The Pleasanton Ca real estate market showed some life in October, especially on the high end, with pending sales up from a disappointing September, and inventory continuing to drift downward. The prospect of further interest rate cuts is hopefully spurring some buyers go get off the fence and take advantage of some of the values available in the market right now.

Pleasanton overall ended October with 199 available homes, down slightly from 207 at the end of September. Pending sales were up to 45 in October, up from 36 pending sales in September. Look for the market to continue its trend of lower inventory though early spring. (click on graph to enlarge)

The low end of the Pleasanton market actually showed a slight decline in both pending sales and inventory at the end of October. Pending sales came in at 26 for the month, down slightly from 28 in September and 45 in June of this year. Inventory ended the month at 99 homes under $1 million, down from 101 at the end of September. Roughly half of the inventory in Pleasanton is under $1 million.

The mid range of the Pleasanton market (between $1 million and $2 million) showed a jump in pending sales, ending October with 10 pending sales as compared to 7 at the end of September, and down from 17 at the end of June. Inventory ended the month at the same level as September, with 64 homes on the market in this segment.

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The high end of the Pleasanton market (Over $2 million) showed a dramatic spike in activity, with 9 pending sales in October, which is up from 1 at the end of August and September. In fact, it is the strongest month of sales since February of this year, where we also had 9 pending sales. Inventory is down in this price range as well, with 36 homes available at the end of October, down from 42 at the end of September.

Clearly, buyers are taking advantage of some of the tremendous values available in the market right now, and the mid range and high end range of the market are more driven by value as opposed to need. This is a good sign for our market. There are buyers out there… it is a matter of getting them off the fence, and the key factor in provoking activity is value. Here’s hoping that the anticipated cut in the Federal Funds rate will spur more activity, and stabilize the Pleasanton market as we enter the holidays.

Okay, so word on the street is that the Fed is going to lower the Federal Funds rate tomorrow. Wall Street and the Bond Market has already priced in a 1/4% rate drop. If Bernanke lowers the rate 1/2%, it could give an additional boost to the stock market, and ease short term rates even more, which is good news. The impact on the long term rates is less certain, as Bond traders sometimes consider short term rate cuts as inflationary. However, with the recent sluggishness in the economy, there is probably not a lot of concern about inflation at the moment. The Fed has certainly made it known that it will do everything in its power to prevent the sluggish real estate markets from tipping our economy into recession. So everyone on Wall Street, in the bond market, and in the real estate and mortgage market are anxiously awaiting word on how much of a rate cut we get tomorrow. I’m betting on 1/2%. Of course, I also thought my first born was going to be a boy, and I was wrong then. We’ll find out tomorrow…

Yeah, we all tend to hate commercials. Non-stop interruptions, same dumb ads over and over. But there are some good things that occasionally come out of commercials. Sometimes, there are pop culture references that become integrated into the mainstream, such as the “Wazzzzzzup” bud light commercials, or the Geico Caveman ads (which got morphed into a lame series).

Once in a while, commercials can be a vehicle for obscure bands to hit the limelight. Volkswagen a few years ago did a commercial with the fabulous Nick Drake singing “Pink Moon”. Apparently, Volkswagon had thousands of emails asking who the artist was, and what song it was. Unfortunately for Nick, he was not around to enjoy his rise from obscurity, since he died years earlier. If you ever get to check out his album, he is a very haunting song writer.

Lately, I’ve seen this Liberty Mutual Insurance commercial, and I can’t get the soundtrack out of my mind. It is a haunting, mellow female voice… a perfect choice for the commercial. So I went online, checked it out (thanks to Hill/Holliday Blog), and the artist is Hem (yes, they are very much alive), an alternative mellow rock group. The name of the song is “The Part Where You Let Go”. Check it out on itunes. A couple of other songs that are really cool are “Hollow” and “Half Acre”. It is fresh, especially if you like acoustic music like I do. Here is their web site.

For those of us in marketing, it is a poignant reminder of the power of emotion in advertising, and how much it is amplified with the right music. So next time you read one of my blog posts about the state of the real estate market, pretend the song “Getting Better” or “Good Vibrations” is playing in the background.

And now, back to the world of Pleasanton & Tri-Valley Real Estate….

