In this week’s edition of Weekly Market Watch we felt it appropriate to provide you with a Q&A with answers to many of the most commonly asked questions regarding today’s market.  I hope you enjoy this edition of Weekly Market Watch:

1.  What will the industry do to adjust to the new market demand or lack thereof?

  • I think we’ve been adjusting in recent years as the market has struggled with the economic downturn.
  • But at Coldwell Banker we’ve grappled with the challenging market by working to grow our business.
  • We’ve launched a number of new initiatives, such as our Market Trends program, a CaliforniaMoves.com redesign, efforts in social media, enhancements to myREcafe.com and more
  • We’ve instituted far-reaching new customer outreach campaigns both at the corporate level and through our agents.
  • And we’ve launched more focused marketing campaigns, especially e-marketing, and deployed more advanced technology for our agents.
  • Additionally, we’ve looked at this as an opportunity to recruit outstanding agents to join our team – people who have a strong track record of success and have been through these cycles.
  • Although we’ve certainly had our challenges like everyone else, I’ve been encouraged by how we’ve weathered the storm and actually have grown business and market share in some regions.
  • I guess I’m also optimistic that we’ve seen the worst of the downturn. Our market figures and reports from the field tell us things have improved tremendously over the past year.

2. How much more contraction can we expect?

  • No one has a crystal ball, but the data I’ve looked at from our offices and the market in general tells me that we’ve seen the worst of the downturn and are heading back.
  • I don’t mean to say that we’re back to normal – far from it. But we’ve seen solid improvement in many of our markets.
  • Last year, much of the gains came from bargain hunters buying up foreclosures and other distressed properties…
  • But since last fall, and especially this year, we’ve seen strong improvement in the mid-range and even some of the upper levels of the market.
  • Still, I also realize that as much as we’d all like it, I don’t think we’re going to have a V-shaped recovery in the economy or the housing market.
  • This rebound is looking like it will come in fits and starts – more of a stair step improvement than a straight line.
  • We’ve certainly bounced sharply off last spring’s recessionary lows. But growth has slowed in the aftermath of the federal tax credit expiration.
  • We also face economic headwinds in the months ahead – high unemployment, very slow GDP growth and consumer spending, and concerns about the debt markets.
  • Nonetheless, I’m optimistic by improvement we’ve seen in sales in the Sacramento/Tahoe area.
  • Couple that with an improving stock market, affordable home values and record-low mortgage rates and I think you have a solid foundation for a steady housing recovery.

3. What continues to insulate or separate the Northern California area from other markets?

  • The Sac/Tahoe area’s housing market has long been one of the most sought-after– not only in California, but across the country.
  • The demand for housing here has historically been far greater than most other regions for a number of reasons:
    • First and foremost, the astounding entrepreneurial success that continues to spawn high-paying jobs and affluent employees looking for homes.
    • Also, there’s a tremendous quality of life here that few regions in the world can match – outstanding schools, a wealth of recreational activities, proximity to Lake Tahoe and to the Bay Area, five-star restaurants…and so much more.
    • Buyers have long been willing to pay a premium for homes here, and sellers have historically received strong returns on their housing investments.
  • So while the Sac/Tahoe area has not been immune to the economic and housing downturn of the past few years, this region may be bouncing back stronger than other parts of the country.
  • I would say that long-term investors who have waded into the market of late will be rewarded for their efforts with solid returns over the years.

4. What influence does the nation’s economic crisis have on real estate?

  • It’s an interesting question.  It will be hard for the market to come all the way back to normal until we get our house in order, both in terms of the economy and what’s happening in the government.
  • With a large budget deficit, the government must find a way to begin closing the gap. The only two ways of doing that are by cutting spending and increasing revenue – most likely both.
  • Increased revenue will come as the overall economy recovers, but in the meantime it could mean increased taxation – perhaps sales and income tax.
  • On the reduction side of the equation, closing the gap will likely mean job cuts and more unpaid furloughs of state employees.
  • Both scenarios mean less disposable income for homeowners and potential homeowners to spend on housing.

While all of this will certainly have an impact on the housing recovery, I honestly believe it’s more than offset by the positives we’re seeing:  buyers taking advantage of record-low mortgage rates and attractive prices, as well as a slow but steady improvement in stock portfolios, the jobs picture and the overall economy.

Overall, the long-term future of real estate is bright.

Now, let’s take a look at this week in real estate:

Placer County: Auburn and Rocklin/ Lincoln and Roseville/ Granite Bay:

Sales Activity—July was good with 50 sales.  30 of these had a 3% commission and we had an average sales price of $273,217.  We were successful in closing several short sales.

Activity on bank owned properties (REO’s)  has slowed although still receiving requests for price opinions (BPO’s), but this seems to be the trend currently in this area.

Open Houses continue to see traffic with as many as 21 and the hosting agents generating good leads.

Our “floor” activity has also picked up with several calls turning into sales in the past few weeks.

Listing inventory in this office is down and it is the same with many of the offices in this area.

Closings were off for the month with several being delayed among the short sales and several appraisals coming in low.  Our biggest difference in the appraisals was one that came in $29,000 below purchase price and the appraiser used 2 active short sale listings as his comps.

Auburn:

Sales Activity—I think everybody was on vacation!! We only had 11 sales and 10 closings.  We have several closings pushed back as they are short sales.

Listings were also down with only 10 for the entire month.  The listing inventory in Auburn and surrounding areas is also down.  There were only 6 homes on tour on the MLS tour last week.

Open house activity has been very low but the turn out at these has been decent with agents generating new leads.

