Market imbalances are resolved through two primary mechanisms: Time and price.

To be sure, the imbalance in new homes remains, despite a recent uptick in buying activity in real estate markets across the country. And as builders slash prices and time drags on, slowly but surely the backlog of newly constructed homes is being worked through.

New home sales ticked up 0.7% in August from the month before, registering the highest total in almost a year, according to Bloomberg. Although the increase was less than analysts expected, it continues the uptrend in place since this summer.

Meanwhile, prices keep falling. The median price of new homes tumbled 9.5% from July, the biggest drop since records began in 1963. This drop is primarily a result of homes less than $150,000 making up the lionshare of sales.

While the increase in sales is good news for market watchers eager to see inventory levels chewed through, fire sale prices push out any eventual recovery. Until it is economic for builders to build new homes, vacant land will remain exactly that, vacant, as landowners bleed cash on upkeep and maintenance. But in keeping new homes off the market, this correction will help speed up the broader housing recovery as inventories of all homes return to more manageable levels.

The resolve of the nascent US housing market recovery is about to be put to the test.

Existing home sales slipped in August, breaking a string of four straight months of rising sales. Purchases fell 2.7% in August from the month before, which was below analysis expectations, according to Bloomberg,

One kernel of good news was that the inventory of unsold homes gapped down 11% to 8.5 months of supply, the lowest level since April 2007. In addition to the brisk summer buying season, this figure also reflects banks’ reticence to list REO properties on the market, which is keeping inventories lean. Housing experts generally agree that 7 months of supply represents a stable market.

As autumn rolls on and gives way to winter, home buying typically dries up. During the next few months sales data will be very telling in determining whether this recovery is for real, or just a dead cat bounce on the way to new, painful lows.

For anyone in the market for a single family residence in Noe Valley under $1 million, pickings are slim, at best. Condos, sure, they’re a dime a dozen as the Noe Valley condo market follows rents off the proverbial cliff, but the attractive single family home for less than 7 figures is a rare find indeed. (click to enlarge images)

2324 Castro Street could be that find. Maybe.

At 1,380 square feet with a back yard and two
parking spots, the self-proclaimed cottage certainly
fits squarely into the “condo alternative” category.
The house does seem to try and crowd a lot into a
small space: Kitchen, dining room, reading alcove,
master bedroom with parlor, office/den, laundry,
storage and the aforementioned parking.

But the outdoor space could make up for what may be a cramped interior, and the premium for not having to share the yard with the condo owners upstairs should be significant.

The only question left is whether 2324 Castro is a DEAL OR NO DEAL?

Address: 2324 Castro St., San Francisco, CA 94131
(MLS Listing)
Status: ACTIVE
Bedrooms: 2; Bathrooms: 2
Living Space: 1,380 sq ft
Lot Size: N/A
List Date: 9/11/2009
Original List Price: $849,000
Current List Price: $849,000
MLS no.: 361149

Real Estate Agent Comment: The Quintessential Garden Cottage – Indoor/outdoor living at it’s best! Enchanting home-privacy through a tranquil garden + porch in the front + private manicured back yard w/ apple trees + charming patio on the rear. Home features living room w/garden outlook. Dining room that opens to kitchen w/reading alcove. Kit w/granite counters &skylight. Master bed has separate parlor
w/ensuite bath. Office/den w/french doors out to back yard.
Laundry + storage. Hardwood floors.

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

Broad measures of home prices continue to show improvements, as the S&P/Case Shiller Home Price Index registered its second straight monthly increase. According to the Wall Street Journal, Case Shiller’s 20-city index ticked up on a quarterly basis 1.4% from the three months ending May 31.

2 cities still showed month-over-month declines, woeful Detroit and Las Vegas. The only cities showing single digit annual declines, Dallas, Cleveland, Denver, Boston and Charlotte, were some of the markets that held up longer than most, and are still in the early stages of their price correction.

Yale’s Robert Shiller, who along with Carl Case devised the Case-Shiller Home Price Index, warns that despite the positive data, foreclosures and job losses could still hamper any legitimate housing recovery. Mortgage defaults, especially in the Prime market, continue to rise, which is leading to increased inventory and falling prices in high-end real estate markets around the country.

The experts at Cirios Real Estate are watching the data closely, especially as the summer buying season shuts down and we move into the traditionally slow fourth quarter. This transition will be the first true test of this housing “recovery.”

Eclipsing even the most optimistic expectations, July existing home sales registered a 2-year high this morning, jumping 7.2% from last month. According to Bloomberg, the National Association of Realtors (or NAR) reported that transactions climbed to a 5.24 million annualized pace, the highest rate since August of 2007.

NAR chief economist Lawrence Yun, the man who asserted the housing market’s slide had stopped back in 2006, is now quite certain the worst is behind us: “We are bouncing back, but we still need to wait until year-end before we see price stabilization.”

While on the surface, this report appears to be filled with nothing but rosy news, there is a kernel of caution amongst the positivity. Despite a jump in sales, inventory levels remained high, at 9.4 months’ supply. In other words, as buyers are coming back into the market, so are sellers.

This is a dynamic we have discussed previously here at Cirios Real Estate, and is a primary reason we are more cautious than most when it comes to this nascent housing market recovery. Even as some markets may stabilize, others will continue to fall until prices return to more sustainable, affordable levels.

Want to know which category your market falls into? Contact Cirios today!

Every once in a while, we run across a house where the list price just doesn’t make sense. When 5692 Cabot Dr. in Montclair popped up on our radar screen, it screamed DEAL without question. So, naturally, we immediately tried to figure out what was wrong with the house. (click images to enlarge)

Good location? Check.
Walking distance to downtown Montclair, an upscale enclave in the Oakland Hills.

Nice interior? Check.
Tasteful updates, high ceilings.

Yard? Check.
Many homes in the Oakland hills are wedged into cliffs and don’t have yards. This one has one– albeit it a small one — but plenty of room for a table and BBQ on the patio, plus some flat ground for a garden.

Quirky? A bit.
The downstairs bedroom has no bathroom and is sort of
long and skinny, but certainly not a deal killer.

We scratched our heads — what gives? This place should sell in a nanosecond above list.

Then we found it: No parking.

Not only does the home have no a driveway or garage, the part of the street immediately in front of it is a No Parking zone! There is street parking nearby, but this should be viewed as a definite negative. That being said, this home still offers a relatively inexpensive to move into a popular neighborhood with excellent public schools.

So, does all that add up to a DEAL OR NO DEAL?

Address: 5692 Cabot St., Oakland, CA 94611 (MLS Listing)
Status: ACTIVE
Bedrooms: 3; Bathrooms: 2
Living Space: 1,687 sq ft
Lot Size: 7,242
List Date: 7/30/2009
Original List Price: $649,000
Current List Price: $649,000
MLS no.:40422306

Real Estate Agent Comment: Heart of Montclair, move-in ready w/a Walk Score of 80. HWF’s, FP, deck in front, patio/yard in back. Upgraded kit & baths. Plus room. New paint inside and out. A must see..

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

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!