Outlook Highlights

• Economic growth will likely strengthen to about 2.5 percent in 2012.
• The U.S. unemployment rate will decline but likely remain above 8 percent.
• Mortgage rates will likely remain very low, at least through mid-2012.
• Housing activity will be better in 2012, but not robust.
• Expect less single-family originations but more multifamily lending in 2012.

According to Frank Nothaft, Freddie Mac, vice president and chief economist, ”While the headwinds remain strong going into 2012, there are indications the economy and the housing market are gaining ground, albeit slowly. Sustained and increased job growth beyond the average monthly payroll gains of 130,000 so far this year ending in November are essential. In housing, look for the rental market to lead the way and for some improvement in the single-family space in parts of the country. All told, next year will be another bumpy ride.”

Get the latest information from Freddie Mac’s Office of the Chief Economist on Twitter: @FreddieMac

From Alto’s August 1, 2001 report,”the Market Action Index has been trending down lately, while inventory and days-on-market are climbing. The trends imply a weakening market. The market has been consistently cool for several weeks. Demand level are low relative to the available inventory. It’s a Buyer’s market and prices continue to fall. Look for a persistent shift in Market Action before prices plateau or begin to rise again.”

Buyers Market: As the chart above shows, according to Altos Research, Saratoga CA has been a “buyers market” since late 2007.  This means that the rate at which homes are being absorbed (sold) is relatively slow compared with total available inventory.  This market condition is more the case in the upper price range, but there was a good price distribution of Saratoga home sales during 2010 as the detail below shows.  There was actually a hot market for homes within the Saratoga school district in the $1.3-1.5 million price ranges during the Spring, 2010.

Sales Volume: There were 287 homes sold in Saratoga, CA during 2010.  Note: this includes only those homes listed on the Multiple Listing Service and there were a few properties sold, but not listed.  This volume  is up from 2009 and 2008, but lower that previous years prior to the national recession.  The average and median price of Saratoga homes sold during 2010 was actually higher than in 2004.

Price Range: Prices of detached homes actually sold (closed escrow) in 2010 ranged in price from $5.6 million to $456,000.

Inventory : At the start of 2011 there were only 68 detached homes and 8 attached homes listed on the Multiple Listing Service in Saratoga, CA.  This is expected in increase seasonally this Spring.

Distressed Sales: There were only 20 detached homes sold through the MLS that were distressed (Real Estate Owner or Short Sales) – this represents less than 8% of the market!

Days on Market: Many overpriced homes have been on the market quite a while, but for those properties that actually sold (closed escrow) the DOM in 2010 was a reasonable 66 days.

Here is the detail for 2010 detached homes sales (closed escrow) in Saratoga, CA:

Here is the detail for attached homes sold (closed escrow) in Saratoga, CA:

Rick Bonetti | APR Referral Network | 408-8800 | DRE #01237009

Currently, the median price of closed home is $1.87 million; while the median list price is $2.174 million. The Interactive Chart above for Saratoga, CA is updated weekly so SaratogaVoice can be your community resource to answer your question “How’s the real estate market?”

The median price of homes for sale in Saratoga dropped rapidly in 2010 until May, when it leveled off.  There was a second smaller drop this fall, but median price has been on the rise again since early November 2010.

Meanwhile, inventory has dropped seasonally to 106, but days on market have been increasing again too since mid summer.  Inventory is expected to decline further and then start to rise again late January 2011.

The buyer-seller index is under 30%, which indicates it should be a good time to be a Saratoga, CA home buyer early in 2011.

Rick Bonetti | APR Referral Network | 408-857-8800 | DRE#01237009

Mid October, 2010 I was at the CAR Expo in Anaheim where Chief Economist Leslie Appleton-Young gave the California Association of Realtors 2011 Economic Forecast.  Here are some highlights:

The housing market next year in 2011 – will be driven by the slow pace of recovery in the economy and modest job growth.

• The number of home sales in California – are expected to edge up slightly with a lackluster 2 percent increase in 2011 to 502,000 units.
• The median home price in California – will increase 2 percent in 2011 to $312,500.
• California jobs will increase of approximately 1.4 million in California in 2011 and an improvement in unemployment figures.
• Distressed properties will continue to figure prominently in the market in 2011, but economists do not anticipate that lenders will flood the market with distressed properties.
• Discretionary sellers will play a larger role next year.

Two Housing Markets – California housing market continues to be a tale of two housing markets:

1)  The segment of the market under $500,000 has been driven by distressed sales with lower supply and rising prices.

2)  Higher-priced areas of the state have been constrained by restricted financing options, and increasingly have experienced an increase in the number of distressed properties and continued softness at the high end.