Okay, time to get our weekly dose of bad news out of the way. Hopefully in the near future, we will be able to write about good things are for Pleasanton real estate, but we are not quite there yet. So here it goes;

* New home sales nationally were up slightly from the revised August number, but down 24% as compared to September of last year. The tricky part of reporting sales for new homes is that builders are experiencing a high rate of cancellation, so these numbers are often revised. That is what happened here, where the August new home sales numbers were later adjusted downward to reflect cancellations.

* Sales of resale homes dropped in September in the Bay Area, down 45% from September of 2006. The median home price also declined.

* Unsold inventory of resale homes in California showed a 16.6 month supply in September, up from 6.4 month’s supply in September of 2006.

* Mortgage defaults hit a record level in the Bay Area and California in the 3rd Quarter. Alameda County saw a 165% increase in mortgage defaults compared to the 3rd quarter of 2006, and Contra Costa County saw an increase of 217%.

Locally, the Pleasanton market is still limping along, with sales running about half what they were in the summer. Some neighborhoods such as Pleasanton Valley/Birdland and Country Fair in Ponderosa are seeing strong activity, but other neighborhoods are struggling right now.

The good news? Jumbo mortgage rates continue to come down as the mortgage market normalizes.

Be thankful you don’t live in the Central Valley, where market conditions are dismal, and unsold inventory of resale homes is at staggering proportions. At least in Pleasanton, Dublin, San Ramon, and the rest of the Tri-Valley area, you can still sell your home if you price it appropriately. In fact, some houses are selling in well under 30 days, and there are still occasional multiple offers on prime properties.

The old saying in real estate is location, location, location. Certainly this is true on macro level. An average home in Manhattan is certainly worth more than an average home in Jackson, Mississippi. But as the Pleasanton/Dublin/San Ramon market slows, the location of a property takes on more significance in terms of how quickly the home will sell, and at what price. The reason is simple. As the market slows, there are more houses for sale, and less pressure on the buyer to compromise over homes.

In today’s market, buyers have become very deliberate, and are far more sensitive to “intrinsic value” factors such as location, condition, age, view, lot size, amenities, and floor plan. So what is a desirable location, and an undesirable location? I am not talking about comparing neighborhoods within a city, but rather homes within a neighborhood. Here are some characteristics of homes that have challenging locations:

Busy Streets. If a home is located on a busy street, it is not as desirable in the marketplace. A busy street, by the way, is considered by most buyers as a street where young children can’t play in the street because there is too much traffic. Because many of the buyers today have young children, or are planning on having young children, they will typically shy away from homes on busy streets. In effect, you are losing a fairly large percentage of potential home buyers. Whether rational or not, the fear that a busy street instills on parents is very real. Typically, buyers who buy homes on busy streets have older kids, where this is not as much of a concern, or no kids at home. And savvy buyers know that even if they do not have kids, it will likely be more difficult to sell the home when the time comes, so they are more conservative in what they are willing to pay. If it is a corner lot, and the busy street is on the side of the property, it also becomes problematic.

Close to major roads or freeways that generate noise. If there is a major road or freeway close to the subject property, this will also likely impact your home in the market today. Buyers typically want peace and quiet, not the constant sound of traffic. And if your home backs up to a major road or freeway, it will definitely impact your home. It is not very often that home buyers come to my office and ask “do you have any homes that back up to a freeway?” or “Can you find me something with a major road behind it? I love the sound of traffic!”.

Homes that abut commercial or other non-residential properties. Homes that abut shopping centers, commercial buildings, water treatment facilities, storage yards, industrial buildings, and other types of non-residential properties will often have a tougher time selling. They are usually not very appealing to look at, and can generate noise, odors, loitering, and other factors most buyers consider negative. This can also go for schools, although this is more of a hit and miss proposition. Some do not like the noise associated with a school, while others consider it “happy noise” and are not bothered by it. It depends on the buyer.

Homes that abut higher density condos or apartments. Single family homes that back up to apartments or high density condos will typically have a tougher time selling because there is a perceived lack of privacy and more potential for noise from neighbors.

