Los Gatos Weekly-Times

Homes

Expectations of buyers, sellers need to align

By Rose Meily

Even as sales slow in the housing market, the Bay Area continues to do well compared to the rest of the state, according to the California Association of Realtors. But the expectations of buyers and sellers need to align in order for market conditions to remain healthy.

California Association of Realtors Vice President Leslie Appleton-Young recently told Bay Area brokers and managers, "The Bay Area is outperforming the rest of the state right now, hands down. The Bay Area still has the lowest inventory, homes here are still receiving multiple offers, and if properties are priced right, they're gone. You're going to come out on top."

Appleton-Young said the turn in the Bay Area's economy was more severe during the dotcom bust. This time, the area is not experiencing any economic distress; its economy is healthy, unemployment is down, interest rates are good and job growth is positive.

In terms of specific areas, she expects the Bay Area will do better than the rest of the state. She said she is more concerned about the Central Valley, the Sacramento area down to Bakersfield and the second-home markets.

The last four years were a boon for the housing industry, Appleton-Young explained. "Appreciation was so strong; mortgage interest rates were so low. The market gave a clear message that you can't afford not to buy a home."

Market conditions are different today, she noted. She told brokers and managers to expect relatively flat prices for the next couple of years. How long conditions will remain this way will depend on the psychology of buyers and sellers, since buyers still expect a "fire sale" and sellers still cling to the thought of a 10 percent or more yearly appreciation and multiple offers.

"It will take awhile before things get back in sync," she said.

Appleton-Young acknowledged this year's soft landing was more severe than originally forecast by the state Realtor association. "It happened a lot sharper than expected," she said. "We predicted a 2.5 percent decline in sales, when the actual decline was about 24.5 percent. We're anticipating a 25-30 percent decline in sales by the end of the year, although this is not happening with prices."

The latest DataQuick Information Systems report indicates the overall sales volume of all home types in the Bay Area was down 29 percent in September. The median price paid for a home in the nine-county Bay Area was $611,000 in September, down less than 1 percent from $616,000 in September 2005. Homes in Santa Clara County, however, continue to appreciate. The median price of a Santa Clara County home was $657,000 in September, up 1.7 percent from last year.

San Francisco and Marin counties also showed an increase in the median home price compared to last year's figures. The median price of a home in San Francisco County was at $746,000 in September, up 3.5 percent from the same period last year. The median price for a home in Marin County was $813,000, up 1.4 percent from September 2005.

Affordability continues to be a problem in California, Leslie-Young indicated. In 1970, the California median home price and the U.S. median home price differed only by $400.

"The division between the haves and have-nots has widened," said the state Realtor official.

Appleton-Young said the slowdown in the market is "all about expectations," unlike that of the 1990s, when widespread job losses hurt the area.

"The rates are not going to be the primary deterrent of the future of the housing market. It has to do much more with nebulous expectations. It's going to be based on what people think is going to happen. We need more of an alignment of expectations of buyers and sellers," she explained.

Sellers need to get more realistic about pricing their homes, said Appleton-Young.

"Please do not take an overpriced listing," she strongly advised Realtors. "Sellers need to realize that 10 to 20 percent annual appreciation isn't part of the deed. Don't spend lots of money on advertising, which you will not be getting back on homes that are priced unrealistically. Things would move much faster if we didn't take overpriced listings."

In closing, the CAR official told the real estate professionals, "We've been through this before. We've got to deal with it and go on from there."