Mixed market continues to baffle buyers, sellers
Originally appeared in Hills Publications, July 27, 2007 and ANG Newspapers, July 29, 2007
This is one of the most confusing real estate markets I have seen in my nearly 28 years in the business. If you are a buyer or seller in today’s climate of contradictions, understanding what is happening could save you money.
Looking back a year
To get a clearer picture of the Oakland residential real estate scene, I searched the Multiple Listing Service (MLS) to compare the first half of this year (January 1 to June 30) to last year for five popular zip codes.
Zip 94602
includes Glenview, Oakmore, Joaquin Miller area, and Dimond. Last year, there were 169 homes sold with a median sales price of $630,000. This year, the figures reflected 126 solds and a median sales price of $604,000.
Zip 94610
includes Crocker Highlands, Trestle Glen, Grand Lake, and China Hill. In 2006, 131 homes were sold at a median sales price of $530,000. 2007 showed 109 solds with a median sales price of $652,000.
Zip 94611
includes Montclair and the Piedmont Avenue area. 2006 figures were 182 sold homes and an $817,500 median sales price. For 2007, it was 183 solds with a $799,000 median sales price.
Zip 94618
includes the Country Club area, Rockridge, Upper Rockridge and Hiller Highlands. 2006 totals were 85 solds with a median sales price of $880,000. 138 sold in 2007 with a median sales price of $772,937.
Zip 94619
includes Ridgemont, Hillcrest Estates, Redwood Heights, and Maxwell Park. The 2006 statistics are 148 solds and a median sales price of $584,000. In 2007, there were 98 solds with a median sales price of $569,500.
When comparing the first six months of this year to last, there has been an 8.5% decrease in sold properties. It is notable that four of the five areas showed a decrease in median sales price from year to year. Only 94610 had an increase in median sales price; however, that could be due to more condos being sold in 2006.
Although still not a true “buyer’s market,” despite media hyperbole to the contrary, our market is clearly swinging in that direction.
Upper-end properties
Location is always the most important component of value. Those areas considered highly desirable, therefore, are also the most expensive and are the last to suffer in a market downturn. They also tend to be the first to recover after a prolonged period of market softness. Neighborhoods such as the Country Club area and Crocker Highlands fit into this category.
In California, as well as nationally, higher priced homes are faring much better than the lower end. I analyzed closed sales of a million dollars or more in the five zip codes for the first half of this year and last to determine whether they match this pattern.
In 2006, 116 homes sold for one million dollars or more. Of those, 60% sold over asking (70 homes). The figures for 2007 are 115 sold, with 65 (57%) selling above list price. This appears to support the theory that the wealthiest are least affected by higher interest rates, tighter lending requirements and a slowing economy. The zip with the largest number of million dollar sales was 94611, with 52 in 2006 and 53 in 2007.
Buyers, sellers in a quandary
Now, more than ever, it is imperative to know whether a particular property falls into the “likely to generate multiple offers” group. Will it be hot, or not?
Real estate reality is that the majority of houses are in the “average category.” In a seller’s market, now long gone, even these sold for a premium. Today, average homes, if priced too high, sit unsold until the price is adjusted to meet the new market. This happens with a seller or agent-induced price reduction, or by an accepted offer lower than asking.
When the market direction is consistent, lasting a year or longer, buyers, sellers and their agents tend to feel they have a grip on what is happening. Our current market does not conform to this description because some houses in top areas are still garnering multiple bids. This creates confusion.
The biggest questions for sellers now are what price to ask, what they can expect to get, and how long will it take to sell. Buyers want to know how much to offer and whether the market in the future will allow them to get a better deal. There are no simple answers.
What is next?
No one knows for sure exactly where activity and prices are going. My sense is that there is a likelihood of fewer sales and moderating prices over the next year or two. If interest rates rise significantly, the risk of a slowing market greatly increases.
Final Thoughts
During the height of our last seller’s market, some buyers bid up prices by hundreds of thousands of dollars. A number of them were able to later sell at a profit. In today’s real estate environment, overpricing or overpaying will have consequences.
Anyone can be an agent and make some sales in a fast market. Today, and in the foreseeable future, you need an experienced professional to help you make an informed decision.
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