We are looking for a new office and the office has many different opinions on this location which is creating a unique energy in the office.

Recruiting has been going well as was noted in my comments from Rocklin/Lincoln office.  One of the agents I met with for lunch has been in the business for 25+ years and may be ready to make a change later this year.  I have also met several of the broker/owners and am building a relationship with them.  I have a couple of agents from KW that are ready to come over, but want to wait for our move.

Roseville/ Granite Bay:

Activity has been steady in the past two weeks: 24 sales, 15 listings, but not at the levels that we would like for it to be.  Although things are slow, we did end July okay for the office.  Rates are low, agents are working, but we need to get the buyers off of the fence; furthermore, dig up some listings!

The agents that are working are trying their best and are excited about opportunity- opportunity to help clients and opportunity to learn, in fact we just finished an In-house class on short sale net sheets which is very fitting for the market.

Solano County: Dixon & Vacaville/ Fairfield:

Both listing inventory and sales inventory are finally increasing and is generating much activity in open houses and prospects.

Another week of high floor calls!!  Our Solano county Escrow companies are very busy and hiring, a good sign for the market! Agents say they are getting an increasing number of calls from clients to buy and/or sell.

Vacaville- Fairfield:

The last couple of weeks our sales have been encouraging – currently our “traditional” sales are equal to the REO’s;   we have one new short sale and three new construction properties.  As always our agents have great focus, they show up every day and they are a constant source of encouragement to their clients and the community.  With the mild summer we are experiencing we hope that the buyers will continue to come out.

El Dorado County: El Dorado Hills and Placerville:

EDH: Inventory is still sketchy with just 354 active listings, 154 of which are short sales. We listed a traditional sale in the mid 500k range and agents are clamoring to get their buyers in. Multiple offers already.  Great closing month in July.

Placerville: Sales are off to a good start this month but listings are getting hard to find. All the agents are working hard to find sellers that can sell because their homes should sell quickly.

Greater Sacramento Area:

Elk Grove:

It’s up and then it’s not.  One week things move at a feverish pace and then the next week, activity goes a bit slack.  There does not seem to be rhyme or reason for the cycles- it’s bizarre.   This past week, open house traffic on one end of town was so fast and furious that the listing agent is asking other agents to attend the next time she holds the home open.  She had 33 groups through.  On the other end of town, 8 groups came through during the same time period.  Some listings that appear to be priced well aren’t selling,   while in one case a listing in Fallbrook had nine offers and sold $10,000 over asking price.  Not an REO or short sale.  There certainly is one constant in all of this for the agents.  The agents working a solid prospecting and lead follow up plan are very busy.  One agent with just five months experience has four escrows and is showing properties like crazy.

Fair Oaks:

Inventory has picked up in the past two weeks- we’ve listed approximately 10 properties. We are finding that there are serious sellers out there and are also listing reasonable with a  market driven price.

Agents are working diligently and success is really showing.  Sales have been good for the month of July!  REO’s have been slower and Short Sales are more difficult to close but we are getting the job done.

Agents in the office have been prospecting even more now. We all know that schools are starting earlier this year and should expect (although hopefully not!) a slight slow down for a few weeks.

Listings over $500,000 and over are seeing increasing activity.

Overall my agents feel confident that the market is picking up with both the sellers and buyers.

Sacramento- Sierra Oaks Office

While sales continue to show some softness, there are small signs of an increase in our business.  Listings are increasing and open house reports are showing great activity.  We are also noticing a Buyer trend of Buyers being more critical and often times backing out of transactions.  “Caution” seems to be the operative word with Buyers.  They are cautious of jumping into a transaction and also more cautious than normal in review disclosures and inspection reports.

Pricing in some of our areas are still showing a small decline, but in several areas there has been little price resistance, i.e. East Sacramento, Land Park, Wilhaggin, Arden Park and Del Dayo areas.  It is amazing sometimes how little these areas have been affected with regards to the downturn that we have been experiencing.  Meanwhile, our clients and our agents realize that we are not at the bottom of this market, but there are some signs of a turn around.

Sacramento- Metro Office:

The listing inventory is decreasing; we’ve seen an absolute stand-still for the past few months.

Open houses are steadily attended, of course better in the more desirable, core areas.   Short sales are improving and we’ve seen activity on REO’s as well.  The agents in our marketplace are all very solid, experienced agents and are focusing on how to do business on today’s market and not stuck in the ‘hot’ market.

North Lake Tahoe-Truckee Region

The end of July finished strong with 33 sales as compared to a slower and expected start.  All in all, activity level continues to remain brisk and we are optimistic for the third quarter 2010.

For the year thus far, residential and lot sales are up 56% from the previous year and the outlook remains positive for the remainder of the year.  We continue to see advantageous sales prices, favorable interest rates and consumer confidence in our market as compared to the previous year.

The median sales price has decreased by a whopping 16% to $385,000 and the average sales price have decreased by 9% to $518,890.  With the higher than expected number of sales and lower sales prices, it points to the fact that astute buyers continue to show strong interest in Tahoe-Truckee real estate which is priced in some cases at 2001 price levels.

The hottest segment of the market is homes priced under $500,000 as roughly 67%. (494), of the sales have occurred in this segment.  Distressed properties, REO and Short Sales represent roughly 34% of the sales in the market. However, there is still considerable interest in non distressed properties as many are priced at levels that are too good to pass up.

Active Listings: The active listing inventory for the Tahoe-Truckee market increased slightly from the previous week to 2,194 active listings in the market; 1,572 residential properties and 622 lots and land listed for sale.  Coldwell Banker has 14% of the active listings in the market.

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