According to Forbes.com, San Francisco is one of the markets most likely to recover quickly from the current real estate recession. In a nutshell, commercial real estate experts think that San Francisco’s strategic access to Asian trade (via the ports of San Francisco, and more importantly Oakland), and relatively strong office and apartment rental markets make it a good bet to recover fast. The logic is that a strong job base and relative lack of overbuilding in the commercial market means the economy will be strong, which will filter to the residential housing market.

Okay, we’ll take it. Good news is not that easy to find right now, so beggars can’t be choosers!

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It looks like a lot more than candy-seeking children were spooked in October. With the wild, turbulent ride on Wall St and the Fed buying bank stocks and short term paper to avert disaster, October saw a lot of home buyers get spooked as well. In the Pleasanton real estate market, activity was down across all sectors of the market, and things got down right scary for a while as many of us saw our investments and 401k accounts take a major haircut. And political uncertainty added to the mix, as fear pretty much trumped everything. The good news? Things started to stabilize towards the end of the month, and the stock market actually bounced back. Thank god, because I was beginning to think hard about selling everything and stuffing the money in my mattress, or buying one of those lots that Eric Estrada is always pitching on late night TV. But bounce back the market did, and with it there seemed to be at least some stabilization, along with millions of simultaneous sighs of relief. And now that the election is past, we can hopefully get back to the job of getting our economy and the real estate market back on track. After all, I seem to remember hearing Obama saying that he is going to end war, eliminate hunger, fix our economy, give everyone free health care, and provide a good retirement for everyone. Heck, I’d settle for fixing the economy.

In Pleasanton, there were 30 pending sales in October, down from a strong 55 pending sales in September. Actually, that is not bad considering the climate of fear that prevailed throughout much of the month. But there is also a growing sense among some of the smart money that we may be closer to the bottom of the real estate market then many people think. And there are some great buys out there. Inventory overall dropped slightly, with 231 single family homes on the market at the end of October, as compared with 236 homes on the market at the end of September. (Click on the graph to enlarge)

In the under $1 million market segment, activity was down strongly. There were 21 pending sales in October, as compared with 37 pending sales in September. Inventory remained roughly the same with 122 single family homes on the market. (click on graph to enlarge)

In the $1 million to $2 million market segment, sales dropped from 15 pending sales in September to 7 in October. No doubt the gyrations in the financial markets had an impact on some buyer’s down payment funds. Inventory remained steady at 78 homes on the market, or a 10 month supply. (Click on the graph to enlarge)

In the luxury home segment over $2 million, there were 2 pending sales in October, as compared to 3 in September. Inventory dropped in this price segment to 31 homes on the market at the end of October, as compared to 37 at the end of September. Certainly some of the sellers decided that this was not the market they wanted to play in, and opted to wait for a better market to sell. Still, there is a 10 month supply of homes in this price segment, and it continues to struggle along. (Click on graph to enlarge)

Hopefully with the election, we can turn the page and get on with the recovery. Opportunity is certainly out there, and smart buyers with stable jobs, good credit, and strong assets are finding the market to be ripe with good values.

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Timing financial markets, including the real estate market, is always tricky business. There are dozens of variables that have direct influence over the real estate market, including interest rates, buyer demand, population growth, economic factors, inventory levels, new home construction, changes in personal income, and job growth to name a few. It is the interplay of these variables that determine the strength of “the market” and determine price trends. Right now, there has been a lot of turmoil and volatility in the financial markets, as well as negative news about the real estate market both nationally and regionally. This has contributed to the downward pressure on the local real estate market.

I hear a lot of buyers say “I’m going to wait for the market to bottom out before I buy”. As a result, there is tremendous pent up-demand for housing in our area. All we need is for some definitive news that we have hit “the bottom” and there will be strong activity in the market. But finding “the bottom” is often harder than it seems. Unfortunately, there is no magic formula to alert us when we have hit “the bottom”. At that point, we are wondering “Is this the true bottom, or is it just a pause in the downward trend?”. The only way to know will be to wait and see, and if the market did in fact hit the bottom, and starts to trend up you will have missed it. In fact, the only way to know that you have hit “the bottom” is when you are well into the recovery.

Take a look at the above illustration. Everyone wants to buy at point “B”, which is the bottom. But actually buying there is more of a matter of luck than anything else, since at that point in time the market still seems to be going down. The reality is that most buyers who are waiting for “the bottom” end up buying at point “C”, which is well past the bottom. At this point, there are clear indications that the bottom has been hit. But due to pent-up demand from all the other buyers waiting for “the bottom”, the market has actually rebounded a little and is starting to trend up. In reality, you are better off buying at point “A” than point “C”, even though prices are still coming down. Why? Because if you buy at point “A”, you have several advantages:

* You have little or no competition for the house you want. Thus, you are in a better position to get a better price.

