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What’s in Store for Real Estate in the New Year?

As we approach the end of 2010, I am frequently asked about what lies ahead for real estate in the New Year.  Will the New Year bring positive upward motion for housing both in our state and local San Francisco Bay Area?  Are we going to see some job growth, which will help to fuel growth in a somewhat anemic housing recovery?  The way I see it, is it's going to be a slow start in 2011 – let’s call it a year of transition. We may not always feel like we're making progress because of the slow speed.

Despite how slow or fast we're moving, it’s clear the bottom is behind us and we are setting our sights on upward movement in 2011.

As for foreclosures, they’ll be with us for some time, but the market will continue to work through them.

In the Bay Area, there are a lot of developments that are optimistic about 2011. Facebook game developer Zynga recently signed the largest lease for San Francisco office space in five years. Facebook itself recently announced a joint $250 million fund for social application developments. Stocks have been surging at Oracle, eBay, Google, Intel and other Silicon Valley tech powerhouses. And while sales volume has lagged, home prices in the Bay Area rose for 13 straight months through September, according to MDA Dataquick.

These are all very positive signs that the Bay Area economy is already looking up, though we need to be mindful that slow and steady progress is what 2011 will be about.

  What to expect? 

For Home buyers:  Continue to expect the loan process to be long and lending guidelines to be conservative. You will need cash, a solid credit history, appropriate salary and job security. Buyers won't have the lowest of the low interest rates forever so expect the spring buying season to come on strong. Already surprising some buyers is buyer competition and multiple offers.
 Home sellers:  Studies by the California Association of Realtors have focused on the tale of segmented housing markets in our state: the low end, mid range and high end. How sellers come out in 2011 really depends on which market segment they are in.

  The low end category, sales of properties valued at less than $500,000,  is largely made up of distressed properties and banks are expected to release more inventory next year. This means sellers of properties in this price range will continue to have a lot of competing inventory.

  Meanwhile, sales at the mid range (and this is the “sweet spot”) – between $500,000 and $1,000,000– have seen and will continue to see improvement do to the consistent flow of available financing.  Although underwriting is conservative, the Bay Area benefits by having the conforming loan size set at the maximum of $729,750.

The sales of high end properties begin to fade as the price moves above $1million.  The good news is that “jumbo” financing is more available now than it has been and the spread between high balance conforming ($729,750 in the Bay Area) and “jumbos” has narrowed this past year.  For buyers in this category a minimum of 20% down is needed and to qualify for the best rate up to six months “reserves” are required.

The prognosis? It won't be the best year to be a home seller in 2011, but be patient as there are buyers on the sidelines waiting to jump in. 

Homeowners: As the economy continues its slow improvement, expect to see some homeowners walking away from a mortgage, but hopefully some of the positive economic news will create a much needed sense of security for these folks.

  The transition we need: According to Intero Real Estate Services CEO, Gino Blefari, “we have a lot going for us in 2011. Our state's sheer size of nearly 37 million residents, expansion of the exporting and technology sectors, and an expected rise in personal incomes are all factors we have working for us. We are still the eighth largest economy in the world with a gross domestic product of some $1.8 trillion.”

  Gino went on to say, “It takes a lot to keep us down, and it will take a lot to pull us back to normal. 2011 won't be remembered as a breakout year of growth, but it will be the year we turned the economy back around – the year we needed to transition from decline to moving up.”

As a real estate and mortgage professional, I take my responsibility to my clients very seriously.  I am always available to answer your questions or discuss your concerns.

With the complexity in today’s mortgage and real estate market you will benefit from the advice and guidance of an experienced and knowledgeable mortgage and real estate professional.  I’m always available to answer your questions or discuss your concerns.  Just text, call (650 325 7877) or email me for a prompt response.

If you are in the San Francisco Bay Area, I invite you to take a look at our Resource Center, www.AboutBayAreaHomes.com. There you will find links for active home listings, including bank owned and short sales, home loan information,  market activity reports, home seller strategies, staging and decorating, a suite of 19 calculators, plus my book, “Let’s Make a Deal, The Insiders Guide to Buying and Selling Real Estate” and more.

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula Communities of the San Francisco Bay Area. They serve clients in San Mateo, San Francisco, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real Estate Broker by the California Department of Real Estate, 01264240. National Mortgage License Registry 230411