The housing market got another piece of “good” data today, as the S&P Case Shiller Home Price Index registered its first month-over-month uptick in almost 3 years, according to Bloomberg. The increase was nominal, to be sure, at a mere 0.5% from the prior month, but it was an increase nonetheless.

As can be seen by the graph below, the 20-city composite index is back to where it was in May 2003.

(click to enlarge)

Taking a look at the California markets included in the survey, markets in the Golden State have corrected further than the nation as a whole:
San Francisco - August 2000
San Diego - August 2002
Los Angeles - August 2003

(click to enlarge)

Keep in mind, as we do our best to reiterate here at Cirios, that these broad measures may or may not be relevant to an individual, local market. Home prices in San Francisco proper are down around 20% from the peak, while the metro area has seen declines of more than 45%. Brentwood, Antioch and other parts of Contra Costa county, on the other hand, have seen declines of 60% or more.

We will continue to monitor this measure as an indication of broad, national and statewide trends, but ignore this data when it comes to evaluating individual homes. Have a property you’ve seen and our want our professional opinion? Send it to us info@ciriosre.com and we’ll take a look!

As the San Francisco rental market softens, so too is the market for condos and TICs (Tenancy in Common). This bodes well for buyers — as long as they can be patient. In general, we do not forsee a stabilization in the lower end of the condo/TIC market in San Francisco in the near term, so until that changes buyers very much have the upper hand, as they can demand price reductions, parking and other amenities to be included in the sales price.

This week’s Deal or No Deal is a newly remodeled TIC in
Nob Hill, close to the bars and restaurants of Hyde Street.
2 units in the building are up for sale, this being the middle
(and therefore lower priced) unit. Updates throughout, access to the back yard and a list price drop of $70,000. Parking, however, is listed as an extra $45,000 or $75,000 (depending on size of the spot).

In addition, HOA dues of $394 makes the monthly maintenance on this spot a bit on the pricey side.
The spot looks great, but do the numbers add up?
That’s what will determine whether this is a DEAL OR NO DEAL.

Address: 1446 Sacramento St., San Francisco, CA 94109 (MLS Listing)
Status: ACTIVE
Bedrooms: 2; Bathrooms: 2
Living Space: 1,025 sq ft
Lot Size: N/A
List Date: 5/26/2009
Original List Price: $669,000
Current List Price: $599,000
MLS no.:357053

Real Estate Agent Comment: Spectacular studs-out contemporary remodel of vintage Edwardian. 2BR/2BA flat with custom finishes throughout. Modern open floor kitchen/great room w/professional Viking appliances & Ceasarstone breakfast bar has french doors that open to rear deck w/access to lush landscaped rear yard. Master bath w/glass mosaic tile & walk-in closet. White oak floors, custom lighting & fixtures & new windows throughout.
In-unit W/D, garage pkg available.

DEAL or NO DEAL?
Comment below and tell us what you think!

It’s been a long time since the housing market has set a record that wasn’t something like, “Worst since…,” “Biggest decline since…,” or “….since the Great Depression.” The Commerce Department reported today that sales of new homes leapt in June, up 11% from May. According to Bloomberg, the figure marks the biggest monthly gain since 2001.

Sales outpaced analysis expectations, and shares of US Homebuilders climbed in kind. Ryland Homes, Lennar, Toll Brothers and Pulte Home all posted strong gains on the day.

Some analysts are making bold statements 3 straight months of positive housing data.

“We’re barely past the housing bottom, this thing is still fragile. It’s premature not premature to talk about home prices bottoming — it’s somewhere in the next three to six months. There is a light at the end of the tunnel,”

said the chief economist at Deutsche Banks, Joseph LaVorgna.

Back on planet earth, readers of this site  know that saying something like “home prices bottoming” is a meaningless statement. Even as the hardest hit markets grope for a bottom as investors step in to take advantage of mispriced homes, many high-end markets are still in freefall. This dynamic will continue until well-to-do markets experience the same price discovery as have their lower priced brethren.

All in good time.

This post first appeared on Minyanville.

It took the Wall Street Journal an entire survey to prove what readers of this column have known for months: The housing recovery, as it plays out, will be a localized event, varying greatly city to city, neighborhood to neighborhood, street to street.

The Journal, god bless them, compiled housing data to compare inventory changes, months supply, price drops, unemployment, and default rates across 28 US metro areas. Unsurprisingly, bubble markets like Las Vegas, Phoenix, and Miami look particularly horrid, whereas areas like Dallas (which avoided much of the housing mania) and cities like Charlotte and Seattle (which are just now seeing price declines accelerate) appear to be holding up rather nicely.

But drilling deeper into the raw data reveals a housing market that’s deeply bifurcated, even within individual cities.

As low-end markets experience a sharp increase in buying activity due to supply shortages and vastly lower prices, illiquid high end markets are experiencing violent price swings — typically in the southward direction. This much is already known, and the Journal’s study simply shows what we’re told ad nauseam: Real estate is, in fact, local.

