coldwell Banker - MARCH MARKET FLASH
Statistical data from CAR and DataQuick
PRAISE THE FED AND TEST YOUR INTUITION
Intro: Another
record-setting month and quarter. Are interest rates going up enough
to make borrowers wary? Will they stay low enough to keep payments
attractive even when affordability power-dives? Will your prospect
have to lock in a loan and wait for a house, or the other way around?
Welcome to a residential market that can be truly rewarding and
totally annoying in the same ten minutes.
Statistics:
Statewide:
The median resale price of a single-family detached home in California
for January was $485,700, an increase of two-plus percent for the
month and 20 percent over January 2004. (Also, $80,000 in a year.
Never seen the like.) Unsold resale inventory represented a 4.2-month
supply, compared to 2.3 months (CAR’s figure) for the same
period a year ago. Median number of days till sale was 48 in January,
up steeply from 27 for the month a year earlier.
Top Ten List: The ten
California communities with the highest median home prices in January
were: Palos Verdes Estates, $1,600,000; Newport Beach, $1,093,750;
Mill Valley, $937,000; Santa Barbara, $931,000; Los Gatos, $890,000,
Cupertino, $775,000; Encinitas, $729,500; Danville, $727,500; San
Clemente, $722,500; San Ramon, $717,000. Hey! Five in the top ten.
Haven’t seen that in a while. But don’t crow too loud;
it’s January, so activity is low, meaning some of the usual
heavyweights didn’t make CAR’s cut; a lot of the better
Southern coastal communities (Malibu, e. g.) had weak sales because
of storms and slides… And, making its first appearance on
the Top Ten List, Encinitas, which forty years ago was an achingly
cute little surfer village. Times change.
Bay Area: January
median price, at $666,740, is slightly higher than last month and
about 16 percent higher than the January 2004 figure. The Santa
Clara County median price of $664,000 is about level for the month,
up a solid 20 percent from last January’s figure. Santa Cruz
County median is up 10% for the month and almost 23% for the year.
Sales activity…look. Everywhere in Northern California,
practically everywhere in California, activity is down between
25% and 35% in the short term. It’s called December-to-January
roll-off, and this year’s just happens to be an extreme example.
Year-over-year activity is down about 11% in the Bay Area as a
whole, down 4% in Santa Cruz County, up 6% for San Francisco proper,
up 13% for Northern California as a whole, and up almost 34% for
Monterey County. This recalls our last month’s remarks about
a confusing market. (Oh, and that figure for San Francisco is getting
a lot of its punch from overseas buyers. Comparable for comparable,
a square foot in London is three times as much as a square foot
in SF – how’s that for horrifying?)
Sacramento/Capitol Region: Sacramento
median price, at $346,950, has – like
the state as a whole – picked up $80,000, which is 32% over
this time last year. Sales activity is down steeply for the month,
here as elsewhere, but has picked up about 1% from last year’s
level. Our verdict, like that of the Sacramento local press: Cookin’.
Interest Rates: Thirty-year
fixed rates are looking stable, for the moment, at 5.25% after
bouncing from a low of 5.1%, and down a half-point
since January 2004; adjustable rates, after being more or less
flat since the last quarter of ’04, have inched up this month
to 4.63%, a full point over last year. The narrowing gap between
rates for adjustable and fixed will, of course, continue to have
a disproportionate impact in California, where the ARM remains
the instrument of choice – although less so than a few months
ago. (And cross your fingers that the Asian central banks hang
on to their Treasuries.)
Inventory: Well,
it’s possible to find some correlation – in communities
where sales activity is high, inventories are low. You probably
figured that out already. But that makes the inventory picture
as messy as the activity picture; in perennially hot markets like
Marin and San Francisco, listings are getting scarcer again. Where
sales are leisurely, inventory may be much better. Add in the false “inventory-stretching” effect
of lengthening mean days on market, and you’ll end up saying
to yourself “Well, either I’ll find a listing or I
won’t.”
News Media: Who’d
be a reporter?! The poor things scurry around finding reasons why
this boom can’t last. Then it does. January 2004
was the hottest January since 1989. So was January 2005. (But if
you want some clues as to why residential property is staying hot,
take a look at the stock pages. The weak dollar and the nationwide
clashes over Social Security are making individuals more reluctant
to invest in paper.)
Overall Assessment: Last
year we said “This is a great market, yes,
but in the presence of two potentially strong restraining influences.
Those who can only marginally afford to purchase will be hurt by
declining affordability; those with plenty of cash may be held back
by a comparative lack of homes to their liking. That said, the appetite
of contemporary prospects remains about as strong as we’ve
ever seen it.” It’s amazing how much stays the same about
January and about Northern California. But this year’s market
looks more volatile than the spring market of years past – primarily
because of events that superficially have little to do with real
estate, California, or even the United States. It would be nice if
the current situation was more trustworthy in its fundamentals, but
hey…the very forces that make economics unpredictable are also
the ones that sell houses, right?
