Predictions for 2012 Marin Real Estate Market

Andy's real estate crystal ball predicts multiple offers, low and high end markets, distressed properties and more.

Contrary to popular belief I actually do possess a crystal ball and I consult with it on a regular basis when making real estate guesses, I mean prognostications.  Sometimes the ball is a little murky and even misleading, so please don’t shoot the messenger.  I'm serious, please don’t shoot me if I’m wrong.

Multiple offers are back! 

That’s right, if you are a seller in the Marin market in 2012 and you price your house well you can reasonably expect to see more than one offer, especially in the first quarter of 2012 when inventories are expected to remain low and demand high.

Bottoming out of entry level sectors throughout Marin

In the current real estate climate it’s hard to imagine prices getting much lower.  Already for entry level homes it makes more sense to purchase than rent, so buyers should not expect prices to fall further on entry level homes.  That would be like looking the gift horse in the mouth.  Turn your back on those sales, and the horse may kick you in the rear.  Anticipate intense competition for these homes.

Demand for ultra-high priced homes to pick up, slightly 

As of Dec. 30, 2011 there have been 154 single-family home sales over $2 million in Marin.  In 2010 there were 161.  Both years were better than the 127 sales in 2009, which was understandable after the mortgage meltdown of August 2008.  To put this into perspective, in 2008 there were 220 sales, and 2007 saw a whopping 283 sales.  I’m predicting between 170 and 190 single family home sales over $2 million in Marin.

More that 1800 listings won’t sell in 2012

This year 1,990 listings were cancelled, expired or temporarily taken off the market.  There is some overlap, as some homes were listed and didn’t sell more than once.  If you think 2011 was bad, 2,299 didn’t sell in 2010, and 2,183 didn’t sell in 2009.  In 2008 that number was only 962, and 2007 562.  These are a barometer of the health of our market, and 2012 should continue to see improvement.

Persistence of foreclosures and distressed sales

Sorry folks, but distressed properties have not gone away, and I expect them to continue to be an active segment of the market in the coming year.  The good news is that these sales will no longer necessarily weigh the market down as they have in the past because prices have already taken such a big hit.  It’s common to now see multiple offers on well-priced distressed properties.

This year, we’ve seen 759 distressed sales in Marin, which includes short sales, bank owned properties, VA repos, notices of default and properties in foreclosure.  In 2010 that number was 606 and 2009 it was 616.  2008 we had just 411.  In 2007, when this cycle began we had 31.  With 401 distressed properties currently on BARIES MLS we could easily see 700 or even 800 distressed sales in 2012.

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John Ferguson January 11, 2012 at 08:12 PM
If your comparison is renting in SF vs. owning in Marin, that's a very different conversation than the one we're currently having. Apples to oranges I would say. In a flat or declining market with stagnant wage growth I don't believe in the concept of 'starter home'. The concept I'm considering is buying (and holding) vs. renting in a single market - in my case, Fairfax. I don't really have any interest in living anywhere else at this point. My kids are in school and we're very happy here. Rent increases certainly play into the equation. I haven't seen a significant rent increase outside COLA since I've lived in Marin, so it's pretty speculative that the rental market will suddenly heat up and rents would increase around where I live. If I could buy a house and pay a fully loaded cost (mortgage, tax, insurance and upkeep) that was under say 115% of my rental costs I would buy but it's not even within 140% by my calculations. The great thing about this is that I can always track the rent ratios in my area and if they drop below 16 I'll be looking to buy. Currently they're at 20, so we're not close. At my current rent payment, a comparable 3/2 home would have to be priced below $450k to meet my criteria. When you find a decent 3/2 house on flat land in the Ross Valley for under that, please let me know.
John Ferguson January 11, 2012 at 08:21 PM
I imagine that most people have the same thought as Andy does - that their home is an investment vehicle to be redeemed upon retirement. People have one chance to get maximum value for that investment, so they'll sit on a property that they would like to move in hopes that the value goes up. In a flat or declining market, any upward movement of prices will trigger a flood of listings, with the nicest most reasonably priced ones selling and the rest sit there until the owner decides she's not getting the offers she wants and she pulls the listing. Rinse and repeat. That cycle in an aging Marin will keep housing prices stable for years, if not decades. The boom is over folks and you can choose when to buy based on the cycles that will repeat for quite some time. That's what I'm seeing anyway. As far as economic indicators, make sure you pay attention to what's going on in Iran right now. If the Iranians decide to lock up the straits of Hormuz for any length of time, oil prices will spike and we'll see an economic downturn regardless of what happens with European debt. There are so many potential triggers to a recession it's almost impossible to predict not having at least a 6 month downturn in the next 3 years.
Ian M Rogers January 13, 2012 at 05:55 AM
Well the rental market is small Marin, I looked at the Cove apartments in Tiburon, I work in San Mateo and need to be in Southern Marin as the drive is killer. The 1x1 at the Cove was $2600 more than our rent in San Mateo; we were burning thru savings at the current rent levels in the Bay Area. We could pay our rent but were never getting ahead, with home ownership we are not rolling in cash but paying into our own financial wellbeing, heck only 29 more years to go and we own the place. The best part about owning is that I know my payment will be the same for the next 29 years. Also I live on a hill in Mill Valley and picked up one of the few single family homes under $485,000 last year. I love Mill Valley being a 5th generation Marin born, I love the area and the hiking we have at our back door. When my family homesteaded in West Marin before California was a state the county was a magical place, I still fell this magic is here and want to spend my life here.
Mark Burnham January 17, 2012 at 04:35 PM
andrew, good morning. i thought about you this am when i read this article. ANYONE considering buying real estate currently that believes we are at a price lows, near price lows, or that it makes sense to own vs the price of current rents should read this easy to read article that came out today on the cnn website. i'd rather not summarize but one of the leading wall street mortgage analysts is stating that unless banks and the government get real about the mortgage crisis and what they need to do .. the bloodshed will be far, far worse over the next few years. worth a quick read.. http://money.cnn.com/2012/01/13/pf/ows_goodman_best_money_moves.moneymag/index.htm?iid=HP_LN
John Ferguson January 18, 2012 at 02:25 AM
The real problem for the housing market here is not the large pool of bank owned housing (mostly in other places - real estate markets are incredibly local..) or default rates, it's the ability to find appropriate loans for qualified lenders. Not many houses are sold for cash. With the debt market taking a turn for the worse, a lot of commercial banks are grabbing money any way they can and hoarding it to cover their exposure in a market they can't easily sell out of (commercial and government debt). That means it doesn't really matter what the rates are, qualifying for a loan to finance that $800K house just got really difficult. So, less qualified buyers with pre-approved loans means what? Fewer offers, and a declining market with generally lower prices. We haven't seen the bottom of this housing market yet, not until the banks clean up their balance sheets.


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