So does this mean that homes with location issues won’t sell? Of course not. Any home will sell if it is priced correctly. It does mean, however, that it will sell for less than a similar home in a better location, all things being equal. All things being equal, buyers will overwhelmingly opt for better locations if there are 2 similar homes to choose from. Because of this, there is always a discount for homes in less than desirable locations. The amount of the discount will vary, however, depending on market conditions. When the market is hot or overheated, and there are multiple offers and intense competition from buyers, the discount for inferior locations is much less, as buyers are forced to compromise and be more accepting of homes that are not perfect. Even if they don’t start out that way, after losing 2 or 3 homes in multiple offer situations, buyers tend to get discouraged, and tend to settle for homes that are not perfect. Conversely, when the market is stable or slow, and buyers have the luxury of choice, location becomes a much bigger issue. In effect, homes with inferior locations need to be discounted more heavily to attract interest from buyers, and they will typically take longer to sell, as you must go through more buyers to find one willing to overlook the location.

There are also offsets that can help to mitigate location issues. For example, many homes that back to busy streets or freeways have over-sized lots. This can help to offset the location issue, but the home will likely still be discounted by the market.

Location is unfortunately one of the intrinsic value items that you can not change. You can only adjust the price to make it more attractive to potential buyers.

Well, we’re half way through the month of October, and the Pleasanton real estate market is moving along at about the same relative pace that is did last month. So far in October, we have 16 single family homes that are pending, which is about the same as the first half on September. Right now, there are 215 single family homes on the market in Pleasanton, which indicates that inventory, while up slightly from the end of September, is relatively stable. But there are some interesting observations about the recent activity in Pleasanton. Since September 1st, there are 50 homes that have gone into escrow (some of which have closed escrow). When you take a look at the all of these sales, several trends emerge:

* Over 50% of the sales (28 sales) were on the market for 30 days or less, and almost 1/3 of these sales (16) were on the market for 14 days or less.

* Of these sales that occurred in 30 days or less, only 3 of the 28 sales had a price reduction

* Of the 22 sales that were on the market for over 30 days, 77% of these sales (17) had price reductions

* Of the 11 sales that were on the market for over 60 days, 91% of these sales (10) had price reductions

So what conclusions can be drawn from this data? Here is my opinion for what it’s worth:

1. Good News. There are homes selling, some very quickly. Buyers are still out there… they just need to be convinced that the home is a good value

2. Your best chance to sell your home in the current market is within the first 30 days. It should be prepared for the market by making sure it looks the best. Paint, carpeting, landscaping, and other cosmetic improvements should be done ahead of time to ensure that your home looks its best when it first hits the market, when interest from buyers is typically highest.

3. If your home does not sell within the first 30 days, a price reduction will often be necessary to keep the momentum and continue to attract attention from buyers.

4. If your home is on the market for 60 days or more, a price reduction is pretty much mandatory to make your home attractive.

Success in selling your home in today’s market requires that the seller be flexible, and adjust to the market. One thing about markets, they always tell you where you stand if you listen. So prepare your home for the market, price it to be attractive, and you have a much better chance of getting your home sold quickly at a decent price. And it is certainly true in this market that the sooner your home sells, the better the price you will get. If you have questions on how to get your home prepared and priced correctly, give me a call.

Okay, first let’s get the bad news out of the way. It seems like every week we are hit with bad news about the housing market, and this week is no exception.

* The California Association of Realtors predicts home prices and sales will be lower next year. It forecasts sales of existing homes will be 9% lower. The good news: It is less than the almost 23% drop in sales this year.

* They also predict a drop in the median home price statewide of 4%, down to $553,000. The good news: The prime markets in the Bay Area are expected to fare much better than the inland areas of the central valley and Southern California. Statewide statistics will continue to be misleading with respect to the Pleasanton, Dublin, San Ramon, and Tri-Valley real estate markets.

* There is no question that there is some price erosion right now. The good news: If you are a buyer, there has rarely been a better time to buy a home.

* The mortgage industry, along with the federal government, is taking steps to stem the tide of foreclosures nationwide. There are plans for a new mortgage industry coalition, comprised of 11 of the largest mortgage bankers nationally, aimed at assisting financially strapped homeowners in desperate need of assistance. The good news: some help is on the way for some borrowers in dire straits.

I’ll say it again…. Pleasanton, Dublin, San Ramon, and the Tri-Valley region are going to be fine. Sure, prices have slipped, but they went up 40 to 50% between 2001 and 2005. We are still way ahead. And the good news is that I just got an email from the Oil Minister in Nigeria, and I can make some serious money just by helping him transfer some funds into my bank account. So things are indeed looking up!

