Sonoma's Fairy Tale Market....
... is going to need a whole lot of pixie dust to pull off one of those real estate fairy tale "soft landings."
(in the Index Tribune 3/31)
The president and COO of Coldwell Banker Residential Brokerage in Sonoma County (Avram Goldman) said:
"After several years of what can best be described as a "white-hot" sellers' market for residential real estate, Sonoma County's housing market is finally starting to come back to a more normal, balanced state. To paraphrase Goldilocks, it's not too hot and it's not too cold. And frankly, that's just right for both buyers and sellers."
Really? So when he says the market is starting to come back to a more normal, balanced state... well what IS a normal, balanced state? Is it a state where inventory balloons, sellers sit in disbelief that nobody wants their flipper flopped house, interest rates rise and the ticking of the ARM loan timebomb can be heard above the crickets at the open houses?
Then he says it's not too hot and it's not too cold... ok... I think he is really saying hypothermia from the sales temperature change has not quite set in yet... so jump in quick before the over-leveraged go all the way under.
If it is just starting to come back to a balanced normal market...how can it be just right?
How many people look forward to buying when it just STARTS to get back to a normal and balanced market?
Why don't the smart buyers just wait until the normal and balanced market fully arrives and unpacks?
He goes on to say:
"Home listings have gradually started to rise and the stratospheric increases in sales prices are beginning to level off, although we're still seeing double-digit appreciation in many parts of Sonoma County. But it's safe to say that the pendulum is moving back toward center between a buyers and sellers market, and that's a very healthy sign for Sonoma County's housing market."
Did he say pendulum above? I am pretty sure he meant wrecking ball. You know, the one tolling the end of this pimped out creative financing house of cards?
Sample Sonoma Valley listing progression
2/14/06 = 172
2/14/06 = 183
2/24/06 = 193
2/25/06 = 200
2/27/06 = 214
3/01/06 = 219
3/04/06 = 220
3/12/06 = 230
3/20/06 = 236
3/26/06 = 238
4/03/06 = 268
96 new listings in 7 weeks
13 listings per week
close to 2 per day hitting the market. (this is a small town. that's a lot)
Sonoma has been selling on average of 4 properties per week according to SFGate at that rate looks like Sonoma has a 6 month supply of houses on the market. This doesn't factor in ANY of the new home developments- these are existing homes only.
Looks to me like buyers have plenty of time to wait for that balanced market to arrive, unpack and get into something more comfortable.
Sonoma County sample listings progression
3/20/06 = 1742
3/26/06 = 1766
4/03/06 = 1888
146 new listings in 15 days.
close to 10 listings per day
He pays lip service to what the rest of us already know...
"While the meteoric rise in values might have been great for sellers, it simply couldn't be maintainted over a long period of time without putting the housing market out of reach for too many buyers. Although demand to live here is as strong as it's ever been, the sharp increase in prices and recent rise in interest rates have made it harder for many buyers to qualify for a mortgage in Sonoma County."
Sellers DID have a hey-day flip-flopping houses to each other and laughing like fools I am sure.
Let's beat this dead horse some more... 7% of county households can afford to buy a house.
He is right about one thing- the fool's gold of exotic financing wasn't going to last forever and I can hear the piper coming now.
What would a realt estate infomercial be without a little magical thinking?
"As a result of the more balanced market we're starting to see in Sonoma County, we are less likely to price out many potential buyers- (For the love of Pete! You don't have MANY potential buyers. Say it with me now... 7% and you probably flipped to them LAST year.) -and less likely to hear the pop of a housing bubble bursting. Instead, it's more likely that we'll experience a soft landing and a real estate market that will be healthier and more sustainable in the years ahead."
We may not hear a "pop" perhaps it will leak air in a not so sudden fashion and sound more like the irregular emissions of a leaking gasbag?
Mr. Goldman appeals to authority by putting in a couple dated quotes from the president of DataQuick (Marshall Prentice) and one from the ever orally flatulent David Lereah (NAR) since they are not new, not enlightening, nor particularly credible no need to regurgitate them here... but there is a nice invitation to any remaining Fools to come to the party....
"Taking everything into account, this is a great time for buyers to jump into the market."
Then my favorite part of the printed infomercial....
"A word of caution for buyers: while the market is moving more into balance, it would be a mistake for buyers to sit on the fence hoping for prices to come down. Even the more pssismistic economists are not predicting a drop in prices, only an easing of appreciation rates. So sitting on the sidelines could cost buyers plenty in terms of both higher housing prices and interest rates."
Looks like the best seat in the COUNTY is the fence. Go on ahead and pull youself up a fence post and get comfortable. This is going to be a good show.
And just because I don't believe in fairy tales...from a previous post:
"The risk of home price declines in the Bay Area is increasing as interest rates rise and the pool of potential buyers is shrinking, according to a quarterly study by a mortgage insurer."
"In 2005, investment in housing constituted a higher proportion of the goods and services the nation produced than it has since 1950, when the nation was experiencing a massive postwar housing boom."
"The proportion of jobs in real-estate-related fields is the highest it has been since at least 1970.”
“As a result, economists worry that the housing slowdown that began late last year could hurt the broader economy more than past real estate downturns. Now the companies that have benefited from this expansion are bracing for the great unwinding.”
“‘Those economies where housing has gone skyward are most vulnerable as housing comes back down to earth,’ said Mark Zandi, the Moody’s chief economist.”
"The chance that real estate values in the region's three major metropolitan areas (SF Bay Area is one of them includes us) will fall during the next two years stands at 55 percent or greater, researchers at Walnut Creek's PMI Mortgage Insurance Co. said."
(Sonoma County- previous PMI data in 2005 predicted a specific price decline prediction for Sonoma County in 2006 based on the property values they estimated were about 35% over-valued.)
Mr. Goldman's advice to sellers...
"The number of homes on the market has gone up considerably over the past year so you need to set a price that will attract buyers."
"More homes could come up for sale in your neighborhood in the coming weeks because sellers typically wait until after the holidays to list their homes. Keep all of this in mind when trying to set the price of your home because the more time an above-market priced home sits on the market, the greater the chance you will have to lower your asking price as interest rates rise."
Did you catch that? "Buyers... prices aren't coming down.... Sellers...bring those prices down."