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SPRING REVITALIZATION?

The real estate industry is abuzz with the new FHA loan limits for California finally approved by HUD. All in all, 14 California counties saw their loan limits for FHA, Fannie Mae and Freddie Mac increased to the $729,750 cap. Most were in the San Francisco Bay Area or other parts of Northern California, including Alameda, Contra Costa, Marin, Monterey, Napa, San Benito, San Francisco, San Mateo, Santa Cruz and Santa Clara Counties. The Sacramento area also saw its loan limits increase to $580,000. What does this mean for the Northern California real estate market? Increased opportunity for new and existing homebuyers. The purpose of this increase in loan limits is to assist individuals who currently have “jumbo” loans (greater than $417,000) to refinance into lower and more affordable rates and payments. With the traditionally strong spring market just around the corner, the new loan limits may be just the thing to revive the Northern California market. Read on.

Statistics:

Statewide: The median resale price of a single-family detached home in California for January was $430,370, a decrease of almost 10% for the month and about 22% from January 2007. Unsold resale inventory represented a 16.8-month supply, compared to 7.6 months (CAR’s figure) for the same period a year ago. Median number of days till sale was 72 in January, up from 69 a year ago.

County Statistics:

Alameda County: January’s 494 sales were about a quarter as many of March 2007’s recent peak of 1,840. Median was in the vicinity of $600,000 from the summer of 2006 to the fall of 2007 and since then has dropped off.

Contra Costa County: After a drop between December and January, sales are about half of what they were a year ago. Median, although robust in the first half of 2007, has been falling since June and is now under $500,000 for the first time since late 2004.

El Dorado County: Median rose through $400,000 in the fall of 2004 and reached its record, so far as we know, of just over $525,000 in the spring of 2006. For most of the time since then, it has orbited around $450,000, but this month it is under $400,000 for the first time in three years. Sales had a little boom in the summer of 2007 but are now back at pre-2005 levels.

Marin County: And still the champion! High median for the month, month-over-month and year-over-year. Sales reached a peak of 481 in April 2005 and have declined since to about a fifth of that level currently.

Monterey County: The current median is $450,000 and sales have fallen by roughly a third since July (as far back as our Monterey sales numbers go) but they are still not far below the recent average.

Napa County: Napa sales have been declining since the summer of 2006. Median meanwhile has been oscillating between $550,000 and $650,000 for years and we will have to see what spring will bring.

Nevada County: Not doing badly for a rural county, since its current median is less than $100,000 below its historic record. Sales, which were 125 as recently as October, were 55 in January.

Placer County: Really wild sales. In the low 200s a year ago, then again as recently as September, but in the interim jumping into the 300s, 400s, even 500s. Erratic numbers do not entirely mask the fact that this is one of the few counties whose activity seems aggressively healthy. Median meanwhile has declined from a record of $515,000 to the current $360,000 – but it has taken two and a half years to do it, without any jagged surprises.

Sacramento County: Median is currently $250,000. Monthly sales at just under a thousand are not spectacular, but they are significantly better than they were last January.

San Benito County: Data Quick did not give us January figures for this county. Sales have been bouncing between the high teens and the 30s for the last year and right now they are at the low end of that.

San Francisco Bay: Spring and summer monthly sales were 7,000 to 8,000; in September, they declined to roughly 5,000 and stayed there for a while; now in January they have declined again, to about 3,600. After staying above $600,000 for over two years, regional median is currently at $550,000.

San Francisco County: Sales for this county have shown a hectic collection of peaks and valleys as far back as we go, but 262 for January seem to be about half the recent historical average. Median, though, has fallen less than 1% year-over-year and is less than 4% below the three-year average; the typical San Francisco County buyer is probably well-off and may be international, and we have always thought that sales here can depend on a reliable core of cash (or at least high-down-payment) customers.

San Mateo County: January sales of 237 were down by more than half year-over-year. Median is down more than 10% year-over-year and 11% from the two-year average.

