What kind of real estate market is this anyway??

Was this video helpful? :

• No Discussion Started

Links & Docs

The June Market Metrics Reports, validated what we’ve been saying for a number months. The Bay Area Real Estate Market is showing consistent increases in sales activity and median prices are rising.  A question that has come up several times is “what kind of market is this, a seller’s market or a buyer’s market?” We’ve become very used to categorizing the market one way of the other. 

I’ve been active in the real estate and mortgage markets for 30 years and recovery’s always start at the same place, the entry level.  That’s right, it takes first time buyers to get the market moving.  First time buyers buy from sellers who themselves “move up” to higher priced homes. A “trickle up” effect, if you will, that eventually reaches the high-end of the market.   That’s one of the reasons we see the focus on first time buyers in federal and state stimulus programs that provide tax credits to first time buyers.

The activity that is creating the upswing in sales and median prices across the bay area counties shows extremely strong activity in each market’s entry level price range. Moreover, in the first week in June the number of pending listings in some areas exceeded new listings for the first time since July of 2005. This is an indicator of a healthier supply/demand balance.

Clearly, buyers at the market’s entry level have decided that we are at or near the bottom. The $8,000 federal tax credit provides extra incentive to move. And according to a recent Gallup poll, 71% of Americans think it is now a good time to buy a home.

 

So if we’re on our way to recovery, then we must be moving from a “buyers” market to a “sellers”, right?  Perhaps.  But there’s more to the story.  You see, in many areas, the majority of the sellers are banks, not people.  In fact, according to DataQuick, a provider of real estate market data, 55% of California home sales in May were properties that had been foreclosed on in the prior twelve months.

The number of REO or “bank owned” listings in our market is staggering. These are properties banks have repossessed from foreclosed homeowners and must sell.  When a bank-owned listing is sold, the seller, the bank, isn’t going to “move up” into their own purchase at a higher price.  There’s just a bank selling a foreclosed home.

So called “short sales” have a similar effect.  While the seller is a real person, the lender that agrees to take less than owed to complete the sale really controls the outcome, and very few “short sale” sellers are in a position to “move up”.

You see my point: The market is moving in a positive direction, but the climb up from the bottom is likely to be a little bumpy along the way and may take longer this time.

This is great news if you’re a buyer or investor: Prices at all levels of the market remain attractive. If you’re a seller – particularly at the high end – you must continue to price aggressively and have your home in top showing condition to sell.

In the meantime, we’ll continue to look for signs the market recovery is moving upward.

• No Polls for this Video