Monday, November 2, 2009

It's the economy stupid - 2009 redux

There were a flurry of positive economic reports in today's news including these tidbits:

- The pending home sales index rose 6.1% in September, 20% higher than September 2008
- Construction spending rose .8% in September driven by the strength in home building

Here are two reports on those figures:

So what does this mean for the local market? Continued strength in sales and pricing with less erosion, lower inventory, and faster sales. Here's the inventory picture for 2009 vs. 2008 as of this morning:

CityOct 2009Oct 2008Sept 2009
Los Altos708677
Los Altos Hills565064
Mountain View496661

So in general, the overall market is stronger this year and even month-over-month as the economy continues to build strength. There's a certain level of seasonal sales activity as people try to close deals before the holidays and some strength in Mountain View is driven by the $8000 tax credit that expires November 30th. However, overall we're getting to a "normal" market.

That said, I find it annoying that buyers and their agents are still trying to press hard for price reductions when a property is already priced in line with the market. There are several properties on the market that are at or below nearby comps and yet offers are coming in 2-5% below the list price. When the agents are pressed to make an offer, they balk with excuses of "we don't want to compete, etc".

I think the writing is on the wall for buyers, especially in the entry-level market. As inventory drops, the need and willingness of sellers to negotiate drops as well. That means more competition and buyers end up paying list price or more. My advice to buyers is to take advantage of the low interest rates and good inventory while you can.

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