Here’s a quick look at the stat I was taking about recently. The absorption rate, or the percentage of active listings going into escrow in a given month, was up to 75.3% for February for Marin County overall. That’s higher than it was in any month even back in 2005, at the height of that crazy market. More listings have been coming on the last couple of weeks, so we’ll see if it does mellow out a bit as we head into spring.
We’ve been posting for a while now about how hot the Marin housing has market has become, and how we need more sellers to bring homes on to satisfy the incredible demand. All of last year we saw low inventory and lots of buyers competing for those few homes for sale. Well, it’s gotten even crazier so far this year. We haven’t seen anything like this since 2005, and even then I’m not sure it felt quite like this. The whole county is experiencing the effects of the high demand and low inventory, but in especially popular areas like Corte Madera and Greenbrae it’s getting kind of ridiculous.
In Greenbrae for example, as of this writing there are zero active listings for sale. None! There are five properties in escrow, and a few have closed so far this year, but if you’re shopping for a home there right now you’re probably frustrated, and with good reason. Corte Madera has had a little more inventory, but with exceptions here and there everything is selling right away, with up to twenty offers in some cases. And looking a little farther north, just this week we’ve seen homes in San Rafael and Novato receive nine offers each.
Here’s a look at the absorption rate for all residential properties in Marin County, which is a good measure of how hot the market is. It’s measured as the percentage of the active listings that go into escrow per month, and it was up to a whopping 68.6% in January. That’s compared to 36.7% one year ago, and 15.2% back in January 2010.
This means that by definition prices are actually going up rather quickly, as each home that closes substantially over the asking price becomes a new comp for the next listing. It can’t go on forever, and a surge of new inventory this Spring will hopefully even things out a little, but for the moment we are in one of the hottest, most competitive markets Marin County has ever seen. It’s certainly great for sellers, but overall a little more balance would be nice.
Looking back at 2012 the big story the whole year was the incredibly low inventory level. It started low in January and never really ticked up much, and more buyers kept jumping in the market, sensing they had missed the bottom and had better buy a home before they missed the boat. The problem has been there just haven’t been enough houses for all of these buyers to buy. This has meant that correctly priced, desirable homes coming on the market have been getting tons of attention, and multiple offers have become common–almost a given in many cases. It’s been a great market for sellers and unless something changes dramatically it’s going to continue to be as we head into 2013. Here’s a look at all residential properties in Marin under $1.5 million (the most active segment of the market) over the last five years.
The light green bars that get lower and lower show the number of homes for sale each month, the dark ones indicate the number of homes closing each month, and that blue line that dips down to the floor at the end…that’s the number of new listings coming on the market. What does that say? We need more homes for sale!
And below is a look at the months supply of Marin County homes under $1.5 million, based on how quickly they’re going into escrow. It was down to 1.2 months in December! How bad is it? I just checked and there are only four active listings in Corte Madera right now–three single family homes. Three. This is not normal. There are only seven listings active in Fairfax right now. This is very unusual.
Now Real Estate 101 says you should bring a home to market in the spring when the weather is nice, the flowers are blooming, and a young man’s fancy turns lightly to thoughts of love, etc. And there are reasons for that of course. But if everyone else is thinking the same way then a bunch of homes will come on about the same time, so we get the big spike in listings like clockwork in April and May each year, as you can see in the first chart above (though 2012 was not quite a typical year).
On the other hand, if you go against the conventional wisdom and bring your property on in January or February, when there isn’t as much competition, you stand out more. And in a market like this with so little inventory and so many buyers chomping at the bit for a good house, going against the grain can be a solid strategy. Of course it helps if the weather cooperates and you’re not trying to sell your home in a monsoon, so there is that to consider.
If you’ve been thinking about putting your home on the market we’d be happy to help you figure out the best strategy for your situation. Email me at george@sfnorth.com, or give me a ring anytime at 415-819-3342.
Since the beginning of the year the market in Marin has been on fire and it has continually sustained that pace throughout the year. We usually see seasonal ups and downs throughout the year but that hasn’t really happened in 2012. The big questions are what is causing this and will it continue into next year?
One major factor is that interest rates are at historic lows. These low rates have made it possible for buyers to push their limits and be able to afford more home. Inventory is low because homes are being snatched up with multiple offers and we think sellers are seeing this and waiting to put their homes on the market, hoping to make more money if they wait. Another factor is the dramatic drop in short sales and foreclosures coming on the market. Also, some say the latest dot.com boom happening in San Francisco is pushing people out of the city and up to Marin because it is more affordable. All of these factors have contributed to making it very competitive in the Marin housing market but there is one other factor that has frustrated buyers and agents–the house flippers who have become so prevalent in Marin and Sonoma counties.
We often say to our buyers that the best investment is trying to find “grandma’s” house because it has often been well maintained and the list price usually reflects the updating that it needs. Most buyers want to pick their own finishes and are okay with pulling out old green carpet, refinishing the hardwood floors underneath, painting and picking out kitchen and bath counter tops. In Marin this usually means instant equity once a buyer transforms the house. The problem is that most of these nuggets are being snatched up by flippers who slap on some cheap updates and re-list for a hefty profit, thus pricing out many young families who would otherwise be able to benefit from such a situation. Of course some flippers are buying foreclosed properties on the courtyard steps for all cash, which in my opinion is fair game since they’re taking that risk, and most buyers don’t have all cash and aren’t willing to take the home subject to all outstanding liens.
But when a sweet home with upside potential hits the MLS buyers need to realize they are probably going to have to go up against flippers, who end up putting in cash offers with no contingencies. This is frustrating because these buyers, who would otherwise be able to compete for a good home with upside, instead end up with the option of buying the flipped house, often with updates done with poor craftsmanship, sometimes with concealed problems, and at an inflated price.
