Mid Year Market Update/January 2009-June 2009

The Pleasanton Real Estate Market has seen a surge of activity in sales of single family homes.  The 2^nd quarter of 2009 ended with 205 sales, the highest number of quarterly sales activity since the 2^nd quarter of 2007. Sales for the quarter were up 114% over the 1^st quarter of this year. 

At the same time the inventory of homes for sale is trending downward.  Normally inventory tends to increase on a seasonal basis between the 1^st and 2^nd quarter.  This year the inventory has dropped from 237 homes for sale at the end of the 1^st quarter to 213 homes at the end of the 2^nd quarter.   As of this writing (7/29/2009) the inventory level has dropped to 186 while sales for the month of July has reached 75 with two days remaining in the month.

For the 2^nd quarter short sales and REO properties represented a significant percentage of the total sales with short sales coming in at 36 or 18% of the total of 205 and REO properties coming in at 15 or 17% of the total of 205.  Combined distress sales accounted for 25% of the total sales activity.  For the month of July that percentage is down to 19%.  Of the current inventory of available homes for sale (186) there are 14 showing as short sales and 2 as REO sales for a combined total of 9%.  The number of distress sales appears to be shrinking for the moment.

How many homes are on the market in Pleasanton?

As of 10/31/08, there were 249 single family homes available for sale in Pleasanton.  The inventory levels have been increasing steadily through July of this year and appear to have leveled off since then as you can see from the table below.

How many homes have sold in Pleasanton in 2008?

Although the year started out slow with 105 sales in the 1^st quarter, the 2^nd quarter and 3^rd quarter saw significant improvement with 170 sales and 154 sales respectively.  September ended with 58 sales.  With the available inventory at the end of September equaling 252, we stood at 4.96 months of inventory, a very good number in this market environment.

How many homes have sold recently in Pleasanton?

October sales have dropped significantly.  As of this writing, there were 28 homes reported as “PENDING” in Pleasanton during the month of October.  That is greater than a 50% decrease from the monthly average of 54 sales over the 2^nd and 3^rd quarters of 2008.

Where is the Pleasanton real estate market headed right now?

It would appear that the slowdown in Pleasanton home sales activity is a direct result of the stock market correction that occurred at the beginning of the month. There were only slight decreases in sales activity during the month of October 2006 and October 2007. 

As I speak to fellow Realtors it seems as though fear of a pending recession has caused many prospective buyers to postpone their home purchase decisions.  There is a general sense that the buying activity will increase once the buyers’ confidence is restored.  Many buyers have recognized that this housing correction has created a buyers’ market of historic proportion.

First time buyers are back in the market with affordable homes back in reach. Investors are back in the market with demand for rentals at all time highs.  Move up buyers are back in the market recognizing that the loss of equity in their current homes will easily wash out with the purchase of a replacement property.

Have we hit bottom and when will prices go back up?

It’s a reasonable question that unfortunately no one can answer.  One indicator that is useful to measure the stability of our market is the percentage of homes for sale and homes sold that are short sale or REO properties.  Short sale properties involve sellers where their mortgages exceed the value of their home.  REO properties are homes that have been repossessed by the lender through the foreclosure process.

This table was prepared on 10/24/2008.  As you can see Pleasanton has the smallest percentage of distress properties on the market. At least for now this should help us keep our home prices relatively stable compared to some of our neighboring markets.

September 2008 Market Update

 As September 2008 draws to a close there is good news and bad news for the Pleasanton Real Estate Market.  Let’s start with the good news.

The available inventory of single family homes for sale continues to decrease.

Peaking at 276 homes for sale at the end of July, the inventory level has decreased to 248 homes at the end of September. That’s a 10% decrease.  Meanwhile monthly sales have remained very steady over the last 6 months, averaging 53 homes per month.  At the current pace of sales we have about 4.35 months of supply. 

Overall these numbers are very healthy and would give the appearance that the market is doing quite well.  Now comes the bad news.  Prices are down from one year ago.  The median sales price for single family homes was $730,000 at the end of August 2008 compared to $835,000 at the end of August 2007.  That $105,000 represents a 12.57% decrease.

Part of the problem is distress sales.  There are a fair amount of homes currently on the market or recently sold that are in financial distress.  These can be classified in one of two ways:

A.      Short Sale This is a situation where the current owners are trying to sell their home as they are typically delinquent in their payments.  However the current value of their home is less than the amount owed to pay the mortgage loans against the property.  A short sale then is a situation where the owners are requesting the bank to accept less than the amount owed to settle up the debt.  If this situation is not successful, the bank will take the house back in foreclosure.

B.      REO  This is a situation where the bank has already taken the house back in foreclosure and now wants to sell it.  Typically the price is very aggressive as the banks simply want to get rid of these properties as quickly as possible.

This table shows the number of short sales and REO properties as a percentage of all sales activity for Pleasanton since January 2008. 

These distress sales are having a significant impact on our market.  On the one hand they tend to show an increased level of sales which can be misleading since these distress sales are typically priced below market value.  On the other hand, the below market sales tend to pull down house values.

On the bright side you can see that the number of distress sales in Pleasanton is not as great as it is in other communities.  As you can see from the table below, Dublin has a much greater  percentage of distress sales in all categories.

Other communities are even higher still. Livermore for example is at 69%.  Brentwood is at 86%.

So have we seen the last of the short sale and REO properties?  Unfortunately that is likely not the case. A lot of what we’ve seen this year in the way of short sales and REO sales are a result of the sub-prime loans attached to purchases completed in 2005 and 2006. 

There is another large group of what is called ALT-A loans where the homeowner refinanced into a high loan balance with a very low fixed interest rate that will come due in 2009-2010.  Many homeowners may not be able to manage the payments when these loans convert to adjustable loans. 

Foreclosureradar.com reports the following summary for the month of August 2008:

·         The notices of default increased in California by 4.8 percent.  This is the first step in the foreclosure process.  That equates to 42,790 filings.

·         Notices of Trustee sale, the next step in the foreclosure process, decreased by 7 percent. There were 36,292 filings.

·         Properties taken to foreclosure decreased by 8.6%.  There were 26,309 properties taken to sale at auction.   By the way, 96% of properties sold at auction go back to the bank.

      The decrease in the notice of trustees sales and properties taken to foreclosure either means that banks are doing more to modify loan terms with delinquent borrowers so they can get current and remain in the property or a combination that the volume is too great for the lenders to process and/or they are purposely delaying the foreclosure process to push losses into future quarters.