Marin County, CA. Real Estate Update — January 2010 (Homes For Sale & Price Ranges)

When Will Marin County Real Estate Markets Return To Normal?

We are approached daily by our clients with requests to predict what will happen in our local real estate markets in the near future. To shape our perspective, Morgan Lane researched Marin County single family home (SFH) sales and indexed them (on a units-sold basis) to multiple benchmarks including: interest rates (10 Year T-bill), unemployment (SF Bay Area) and an affordability index (income vs. cost of ownership). We continue to struggle to find direct correlation between Marin County real estate and these available indices.
We have found a relationship worth noting between the total number of Marin County SFH (supply), the total reported sales (demand) and the annual rate of appreciation (%). The chart below illustrates the following: Supply, since 1999, increased an average of only .38% per year; Demand (closed sales) averages 2,352 units, or 3.62% of total supply; Appreciation averaged 6.50% over the past eleven years but has decreased -.35% over the past five years.
The rate of demand is a key variable for Marin County real estate. In four of the six years where demand has exceeded the average (3.62%), we have experienced double-digit appreciation. In 2002 and 2003, the demand exceeded the eleven-year average, but we did not realize double-digit appreciation. Demand for SFH in Marin County has fallen 52% since the peak in 1999. Our SFH sales in 2009 are 1,650 units or 70% of the eleven-year average making 2009 the 2nd slowest year in the past eleven.
In our view, recovery to a normal market (demand of 2,352 units or 3.62% of supply) will require substantive shifts in the overall financial landscape including, but not limited to, stability in financial markets, a strong local employment trend, affordable interest rates and strengthening consumer confidence. It is difficult to predict the future and “normal” may return with a somewhat new definition. As for our outlook, we are prepared to do business in current market conditions throughout 2010.
Through 2009, Marin County continued to see substantial decreases in demand (units sold) vs. 2008. To our benefit we see only pockets (both price ranges and geography) of average or median price erosion (see chart below). We are encouraged to see Marin County volume up in all segments. By contrast, California markets with significant excess inventory (supply) are experiencing prices and units sold down by well over 40% year-over-year.
Pricing a home in this market is clearly our most important role and a significant challenge. We rely on rigorous methods of analysis and proven results to demonstrate our success. How all of these dynamics relate to you, your desired neighborhood or specific home requires a focused analysis similar to the one above. If you have questions or concerns, please do not hesitate to call on me.
I look forward to continuing our relationship and successfully assisting you in your real estate investment decisions. Please feel free to contact me for a confidential and thoughtful analysis of your situation | Kyle Frazier, CRS, CLHMS (Morgan Lane Marin | Christie’s Great Estates) (415) 350-9440.