* You have the luxury of choice, and can find a home in a prime neighborhood that in normal market conditions would sell immediately, perhaps before you even had a chance to view it.

* Depending on the situation, you have less pressure to rush through inspections and gloss over potential issues with the property. You will have time to evaluate the condition and address any concerns you have. And the seller is much more likely to accommodate you if any property issues need correction.

If you buy at point “C”, you have missed the market. At that point, you are in a weaker position because:

* You have competition from other buyers who were waiting for “the bottom”. You will likely pay more for the house because of it.

* You have less choice in available homes as the market heats up. And prime properties in the best neighborhoods will sell quickly, sometimes with multiple offers

* You will be more inclined to make concessions on the condition of the home, as you will be under pressure from other potential buyers

* The seller also knows that we have hit “the bottom”, and is expecting prices to rise. This will raise their expectations, as well as the price they are willing to now accept

The fact is Real Estate is a long term proposition. If you are planning on staying in your house for 5 years or so, it is not crucial that you find the bottom of the market. I purchased my last 2 homes at the “top” of the market each time (in June of 1989, and July of 2000). And both houses have at least doubled in value, even if they declined in value after I purchased them. If you are a believer in market timing, I overpaid for both houses. And it is the best thing I ever did. In the long run, local real estate is very desirable, and given the long term growth in area population, job growth, and future restrictions on housing development, real estate will be in demand. So if you want to buy a home or move up into a larger home, now is a great time to do so, even if prices are still trending downward. Do it now before we hit “the bottom”, and you will be better off in the long run.

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Despite the doom and gloom from Wall Street and the national real estate and mortgage markets that has permeated our collective psyche, the Pleasanton real estate market continues to be steady in the face of adversity. September saw pending sales increase to the second highest level of the year, with 55 pending sales, up from 50 in August. This is second only to April, which saw 67 pending sales. Inventory edged lower as well, with 236 single family homes on the market at the end of September, down from 264 at the end of August. (click on graph to enlarge)

So what accounts for this strong showing in the face of negative news? In my opinion, it is several factors

* Pleasanton remains a highly desirable community, with excellent schools, good commute access, strong job base, outstanding quality of life, clean, well manicured neighborhoods, and a charming downtown.

* We are still seeing a fairly consistent migration from the South Bay/Fremont to this area. Buyers are looking for good schools and safe neighborhoods

* The market here is more stable than many others in the outlying areas. Pleasanton has yet to be inundated with large increases in distressed properties for sale.

* Home values are attractive. While the market is certainly more stable than other areas of the East Bay, prices here have definitely dropped over the course of the last 2 years, and this creates opportunities for buyers to get homes in prime neighborhoods at great prices.

Inventory is down because some sellers have decided they don’t want to participate in the current market environment, where demanding buyers are extremely cautious and looking for prices that reflect the current reality. There is no getting around it… buyers demand value today, or they are just as happy to wait. But when a home is a great value, there is interest from buyers. And the more motivated sellers are willing to swallow hard and sell their homes at a price that is attractive to buyers.

The under $1 million market saw a sharp decrease in inventory, with 121 single family homes on the market at the end of September, down from 148 at the end of August. Pending sales were about the same, with 37 pending sales in September, down from 38 in August. (click on graph to enlarge)

The $1 million to $2 million market saw an increase in pending sales, with 15 pending sales in September, up from 9 pending sales in August. Inventory edged down to 78 single family homes on the market at the end of September, as compared with 83 in at the end of August. (click on graph to enlarge)

In the luxury home segment, inventory edged up, with 37 homes on the market at the end of September, as opposed to 33 at the end of August. Pending sales were basically flat, with 3 pending sales in September. (click on graph to enlarge)

Here’s hoping we can see some stabilization in the financial sector soon so we can see better days ahead.

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I love this sign, courtesy of the Knoxville News Blog. With so many “bottom feeders” out there posing as buyers, it is refreshing to see someone tell it like it is. I know everyone wants a deal, and I am generally good with that. But it gets annoying getting calls from people asking if the sellers on your home that is listed (correctly, by the way) at $899,000 will take $650,000. Sure, as soon as John Lennon plays his next live tour (Click on image to enlarge)

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