The economy has been on the mend and continued its steady improvement in 2012. As we turn the corner into a new year, let’s take a snapshot of the key indicators of the U.S. economy over the past three years to track their progressive shift. As major drivers of the recovery of the national real estate market, and our local Marin County market, these numbers tell an important story.
The all important Consumer Confidence Index improved significantly, rising from 52.5 in January 2011 to 64.5 in January 2012 and finally to 65.1 in January 2013. As reported in my November market update, consumers nationwide displayed improved optimism in 2012, driving the consumer confidence index up to 73.7 in November–the highest reading since February 2008. However, the cloud of uncertainty of the Fiscal Cliff dampened their enthusiasm in December, resulting in a drop in the index at the end of the year to 65.1.
The Dow Jones Industrial Average increased from 11,600 on January 2, 2011 to 12,200 on January 2, 2012 and finally to 13,400 on January 2, 2013. For detailed historical information on the Dow Jones Industrial Average, click here.
Interest rates continued to make headlines, reaching historical lows, as they continued to be artificially supported by the feds in their effort to spur the housing market’s recovery. The 30 year fixed mortgage rate slipped from 4.77% on January 7, 2011 to 3.91% on January 6, 2012 to 3.34% on January 5, 2013, according to Mortgage-x.com.
Finally the unemployment rate, after reaching a high of 9.7% as of January 1, 2010, improved steadily from 9.0% on January 1, 2011 to 8.3% on January 1, 2012 to 7.8% on January 1, 2013.
The Housing Recovery: A Case of the Chicken and the Egg
A housing revival is typically what spikes optimism about the broader economy and jobs. In every recovery since World War II, a strengthening housing market has powered economic growth. This was not so during the current recovery, because housing was ground zero for the economy’s problems. Instead, the improved economic climate spurred the recovery of the housing market in 2012. That being said, now that housing is finally getting its bearings, it will turn from an economic headwind into a tailwind and become a significant source of jobs. There will be more construction jobs, construction-related manufacturing jobs, transportation and distribution jobs, retailing jobs, financial services jobs and a range of service jobs from cable hookups to landscaping. A better housing market is the principal missing link to a better job market.
The Main Story in 2012: Strained Inventory of Homes for Sale
Feeling more optimistic about the economy and their job security, an increasing number of buyers who had been waiting on the sidelines jumped into the home buying game with a vengeance. These prospective buyers however found that owners were in no rush to list their properties for sale in a market where prices have remained relatively flat for three years. Those who bought during the market peak, or took most of the equity out of their home during the go-go days of easy mortgages, have not seen their values recover to the point where they have enough equity to sell. Other would-be sellers were deterred by the lack of inventory and surging rents as they were finding limited options to buy their next home. The drastic reduction in the number of distressed properties coming on the market in 2012 was also a compounding contributor to this shortage of inventory.
As could be expected, the combination of high demand and low supply resulted in fierce competition among buyers and frequent multiple offers on the most desirable properties. Many buyers brought all cash offers to the table, making it challenging for buyers with a more traditional financial profile (i.e. those getting a mortgage and putting down 20-25 percent) to prevail. Prices increased only slightly, as the appraised value of homes frequently fell short of their contracted sales price when buyers bid up prices above recent comps.’
For an excellent analysis of the housing market, please read the Washington Post Article: Housing Renaissance Could Lead an Economic Recovery, penned by Mark Zandi, chief economist at Moody’s Analytics.
According to a recent report from the California Association of Realtors, here in California the positive fundamentals resulted in strong housing sales, especially in the fourth quarter. “Sales for 2012 rose 5.4 percent, reaching 525,120 for the year as a whole, slightly above our projection, said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. She added: “With sales in the higher-end market remaining strong throughout the year, the price gain at the state level surpassed our expectations, increasing 11.6 percent from $286,040 in 2011 to a preliminary $319,340 in 2012.”
Our local Bay Area economy remains strong, its growth fueled by our proximity to Silicon Valley, the biotech industry and the influx of 700 new startups in San Francisco in the past couple of year. In 2012 all markets in the Bay Area regained some of the value they had lost during the recent recession, with San Mateo ranking the highest in its median price increase at 30.3 percent year to year in December. In comparison, the Marin County market was a bit softer as we don’t benefit from the tech industry and the start ups as much as Menlo Park or San Francisco, but we had a very robust market and healthy increase in activity and values in 2012.
MARIN COUNTY MARKET –
What a difference a year makes!
While there is typically a lull in activity during the holiday season, this past December buyers in Marin County did not take a break. Despite the very limited number of properties on the market in December—280 vs. 547 last year—179 buyers wrote an offer to buy a home in Marin vs. 156 in December 2011. Typically in January we experience the lowest level of inventory of the year – this year it is record-breaking low. Today there are only 282 active listings on the market, compared to a low of 431 in January 2005 at the height of the market and a high of 1,107 in January 2009. This achingly low inventory (the lowest since records have been kept starting in 1985) is causing quite a feeding frenzy for new properties, swamped open houses on brand new listings and quick, multiple offers. A stunning contemporary home listed at $2,999,000 by Frank Howard Allen in Mill Valley went “pending” on its first day on the market, which means the buyer made an offer with no financial or inspection contingencies!
