a panel of commercial real estate entrepreneurs in San Francisco 3/30/11 including Maxwell Drever, Doug Shorenstein, and Stuart Shiff and they are all positioned for liquidating in the next ‘up’ market– i.e. they know the cycle has turned and are ahead of the curve. Their message about the market for commercial opportunities was : if you are waiting for “the bottom” it has already passed. The “generational opportunities” you heard about in the press were few and far between. There is a mountain of global money chasing cash flow from the best buildings in the best locations in the US—and these are trading at attractive prices. Older assets and those in sub-par locations simply aren’t trading or are going very cheap.

The residential real estate markets in Marin are very similar to SF commercial, and is a tale of two markets: Updated homes in preferential locations continue to sell at premium prices. Dated homes and or those in less desirable  locations are a real challenge. The cost of building was very expensive and now has increased slightly during the recession. Most buyers in Southern Marin are families and they can’t stomach a long expensive project.  More importantly, the post-construction cost for updated homes is not recoverable in the current market unless the house trades marginally above lot value.

This trend of homes trading close to lot value while updated homes trading at premium prices will make value in our real estate markets extremely difficult to discern using $/SQFT from market comparables. All automated valuation models (AVMs) like Zillow will be even less accurate then they already are (median error of Zestimate is about 12.5%).

 SELLERS:  Two lasting traits of the “Great Recession”:

First, home buyers are extremely value conscious. Homes need to be priced within a “Window of Perceived Value (WPV)” in order to garner offers. Otherwise, buyers will pass on to the next opportunity. If homes are priced “to get my money out”, the sales cycle may be long–  especially if you bought in the last 5 years.

Second: If the home isn’t updated it will likely sell closer to lot value. The cost of construction both in terms of time and money combined with near lunacy at the Marin planning boards, is just too expensive for most buyers.

Marin County is a very transitory place with only ~45% of the population living in the same house for more than 5 years. Buyers are more rational now in their expectations of both their time horizon, and buying versus renting. If they can’t find something acceptable they just rent.

BUYERS:

This recovery is all about location and San Francisco is one of the few premium areas poised for continued recovery as commercial office building data foreshadows. New SF offices bring new jobs, and jobs bring home buyers. Demand is strong right now in the lower market segments but slow in the higher end as the charts below indicate. Your biggest concern should be inflation (or stagflation as the case may be)… The loose global monetary policy of the previous few years at some point will bring very quick spike in prices similar to what was seen in the late 1970s when inflation went from 6% to 15% in several months.  The timing on this is uncertain, but will likely coincide with a significant event like a change in global reserve currency or the bankruptcy of a US state or municipality. Real estate is not a bad investment during times of inflation especially in preferential locations close to diversified employment markets. The key is locking in long term interest rate before interest rates spike. If you are keen on buying, please call me and lets put this data to good use in negotiations.

When you look at the below Real Estate charts you are seeing most data points hitting news lows. Please reference each town page for more specific and pertinent data for each town in Marin.

The long-term direction of Marin County home prices is positive and shows a bottom placed in 2009. The rate of improvement county wide is slowing. The health of the real estate market is less about price increases than about continued liquidity.

Marin County Real Estate Prices having a fair quarter. Prices of Southern Marin homes for sale are fairing a bit worse.

Liquidity for Marin County Homes is  struggling more in the high end.

 The data below shows that 35% of the homes on the market are in contract. This is a very high statistic and representative of a healthy real estate market… however homes priced above $1m are not as liquid but much better than its been for several years.

 Mill Valley CA homes, Tiburon CA Real Estate and Beveledere CA property had a tought Q1.

 Sausalito CA real estate however did better. Please read the Sausalito homes page.

The DuPont Group is a dynamic real estate team active in Southern and Central Marin communities. Dave received his MBA from Pepperdine University and is a Certified Financial Planner (CFP). Please call or email us anytime for more information.

Q1 2011 Marin County RE Review is a post from: Southern Marin Real Estate Blog

Sales in Southern Marin surged in weeks leading up to Thanksgiving.

Four segments of the Southern Marin SFR market:

• Entry level (below $1.2m): activity in this segment has been very brisk for 15 months.
•  Middle Market ($1.2m-$3m): Momentum in the entry level moved into the middle market about 6 months ago and the data has clearly improved.
• High End (above $3m): Buyer activity reached the high end about 4 months ago.
• Ultra-High End (above $7m): Improving but still very slow

The primary active buyer demographic now continues to be families looking for good public school options, finished homes with lawns (not remodels), preferably with views, 4 beds+ and 3.5+ baths.