What’s far more applicable to home buyers and sellers around the country, however, isn’t what a few broad (yet important) data points show about what’s happening in a few hundred neighborhoods all lumped together. Instead, it’s where individual submarkets are headed. After all, owning a home is an investment in a neighborhood, a street, a community — not necessarily a metropolitan area at large.

Housing prices, by extension — when measured as broadly as a metro area — are basically meaningless.

Real estate, for all its intricacies, isn’t any different than any other market: Prices are set by the interplay between supply and demand. The trick, then, is isolating the key data points within an individual micro-market that tell us who has the upper hand — buyers (demand) or sellers (supply). This is the best short-term indicator of where prices are likely going in the near term.

Unfortunately — and one of the reasons bottom-calling in the current housing cycle is so dangerous — myriad behind-the-scenes deals between regulators and big banks like Citigroup (C), Wells Fargo (WFC), Bank of America (BAC), and JPMorgan Chase (JPM) are impacting markets in a material way.

There are a number of important measures of housing supply and demand. And because at Cirios Real Estate we take a bottom up approach to evaluating property values (i.e., house by house, rather than city by city), we pay close attention to the sales-price to list-price ratio.

This ratio simply measures the difference between where a home was listed and where it was sold. To be sure, this can get complicated in markets where price reductions are common. But comparing both original list price and most recent list price to the eventual sales price can yield important insights into a market’s true behavior.

As can be seen in the graph below, which measures this ratio in 2 towns in the San Francisco Bay Area, this ratio tends to follow housing booms and busts fairly closely.

All things being equal, as sellers gain the upper hand and buyers become more desperate, prices are bid up over list and this ratio will rise. On the flip side, as demand weakens and sellers scramble to unload their homes, price reductions and low-ball offers drive sales.

In markets with rising sales-price to list-price ratios that have been under pressure for months, if not years — like many distressed markets — we’d argue stabilization could be just around the corner. The big caveat, however, is that banks keep bleeding out their shadow inventory slowly, and don’t dump their massive bank-owned home portfolios onto the market. Keep in mind, also, that stabilization doesn’t imply appreciation.

High-end markets, on the other hand, are seeing massive list-price drops, and any sort of bottom is indeed very far away as forced sales and foreclosures creep into well-to-do communities.

In today’s market, this analysis further must be broken down between homes that are in move-in ready condition and those in need of rehab. The former, financeable by the various government-backed loan programs, is generally in short supply and high demand. The latter, which must be purchased with cash, appeal to a smaller world of buyers looking to turn a quick profit.

We find that in many areas, turn-key updated homes that pass muster with the FHA, along with Fannie Mae (FNM) and Freddie Mac (FRE), have a far higher sales-price to list-price ratio than do homes bought with cash (i.e., fixer-uppers).

This makes intuitive sense, since even if government-backed loan programs could be used to buy these rehab projects, few prospective homeowners in the current environment have the cash on hand for a down payment as well as a remodel project. Moving in with as little out-of-pocket expense as possible is of the utmost importance.

Taken together, often times the sales-price to list-price ratio in a given town or zip code hovers close to 100%. But dividing sales into “financeable” and “non-financeable” yields a far different result. In most cases, sellers of updated turn-key homes currently have a distinct upper hand over buyers, while buyers of fixer-uppers can still get low-ball bids accepted. Of course, there’s still the world of homes that are wildly over-priced — but those aren’t selling anyway.

There are many other ways to look at supply-demand fundamentals in local real estate markets. But if you don’t divide analysis between homes that can be financed through the FHA, Fannie, or Freddie and those that can’t, you may as well be comparing bombed out duplexes in Oakland to luxury condos in Manhattan.

Wait, never mind, bad example — those 2 markets share one unique characteristic: No one is buying.

Lies, damn lies and (NAR) statistics.

Indeed.

The National Association of Realtors (or NAR) released data today showing that sales of existing homes crept up in June, the 3rd consecutive up month. While sales were a touch lower than they were a year ago, the annualized, seasonally adjusted sale figure was up 3.6% from May. (For more on seasonal adjustments, please read The Magic of Seasonal Adjustments)

This positive data led many pundits and so-called experts to reiterate calls for a bottom in the broad housing market.  “We have finally bottommed out,” Stuart Hoffman, chief econmist at PNC Financial Services told Bloomberg. Hoffman was referring to sales, not necessarily prices, but conventional widsom says that prices follow volume.

Others, like the popular economics blog Calculated Risk, did some actual analysis of the data and came to a different conclusion about the fundamentals of the market:

“It’s important to note that the NAR says about one-third of these sales were foreclosure resales or short sales. Although these are real transactions, this means activity (ex-distressed sales) is much lower.”

