Sonoma Napa Homes Undressed

I think just about everyone is on media overload. Between the roller coaster stock market, the bailout plans, the Presidential elections and the myriad of international crises, we are over the top. It has created a “deer in the headlights mentality”.  Fear is not only controlling the financial markets, it has impacted the housing market, particularly during the last week or two. Many buyers are now on the sideline immobilized by the upheaval, increasing interest rates and larger down payments being required by lenders, especially on jumbo loans (loans over $729,750) “Dreaded” Monday this week turned out to be “cheery” Monday, with a 400 plus point gain on the Dow.  It appears that some of the moves, both domestically and internationally, have begun to loosen the credit markets indicated by the Libor rates declining (the rates at which banks loan each other money).  Bernanke’s endorsement for another stimulus package could have been another factor in changing the pattern of the last several weeks.  However, most experts are predicting continued volatility. There are concerns that we have more de-leveraging to contend with and that lingering weakness in the economy will remain for some time.  A minority feel that most of the wild swings are behind us and that the volatility will subside in the short-term.   Whatever the outcome, many buyers have taken a breather as indicated by the slowing open home traffic and sales. The media persists in painting a bleak picture which reinforces the inertia.  The lower end price ranges are seeing the bulk of the activity.  The majority of multiple offer sales are occurring in this same range. The exceptions are homes that combine three essential factors—updating, staging and aggressive pricing. A $1.249 mil. 3 bedroom 2 bath home in Mill Valley received 2 offers and went over list price. It had the triple threat.   The market has not come to a halt. It is trudging along.  Until buyers fears are allayed and the jumbo loan market returns to equilibrium (more reasonable loan parameters and rates) sales will reflect the pattern we experienced at the end of last year and the beginning of this year—well off the record pace of previous years. In the meantime sellers will be able to move their properties by staging and competitive pricing their homes. This is not the time to test the market. If sellers are seeing little showing traffic they need to quickly adjust their pricing, otherwise they will be chasing the market downward.  Conversely, in most cases, buyers are in the driver’s seat.  Well-qualified buyers have their pick of listings and can certainly find great value.  There is plenty of money available on good terms for conforming loans (those below $729,750). It is a buyer’s perfect storm. The pricing bubble expanded between 2003-2005 and burst in 2006. A new bubble is forming. I call it the “buyer demand bubble” and it is building.  No one knows how long it will take until the conditions are right for it to let off steam. When it does, prices will stabilize and begin to rise once again.  Certainly not with the velocity of the last upward cycle, but if prices appreciate at 2-3% a year we will be headed back to a healthy, balanced market. It will happen and you can quote me on that.