More Signs that Housing Market is Stabilizing as New Year Begins

Last year closed on several positive notes when it came to the housing market, and a number of recently released reports suggest we could be seeing the market stabilizing and even gaining some momentum as we begin the New Year.

Noted housing economist Liz Ann Sonders of Charles Schwab said in a recent report that “we’re seeing a light at the end of the housing tunnel.” The senior vice president and chief investment strategist for the brokerage firm pointed out that the pending-home-sales index surged more than 7% last month to its best level since April 2010.

“At that point, housing was artificially supported by the homebuyer tax credit,” she said in her new economic forecast. “The last time pending sales were at the current level without government support was June 2007.” Adding to the optimism, Sonders said, was the fact that the latest construction spending report was well ahead of expectations with most of the gains in private housing.

Sonders isn’t alone in her estimation that real estate could be bottoming out. In a report released Monday, Clear Capital, a real estate valuations company, predicted that prices in the San Francisco-Oakland-Fremont metropolitan area will remain flat this year versus a 4.7 percent drop in 2011.

The firm said Silicon Valley should see a 1.6 percent increase in home prices, compared with a 2.5 percent drop last year. "This region overall is doing pretty well," Clear Capital research director Alex Villacorta told the San Jose Mercury News.

Also encouraging was a report out Thursday that California foreclosure notices and actions decreased by 21.7 percent in 2011, although the state still had the nation’s third highest foreclosure rate, according to Irvine-based data firm RealtyTrac.

The positive signals add more evidence that the housing market overall is moving in the right direction as we begin 2012.

Of course, we’ll continue to face headwinds. While foreclosures declined sharply last year, the drop was in part due to legal and regulatory issues that prompted lenders to delay action on delinquent borrowers. That “shadow inventory” of distressed homes could come back on the market this year, although it’s doubtful we’ll return to 2010 levels again.

The jobs picture is improving, although there will be bumps along the road as we saw this week. Weekly unemployment claims spiked last week more than expected after companies let go of thousands of holiday hires.

And while predicting that the real estate market has bottomed, Schwab’s Liz Ann Sonders believes the recovery in housing will be a slow and gradual one, similar to how she sees the recovery in the overall economy playing out.

Nonetheless, the economic and housing news in recent months continues to trend higher and offer reason for encouragement that 2012 will truly be a “Happy New Year.”

Below is a market-by-market report from our local offices:

San Francisco – The end of year seemed quiet, according to our Lakeside office, but the activity was more than double that in the last days of the prior year. December was a very slow listing month, the Lombard office manager says. You’d think that buyers were on vacation until a well-priced, turn-key home pops up and there’re 11 offers. Hoping for a post-holiday listing surge as inventory remains thin. Still 11th hour lending problems occur on many closings. Our Market Street office reports that the last two weeks of the year seemed to indicate that much of the unsold inventory was finally spoken for.    Properties that sold in the final two weeks were on the market for an average of 85 days, compared to our final quarter of around 36 days.  Inventory diminished significantly toward the end of the year, and buyers saw an opportunity to go out and make deals on unsold property.    We also saw a flurry of ratified contracts with very clean terms and buyers desiring to close by year-end, so perhaps tax benefits fueled a last minute surge as we approached 2012. In the Sunset district, it looks like the buyers did not take time off during the holiday season.  Sales activities did not drop off during this period but remained very strong.  Listing inventory is extremely slow.

SF Peninsula — Burlingame agents were busy all through the holidays but waiting for some inventory to come to the market. In the Previews high-end market reportedly there will be some great listings coming on in the next 30-60 days. Across the hills in Half Moon Bay, listings came off the market for the holidays but sellers are looking to re-start the marketing mid-January.  Agents were busy the week between Christmas and New Year’s as buyers are sensing it’s a great time to buy. Our Palo Alto manager reports that the local market is seasonally slow after the holidays.  Inventory is very, very low in the local communities – from entry level on up. It has definitely been a holiday market, according to the Redwood City office, with very little activity and low inventory. The San Mateo area market is showing good signs of buyer and sellers interest - more balanced than 2011, the local manager says. Per MLS of the four Hillsborough listings that closed escrow in December only two had a sales price over $2 million and of the four homes with ratified sales in Hillsborough, only one had a list price over that level.  Of the 48 homes ratified in San Mateo, one had a list price above $2 million.  There appears to be pent up demand for higher priced homes not in MLS.

Silicon Valley – It was holiday light, according to our Cupertino office, with both sales activity and inventory declining in recent weeks. A similar story was told by our Los Altos manager, who said agents saw very little activity over the holidays with few buyers out looking and fewer listings coming to market. But in Los Gatos, the typical seasonal slow-down was absent.  Agents managed to attend their walk-throughs, sign offs and continue to show and sell properties amidst the hustle and bustle of the holiday season.  While most of the San Jose area saw the usual holiday slowdown, the Willow Glen office reports that things were fairly busy with 20 new sales.  According to our Saratoga office, the local market experienced its typical holiday slowdown. The agents working are the ones that have deals that need to close by 12/31 and those that are determined to plan for 2012.

That’s it for now. Have a great weekend.