Buyers continue make purchase decisions primarily because of perceived value. The sales cycle for homes that are priced correctly is generally short and sweet. Sellers who price their homes above the market hoping to “find the right buyer” are setting themselves up for a long disappointing sales cycle in market full of value hunters; and the wealthier a buyer is (to a point) the more focused they are on value.

The market data pretty clearly shows that a bottom was placed in most market segments in the various towns of Southern Marin during the third quarter of 2009. We are reluctant to call it “The Bottom” due to various sticky macro financial issues, but the direction of economic data appears headed in the right direction and this coming Spring is likely to be the best Spring selling season we have had in 3 years.

High End Update: Marin County does not bear high end pricing (>$10m) like other premium real estate markets around the world. Records show 7 closed deals above $10m in Marin since 2005 versus 25 in San Francisco, and many others closed off market (privately) in SF. There are currently 13 homes above $10m available for purchase in Marin and none are in contract. While many of these homes are truly remarkable: showcasing the latest and greatest in luxury living, many others are simply mispriced.

Belvedere is statistically the worst Mill valley and Sausalito have corrected more than Tiburon. Mill Valley and Sausalito are improving. Tiburon homes are still in correction mode except for Tiburon condos which really bounced in 2010.

Please see the individual town pages.

Marin County CA Real Estate Update – Q4 and 2010 Review is a post from: Southern Marin Real Estate Blog

Q3 Marin County CA Real Estate Market Review is a post from: Southern Marin Real Estate Blog

There has been a surge of interest in Marin homes in the last few days. My leading indicator for Marin Real Estate activity is reaching close to the highest level in almost 3 years.

The below graph tells a similar interesting  story. For all SFR sales above $1m (which is what it costs to buy a family home in Southern Marin):

Please click to enlarge:

Between falling prices and incredilby affordable interest rates it is a good time to consider buying a home in Marin County. We may or may not be at “The Bottom” of the real estate market, but interest rates will likely start rising as better economic data hits the news wires. To be sure we have a long road to consumer balance sheet health, but the survivors (Marin buyers) are locking in great deals with very affordable financing.

Please feel free to contact us  at any time and please keep reading below:

Dave DuPont 415-867-6611

Marin County Real Estate: Mid Quarter Update is a post from: Southern Marin Real Estate Blog

The current market rebound for Marin County homes is no exception: the current action in the market (while well below peak market levels in terms of both price and unit sales) is much better relative to the pace of sales in 2009. Price levels show widespread marginal improvement in Q2 and year to date relative to 2009.

This market cycle started in November 2009 and reached the ‘mid-high end’ about 6-8 weeks ago.

• Activity in the lower market segments in all towns is still brisk as you can see in the below graphs
• Activity in the middle+ market segments $1mm+ is decent: recently remodeled homes in acceptable locations are still selling for what I consider to be very decent prices. Homes which require remodel are not moving for several  reasons: 1) because recession buyers want to hit the ground running, not a multi-month project 2) Buyers want clarity on what their final costs will be and remodeling  especially in Marin is notoriously opaque on permitting and construction costs, 3) Most of the people actually buying  are families and they don’t want projects; and 4) sellers aren’t pricing their homes to actually sell in this market– buyers require a discount for both the cost of the project, but also a sort of retainer for the cost of living (and the headache) while the work is done.
• The ultra high end has been disastrously slow and will likely remain that way until sellers focus-in on the economy, pricing, and the secular directional change in the market (more on this below).  Example: The Average listing price of a home on the market in Belvedere is over $6.1m. Example #2: There are over 40 properties on the market in Belvedere and only one is in contract.

The difference in this recovery is that the secular direction of the market has changed. In most past recoveries, the longer-term trend in home prices was up and the counter trend was down. In this market, the longer term trend in Marin will likely be flat or marginally down with counter-trend bounces.

BUYERS:

Calling the bottom in any market is very difficult—real estate is even more so because affordability and pricing are not always the same due to changing levels of interest rates, and the advantageous effect of low fixed mortgages during times of inflation (and inflation is coming, but… after a period of deflation) .  Interest rates are at 30 years lows which combined with 20%-30% price decreases make housing remarkably affordable relative to the past 15 years. The direction of interest rates leads the direction of prices—interest rates will have long bounced above 6+% before the first group makes a significant capital gain on residential real estate.