If you just read or listen to the national media, you would think that getting a mortgage loan today is a lot like getting audited by the IRS… a painful, nerve racking experience that inevitably leaves you poorer. But there is good news in the Pleasanton and Tri-Valley CA mortgage market. The lending environment has improved substantially since the meltdown in August. Mortgage investors in the secondary mortgage market (where loans are packaged and essentially sold as bonds) are slowly but surely starting to buy jumbo loans again. This means that lenders are starting to get more aggressive in their pricing, and rates are coming down after a dramatic spike in August.

According to Rick Kuhle, Senior Loan Officer at Diversified Capital in Pleasanton, the normal spread between conforming 30 year fixed loans and jumbo 30 year fixed loans was 1/4% to 3/8%. In other words, compared to rates on conforming loans (Fannie Mae insured loans with a maximum loan amount of $417,000), jumbo loans had a 1/4% to 3/8% premium above the conforming loan rates. When the mortgage market tanked in August, the premiums on jumbo loans soared to as high as 1 1/4% to 1 1/2%. The following graph shows the spread between conforming rates and jumbo rates in July through September. Look how much the spread increased in August. (click on the graph to enlarge)

As we have discussed before, this was caused because investors in the secondary market demanded much higher rates to compensate for the perceived higher risk in jumbo loans. As I am fond of saying, the only thing that trumps fear is greed. Once jumbo loan rates soared, some lenders sensed an opportunity to capture business, feeling confident that investors would start buying jumbo loans again once the market stabilized. Well, it looks like that is what is occurring. Right now, the spread on interest rates for jumbo loans is down to around 3/4%… not quite where it was, but much lower than it was in August. Indeed, conforming loan rates right now seem to be in the 6 1/4% range, with jumbo rates in the 7% range. This will certainly improve the lending climate locally, and as a result, the real estate market should benefit as well. This graph illustrates how dramatically the spread between conforming rates and jumbo rates increased in August. Look for this gap to close even more in the weeks to come.

We are even seeing some sub prime loans resurfacing. These are buyers with less than golden credit. Today, a borrower with lower credit scores can get a 90% jumbo loan.

The mortgage market is improving. Rates are down. Prices are down. There are prime properties for sale right now that would have received 5 or more offers in the not so distant past. Maybe now is the time to take another look at making a move….

By now you have probably wondered what they are building on Valley Ave at the Hopyard Rd intersection in Pleasanton, CA. It used to be a drive through bank branch with those weird air tubes that shoot your money to the teller… kind of like something out of the movie Bananas by Woody Allen. Well, wonder no more. Pete’s coffee, obviously sensing that Pleasanton residents are wired, exhausted, and overworked, are building a new coffee shop in this location (across from Gene’s Market). Pete’s joins Tully’s as the two major coffee retailers challenging Starbucks for the apparently lucrative coffee market in Pleasanton. Not to be outdone, Starbucks immediately announced the opening of small “micro stores” on every major intersection in town (just kidding). It’s a good thing, I guess, since 25 to 30% of my family’s disposable income already goes to retail purchases at Starbucks and Tully’s. No wonder I’m always so jittery and hyped up…

The Merrit Property, a highly desirable 46 acre parcel located on Foothill Road in Pleasanton, looks like it will have another development proposal submitted in the near future. Ponderosa Homes, who has built several subdivisions in Pleasanton, along with the Merritt family and DeSilva Group, are seeking input on their preliminary development plan from the neighbors surrounding the parcel, which is currernly a walnut orchard between the Foothill Farms neighborhood along South Muirwood Dr and Foothill Knolls further south. Ponderosa is proposing 82 high end homes on minimum 12,000 sq ft lots. The site has long been prized because of its excellent West Pleasanton location and views of the ridge.

The property has had a history of controversy. Back in the late 1990’s, there was a development plan approved by the city of Pleasanton for this site, but it was halted after the passing of Measure D, which was a voter driven referendum to require voter approval on large developments. Voters in the city of Pleasanton voted to turn down the development, which brought land use and growth issues to the forefront of the political debate in Pleasanton. Ponderosa Homes is taking this step to engage the neighbors and solicit opinions and concerns, hoping to alleviate these issues before they take their development plan to the city for approval.

Stay tuned…

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