Monday, July 16, 2012

First Quarter Piedmont Update

The market has been very robust this quarter--one easy indicator is the price per square foot. You'll recall we were at about $600/sf for a number of quarters back in late '05, '06, and '07. Since then we'd settled into a $500/sf plateau over the past several quarters (I keep saying ''we're flat flat flat''). I checked the market through earlier this week for clients, and found that for the first 3.5 months of the year (meaning properties going into contract roughly from January though March, and closing by mid-April) the average price per square foot had trended up to $535/sf. (The average through 3/31 was $511/sf.) Moreover, we're seeing that same increase in velocity we saw last spring, in which homes are hitting the market and going into contract in the formerly standard two-week window (and typically for somewhat over the asking price). If we pull out one transaction with a technical glitch (nearly 250 days on market were counted even though it was ''withdrawn'' from the market and for all intents and purposes was an off-market sale), the average days on market for all 19 properties closing by 3/31 was 14 days (which means that these homes were typically selling in competition, which means they would typically be selling for something over the asking price). In fact, the average sale price was about 3% over the asking price, ranging from 74% of asking to 116%, excluding an effective REO auction situation. Eight of the sales closed at 5% or more over the original asking price, and six (of the eight) closed 10% or more over that asking price. About 70% of the transactions in my office this last quarter were in competition, compared to about 40% for the last year or more. Shifting back to our traditional discussion of pricing trends, the average sales price in 1Q12 in Piedmont was $1.275 million, ranging from $510K (for the one REO property--we also had one short sale) to $2.76 million. This compares with 16 sales averaging $1.331 million ($480/sf) selling in a leisurely average 42 days in 1Q11. Because of a difference in the size and condition of homes selling in the two quarters, the average price is down by 4%, but up by 6.6% on a price-per-square-foot basis. Taking a look at sales in the traditionally slow last quarter of the year, prices are again down by 7% this quarter compared to last (when the average home sold at $1.382 million), but up 9.5% on a price-per-square-foot basis. Unlike past years, when only a few homes sold, explaining this kind of volatility, we have another phenomenon now: ''All'' the homes coming to market are getting snapped up very quickly, yet prices aren't trending up consistently. Broadening the view to Oakland, Berkeley and the surrounding region, the number of willing buyers and willing sellers out there making deals they can live with is trending back up to the numbers we saw a decade ago--422 homes sold in the ''inner'' East Bay this quarter, compared to about 450 or so each quarter in '02, '03, and '04. Oakland saw an increase in the number of homes sold of 8% this last quarter over 1Q11, and an increase in average prices of 3%. Berkeley on the other hand saw a 15% drop in the number of homes sold, and prices were flat. It's as if the market is trying to take off, and just isn't quite getting the traction for liftoff yet--the wheels are still sliding around under the market. We'll have a better handle on what's going on in the next couple of quarters. Prices in our classic ''move down'' neighborhoods, for instance Crocker Highlands and Rockridge, are up between 3% and 15% this quarter over a year ago. Are many of us conserving our resources for retirement, bidding up prices in those neighborhoods we feel very comfortable and confident about?

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