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First Half Summary
We are in the midst of a moderately severe Marin County real estate corrective cycle. Southern Marin has never been, and is currently not, completely immune. Since 1970 there have been 4 Marin county corrections: the late 60’s & early ‘70’s, early ‘80s, early ‘90s, and early ‘00s. During each of these cycles, different towns correct in different years while the Marin County average home prices continue to creep upward. The only exception was the corrective cycle of ‘91-‘92 where Marin County home prices actually decreased in both of those years by about (1.5%).
Simplistically, the current correction is really an extension of the early 2000 correction—a normally healthy process that was interrupted by a massive infusion of credit by Alan Greenspan (then head of FRB), and our current lending snafu, sub-prime lending, and resulting real estate meltdown are really just those chickens coming home to roost. The severity of our current correction is more dependent on future domestic and global economic factors and the resulting capital market moves. Though the short term looks fairly bleak at the moment, it is too early to tell how long these market conditions will last and how far prices will fall. Currently, Southern Marin real estate prices are stable despite a steep drop in home sales.
Marin County analysis: The first quarter of 2008 flashed warning signs as home sales plunged 38% and average sale prices of most Marin towns were in the red. The second quarter showed an increase in homes sales leaving us down 28% from the first half of 2007. Prices have rebounded in many Marin towns since Q1, but we are still down (1.8%) on the year which is unusual-- since 1965 only ’91 & ’92 have witnessed year on year price declines for Marin County as a whole.
Southern Marin Statistics: Sales of homes priced over $3m in Southern Marin have slowed dramatically from their pace in 2007-- in Q2 ’07 26 homes over $3m traded in Southern Marin as opposed to only 13 (-50%) in Q2 08. That said the average sale price of homes over $3m has increase 2% since the first half of last year. The leading indicators for activity in this market segment are executive relocation and capital market volatility. Executive relocation has all but dried up, and the capital markets have showed remarkable volatility in the first half of 2008, and increasing downward pressure on both US and global equity markets—currently the SP 500 is down 13% year to date.
Sales of homes priced below $3m have dropped off 41% from their pace in the first half of ‘07 and 37% from first half 2006, while average homes prices in this market segment have increased almost 1% from first half 2007. Leading indicators for activity in this market segment is more dependent on local employment markets, and, unfortunately, that data shows weakness- since 2006 SF County unemployment has fluctuated between 3.5% - 4.5%. We are currently are in the midst of increasing unemployment in the area though we haven’t yet reached 2005 levels (June data is not in yet). May showed San Francisco County unemployment at 4.9%.
Fundamentally, the strength and resilience of Southern Marin real estate is a function of supply and demand. There aren’t many homes in the area and many people desire to live here. Inventory levels (supply) have been very tight over the last year and a half and that has kept buyers wanting (demand). Inventories of homes for sale are starting to increase as compared to a year ago especially in the high end as sellers are attempting to close at 2007 prices while buyers resources and buying behaviors are starting to change. Increasing inventory levels and recent non-committal buyer behavior show potential for further downward pressure on prices.
Download this document - Q2-Final.pdf
Q2 2008 Summary
First Half Summary
We are in the midst of a moderately severe Marin County real estate corrective cycle. Southern Marin has never been, and is currently not, completely immune. Since 1970 there have been 4 Marin county corrections: the late 60’s & early ‘70’s, early ‘80s, early ‘90s, and early ‘00s. During each of these cycles, different towns correct in different years while the Marin County average home prices continue to creep upward. The only exception was the corrective cycle of ‘91-‘92 where Marin County home prices actually decreased in both of those years by about (1.5%).
Simplistically, the current correction is really an extension of the early 2000 correction—a normally healthy process that was interrupted by a massive infusion of credit by Alan Greenspan (then head of FRB), and our current lending snafu, sub-prime lending, and resulting real estate meltdown are really just those chickens coming home to roost. The severity of our current correction is more dependent on future domestic and global economic factors and the resulting capital market moves. Though the short term looks fairly bleak at the moment, it is too early to tell how long these market conditions will last and how far prices will fall. Currently, Southern Marin real estate prices are stable despite a steep drop in home sales.
Marin County analysis: The first quarter of 2008 flashed warning signs as home sales plunged 38% and average sale prices of most Marin towns were in the red. The second quarter showed an increase in homes sales leaving us down 28% from the first half of 2007. Prices have rebounded in many Marin towns since Q1, but we are still down (1.8%) on the year which is unusual-- since 1965 only ’91 & ’92 have witnessed year on year price declines for Marin County as a whole.
Southern Marin Statistics: Sales of homes priced over $3m in Southern Marin have slowed dramatically from their pace in 2007-- in Q2 ’07 26 homes over $3m traded in Southern Marin as opposed to only 13 (-50%) in Q2 08. That said the average sale price of homes over $3m has increase 2% since the first half of last year. The leading indicators for activity in this market segment are executive relocation and capital market volatility. Executive relocation has all but dried up, and the capital markets have showed remarkable volatility in the first half of 2008, and increasing downward pressure on both US and global equity markets—currently the SP 500 is down 13% year to date.
Sales of homes priced below $3m have dropped off 41% from their pace in the first half of ‘07 and 37% from first half 2006, while average homes prices in this market segment have increased almost 1% from first half 2007. Leading indicators for activity in this market segment is more dependent on local employment markets, and, unfortunately, that data shows weakness- since 2006 SF County unemployment has fluctuated between 3.5% - 4.5%. We are currently are in the midst of increasing unemployment in the area though we haven’t yet reached 2005 levels (June data is not in yet). May showed San Francisco County unemployment at 4.9%.
Fundamentally, the strength and resilience of Southern Marin real estate is a function of supply and demand. There aren’t many homes in the area and many people desire to live here. Inventory levels (supply) have been very tight over the last year and a half and that has kept buyers wanting (demand). Inventories of homes for sale are starting to increase as compared to a year ago especially in the high end as sellers are attempting to close at 2007 prices while buyers resources and buying behaviors are starting to change. Increasing inventory levels and recent non-committal buyer behavior show potential for further downward pressure on prices.
Download this document - Q2-Final.pdf