The Marin Real Estate Market: Bubble or Recovery

Posted by Anastasia Sheldon on Tuesday, April 30th, 2013 at 12:52pm.

Is it a bubble or a recovery?

We are seeing tremendous market corrections. While the rest of the country is also seeing an uptick, the SF Bay Area is having a meteoric rise in prices.

Almost weekly, a someone asks, "What is causing the steep rise in prices?".

The difference in a nutshell: jobs.

Interest rates are great nationally and local inventory is low- now that the distressed properties are drying up.

However, the biggest difference that sets the  Bay Area a part: Bay Area companies began outfitting for hiring two years ago by acquiring office space and building out those spaces. Technology, Investment and Medical Science sectors were poised to hire by early 2012.

By Spring of 2012,  new recruits began to look for housing in San Francisco and further South.  Many others were forced to look for homes further north as competition in Sf drove prices beyond the reach of many. We, in my industry,  started hearing  stories about  San Francisco open homes;100 visitors per day became the norm with ten offers per home not uncommon.

A year later, Central and Southern Marin agents anticipate a minimum of 100 visitors to each open home.  Five to ten offers are not unheard of. (Although, the average is closer to three or four per home.) Homes go into contract usually within seven to ten days of their on market date. Thus, the days on market has dropped as well. Short sales are hard to find. ( A rise in prices = better home equity= fewer short notes on homes.).

Will home values continue to rise? We need to correct for weak pricing from earlier years but hopefully, strict lending guidelines will temper home prices and slow down the rise. The other X factor has to do with inflated personal portfolios. The stock market has been over the 14,000 mark for some time.  Where are the gains coming from? Solid investments or risky schemes? The strict guidelines in lending are healthy and necessary. Where are the same for equities? I worry that there is too much "fake" cash floating around out there due to risky investments. Perceived portfolio gains do effect homebuying spending habits of the clients that I work with. They are willing to over bid on homes.

Overbidding was a common practice in the mid 2000's. Hopefully,  home prices will begin to stabilize around the values associated with 2005-6 by the end of this year.

Some Numbers:
Marin Residential Real Estate median prices increased 21% in the first quarter of 2013, up from $685,000 in 2012, Q1 to $830,000 in 2013 Q1. (Email me for details on your town.)

The average price also increased. It rose from $945,000 to $1,059,000 which is an increase of 12%.* 

The days on market dropped precipitously as well. The median days on market dropped 39% from 98 days to just 60 days. The average days on market dropped from 142 to 103; down 23%.

Mortgage Info:
More Good News For Borrowers:  The Difference Between Conforming & Jumbo Interest Rates is Shrinking.
 
Even as interest rates begin to rise, the difference between conforming and jumbo loan rates is shrinking, and that is good news for buyers of higher-priced homes.

Conforming loans are largely financed by Fannie Mae and Freddie Mac, and are valued at up to $417,000 - although they can be as high as $625,500 in the Bay Area.
 
Jumbo loans are anything above that and are funded by banks or private investors. Rates used to be far higher for jumbo loans, but that is changing fast. The spread between a jumbo and a conforming rate was as wide as 0.875 percent last summer. It is between 0 and 0.25 percent more recently.

The improvement is attributed to tighter lending guidelines that have reduced consumer late payments, strategic defaults, and foreclosures. Thereby giving investors confidence to buy jumbos again which means lower rates for consumer borrowers. (Mortgage news provided by Gina Kemsley of Terra Mortgage.)

*Median represents the middle home value while average is a total of home values divided by the number of sales.

Anastasia Sheldon

Direct 415-302-4123

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