The key takeaway is not whether or not the housing market has “bottomed,” but that markets are still being enormously impacted by government backed foreclosure moratoria, first time buyer tax credits and efforts to keep interest rates low. With unemployment stubbornly high, the true outlook for a housing recovery remains uncertain.

Wondering where your market sits on the path to the bottom? Contact Cirios today and we’ll disect your local market like you wouldn’t believe …

Every once in a while, we get one wrong - even the Cirios valuation team is human.

A few weeks ago, we identified 1305 Campus Dr. in the Berkeley Hills as a Deal, assigning a value of $780,000 to a home listed at $759,000. It’s not often that we value a home above it’s list price, especially in this market, but we felt this one would garner enough interest for some high bids.

As it turns out, this home was more of a deal than
even we thought! 1305 Campus sold for $848,500,
almost 20% ABOVE the list price.

Truly, a deal.

Click HERE for the results of this Deal or No Deal.

Nestled in the heart of Ignacio Valley, Walnut Creek is the heart of the Contra Costa County economy. During the dotcom boom, tech companies of all stripes opened offices downtown, as the skyline grew and housing developments began to dot the hillsides. (click on images to enlarge)

During the housing boom, surrounding towns like Antioch,
Brentwood and San Ramon saw rapid development as
homebuilders threw up houses where farms and rolling hills
once stood. Traffic, along with the local economy, grew, and
Walnut Creek gained mightily as its neighboring towns overflowed.

Housing prices in Walnut Creek shot up during the boom, like they did everywhere else, but the town’s relatively strong economy caused values to hold up relatively well. Median prices peaked at just north of $900,000 as recently as January 2008, but have since tumbled to just over
$600,000.

630 Sitka is a 3 bedroom, 2 bathroom house with 1,602
square feet on an nice sized lot. The property has a nice
yard and some updates, but there certainly is room for
improvement. The only question (of course) is whether
it’s a: DEAL or NO DEAL?

Address: 630 Sitka Dr., Walnut Creek, CA 94598 (MLS Listing)
Status: ACTIVE
Bedrooms: 3; Bathrooms: 2
Living Space: 1,602 sq ft
Lot Size: 8,880 sq ft
List Date: 6/19/2009
Original List Price: $669,950
Current List Price: $649,950
MLS no.: 40415690

Real Estate Agent Comment: Like a smile is to happiness, this home’s perfect blend of structure and environment creates a warm, comfortable place to relax and enjoy with your family & friends. You’ll appreciate how this home has been tastefully updated throughout and how the abundance of natural light brings this home to life

DEAL or NO DEAL?
Comment below and tell us what you think!

Cirios Verdict: NO DEAL (Click here for the original Deal or No Deal post)

The subject is an updated home in the hills of Belmont, CA. The home has an updated kitchen and two updated bathrooms. The backyard sits on the side of a hill but it has been tiered, which makes it significantly more usable than just a hillside. However, the home only has two bedrooms and neither of them are pictured, which is concerning. Also, the home only has a carport at the bottom of the hill which is not ideal.

Belmont is a very desirable city on the Peninsula. Schools are very good and it is close to numerous job centers. Even though values have been falling, Belmont is not a distressed market and sales activity has been strong over the past few months. One of the biggest factors in the decline of values is the lack of a jumbo loan market, which remains constricted. However, the long term outlook for Belmont remains very strong as the Peninsula will remain a desirable place to live for the foreseeable future.

Positives: Updated kitchen and Bathrooms

Negatives: No pictures of the bedrooms / no garage

Verdict: No Deal

Two bedroom / One Bathroom homes are selling in the mid to high 600s and this home is only listed for $695,000. As long as the bedrooms are not too small, this home looks pretty attractive, but at a slightly lower value.

(Don’t forget to start saving money to turn the car port into a garage)

Address: 1715 Notre Dame Ave., Belmont, CA 94002
List Date: 4/4/2009
Current List Price: $695,000
Cirios Value: $670,000
List Price vs. Cirios Value: 3.6% over-listed

For a complete Cirios Valuation, click here for our CLEAR report, or on the image to the right.

Have a home you’d like Cirios to use for our next House of the Week?

Things are looking up for US homebuilders — or at least they think so.

The National Association of Homebuilders/Wells Fargo Housing Market Index registered a 17 this month, its highest level since September of last year. The measure jumped from 15 in June, after hitting a low this past March of a measly 9. Anything below 50 is an indication builders are pessimistic, so we still have a long way to go before optimism reigns in the world of building houses.

NAHB Chairman Joe Robson, while encouraged by the current environment, was sober about the reality for a meaningful rebound in housing:

A true recovery in the housing market and overall economy cannot take place until the continuing foreclosure crisis is abated and a decent flow of credit is restored to housing production,” Robson said.

Meanwhile, the stalled jobs market is a major concern to builders and potential home buyers alike.

Indeed. Buying activity is certainly strong in some markets, but its unclear how long this wave of buying can last, given the weak economic backdrop. Foreclosure moratoria can only keep supply off the market for so long.