News and Views

Right from the start of the year it was apparent that buyers had suddenly decided that the time to take action had arrived. It started slowly then accelerated like a rocket! Any desirable homes up to around a million dollars were getting multiple offers if they were priced right. What was it that catalyzed the change?

I think a lot of it is about frustration. I know many of the buyers I have been helping have wanted to move for a year or to but there was always that uncertainty about prices. Had we really bottomed out? Was there going to be a “double-dip” in the economy? What about the foreclosures and the supposed “shadow inventory” that the banks were holding back? Would we see a flood of distressed properties dumped on the market with a resulting collapse of prices?

It seems that buyers decided that it really is not all gloom and despondency in the real estate market. The headlines in the national press (and even the regional press) did not apply to the San Ramon Valley. Real Estate really is local so there was really no good reason to wait any longer. It was time to buy again.

All of this should have been great for the local economy. When people buy homes in large volume, many local businesses benefit. Home improvement stores like Home Depot and Lowes do well as do the paint stores and furniture stores. It all makes for a great knock-on effect.

But there was a problem. Historically, people who have unsold homes in late November tend to take them off the market for the Holidays and then put them back on in March or April. There are also relatively few new listings early in the year because many people spend the first few months getting their homes ready to sell in early spring. So we had a large pool of would be buyers looking at a very low level of inventory. The result was that any homes that were properly  prepared for sale, professionally presented and priced right were selling in a matter of days with multiple offers. All of this is borne out by the chart here.

The area covered is from Alamo to San Ramon over the period October 2011 through March 2012. The line graph shows numbers of sales agreed over this period, and as you can see this just took off rapidly from the beginning of the year. Sold properties lagged behind by a month, which is exactly what you would expect based on a typical 30-35 day escrow period, but numbers of homes for sale has  stayed constant over this period. Inventory is being bought up but it is not getting replaced at anywhere near the rate it needs to be in order to cope with demand.

With multiple offers in a sellers market, the outcome is generally increased prices and indeed we are seeing that  happen. Until recently, we could rest assured that prices would be controlled by realistic (or even pessimistic) appraisals but this does not seem to be the case here. I have recently seen homes appraising at values that have surprised me. Not only that but when homes have failed to appraise at full price, I have seen buyer ans seller split the difference and I have seen the buyer just accept it and bring more money to close the transaction. Sellers do not want to lose the home when they see an appreciating market.

The big question is “What will happen now?” I think we will continue to see prices rising, at least though May, and then provided we get more homes listed for sale, prices will probably stabilize. As for the rest of the year, it is hard to predict. I know that if I was thinking about making a move, I would want to get my home on the market as fast as possible to take advantage of this wild, wild market.