I feel like I may be the only blogger or journalist that pays attention to what is actually happening on the streets in this real estate market. And because of this, I feel it my duty to help readers understand the things that Kelly Zito neglects to include when she writes her ‘gotta sell more papers’ cover stories for the Chronicle.

Today’s cover article is entitled, “Home Sales Falter – Hints of a Slowdown“, and she goes on to cite her favorite (only?) source for real estate data, John Karevoll from Dataquick.

Now, you have to recognize that there have been ‘hints’ of a slowdown in every article she’s written in recent memory for the Chronicle, so for those of us that are NOT ‘hoping against hope’ for a market crash (because we’re smarter than that), or trying to sell newspapers, there’s more to the story.

We do have a different market than we did in February of 2005. But we don’t have very many examples of the ‘faltering’ that she refers to. The quotes from Karevoll are the same as they’ve been for years, so it’s probably getting old to many readers to hear that the ‘experts’ still don’t know if the market is going to crash or just have a ’soft landing’.

Well out on the streets, where business actually takes place, and where these numbers are generated, we see a very different picture. IMHO, her only real on-the-street data came from a fellow Zephyr agent (and blogger), Matt Fuller who quoted some sales figures from our office meeting yesterday. The reality is that we still see nearly 50% of sales going OVER the asking price, and 88% of sales going at asking or above.

Now you know I always talk about ‘percentage over asking’ as a function of the way that agents and sellers are pricing their properties. In my experience right now, most agents and sellers are pricing properties at a level that is much closer (if not ‘at’) the price they are willing to accept. This just goes to show that with nearly 50% of properties (sold by Zephyr agents) still selling over these asking prices, we have a vibrant market in San Francisco.

Does this mean the market is crazy? Not at all. But Chicken Little can take a rest, because the market is not showing any signs of crashing.

Some of the things that I took from the Dataquick press release:

“A decline from December to January is normal for the season.”

“We won’t know for another couple of months if this is a lull in the market or part of a longer-term downturn. It’s always difficult to project from trends we see in January and February. The March numbers will tell us much more about what’s going on,” said Marshall Prentice, DataQuick president.

“Indicators of market distress are still largely absent. Foreclosure rates are coming up from last year’s low point, but are still below normal levels. Down payment sizes are stable and there have been no significant shifts in market mix, DataQuick reported. “

So why were these items missing from Kelly’s article? Because uneventful news isn’t worthy of a headline, especially a BOLD cover story headline.

I do see bargains out there, however, as I always do, even in the hottest markets. From what I’m hearing, there are some lofts that aren’t getting much activity right now. There are also a large number of TIC units avaialble (149 currently active units in the city of San Francisco, per SFAR MLS).

As an example of on-the-street data, let’s compare CLOSED sales (which likely went into contract in early or mid-January) of single family homes between Feb 10-17, 2005 (one of the hottest weeks — for market frenzy — in the history of San Francisco real estate) and Feb 10-17, 2006:

2005 – 49 sales, 31 days on market, average sale price 110% of asking, median price $780,000

2006 – 27 sales, 35 days on market, average sale price 102% of asking, median price $925,000

IMHO, the difference in the number of sales is as much a function of inventory as anything else right now. The hot properties are coming on the market and selling in one or two days (this isn’t always properly reflected in the MLS, either). Some of the properties that are sitting on the market are just plain overpriced, causing the numbers to skew a bit.

In looking at more data from Zephyr agents, comparing closed transactions for the weeks of Feb 8-14 between last year and this year (that likely went into contract in early to mid-January), we see that in 2005 we had 89% of sales at-or-above asking, and in 2006 we had 78%. To me, that decrease is explained when some of the funky listings that were sitting on the market finally sold and when those sellers eventually came to terms with the current market as it related to their particular piece of property (which was likely overpriced to begin with).

One more interesting piece of data: In the past 24 hours (per the SFAR MLS) there were 26 properties that went into contract, with an average days-on-market of 50. So, while some of the properties were only on the market a few days, others were on for much longer. This is another indication that some of the stagnant inventory from last fall is going away, including properties on the market for 106 days, 162 days, and 288 days.

The new inventory is selling well and the old inventory is selling, too. Yet another reminder that there’s not that much out there for buyers, so they’re looking to more creative locations and property types.

What do you really want to know? Should you buy now? Should you sell now?

For what it’s worth, I will always find good deals in this town, especially in markets where there is some stagnant inventory (like right now). If you’re a buyer that wants the perfect location and a nicely remodeled unit, you’re going to pay top dollar. That’s a promise. If you are willing to step outside of that realm a bit, there are bargains to be had. Especially in the TIC market.

If you’re selling, you really need to make sure that you’re doing everything that the market wants to see. You must price your property appropriately, which does not mean matching your neighbor’s sale price from last August. It also means cleaning, painting, staging, marketing properly, and being willing to be flexible in your marketing period if other inventory hits that is just like yours…. like if your neighbor lists their identical house for $50k less than you’re willing to accept.

Despite everyone’s longing for more affordable housing in San Francisco (myself included), printing negative news stories that single out the worst of the market and citing the same data source every week just doesn’t help anyone.

Last time I picked on Kelly, my comment list went 27 deep, so I’m sure that all of the bubble-prophets will be hot on this topic, but just realize, even if people are paying asking price for their homes, a year-over-year rise in the median price of single family homes from $780k to $925k in a down market just doesn’t compute.

I can see the comments now, “Yeah, but it’s coming! Just you wait! It’s a bubble! You’ll see…”

Yes. We will see, won’t we.

In the meantime, my advice is for buyers and sellers to come out of hiding. I’m working with a number of great buyers and sellers that see this as an opportunity to do a transaction in a balanced market, a market that is good for both sides of the transaction.

What’s so negative about that?

This entry was posted on Friday, February 17th, 2006 at 10:05 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.