Bay Area Home Sales and Prices on the Rise?

As reported by DQNews.com - "Bay Area home sales and median price top last year again":

The median price paid for a Bay Area home rose above the year-ago level for the second consecutive month, a reflection of widening price stability, fewer foreclosures selling and more activity in pricier areas. Sales dipped below October but were higher than a year earlier for the 15th consecutive month, a real estate information service reported.

The median price paid for all new and resale houses and condos that closed escrow in the nine-county Bay Area last month was $387,000. That was down 0.8 percent from $390,000 in October but up 10.6 percent from $350,000 in November 2008, according to MDA DataQuick of San Diego.

Prior to its 4 percent annual gain in October this year, the median sale price hadn't risen on a year-over-year basis since November 2007, when it gained 1.5 percent. Last month's median was 33.4 percent higher than this year's low point - $290,000 in March - but was still 41.8 percent lower than the $665,000 peak reached in June and July of 2007.

Skewed data presenting a false sense of housing stability? More pricing pressure and housing woes to come?

'The latest stats show just how much the Bay Area market has changed in a year,' said John Walsh, MDA DataQuick president. 'Financial distress is still a problem with many borrowers, but for now cheap foreclosures have lost their leading role in this housing drama. In the short run, we'll be comparing the new data to some ridiculously low median sale prices a year earlier - medians severely skewed back then by so many inland foreclosures selling, and so few coastal high-end sales.'

'Statistical quirks aside, the longer-term outlook for home values is far from clear,' he continued. 'A lot of people sense lenders are holding back, and that there's at least one more round of foreclosures lurking around the corner. Combine that with less government stimulus in 2010, and it would threaten whatever price stability we see now.'

Currently, there is a tale of two cities in reference to the residential housing market. The bottom end of the market has definitely been firming up in many locales throughout the country. In fact, there has been substantial pricing pressure as inventory levels have been shrinking in this segment of the market. As housing values have been battered, the increased activity and competition has left the price points of six months ago in the rear view mirror. While tax incentives remain in place and interest rates continue to flirt with historic lows, this pressure should continue. When the government begins to rein in the stimulus and depending upon how much additional "shadow inventory" the banks push onto the market will determine if this is a fleeting trend or the beginning of the next push towards home price appreciation. The higher end of the market has been seeing downward pricing pressure in many locales and it appears that many of the Alt-A and Option Arm loans associated with these homes may continue to lead to downward pricing pressure pushing into 2010 especially in states like California.

Emerging Trends in Real Estate 2010 by PricewaterhouseCoopers

As reported by PricewaterhouseCoopers in their "Emerging Trends in Real Estate 2010."

PWC's full PDF real estate report:
http://www.pwc.com/us/en/asset-management/real-estate/assets/2010-emerging-trends-us.pdf

Below is an excerpt from the preface to PWC's Emerging Trends in Real Estate 2010. Click the link directly above to access the entire real estate report.

After more than a year spent in suspended animation lagging already shattered housing markets, the commercial real estate industry hits bottom in 2010, suffering a surge of painful writedowns, defaults, and workouts. Massive government infusions finally build up loss reserves in financial institutions to levels allowing them to foreclose or strike deals with many overleveraged borrowers. In turn, banks will start to dispose of real estate owned, and government regulators will package and sell more bad loans and real estate assets acquired in takeovers of increasing numbers of failed community and regional banks. Transaction markets will begin to thaw and value declines ultimately will average more than 40 percent off mid-2007 pricing peaks. These property market reversals likely will be the worst registered since the Great Depression, eclipsing the industry debacle of the early 1990s.


In a classic timing play, investors with cash should be poised to take advantage of highly attractive buying opportunities at cyclical lows. Stressed owners, meanwhile, gird to hold on if possible and try to maximize property cash flows by focusing on asset management and leasing strategies in a decidedly tenants’ market. Emerging Trends surveys indicate that 2010 will be the worst time for investors to sell properties in the report's 30-year history, but will offer a much-improving environment to buy (with cash).

Pending Home Sales Index

From Realtor.org, "Nine Consecutive Gains for Pending Home Sales":

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in October, increased 3.7 percent to 114.1 from 110.0 in September, and is 31.8 percent above October 2008 when it was 86.6. The rise from a year ago is the biggest annual increase ever recorded for the index, which is at the highest level since March 2006 when it was 115.2.

Pending home sales region by region:

The PHSI in the Northeast surged 19.9 percent to 100.2 in October and is 44.2 percent above a year ago. In the Midwest the index rose 11.6 percent to 109.6 and is 36.6 percent higher than October 2008. Pending home sales in the South increased 5.4 percent to an index of 115.4, which is 31.6 percent above a year ago. In the West the index fell 11.2 percent to 127.7 but is 21.9 percent above October 2008.

The tax credits are helping? Lawrence Yun, NAR chief economist, thinks so:

... home sales are experiencing a pendulum swing. 'Keep in mind that housing had been underperforming over most of the past year. Based on the demographics of our growing population, existing-home sales should be in the range of 5.5 million to 6.0 million annually, but we were well below the 5-million mark before the home buyer tax credit stimulus,' he said. 'This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future.'

Is the housing market improving or is it simply being propped up in the short term by government stimulus?