You can take the pulse of a real estate market by looking at the percentage of listings in contract: 64 percent of all active listings were in contract in December 2012, compared to 29 percent in December 2011, a 124 percent increase and a clear reflection of the low supply and high demand in our market. A balanced market is generally considered to be around 25-30 percent in contract.
A total of 221 homes were sold in December, barely down from 226 in November. 2,980 homes were sold in Marin County in 2012, up 19 percent from 2,503 homes sold in 2011. Looking back, 2012 sales were the highest since 2005 when they reached 3,419. A look at annual sales back to 2005 illustrates the timing of the market crash and the slow, steady recovery starting in 2010: Marin County annual sales were 3,419 in 2005, 2,852 in 2006, 2,509 in 2007, 2,080 in 2008, 2,173 in 2009, 2,325 in 2010, 2,498 in 2011 and finally 2,980 in 2012.
The median price paid for a Marin County home in December was $705,000, down 1.8 percent from $718,000 in November, but up 29.35 percent from $545,000 in December 2011. The low point of the current real estate cycle for a Marin County property was a median of $542,000 in January 2011, while the peak was $996,000 in May 2007. Please keep in mind that the numbers are skewed by a significant shift in the market mix: the substantial increase in price was due in large part to a significant increase in the number of higher-priced properties, while inventory constraints continued to constrict sales of lower-priced homes.
As such, it would be premature for you to jump to the conclusion that your home is worth 29 percent more today than it was a year ago.
Price increases are not expected to continue at such a high pace into 2013. Once lost value has been regained through bidding wars and low inventory, rapidly increasing property values will likely be tempered by rising interest rates–they will eventually come up. Furthermore, as values go up, inventory will increase to a more normal level as more sellers are encouraged to finally list their home for sale. When supply and demand are in balance, the market should go back to a more “normal” and sustainable property value appreciation of around 3 to 6 percent per year.
CITY BY CITY REPORT
With a large number of qualified buyers competing for fewer homes, the percentage of homes in contract remained very high overall in the county throughout 2012 and into 2013. As of today, Fairfax has the greatest percentage of homes in contract with 76.19 percent. Novato, at 67.94 percent, and Greenbrae, at 60 percent, come in second and third positions, respectively. Ross is at a relatively high 50 percent with half of its inventory in contract. Of course, there are currently quite a few off market listings in Ross, as is typically the case, which are not included in these numbers.
SALES ACTIVITY BY PRICE POINT
While the bulk of the activity remains in the below $1 million price range, the luxury market continued to improve with all price ranges up to $3 million at more than 30 percent in contract. It is generally considered that a market with over 25% of its active listings in contract is a seller’s market.
If you are thinking of selling your home, feel free to contact me to discuss your particular situation. If you are planning on selling your home in the spring, let’s sit down and discuss how to prepare your home for sale to get you the best possible price: it is never too early to start!
If you are thinking of buying, let’s sit down and talk about your needs and your goals.
I look forward to assisting you with your real estate needs in 2013!
About the Author: The above Real Estate information on Marin County Real Estate was provided by Sylvie Zolezzi. I can be reached via email at Sylvie@YourPieceOfMarin.com or by phone/text at 415.505.4789. I am an award winning Realtor specializing in luxury residential real estate in beautiful Marin County, just north of the Golden Gate Bridge.
I attract clients who demand excellence—in marketing, negotiations, market knowledge—and a genuine concern for their needs. My association with Decker Bullock Sotheby’s International Realty allows me to provide a high-end luxury experience to all my clients at every single price point. It also enables me to leverage our unique combination of local knowledge and global resources, providing unmatched exposure to my clients’ properties locally and worldwide.
I view it as a great privilege to be of assistance to people at very important stages of their lives—whether they are newlywed, starting a family, relocating, retiring, divorcing or mourning a loved one—because I view my job as much more than facilitating the sale or purchase of a property, but rather as helping them find their new sanctuary or part with the home where they have raised their children and created so many memories. In addition, I am always excited to help my clients discover Marin County, our stunning sceneries and unmatched lifestyle and find the right home in one of our charming towns: Sausalito, Tiburon, Belvedere, Mill Valley, Corte Madera, Larkspur, Greenbrae, Kentfield, Ross, San Anselmo, San Rafael, Fairfax, and Novato.
The above Real Estate information on Marin County Real Estate was provided by Sylvie Zolezzi. I can be reached via email at Sylvie@YourPieceOfMarin.com or by phone/text at 415.505.4789. I am an award winning Realtor specializing in luxury residential real estate in beautiful Marin County, just north of the Golden Gate Bridge.
My goal is to provide you with the best home buying or selling experience possible by combining my business and financial experience with meticulous attention to detail and a warm, personable and caring approach to meeting your needs. I have an excellent track record as a successful, results-oriented negotiator and effective communicator. My analytical skills and understanding of current market conditions, along with my ability to utilize a broad range of cutting edge technological and innovative marketing resources, make me an invaluable real estate resource.
I am a long term Marin County resident and home owner. I strongly believe our quality of life is extraordinary and practically unmatched. I love our community, quaint towns and vast open space and never tire of their breathtaking beauty. I know the neighborhoods, the schools, the amenities; I know where you want to live. I know and love Marin County!
I specialize in Luxury Homes in the following towns in Marin County: Sausalito, Tiburon, Belvedere, Mill Valley, Corte Madera, Larkspur, Greenbrae, Kentfield, Ross, San Anselmo, San Rafael, Fairfax, and Novato.