Hello Everyone,
Late breaking news! And lots of it. Front page of yesterday's (3/14) IJ screams "Home prices tumble to $830,000". Article below belies the headline in the first paragraph, saying "but there's no cause for concern, a real estate research firm reported Thursday". Let's take a quick look at the actual statistics.First, the IJ and other publications seem to be irrationally enamored of the "median" price statistic. To me, it seems one of the less useful real estate statistics. All the median price does is identify the price that is the middle price on a list. An extreme example of this would be a list of 3 prices: $3million, $100 thousand, and $500 thousand. The median would be $500 thousand. What does this tell you? At least the average of these 3 prices would be $1,200,000!
The other thing that these publications consistently do is to compare only one month of statistics, as in February 2007 to February 2008. This is too short a time span to judge a market, however, just to stay within their framework, let's take a look at the average prices for February: In February of 2007, the average price of a Single Family Residence sold in Marin County was $1,131,136; In February of 2008, it was $1,231,313, an increase. Would the paper say that? Apparently not.
OK. Other noteworthy events this week are the run on the Wall Street investment firm of Bear Stearns. The company suffered a liquidity crisis due to a run of redemptions by clients who had lost confidence in the its ability to stand behind its obligations. Because of this run on cash, the firm was in danger of defaulting. A rescue package with a large injection of capital was designed and implemented by another Wall Street firm, JPMorgan Chase, but it was ultimately guaranteed by the US government. This highly unusual action was designed to maintain confidence in the US financial markets and to prevent further runs on capital. The stock markets dropped significantly. The subprime mortgage "meltdown" is obviously the root of a great deal of this problem, but the greater impact is from people's perception of the situation and their reaction to that. The government's action yesterday was meant to restore/instill confidence that the system still works and to calm investors who might otherwise create runs on other institutions. It appears that the Feds will continue to be a bulwark against extreme market conditions. They have done quite a bit to inject liquidity into the US economy in recent weeks and to keep the wheels of commerce turning. Why is this important? Liquidity of the banking firms is essential to creating the availability of money for consumers to purchase homes and other items.
Now, the Marin real estate market. Inventories continue to increase, but are a bit below the same time last year, so there is no "glut" of homes on the market. In fact, the biggest complaint we hear from buyers is about the limited choice available to them. Many of them feel frustrated after trudging around to open houses week after week without finding the property they are seeking. Fortunately, normal seasonal trends will soon bring more homes on the market. Yes, sales are down from the same time last year with SFR's currently at -29% on YTD units sold, and Condo's at -47%, however they have been slowly narrowing the gap. Last week the numbers were -35% and -48%, respectively. Novato and San Rafael, which have been weighing down the County averages, have experienced a significant revival of buyer interest and sales. I continue to be optimistic and hopeful about the prospects for this year's Marin County real estate market.
more next week---
Until then, best wishes to all,
Fred
for access to spreadsheets please visit http://www.fredanlyan.com
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