The weekend of March 14th and 15th could prove pivotal for the San Carlos housing market. For the first time in a long time, sellers may finally benefit from the perfect storm of events:
Inventory headed down. As of Friday morning we were down to only 64 Active properties. We started this week with a high of 68 and it looked like we might bust through the 70 threshold. However, we managed to put four properties into contract and I believe one more will be taken off today, leaving us with 63, plus any new properties which may come on for the weekend. This may be the first sign of some good news for sellers.
Stock market finally has a solid week. The San Carlos real estate market largely reflects the stock market. The fact that the stock market finally had a solid week and was able to hold on to gains should give buyers a little more confidence.
Interest Rates on jumbo loans are finally coming down. A few months ago, trying to get a fixed interest rate on a jumbo loan below 7% was very difficult. Slowly banks have loosened the reigns on these rates and the requirements. Many purchases in San Carlos require a jumbo loan. As these loans once again become more accessible, the San Carlos market will continue to improve.
Active versus Pending Ratio is solid. Currently, San Carlos properties are running at better than a 3:1 ratio of Active versus Pending properties. This is a ratio that you would expect to find in a healthy market.
Spring is finally here. After a very rainy February and early March, we appear headed for the first real spring weekend of the year. Great weather should help buyer turnout.
Whether this is enough to jump-start our relatively flat market remains to be seen. However, clearly, this weekend represents the best chance that we have seen in some time.
3 Comments
Bob
I fear for the buyer that takes one good week in the stock market as a sign of anything.
Given your view about the stock market playing a major role in the San Carlos housing market, and with the market off by 50% in six months – I dont see much chance for a strong spring.
One think I have notices about agents, and sales people in general (I worked in marketing analysis for many years), is that they are very focused on the short term changes in the market and tend to over emphasize small moves importance as a harbinger of the market. Of course, when a person in in the trenches sees a few extra bullets flying his way, it really really makes an impact on his view of the war.
One question I had for you was about the active to pending ratio. Have we seen an increase in houses sitting in escrow for long periods of time under buyer contingencies? Because the active-pending ratio does seem pretty neutral, but prices clearly are dropping. So I am speculating if the ratio is being skewed by overly long escrows and/or high numbers of homes dropping out of escrow. In short, I am asking for data from the front lines.
Hi Baggins,
Thanks for your post. First, I wholeheartedly agree with you that one good week in the stock market is absolutely nothing to pin your hopes to or suddenly go out and purchase property. The point I was trying to make (and perhaps I worded it poorly) was that this was the first time in a very long time that there was finally the slightest hint of something positive for the market, that’s all. That point combined with the others listed above, may be enough to move a few more properties than we have been moving.
As far as the short term versus the long term, I have always advocated a long term view on this site. I have repeatedly stated that if you are thinking of buying and then selling in under five years, this is not the market for you. The same applies to flipping properties, etc. However, for folks in the move-up market or looking to buy a rental property in San Carlos, the short term market may very well work for a purchase.
I like the terms you used in your post, “war, front lines, trenches”….that is spot on, and it is exactly what it does feel like at times.
Regarding the active versus pending ratio, I went back and calculated the length of time of all pending properties in San Carlos. When properties enter into contract the realtor must enter the date of the contract as well as the close of escrow (COE) date into the MLS. I went back and pulled this data and counted the days between the contract date and the stated COE date. I tossed the high and the low and averaged the remaining pending properties. The average COE is scheduled to be 37.71 days for all properties that are currently pending. Over the last year, the average COE was 28.89 days. So the current escrow period is about 9 days longer.
Hope this helps. Thanks again for the post.
Bob Bredel
Your post is overly optimistic. The bay area market has a long way to come down to make up for the irrational exuberance of buyers (and lenders) in the last 10 years or so. San Carlos is no exception. Given the strict lending requirements for jumbos (and even “conforming jumbos”), I really don’t see how houses are continuing to sell, even at the slightly lower listing prices we’ve been seeing recently on the peninsula. One small upward blip in the stock market is not a sign of market recovery. Those who have their house down payment tied up in the stock market are still down ~50% from the peak, and won’t be liquidating to purchase a home anytime this decade.
This is how bad things really are (and also why the market is not going to get better anytime soon): couple in their 30’s, stable jobs, good income ($300k+), excellent credit (790+), low/no debt, have owned homes previously outside of the bay area, now looking to buy on the peninsula (“starter” home, 3/2 in livable condition). They talk to a mortgage broker. Mortgage broker says: “great income! great credit! no debt! perfect home buyer! let’s talk down payment! 25%???” Couple laughs. Good one. Broker is serious. 20% minimum. 30% for best interest rates. The banks think property prices are going to come down way more. They don’t want to be left holding the bag yet again. Can’t blame the banks. Couple decides renting is a VERY good idea, buying is a VERY bad idea.
This is a pretty common story for potential first time home buyers on the peninsula.
My question… who is buying these houses at today’s prices? The days of hitting the jackpot with stock options, IPO shares, and/or huge bonuses are over. If you aren’t already in the market, you’re pretty much screwed when it comes to finding $200-250k for a down payment, unless you want to raid your retirement or kid’s college fund, both of which seem like bad ideas. And given the instability of real estate values, no one wants to put $250k into a house down payment and watch it disappear as prices come down out of the stratosphere.