Marin Real Estate Pulse

The number of sales and median price of Marin county single family homes has fallen dramatically over the past five years. All the numbers below are from January 1 to May 18 (YTD) for each year.

While single family sales overall are down 55% from 2005, for homes one million or more sales for the same period are down 74%. For home $500,000 or less the number of sales are up 1,300% (6 to 78).

So when we read the headlines “Median Price Plummets” don’t just assume that every house has lost half its value (some have). The truth is prices are down but what really is affecting the median price is sales at the low end have jumped while sales at the high end have plummeted. When the median price is calculated it does not take into account which homes are selling.

Number of Single Family Sales January 1 to May 18 for past five years

Source: BARIES Marin County MLS

Median Marin County Price for January 1 to May 18 for each year

Source: BARIES Marin MLS

Information deemed correct but not guaranteed.

Novato has half the Short Sale listings in the Marin MLS (B.A.R.I.E.S.) yet they are not closing escrow at anywhere near the rate they are going into contract. Short Sales in general have a high escrow fall-out rate and most of the time that is due to the bank taking too long to respond to legitimate offers. The banks are overwhelmed with paperwork from poor performing loans and don’t seem to know how to deal with the situation.

Here is the interesting part; Novato currently has 121 Short Sale listings and 48% of them are in contract (various stages of the sale process). If that percentage were actually closing escrow it would represent a very strong Sellers Market, which is definitely not the case.

In July 2008 Novato had just 9 Short Sales close escrow. Assuming the number of listings was similar in July to this August, which it is that means that less than 20% of the Short Sales are closing which is way off from the 48% in contract.

What happens to these homes when they fall out of escrow? Some go back on the market to give it another go but many are taken back by the bank and sold as bank owned property (REO – Real Estate Owned “by a bank” ).

The August 2, 2008 edition of the Wall Street Journal has a front-page article about ghost towns throughout America. The ghost towns are largely a result of unfinished subdivisions. Many of these subdivisions remain a half filled with for sale signs outnumbering occupied properties. Many of the projects have been abandoned by their developers with little hope of being completed in the near future.

The story features a couple who won a rent-free, for five years, with an option to purchase a home at the end of the term for $452,000. I suppose this could turn out to be a great deal for the lucky renters if they don’t mind what can a weed filled yards for the next couple of years. Most of these ghost towns are in areas that had extraordinarily high development of new homes. Conversely, Marin County had very little development in the preceding five years. Most of the development that did occur was in Novato and not surprisingly Novato has experienced the largest reduction in prices in Marin County during the current housing market.

Most of Marin County is designated open-space which prohibits the development of new housing tracts and this remains one reason that Marin County pricing has weathered the current market downturn better than other counties and states. While Marin counties foreclosure rate has increased dramatically it is still significantly below the statewide average. There are very few abandoned properties in Marin County and those that have been abandoned are usually quickly resold by the banks.

If you are looking for one of those funky Western ghost towns I suggest you drive outside of Marin County.

For all the headlines you would think Marin County Real Estate had fallen off a cliff but the numbers don’t reflect that.  Below is a comparison of single family homes, condominiums, and both combined.   Although the numbers reflect just a 1% drop in median home price they really are not telling the whole story.

I recently closed escrow on a three bedroom home in San Rafael for $599,000.  At the peak of the market in 2005 this home would have sold for well over $700,000.  In 2005 loans were too easy to obtain and buyers, with 100% financing were playing with funny money and many were more concerned with monthly payment than amount paid.  This resulted in some buyers paying the absolute top dollar for a home and we are seeing some of those homes selling for much less today, often as a short sale or REO.

The truth is, regardless of what the numbers are showing, prices are down especially for the lower price range and less than the most premium locations.  On the other hand, homes over two million seem to be holding up well. 

These numbers are from Marin MLS (B.A.R.I.E.S) and are current as of July 14, 2008.