We know it’s “just business” and there is no law against flipping homes. But this trend is making buyers do things they wouldn’t have otherwise done in order to compete. One major concern we have is that now buyers are feeling like they have to rush to do pre-inspections and are basically being forced to write offers without a buyer inspection contingency, which can be very risky. A lot of buyers don’t want to spend up to $2,000 inspecting a home that they aren’t even sure they are going to own, which totally makes sense. We don’t want buyers to feel rushed doing their inspections yet we also want them to be competitive when they are going up against an all-cash flipper in a multiple offer situation. Each home and buyer is different and we of course council each situation differently, but overall we want buyers to have time to do their inspections and have time to reflect on a home’s condition, or to get further inspections if needed.
There’s no easy answer to all of this, but unfortunately it’s something buyers need to be aware of in this market. Obviously there are some good contractor/investor types who do a nice job when flipping a home and take pride in the outcome, but we’ve also seen a rise in the number of flip outfits that have turned the practice into a big business. And that trend is making it tough for regular buyers to compete for those homes, and it’s making them feel like they have to take risks if they want to try.
We posted back in May about the declining short sale inventory in Marin County, and how that trend has been contributing to the low overall inventory this year. Thought we should update how things have gone since then. A few more came on in May and June but the trend has generally continued, with only twelve new short sale listings in Marin in October, which looks to be the lowest number in any month since the short sale explosion began back in 2007. Here’s a three year look at short sale inventory in Marin through October:
That’s good news in that it looks like fewer homeowners are feeling the need to sell their houses while underwater, but not as great news for buyers who are feeling frustrated by the lack of homes available to purchase. It feels like we’re at a crossroads of sorts, where a lot of the homeowners who needed to sell (even in a bad market) have largely done so, while those who might like to sell, but don’t have to, are seeing the market improve and are thinking they’ll get more for their homes if they wait a bit.
At some point we should see more inventory as more sellers will jump in as prices increase, but that may not happen until spring. And even then it’s hard to say if we’ll then see enough of an increase in listings to satisfy the strong demand for homes in Marin and get us back to a more balanced market. Below is a look at the same period for all residential listings.
The real estate market in Marin (and most places for that matter) normally has a seasonal cycle of peaks and valleys of activity and inventory. Even if the totals are higher or lower in a given year, the basic pattern generally holds: inventory bottoms out in winter, and peaks in spring/summer. That’s not the case so far in 2012, at least when you look at homes under $1,500,000. The chart below shows all Marin residential properties under 1.5 million over the last five years, and you can see how the number of homes for sale has stayed low since winter.
Basically, this means it’s the best time to be a seller in that price range in years. As has been the case in general this year, multiple offers have become common for good homes that are priced right. What will happen this winter? Hard to say, but if you’ve been considering selling we should talk. Email me at gcrowe@sfnorth.com if you’d like to explore that possibility, or if you’d just like market stats tailored to your price range and area.
We are well aware of the unreliability of Zillow.com’s “zestimates” of home values in Marin, but this post on their blog is pretty cool. They’ve crunched the data to show how many years it would take to break even on the cost of buying versus renting the same home in metro areas around the country, including the Bay Area. The numbers are pretty low in areas where home prices are relatively low compared to rents, and much higher in expensive markets. For example, they say that in Novato just 4.5 years after buying a house you would start to save money versus renting, while in a market like Tiburon they calculate it would take more than 15 years to reach the break even point. Here’s a direct link to the SF and Marin numbers.
Here are the pending rates for Marin towns for June, 2012. They are calculating them a little differently now, so are actually more accurate that they have been for previous months and the rates will now appear to be lower across the board (no more 135% pending rates for example). I won’t get into the changes in methodology here, as even the old ones are useful as relative activity between the various areas. If you’re curious let me know and I can send you more info. Greenbrae led the charge with a 70% pending rate, with Mill Valley, San Rafael, and Novato coming in as “slight seller” markets. As has been the case for some time, the rates are much stronger in the lower price ranges, as shown in the second chart.
The housing market has remained pretty crazy around Marin County through May and into June. The number of homes for sale has ticked up slightly as you would expect in Spring, but with continued demand there has continued to be lots of competition for good properties, especially in the under $1 million segment of the market. The increase in new listings has at least reversed the downward trend in months of supply a bit, so things have stabilized somewhat after bottoming out in March. We’re hoping Summer will be a time for supply and demand to even out a little so we can get back to a healthier, more balanced market.
If you’d like market stats tailored to your town or price segment feel free to drop me an email here.
Marin Homes For Sale, Pended, Sold through May 2012
Marin County Months Supply of Homes
Everyone is speculating about why the inventory in Marin County has been so incredibly low all of a sudden this year, and I think I can offer at least a partial explanation: buyers are snapping up short sales and less are coming on the market. The chart below shows all residential short sales in Marin over the last five years, so basically since the time we started seeing them come on the market back in 2007. The number of active short sale listings has come back down to about where we started, with a dramatic drop in new ones coming on in April (the blue line that dives down at the bottom right). There were only 13 new short sale listings in Marin in April, compared to 38 in March, and 44 in April of last year. And so far in May only 13 have come on. This certainly is affecting inventory overall, and it’ll be really interesting to see if this is a trend or an anomaly.
And then the real question is why are so few new short sales coming on the market ? Are sellers who were thinking about short selling now having second thoughts because the market has been so hot, thinking maybe they can wait it out and their homes will come back in value? Are they more successful at getting loan modifications lately? Is it some combination of these things, or something else altogether?
If you have thoughts or insights please share them in the comments, and as always feel free to email me at george@sfnorth.com with questions or to get more detailed markets stats.
Marin County Short Sale Listings