Economic conditions improve, lagged by jobs

The month of September began with a sobering report by the Bureau of Labor Statistics that job losses were continuing. In the 10 years since 1999, the nation has lost 223,000 net jobs while the population has grown by 33.5 million people. The jobless rate hit 9.7%, the worst showing in 26 years.

That said, the pace of job losses is slowing, which supports many economists’ beliefs, including Fed Chief Ben Bernanke, that the recession is ending.

Like a caboose, job gains always bring up the rear in a recovery, so other news in the economy appears more favorable by comparison.

First to turn positive is housing, largely driven by the first-time home buyer tax credit.  The National Association of REALTORS reported that July existing home sales jumped 7.2 % - the largest monthly sales gain since 1999 and the fourth consecutive month of growth.   

In addition, pending sales are up for the sixth month in a row.

If this rate of improvement, from 9.8 months on hand in June to 9.4 months on hand in July, the existing housing market could be balanced (on a national basis) in approximately 8 months.

Momentum in housing sales should continue, as the first-time home buyer tax credit doesn’t end until November 30, 2009. With new banking and appraisal rules adding time to the typical closing dates, home buyers should open escrow by the end of September if they hope to close on time to qualify.

There are a number of reasons why now is a good time to buy:  

The economy is improving

The worst recession since the Great Depression may be winding down, said The Conference Board on August 20, 2009. The analysts found that leading economic indicators rose 0.6% in July, following a 0.8% rise in June. That’s two consecutive months of improvement halting 8 months of declines.

While the indicators can certainly slide backward on new data, serious home buyers should realize the days of wholesale bargains may be numbered, which could explain why California entry-level prices are rising, and luxury home owners are starting to stick to their prices.

Inventory is being absorbed

We appeared to hit bottom during the second quarter of 2009, since then we have seen a steady rise in closed sales. Existing, or pre-owned, home inventories are being absorbed and are close to a balanced market at a 9.4-months of supply. At their highest during the recession, new and existing home inventories hovered at 11 months on hand. A balanced market is approximately six months of inventory on hand.

Average Sales Prices Are Starting To Rise

Lawrence Yun, chief economist for the NAR says that improved affordability has driven sales with first-time home buyers taking advantage of the tax credit. “The demand for foreclosed and lower priced homes has spiked, and a lack of inventory is becoming a common complaint.”  In many Southern California communities, homes priced at conforming loan levels or below have little inventory on hand allowing sellers to raise prices and entertain multiple offers.

As the first-time home buyer tax credit comes to a close, banks will be inundated with loan applications for an already narrow production pipeline. Home buyers should allow at least 60 days closing, which will put some first-time home buyer loans at risk of not meeting the November 30, 2009 deadline if they are not in escrow by the end of September 2009.

Since May 2009, Federal Housing Finance Agency appraisal regulations have slowed home sales transactions. The National Association of REALTORS® has found that 76% of its members reported delays in closing. 

Sellers should price their homes for today’s market, as lenders are very cautious about raising home values as long as some markets are still declining.  

To avoid delays in closing, make sure your home is in top repair and that you have all of your property disclosures ready for the home buyer’s inspection. You may see some buyers still waiting for signs of a bottom, but motivated buyers will respond immediately to a well-priced home in great condition.

The Greater Bay Area

The market doesn’t turn in all sectors at the same time.  The median Greater Bay Area single-family home price was down 1.9% to $510,000 in August from July 2009. Sales volume decreased 17.3% for the same period to 2,092 units.

Affordability in the conforming loan ranges created a bright spot in August sales for condominiums, which gained 2.8% in price to a median of $349,444 from July 2009. Attached home sales volume decreased by 11.3% to 550 units.

The most dramatic improvement in month-to-month sales price goes to the city of Stockton. At a median sales price of $135,750, the area was up a whopping 102.6% in August over July. Year-over-year, Stockton lost only 4% in pricing power. However, the city’s sales volume is still 83.3% off from August 2008.

Sales volume was most improved in the city of Hayward, up 61.5% from July to August, 2009, and up 75% year-over-year. The best sales volume in the Greater Bay area was in the San Lorenzo Valley, up 76.9% over August 2008.

Year-over-year in August, prices held firmest in Tracy, up 5.2% and Carmel, up 4.4%.

For more information, see: http://www.clarusresource.com/marketdata/MLSListings/mlslstng_0909.html