                January 1 to July 1, 2008                Jan1 to July 1, 2007

Marin Overall:                 

Number of Sales                981                         1,405

Median Price                     $875,000              $900,000

Average Price                    $1,194,230           $1,210,350

Single Family Homes:                   

Number of Sales                786                         1,111

Median Price                     $1,050,000           $1,065,000

Average Price                    $1,352,877           $1,363,208

Condominiums:                              

Number of Sales                194                         291

Median Price                     $469,500              $628,926

Average Price                    $542,416              $560,000 

The house in the May 19, 2008 Forbes article is estimated to cost two billion dollars, has 400,000 square feet and a separate gym for each family member.  It is in India and owned by Mukesh Ambani, the fifth richest man in the world.

Obviously money is not the issue. The question is how much house is too much.  Yes some people can afford this but how do you rationalize wasting the energy required to heat or air condition 400,000 square feet for one family?

What about Marin County, do families need 20,000 square feet homes?  If they can afford it why can’t they have it?  No one needs that much space, that’s why. We don’t have the energy to indulge egos.  Regardless of construction or energy efficiency no large McMansion is Green and none of them add any value to Marin.  I would argue, in the aggregate, they reduce the real value of Marin and the charm that has taken decades to develop.

Too many cute homes in Marin have been torn down to make room for the latest, greatest McMansion.  Unincorporated Marin and some Marin cities have enacted a maximum size for new home construction.  This is the result of some common sense and a combination of “not in my backyard” or “we don’t need any homes larger than MY McMansion”.

Is there really anything wrong with a family of four living with less than 5,000 square feet?  I don’t want to take away from anyone’s success or living standard I am just saying at some point the extra space is more about ego than requirements.  Sure, some may realistically use the space, large family, in-laws, home office, etc., and those don’t bother me I just don’t want Marin to be only for the wealthy.

No, this article was not written ten years ago, these are Marin condominiums from Sausalito, San Rafael and Novato all currently on the market with an asking price of less than $200,000.   The lower price point has taken a significantly larger hit than the average Marin house.

If you have an interest in looking at this type of investment property let me know.

While I am on the subject of lower priced homes there are 105 condos in Marin priced under $300,000 and what I find interesting is while 31 of those are in escrow the numbers don’t add up to all of them closing.  For example for February, March, and April 2008 an average of 3 units per month closed.  That would imply we have over 30 months of low priced condo inventory.  If you look at the over thirty in escrow the number should be closer to just over three months inventory.  So what gives here, is May going to be a super month or are these just not closing?  Because I have not been following this statistic I can’t say for sure but when probing a little deeper I find that the vast majority of these condos in escrow are short sales.

In prior post I have written about the large percentage of short sales that fall out of escrow.  Part of the reason for this is sellers and listing agents are not always realistic about the asking price.  After all, it is the bank that has to agree to take something less than the full loan payoff, they are the one short at the end of the day.  I am not defending banks or their prior practices by any streach, just pointing out that short sales fall apart for many reasons; lack of or untimely bank response to offers, and unrealistic asking and offer prices just to name a couple.  That being said, I feel if you are willing to put up with what it takes to close a short sale you better have gotten a very good price on the property.

First time buyers have not seen numbers like this in years. For the past few years (looking at the first quarter of the year for single family homes in MLS), 2005, 2006, and 2007 specifically; only 7% to 9% of Marin County homes sold for less than $600,000. For the first quarter of 2008 28% of homes sold for under $600,000.

It is an interesting number because it is more difficult for new buyers to get loans.  Most buyers tend to spend as much as they can afford when buying a home which means these were not buyers looking at $700,000 homes and then deciding they could get what they wanted for under six.

Where are these buyers coming from?  There is not a statistic to answer that question but here is my take.  In the past there were so few homes available at that price and those that were on the market did not offer much appeal.  Now when a buyer goes looking for a home and can’t spend over $600,000 they have some nice homes to choose from.  In Marin the lower price homes were hit the hardest with the mortgage mess.  This put price pressure on sellers to lower prices and they have.

If you thought you could not afford a single family home in Marin that may not be true any longer.