Second, primary homes are not really investments—especially for families with children. This isn’t to say we should make ill-conceived investments in real estate; but that the real investment return on a primary home is measured in more than the actual dollars returned at the time of sale. Home buyers need to understand that living in a house is the primary investment return in and of itself; and the tax deductibility of mortgage interest is icing on the cake. Actual price appreciation will be unlikely until inflation rears its head later in the decade.

Since the return of a primary home investment is actually living in the house, home buyers need to take their time, breath deeply, set a budget and find the right house at a decent price. What we are seeing in the market place are panicky buyers focusing on the latest doom headline with shifting budgets trying to find the best possible deal. Please don’t shoot us when when we remind buyers that the best deal is quite often not the best home for you and your family. If you buy the wrong house for the ‘right price’ your actual return on your money will suffer every single day you live in the house relative to what else you could have gotten for about the same price. Every $100,000 costs you about $475 each month including property tax & insurance, and every $50,000 cost you $230 per month.

If you are worried about your job,  adjust your budget until you feel more comfortable– the economic picture is murky at best. That said– one of the best places for executives to live and work in this recession is the SF Bay Area. We are the gatekeepers of US entrepreneurialism & technology and there are (and will be) plenty of problems for us to solve moving forward.

SELLERS

The direction of the market has changed and you don’t benefit by low mortgage rates unless you are horse-trading into another house.

Horse Trading: if you are trading into another house you have long ago realized that its a game of arbitrage: Arbitrage opportunity #1: Loose money on your house, save near the same amount on the next house– but with greater utility = higher return on your investment. Arbitrage opportunity #2: Loose money on your house, spend even more with the new purchase, but with even greater day in day out utility = higher return on your investment.

Please call me fore more info on this if necessary 415-867-6611.

Straight Sale: If you are selling and not buying another home, the picture is less rosy. If you can hold on until 2015-2016 it is likely you will get more than selling now for your home (adjusting for inflation). If you factor in carrying costs for the next 5-6 years on a home you are not living in, or would prefer not to live in, then its probably better to bite the bullet and sell now.

Pricing: In a market which is trending flat or down for the next few years, you need to get ahead of the market.The last 50+ years you could get away with pricing high and eventually the market would catch up and the home would sell. In this market you can’t. If you over price your home on day one, your home will eventually sell for less. Every 1% on a non- horse-trade sale is big money. Pick the right Realtor who understands marketing with a track record of sales in this market downturn– the habits most realtors have developed over the last 10+ years is not translating well into selling homes in this environment. Very few agents do their homework– and homework (like what you read on these pages) is our ammo in your negotiations.

BIG PICTURE: Real Estate Investment

Despite what you read in the paper– real estate as a class of investment is not dead.

1) Unlike the capital markets where most of the non-arbitrage related gains take a while to mature, in residential real estate there is ALWAYS low hanging fruit. The residential real estate market is incredibly inefficient with most home buyers chasing the same tasty morsels like a gaggle of chickens while great, out-of-favor opportunities stagnate. Example: .6 acre lot at 40 Wolfback Ridge in Sausalito. A first-grader could make money on that one today in the midst of the chaos but the flock has long since brushed it aside…

2) Successful Real Estate investing has turned into a longer term play for investors who see opportunities, cycles and familiar patterns from a mile-high (i.e. everyone that cares to step back from the ledge). Real Estate investment has always been a location based phenomenon– and now is no different. The next 24 months will be an incredible opportunity for longer-term investors to invest in areas with good long-term relative demographic & employment prospects combined with constrained supply (example: the closer, commutable areas of Marin County).

Marin County Trends:

The current market conditions depend less on where your property is located than on the listing price of the home.

Homes are trading at a quicker pace in the less expensive parts of the county primarily due to lower price points:

Clear improvement county wide:

The pace of unit sales for Marin County Homes for the second quarter is positive:

If you ever doubted the seasonality of residential real estate, this should bring you into the fold. Note the gradual improvement:

Marin County Real Estate average prices: downward trend with a clear bounce by price and $/sqft.

Please call me at 415-867-6611 or email me at Dave@TheDuPontGroup.net to set up a time to talk. Our primary marketing website is www.TheDuPontGroup.net and a Marin pricing tool can be found at www.HomeToggle.com .

Marin County Real Estate: Fall 2010 Update is a post from: Southern Marin Real Estate Blog

 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 2^nd 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.

Keep your Powder Dry! is a post from: Southern Marin Real Estate Blog

• 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.

Marin County Update is a post from: Southern Marin Real Estate Blog