IS THE WORST OVER IN THE NAPA VALLEY REAL ESTATE MARKET?

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It seems the question on every real estate seller’s mind is: “Is the worst over?”

Buyers ask, “Are prices still coming down? When should I pull the trigger?”

These are monumental questions for sellers who have a house listed for sale, and for buyers who are ready to make a strategic investment. I take the answers seriously and earnestly, and since I have always relied heavily on the objectivity of good statistics I thought it was a good time to update them to see the answers they reveal- thus far- to these vital questions.

A birds-eye comparison of the last 3 months of the Napa Valley real estate market (see bottom of this blog) versus two previous 3 month increments reveals the following:

• An increase in high-end sales in most areas (see average and median sold price) indicates that sellers of high end homes have adjusted their thinking and reduced asking prices, which spurred patient, opportunistic buyers (the only kind out there) to make offers.
• The county wide median sold price is up approx $30K from Mar-May; but only up $15k from Nov’09-Feb ’10. This tells me the summer market was stronger than the Spring, and experiencing minor-not necessarily permanent- stabilization.
• The number of sale, county wide, are slightly up from Mar-May; but down from Nov ’09- Feb ’10. This figure is representative of a typical summer increase, but these numbers historically have been much higher than the winter months, so it is a mixed message.
• The number of days on market increased in most areas, taking longer to sell overall than the sales in the spring. Once again this is a number that is on par with this past winter’s sales. Historically summer sales take less time than winter sales. This tells me the game of chicken continues between sellers and buyers who will simply wait longer.
• The average sold price per square foot is a mixed bag of increases and decreases depending on the town or city; this figure too is better than spring, but worse than winter.

Here are some reasonable conclusions the statistics in the table below predict:

• Short sales and Reo’s (bank owned sales) are still dictating values neighborhood by neighborhood and street by street.
• Until this inventory gets absorbed we will not see stabilization or consistent improvement trends.
• I predicted around this time last year that higher end mortgages would be affected by short sales and Reo foreclosures, and we are seeing evidence of that now.
• Motivation (to avoid a short sale or repo) may account for the increase in higher end homes as sellers who had been stubborn on price in hopes for stabilization or recovery have come to realize their cash flow is too stretched.
• First time buyers and investors took advantage of low interest rates and government sponsored economic recovery incentives and are absorbing the low end of the inventory in at a healthy, consistent rate. This is a classic bottom up recovery trend.
• Until we know just how many more short sales and Reo’s are coming this way it will be impossible to predict stabilization; but count on these factors to continue, and to affect the more expensive homes, well into 2011.

June 1, 2010 –August 31, 2010 (summer season)

March 1, 2010- May 30, 2010 (spring season)

November 1, 2009- February 28, 2010  (winter season)