National Foreclosures Increasing
The past two weeks saw all the major news organizations lead their nightly broadcasts with stories on the May slump in most major economic indicators. Each story featured prominently the national decline in home prices and an increase in foreclosure activity. Certainly, these matters are – and should be – of major concern. However, it must be said that the information is neither new nor was it unexpected to those of us who closely follow market trends. Moreover, the focus on the hardest hit regions creates a distorted picture of the overall real estate economy, and in particular what is happening in our area.
California Home Prices Continue to Drop
It is without dispute that, as a region, Northern California home prices have dropped since January 1st. Case & Shiller’s May 31, 2011 report shows that San Francisco area prices declined by 2.7% through March 30th (or down 5.1% when contrasted with the same period last year). These statistics reflect the increased number of foreclosed (or REO) properties hitting the market following the expiration of the foreclosure moratorium during the last 6 months of 2010. In addition, the state’s continuing higher-than-the-national-average unemployment numbers are compounding the problem, as more cash-strapped homeowners are forced to stop paying their mortgages in order to pay for increased food, energy and health care costs. And the expiration of last year’s home buyer credit also has impacted sales activity.
Know Your Bay Area “Micro-Market”
But just as the Bay Area experiences “micro-climates” so too do we see “micro-markets” within the regional real estate economy. Of particular note are rapidly spiking rental rates in the most desirable neighborhoods of San Francisco itself, a trend local experts predict will strengthen metropolitan prices and sales activity as renters opt to purchase limited housing stock. In addition, home prices in San Mateo are also increasing rapidly, reflecting a new “high tech” bubble. In contrast, prices in many outlining, non-luxury suburban communities (Vallejo, Concord, etc.) remain soft.
The bottom line is to know your specific “micro-market.” Don’t rely on national statistics; rather, search out the most specific, accurate and current data regarding your particular region and plan accordingly. Do all you can to become better informed on how to handle the various types of short sales, which will remain a dominant portion of the market for the foreseeable future. Build strong relationships with the real estate, financial, tax and legal professionals who demonstrate superlative skill and experience. I truly believe that few realtors will survive and thrive in the coming years without a solid foundation in how to successfully handle “distressed property” transactions. Until next week….