Santa Clara County: Sales in January were 628, less than half of 1,607 a year earlier; not great until we look at January 2006 with 335, or January 2005 with 423. Santa Clara monthly sales are constantly bouncing between a few hundred and somewhere over 2,000, so in context, they are typical. Median meanwhile has lost about 5% year-over-year and, perhaps more to the point, about 8% from the two-year average…not bad.

Santa Cruz County: Now what is this about, with the same county showing both the steepest drop in median and the best – or, well, “least bad” – decline in sales month-over-month? Clearly Santa Cruz will bear watching, as is often true. Median has lost almost 20% from the two-year average and sales are down to double digits.

Solano County: Sales at just over 200 are down from 500 in January 2007. Median meanwhile has shed 20% compared to the two-year average.

Sonoma County: Average sales in this county have been about 500 for years and even a year ago, 463 was “pretty typical.” Two hundred and twenty-three for January is a correction for Sonoma and the median has declined $80,000 year-over-year.

Yolo County: The median is down almost $90,000 from a year ago and over $100,000 from the two-year average. That said, sales are showing a glimmer, up about a third year-over-year and only about 10% below historical average.

Sacramento/Capitol Region: Region wide, communities with 10 or more sales have seen an average decline of 13% in activity and 23% in median, year-over-year. In January 50 zip codes made our sales cutoff and of those 15 showed increased sales – these days, in context, that is a big number – with the top seller being North Highlands at 72% increase year-over-year. Other gainers were Antelope, Tahoe City, Rio Linda, Lincoln, Rancho Cordova and parts of Elk Grove, Sacramento and Woodland (but there were trade-offs as we might expect: high sales were generally paired with declines in median, so that North Highlands, for example, saw its median drop by almost half). Medians overall were less reassuring than sales, with four increases: two zip codes of Sacramento, one of Auburn and Granite Bay. One zip code of Sacramento (95864, largely an upscale area) gained 38% in median but sales were cut in half.

Interest Rates*: 30-year fixed, 5.90%; 15-year fixed; 5.27%; 5/1 ARM at 5.03% is showing an awfully big discount from 30-year fixed, since not long ago the two rates were almost comparable (remember how we kept complaining?). Nonconforming loans are obviously a different story with 30-year fixed at 6.88% and 5/1 ARM at 5.68%. Rates were headed for the sky for most of January, but the new pegging of the Fed funds rate at 3% – including, bear in mind, the biggest single cut in the history of the rate, 75 basis points in one swoop – will let lenders keep loan rates attractive.

Inventory: Once more with feeling: “In many areas, inventory now and probably for the rest of this year, simply does not have to figure into deliberations.” True last year, true now.

Overall Assessment: Last year we said, “Loans are easy to get and cheap, bargains are plentiful, and those who buy now may reap the rewards of their good luck for years or decades.” Let’s edit that for the new reality: With the conforming loan limits increased through the end of 2008 and bargains almost everywhere, those who buy now will enjoy the comfort of a roof over their heads and a historically strong, long-term investment. A home is an asset and the comfort and security that it brings offers incomparable stability to an entire household. Those wishing to buy a home owe it to themselves to consider the long-term benefits – there may be no time like the present to act.

NANCY DICKEY, CRS

510.967.6603 (Direct)

510.339.4791 (Fax)

nancy.dickey@cbnorcal.com

camoves.com/nancy.dickey

*Area interest rates are reported to be as follows:

Sacramento/Tahoe, San Francisco Bay Area and Silicon Valley regions: Princeton Capital reports that as of March 10, 2008, the 30-year fixed with one point is 7.25%, the 15-year fixed with one point is 6.375% and the 5/1 ARM with one point is 6.625%, on non-conforming loans of $500,000.

©2008 Coldwell Banker Real Estate LLC. Coldwell Banker® is a registered trademark licensed to Coldwell Banker Real Estate LLC.

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FAX: 510.339.4791

2007 Coldwell Banker Real Estate LLC. Coldwell Banker is a registered trademark licensed to Coldwell Banker Real Estate LLC.