The first quarter of 2015 was perhaps one of the slowest starts to the New Year since the market stall of 2009.  Frustrated buyers are everywhere, patiently waiting for new inventory to arrive.  Question is, will it?

There is a shortage of houses for purchase in Marin County as sellers cling to their homes, hoping their values will increase.  In the process, the shortage is creating somewhat of a housing stalemate.

The growing and booming economies of San Francisco and Silicon Valley, a record-low jobless rate and an ever-increasing influx of newcomers to the Bay Area are pushing demand northward and adding pressure to the Marin County real estate market.  Not even factored in yet are all the new young tech workers who will, in short time, expand their own families and look to move outside of the San Francisco city limits.  No, it doesn’t appear that the shortage of housing is a short-term issue in the Bay Area at all.

Monthly Supply of Inventory


Why is there so little inventory?  There are several factors at play here, all creating the perfect storm making for a dry winter in California, and more specifically in Marin.  First, we all know there is little growth in Marin County.  Marinites prefer to keep things status quo, no matter what the market forces.  But, this approach comes at a big price:  low growth, which creates a lack of housing in a normal market, is exacerbated in a strong market, driving prices ever higher.   This is why everyone who comes to Marin cannot believe what their money can or can’t buy here.  Prices are through the roof… literally!

Well then, why aren’t sellers selling? 

1) Finding a replacement property may be the biggest issue for many homeowners.  “Yeah, I’m happy to sell, but where would I go?” is a legit question for many sellers.  If sellers are not prepared to move to a less expensive market, their options are limited.  “Sure, I can get a lot for my home, but then I’m going to have to pay a lot for that smaller unfinished home down the street … not to mention higher taxes. So what’s my incentive for moving?”

This is a real dilemma.  The move-up market has all but come to a screeching halt.  By the time today’s sellers figure out what they need to do to move up, and how much it’ll cost them in increased taxes, not to mention increased interest rates, it may make sense to just stay put.

2) More homeowners are finding that they can get a bigger return by renting out their property vs. selling.  And, with property values increasing, so does the tax liability for capital gains something sellers may not be prepared to deal with.  Taxpayers may exclude up to $250,000 of profit ($500,000 for married couples), but they will get taxed on the rest.  23.8% federal and 13.3% in California.  That’s a total of 37.1% tax on the incremental gains!  A hefty chunk out of what could have been a nice profit.

3) Off-market sales are also occurring in record numbers.  Buyers and sellers frustrated with the current market conditions are taking matters into their own hands.  “Make Me Move” pricing – that usually outrageous price at which a seller would consider selling and no buyer would consider buying – is on the rise.  But, believe it or not, there are buyers out there now who are willing to pay these prices.  For some reason an outrageous price is more appealing than it would be if the home was put on the MLS.  Both buyers and sellers are at risk here – buyers typically over-paying for a home, and sellers potentially leaving money on the table.  The best way to really know the market value of a home is to put it on the open market, on the MLS, and have it professionally marketed and exposed by a real estate professional.

4) While sellers are trying to figure out their next move, some buyers are choosing to wait it out.  But, waiting may have its costs as well.  If interest rates rise, buyers will have less buying power.  The first quarter of 2015 had some of the lowest rates we’ve seen since May 2013 however, there has also been an increase in rate movement and volatility this year.

The direction of rates for the rest of the year is uncertain.  While some believe global economies have recovered and rates will rise, others believe a strong global push to devalue currencies and lower rates will prevail.  Unfortunately we won’t know which prediction is right until the market changes.  Until then, it would be prudent to take advantage of today’s incredibly low rates.  If prices continue to rise, and rates ultimately rise, some buyers may be priced out of the market.

Is this the new normal?  With each new sale, new pricing records are being established and these are the new market comparables at which everyone is looking.  At some point, buyers may need to look at homes maybe $100-$200,000 below their price range and even then still be prepared to outbid their competition.   But, try giving that advice to a buyer … they’ve mentally left that lower price range behind and only want what’s currently in front of them or a higher value!

The median price of a Marin home was $935,000 in March, compared with $912,000 a year ago. March sold 241 homes as compared to 225 a year ago.  For January, February and March a total of 519 homes were sold in the county, as compared with 530 in the same three-month period last year.  The median price was down slightly from quarter over quarter at $854,500 in Q1 of 2015 vs. $898,000 in Q1 of 2014.


Median Sold Price by City


Number of Homes Sold by City

Homes sold by price

Last 12 Months Median Prices & Number of Units Sold

last 12 mos

Multiple offers are still de rigor on properties that are well-priced and well-presented.  Everyone seems to be looking for the same thing – walk to town, flat yard, something turnkey that doesn’t require much work, and something affordable (ha!).    All-cash offers make for roughly a quarter of today’s purchases, and there are many creative bridge loan products being offered by lenders to make a buyer’s offer stronger.  Sellers are also seeing that a buyer can still have financing and a strong offer at the same time.  At the end of the day it’s all cash to the seller regardless, but the key question is who will perform with the least amount of risk to the seller.

Sellers are also looking for the best terms: fewest days for contingencies, amount of cash down and flexibility of the buyer allowing sellers to stay in their home for a longer period of time, sometimes at little or no cost.  Something sellers should also consider is placing an offer on a replacement property that is contingent on them finding a buyer for their property – in this market this is a pretty safe bet.

No longer considered a lesser property, condominiums and PUDs offer better entry points for new buyers and possibly greater variety of housing options.

Median Prices & Number of Condo Units Sold in the Last 12 Months


Once you’re in contract, now what? Unfortunately, in this market that’s not the end of the drama. Now it’s maneuvering through the loan, the appraisal and the inspection process.  Negotiations continue, and flexibility and communication in the transaction are key.  Buyers can still get spooked by an unrealistic or uncooperative seller.  Heaven forbid a new material fact affecting the home is found during the inspection contingency.  Sellers must be prepared to bargain if they want to keep the current buyer in place.  Risking that they can get their back-up offer to perform, or worse, find another buyer at the same price is not a great bet.

So, what does the next quarter hold?  While we fully expect more properties to be listed in the coming months – we’re seeing a bit of an up-tick right now – will it be enough to satisfy consumer demand?  Real estate is cyclical; we must continue to remind ourselves of that.  What goes up, usually comes down.  But, new trends are being set as are the new normal. Buyers like to believe prices will come down and that there will be more inventory.  But, sellers conversely like to believe prices will continue to rise.  Something may have to give!

What are the answers for Marin?  More affordable housing for sure, but it can’t be done haphazardly or without thought to the growth of our community and the impact of additional growth.  Perhaps turning one-bedroom dwellings into two-family dwellings might be a less profitable, less ambitious, but better received plan by developers as opposed to a 400-unit apartment or condo development.  We have to think outside of the box a bit and try to build within the existing footprint of Marin County.

Pre-sale inspections for the Ross Valley Sanitation Department, housing density in general, and a proposal from air quality officials to phase out old-fashioned fireplaces are some of the current issues affecting Marin homeowners.

If you are in the Ross Valley Sanitation District, you may want to review the disclosure we created for those selling and buying in this area.  Addressing this issue ahead of time may help aid a swift, successful sale.

We continue to monitor these issues as they affect you and will bring news of developments to you as they occur.  Please keep an eye on our company blog for Marin and visit us on Facebook.

Finally, are you a seller wondering when is the right time to sell?  Are you a buyer desperately trying to find the home of your dreams? Or, do you know someone who might benefit from my expertise? If so, please feel free to contact me for the latest home news in Marin County real estate.

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