SEASON OF CHANGE

Intro: The fall season, a time which beckons change, is certainly reflective of today's real estate market.  All of what we have become familiar with in real estate the past few years has changed.  As inventories continue to increase and the market continues to balance, buyers are reaping the benefits with a selection of homes on the market that they have not seen in years.  While multiple offer situations have slowed, there are still some out there.  Homes that are priced appropriately are selling; those that are overpriced continue to sit on the market.  Buyers are optimistic these days and slowly but surely, sellers are getting realistic with their pricing strategies. 

Statistics:

Statewide: The median resale price of a single-family detached home in California for August was $576,360, a 1.6% increase over the revised $567,320 median for August 2005, C.A.R. reported. The August 2006 median price increased 1.7% compared with July's revised $566,940 median price. 

Unsold resale inventory in August was sufficient for 6.8 months, compared to - we said 2.9 months a year ago, CAR claims 2.6 months now - of a year earlier. It was an improvement over July's 7.5 months. Median number of days till sale was 52, up from 29 a year earlier; 22% of existing homes are on the market for 90 days or longer.

Top Ten-Plus List: The ten California communities with the highest median home prices, and over 30 sales, in August were: Manhattan Beach, $1,850,000; Saratoga, $1,517,500; Palos Verdes Estates, $1,450,000; Los Altos, $1,438,750; Newport Beach, $1,310,000; Burlingame/Hillsborough, $1,272,000; Calabasas, $1,150,500; Rancho Palos Verdes, $1,125,000; Mill Valley, $1,025,000; Santa Barbara, $1,017,000.  Four out of ten, like last year, though not the same four.  Made the price but not the sales: Belvedere Tiburon with 16 at $1,980,000; Alamo with 12 at $1,524,500; Orinda with 22 at $1,328,250; Larkspur with 13 at $1,320,000; Sausalito with 15 at $1,195,000; Lafayette with 19 at $1,147,500; Greenbrae with 13 at $1,120,000.  Odd one out: Los Gatos with 44 at $1,019,000.  Chasing the pack: Danville with 70 at $998,000.

Bay Area: August median price, at $737,110, is down a sliver for the month, up a sliver for the year. Sales activity is up 12% for the month and down about 23% for the year. Santa Clara County's median price is down 4+% for the month, sales activity is up 11% for the month, down 23% from last year. Monterey County and region medians are a little bit up here, a little bit down there, but activity is down 30% to 35% for the year. Santa Cruz County, with a $765,000 median, is experiencing slow price deflation with a decline in activity.  San Benito County recorded 57 sales in August (54 of them in Hollister) and the $570,000 median is down about 3.5% year-over-year.

In every Northern California region, from June to July, sales activity fell; now between July and August, activity rose in every region, by between 8.5% (Sacramento) and 26% (Santa Cruz County).  After a downward drift, the market seems to be picking up in certain ways, and this just may be predictable seasonal effect, but it is nice to see that normal rules still apply.

Sacramento/Capitol Region: Among communities with ten or more sales in August, Shingle Springs, El Dorado Hills, Roseville, Broderick, and some zips in Elk Grove and Sacramento proper have improved medians.  Activity for almost all communities with 10 or more sales has declined by 3% to 65%, with the regionwide average decline at about 35%.

Interest Rates*: Thirty-year fixed rates, at 5.8%, have recently taken a sizable dive but are still above the 5.4% of a year ago. Still, the 30-year fixed now is exactly where it was in the fall of 2003, the late spring of 2004, the early summer and late fall of 2005, and at the very beginning of this year.  Do you remember prospective borrowers complaining about rates at most of those times?  We don't either.  Adjustable rates are at 5.7%, up from just over 5% last year. 

Inventory: Generous, even lavish.  Not in a position, generally, to exert influence on a prospective buyer's decision-making.

News Media: As we have for the last couple of months, we can praise the news media for thoughtfulness and restraint.  A few people are pointing out that the slowdown in residential real estate might prefigure a broader readjustment in the overall economy, but after all, making good guesses about the future is one of the things they're paid to do.  And plenty of writers are taking this as an opportunity to remind us that no steep trend in the real estate market - whether up or down - lasts indefinitely.

Overall Assessment: To operate in this market successfully, you may need a different sense of proportion, different timing and more patience than has been necessary since the turn of the century.  Right now, there are adjustments to be made; but as we continue to move through the current market, we may find rewards starting with a significant upturn in affordability and even a revival of Northern California's entry-level market.  Stay tuned.

*Area interest rates are reported to be as follows:

Sacramento/Tahoe, San Francisco Bay Area and Silicon Valley regions: Princeton Capital reports that as of October 5, 2006, the 30-year fixed with one point is 6.125%, the 15-year fixed with one point is 5.625% and the 5/1 ARM with one point is 5.75%, on non-conforming loans of $500,000.