July 4th is generally known as a celebration of America’s independence, but it also signals the start of the second half of the year for the real estate market. Time to look back and reflect on the first six months of 2015, and also to make some predictions for the remainder of the year… as best as any market observer can!
The Marin County market was strong in Q1 and Q2. In what is generally classified as a hot market, or a seller’s market, 1,100 houses exchanged owners from January 1st through June 30th with a median home price of $1,105,000. That’s up from last year by 10.5% when the median home price in Marin was $1,000,000 for the same period in 2014.
Inventory was sparse and we currently have 1.74 months of inventory in stock — meaning 1.74 months that it would take to sell everything that is available on the market today. A normal market would be about six months’ worth of inventory. Anything less is considered a seller’s market, while anything more is a buyer’s market.
We are still experiencing multiple offers on properties that are priced fairly (according to the market comps), well presented, and in desirable locations. The desirability for homes in Marin includes proximity to town, an easy commute, flats vs. hills, fixed up vs. a fixer-upper, and of course “the right neighborhood” as determined by the buyer.
Locations that showed an increase in sales volume include Corte Madera, Mill Valley and Novato.
The high-end of the market (considered those properties above $2 million) makes up for about 37% of all sales in the past six months. Belvedere and Ross saw gains in the median price, with 55.8% and 35.6% increase in prices respectively. Kentfield saw an increase in unit sales (66%) as well as an increase in median price up 3.6%. The highest priced home sold in Marin in the first half of 2015 was 125 Belvedere Avenue in Belvedere for $13,000,000.
While most experts expect inventory will continue to be tight, and rates may or may not rise a bit, we predict to end the year on a high note in Marin County. Everyone is searching for market equilibrium. Here on the West Coast we have experienced more than our share of the real estate recovery and the rest of the country is just now catching up. We’re watching the tech industry for signs of strain, which could potentially strain our local economy, but the industry seems to be holding its own at this writing.
We don’t hear anyone talking about a real estate bubble or crash, but there are expectations that since we are a cyclical business, what has come up must eventually come down. Nobody says it has to be a hard down though.
Is it possible we will see real estate prices fall in time? Sure. Possible we will see interest rates rise? Absolutely. But, when will we see more inventory? It’s going to have to be a movement that builds momentum. People are staying in their houses because they have nowhere to go. They have nowhere to go because prices are too high. Once something gives, we could see a whole trickle of new activity and perhaps more activity, more normalized pricing, and less stress on buyers and sellers alike. We are hoping!
As for the lending market, RealtyTrac released its May 2015 U.S. Home & Foreclosure Sales Report, which shows 24.6 percent of all single family home and condo sales in May were all-cash purchases, down from 28.5 percent in the previous month and down from 30.4 percent a year ago to the lowest level since November 2009. Lenders are open for business and cash sales are declining. Mortgage activity is soaring, with total mortgage origination balances reaching $466 billion in the first quarter – nearly a 75 percent increase from the same time a year ago, according to Equifax National Consumer Credit Trends Report.
Much of 2015’s rising rates are in response to market expectations of an eventual rate hike by the Fed. In fact, Janet Yellen recently reiterated that an increase would occur this year. While the Fed’s rate hike doesn’t have direct bearing on 30 year fixed mortgage rates, often when short term rates move up, so do mortgage rates.
Mortgage rates are still historically low and usually drop in the 4th quarter although this is never a guarantee. Barring unanticipated economic surprises, and if the economy continues to improve, expect rates to remain higher than they were in the first quarter.
For those still wondering if it’s cheaper to rent than buy, check out the Trulia article on this subject. As the article states, “Homeownership remains cheaper than renting in all 100 largest U.S. metro areas.” The analysis does incorporate the down payment and the opportunity cost of investing the down payment in a house rather than the market.
According to results from Fannie Mae’s June 2015 National Housing Survey, the share who believe now is a good time to sell a home reached a new survey high, increasing three percentage points to 52 percent and crossing the 50-percent threshold for the first time in the survey’s history. At the same time, the share who said they expect home rental prices to go up in the next 12 months rose four percentage points to 59 percent, also an all-time survey high. With an increase in housing supply from those ready to sell, combined with higher rental cost expectations, more potential homebuyers may be encouraged to leave the sidelines.
Lawrence Yun, the National Association of Realtor’s chief economist, says it is likely that home sales are off to their best year since the downturn. “The steady pace of solid job creation seen now for over a year has given the housing market a boost this spring,” said Yun. “It’s very encouraging to now see a broad-based recovery with all four major regions showing solid gains from a year ago and new home sales also coming alive.” Read Yun’s full first half report for 2015 here.
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Right now all eyes are on the fall as we always expect a little bump of real estate activity after Labor Day. But, smart sellers know that buyers (all still connected to their mobile devices, wireless internet and social media while on vacation) are still on the hunt for the perfect property this summer. Vacationing buyers are no longer detached from what’s going on in the local market and chances are they are prepared to pounce on their ideal property when it shows up in their MLS alerts.
Rest assured, when most Marinites have headed toward the shores of Tahoe, the local real estate market is still very strong and active! If you need me to drill down more specifically to activity in your neighborhood, please don’t hesitate to call me. I am working through the summer and happy to answer any questions you may have.