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Bay Area Housing Market Outperforming Rest of the State, C.A.R. Official Says

Friday, October 27, 2006

Even as sales slow in the housing market, the Bay Area continues to do well compared to the rest of the state, according to a California Association of Realtors® (C.A.R.) official.

At a luncheon held at the San Mateo Marriott on Wednesday, C.A.R. Vice President Leslie Appleton-Young told San Mateo County Association of Realtors® (SAMCAR) brokers and managers, “The Bay Area is out-performing the rest of the state, right now, hands down. The Bay Area still has the lowest inventory, homes here are still receiving multiple offers, and if properties are priced right, they’re gone. You’re going to come out on top.”

DataQuick Information Systems recently reported that Bay Area home prices fell on a year-over-year basis for the first time in more than four years in September and that the median price paid for a home in the nine-county Bay Area was $611,000 in September. That was down 1.5 percent from $620,000 for the month before, and down 0.8 percent from $616,000 for September 2005.

Appleton-Young said the turn in the Bay Area's economy was more severe during the dotcom bust. This time, the area is not experiencing any economic distress; it’s economy is healthy, unemployment is down, interest rates are good and job growth is positive. In terms of specific areas, she expects San Mateo will do better than the rest of the state. She said she is more concerned about the Central Valley, the Sacramento down to the Bakersfield area and the second home markets.

DataQuick figures show the September 2006 median home price in San Mateo County was $745,000, down 0.9 percent from the same period last year. Sonoma County suffered the most significant drop of 7.7 percent, with the median home price at $537,000 in September 2006.

The last four years were a boon for the housing industry, Appleton-Young explained. “Appreciation was so strong; mortgage interest rates were so low. The market gave a clear message that you can’t afford not to buy a home.”

Market conditions are different today, she noted. She told brokers and managers to expect relatively flat prices for the next couple of years. How long conditions will remain this way will depend on the psychology of buyers and sellers, since buyers still expect a “fire sale” and sellers still cling to the thought of a 10 percent or more yearly appreciation and multiple offers.

“It will take a while before things get back in sync,” she said.

Appleton-Young acknowledged this year’s soft landing was more severe than originally forecasted by C.A.R. “It happened a lot sharper than expected,” she said. “We predicted a 2.5 percent decline in sales, when the actual decline was about 24.5 percent. We’re anticipating a 25-30 percent decline in sales by the end of the year, although this is not happening with prices.”

The C.A.R. economist said the beginnings of the downturn in the housing market began already in the fourth quarter of 2005. She pointed to Hurricane Katrina, the war in Iraq and high energy costs as bringing consumer confidence down, which in turn impinged on the housing industry.

“Consumer spending is two-thirds of economic activity, and it's down a bit," she said.

Affordability continues to be a problem in California, she indicated. In 1970, the California median home price and the U.S. median home price different only by $400 dollars.

“The division between the haves and have nots has widened,” said the C.A.R. official.

Appleton-Young said the slowdown in the market is “all about expectations,” unlike that of the 1990s, when widespread job losses hurt the area.

“The rates are not going to be the primary deterrent of the future of the housing market. It has to do much more with nebulous expectations. It’s going to be based on what people think is going to happen. We need more of an alignment of expectations of buyers and sellers,” she explained.

Sellers need to get more realistic about pricing their homes. She stressed, "Please do not take an overpriced listing. Sellers need to realize that 10 to 20 percent annual appreciation isn’t part of the deed. Don’t spend lots of money on advertising which you will not be getting back on homes that are priced unrealistically. Things would move much faster if we didn’t take overpriced listings.”

Appleton-Young also disclosed a recent C.A.R. survey shows there are more Internet buyers today, as seven out of 10 prospective home buyers use the Internet to research homes. She advised Realtors to sharpen their skills in this area and to respond to clients quickly.

A recent C.A.R. survey showed most buyers respond to the first person who responds to their e-mail. Of Internet buyers, 62 percent expect a faster response; 44 percent expect Realtors to respond to their e-mail in 30 minutes or less.

"The speed of the response time is important," she emphasized.

In closing, the C.A.R. official told Realtors, "California was once an island. It took 150 years to get it changed in the map. Don't let it happen to you or your company or your industry. We’ve been through this before. We got to deal with it … and go on from there.”

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The San Mateo County Association of REALTORS® (SAMCAR) is a professional trade organization representing over 3,800 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula. SAMCAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in San Mateo County.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Julie Ziemelis, Director of Public Affairs, e-mail , or phone (650) 696-8214.

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