Yesterday Lawrence Yun, Chief Economist for the National Association of Realtors presented his 2011 Economic Forecast.  Here is a summary of his perspective entitled Economic Outlook in Uncertain Times:

We are living in highly uncertain times. i.e. recent foreclosure moratorium in several states by some banks.  Here are some notable recent quotes:

Ben Bernanke -”Outlook remains unusually uncertain.”
Alan Greenspan -”If home prices start falling again, we could be facing a double-dip recession.”
James Bullard -”The U.S. is closer to a Japanese-style deflationary outcome.”
Thomas Hoenig -”Too rapid money creation results in eventual high inflation.”

• GDP – most of the time GDP moves in a positive direction, but this is the sharpest downturn since the great depression!
• Housing Bubble – pending contracts on existing homes have been very erratic in the past few years since January 2009 (at the bottom).
• The Federal tax credit – caused a spike this year, but there has been a big downturn after April 2010.
• National Employment – last year, 5 million jobs were lost in the United States, but home prices rose! The test will be this winter (6 months after end of the tax credit).
• California Housing – we had a housing recovery even before the tax credit because California is the most expensive place to live in the country so the $8000 credit had a minor impact.
• California Home Prices – they have overcorrected and had a sharp recovery.  There was a rush of buyers back into the market.
• California Home Sales Volume – now the market is very close to normal in terms of volume, but it may take 10 years to fully recover fully in terms of earlier prices.
• Employment – the current job market recovery is slow (still at year 2000 level).
• Home Prices – are beginning to firm up.  Case-Shiller Price Index also shows that home prices have rebounded and are off the bottom. Not all parts of the country are the same though. i.e. Las Vegas is still in decline – there people “re-bought” their homes at higher price by refinancing.

Jobs and fear are the only things that are holding us back.  Weekly first time unemployment needs to fall further.

• Business spending – dropped and has leveled off even though business profits have been rising since the 4th quarter of 2008!
• Business hiring – Companies know that consumers are slow to spend again so they are slow to hire.  Health care legislation and regulatory bills also mean that companies are slow to hire again because times are uncertain.
• The stock market – is high because profits are high.
• Housing Inventory – Still high months supply of existing home inventory because the rate of absorption has delined recently.
• Short sales and foreclosures – will be with us for several more year.
• U.S. Housing starts – are remaining very low even though population is growing.  This means that we will eventually have a housing shortage.  Builders are not building.  This is the case locally in Silicon Valley too.
• Mortgage interest rates – are at 50 year lows.  With strong credit scores buyers can get 4.4%.  Interest rates will rise if inflation rises.  Current low mortgage rates could rise very quickly!
• Inflation – CPI is 1% now, but the (pipeline inflation) Producer Index is up 2% and PPI is very high, as are commodities.  At some point the Federal Reserve will loose control of interest rates when the job market improves and inflation kicks in.
• Home rental rates are on the rise in some areas such as Washington D.C

Forecast:

• Moderate GDP expansion 2-2.5% in the next two years (historical average is 3%)
• Mortgage rates will be higher next year.
• Home values – no meaningful change in national prices in next 2 years.
• Homes sales will struggle in the near feature.

Alternative Outlook:

• High inflation and devaluation.
• People holding back for better prices and holding back the economy.
• Budget deficit “tipping point” with higher interest rates and a sharp cut back in standard of living.
• Sharp 4-5% GDP growth releasing pent-up housing demand ( there are 30 million more people today versus 2000 when home sales were similar) and surprising higher home sales and home prices.

Rick Bonetti | Alain Pinel Realtors | 408-857-8800

According to the Santa Clara Assessors Office 2010-2011 Annual Report , assessed value tax rolls in the County declined in 2010 by 2.43% – the first time since 1978, when proposition 13 was passed in California.  This means city and county governments are tightening their belts to compensate for shrinking revenues.

The County Assessors office proactively a instituted an online technology to allow for reductions in assessed valuations. As a result, assessed values of 118,690 properties were reduced by the Assessor’s Office as of the lien date,  January 1, 2010, to reflect changes in market conditions.

Related articles

• California Property Tax Rolls Shrink 1.8% in ‘Historic’ Slump (businessweek.com)
• Santa Clara County Home Sales Increase for Fifth Consecutive Month in 2010 (prnewswire.com)
• County fair set to lose funding next year (faircarnivals.com)

Recent media news reports trumpet that sales of existing homes plunged by 29 percent in July 2009.  Is this the whole story… or is this the beginning of election year rhetoric?  Further, do the national statistics have any bearing on how the real estate market is doing locally?

Home Prices Stabilizing – First, let’s put things in perspective. National Association of Realtors Chief Economist Lawrence Yun at his monthly press conference in Washington on August 24, 2010, pointed out that “One of the remarkable things about home sales today is the strength we’re seeing in the national median price.”  He noted a resiliency in prices as a bright spot -  a resiliency due to the equilibrium of prices to household income (including mortgage-payment to income) and the drop in new-home construction. Which is more important – number of sales or home values?

Consumer Confidence – With prices aligned with the economy and interest rates remain historically low (4.42 percent on average), what’s missing is consumer confidence, and that appears to be dependent in part on evidence that jobs are growing.  Elections will be won or lost based on which party is able to communicate best whether we as a nation are gaining or loosing on the job front.  Expect much more negative political media spin on the economy.

Saratoga Real Estate Sales – It is easy, but wrongheaded, to infer that national trends are the same as specific local markets. Take Saratoga, CA 95070 for example, where there were 25 closed detached home sales in July 2010 compared with 27 closed sales during July 2009.  The average sales price of those homes in July 2010 was $1.880 million compared with $1.819 million during July 2009.  Furthermore, those Saratoga sold homes were on the market and average of 44 days for July 2010 compared with 135 days for sold in July 2009!

To bring us even more up to date there were 29 closed sales in August 2010 in Saratoga, CA with an average price of $1.94 million. Hardly a market in decline and crisis!

A Crisis of Confidence – But we still have a crisis of confidence (whose analysis of facts to trust) – whether it be politicians, economists, stock brokers or real estate agents.  Home buyers who just read, watch or hear national real estate trend sound bytes tend to think it is a buyers market everywhere and that things may get worse – which puts them at odds with home sellers who think they are already selling below what their property is worth.

I believe the most astute home buyers are seizing the opportunity to buy a home now at good a value.  It takes careful research and local knowledge.  I try hard to deliver facts and thoughtful interpretation of the local real estate market as I see it and to avoid over-optimistic Realtor spin.  I wish we could trust our media as being unbiased.

What do you read in the tea leaves?

Related articles:

New listings: 10
List price decreases: 3
Pending contingent sales: 6
Sale pending: 4
Closed escrows: 2

Earlier, the mid-upper market priced from $2-3 million was slow, but this reversed this past week with several new pending sales in that price bracket. The highest priced new pending sale is a property on Maude Ave. at $2.9 million, which was been on the market 281 days before finding a buyer.  On the other hand, a nearby home on Quito Road, priced at $2.4 million sold in 9 days and a newer home on a nearly half acre lot on Juniper Lane, listed at $2.6 million was only on the market 13 days!  A $2.7 million priced property on Chester also was sold this past week after dropping the price $155,000.  In addition, two Golden Triangle homes (Twain Ct and Argonaut Dr.) went sale pending as did one on Williams near Saratoga village.

Inventory - Ten new properties were added to the inventory of available single family homes for sale in Saratoga leaving the totla currently 137, which is significantly below last year at this time.

Rick Bonetti | Alain Pinel Realtors | 408-857-8800

The low end of the distressed market in Silicon Valley has been more impacted by general decline in market values of comparable homes.  Saratoga distressed properties are more diverse and range from $2.295 million down to $399K. Most of the Saratoga foreclosures are the result of adjustable rate mortgages notes coming due without potential for refinancing.

The shadow market of properties not yet on the MLS (as identified by Matrix) shows 17 total REO in Saratoga, plus 24 in preforeclosure status.  8 homes are scheduled for auction in Saratoga, CA in August 2010.  A summary list of these properties shows the the status, address, foreclosure recording date, scheduled sale/auction date and type of mortgage; additional detail information is available by calling me.

Rick Bonetti | Alain Pinel Realtors | 408-857-8800

With that qualifier, it is fair to generalize that the real estate market in Saratoga, CA 95070 has been somewhat cooler for several weeks as demand has waned (paralleling the general decline of the stock market since early May) and inventory has increased seasonally.

Perhaps with the recent stock market uptick during the early days in July we will again see a surge in real estate activity too, which we experienced earlier in 2010??

According to Altos Research’s Market Action Index it has been a “buyers market” in Saratoga since fall 2007, in that the current sales rate versus inventory is less than 30:

Average home prices in Saratoga bottomed out in 2009, rising sharply toward the end of the year and then started a downward slide that appears to have stabilized now at a higher level than the previous year.  32% of listed properties have had a price decrease! More expensive homes, rather than those under $2 million have taken more of a hit.

The median list price is currently $1,795,000.  To put things in perspective, this “average” Saratoga home is a large, 3,059+/-sf, 4br/4.5ba home on a 1/4 to 1/2 acre lot – prime real estate!

Keep in mind when we’re talking averages there may still be multiple offers for well priced homes.  There are some good values in all price ranges depending on the motivation of the sellers.

As a home seller, now rather than later this fall may be a better time to put your home on the market as we expect inventory to continue to rise this summer.

Call me for specifics that apply to your situation as either a home buyer or home seller.

Rick Bonetti | Alain Pinel Realtors | 408-857-8800

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