I point you to this article first, because it’s dense but full of good information and thoughts about how to market and price a property in this market.  It comes from Avram Goldman, president and C.E.O. of Pacific Union. Avram penned it on May 26. He refers to markets both in San Francisco and the East Bay.

Like the weather this weekend, overcast with a little sun, typified the market. Open house traffic slowed from previous weeks, but could have been affected by the reporting period’s warm weather and graduations. The buyers that were out there are eager to find the right home.
 
Multiple offers also slowed, dropping to 15% of total transactions.  The majority taking place in San Francisco and the Berkeley/Montclair/Piedmont markets.  Ninety percent of the multiples sold for over full listing price. One SF Noe Valley 4bedr./3ba. property listed at $1.398 mil. received 10 offers and went well over asking.  Curiously, in our Montclair office, 4 homes with single offers all sold over asking.  Perhaps indicating that buyers wanted to secure the properties before more offers were submitted and saving dollars by not getting into a bidding war.
 
The homes that are receiving the most attention are those that have IEA and IVA.  IEA is “immediate emotional appeal” and IVA is “immediate value appeal”. A home that has both will end up in the 15% of the transactions I reviewed above. If a home has neither the chance of selling is zero.
 
What I mean by IEA is that when you enter a newly listed home you are overcome with the feeling that I could live here—just move in and set up for the house warming party. On Broker’s tour last week I saw two homes in the $1.1-1.6 mil price range. Both homes were attractive from the street, but once you entered they were profoundly different. The first one you entered and right away were hit with canine odors. The house had many traditional features, but all you could focus on is the smell. The rooms were ok, but felt ordinary as the beddings were rather sparse and unattractive. The upper deck had weathered paint and plants that looked as weathered as the deck.  Inviting backyard, but the landscaping unimpressive. Nice spacious home, but didn’t sparkle.
 
The second home you entered and you were greeted with that wonderful smell of fresh paint. It had that clean as whistle feeling. It was professionally staged. The landscaping in the backyard was impeccable. The listing agent asked me if I had seen the listing previously. I had not. She shared that the seller invested over $30,000 in creating what I call IEA. Oh by the way, the house had just received an offer. Before the investment no offer.  Sellers must make the investment. It will bring them a significant return and most importantly a sale.
 
In today’s market you need IEA or IVA, but preferably both. You need IVA which is as important, as buyers know the values.  They have done their homework.
 
Sales activity remained at the elevated levels of the last report. Meaning that they were at levels that we had not seen last July.  Instead of doom and gloom newspaper stories, we are beginning to see balanced stories, like the one found last week in the San Francisco Chronicle. I have attached it if you missed seeing the article.
 
The stock market drubbing this past week due to the escalation of oil prices could potentially have an effect on activity, as consumers may decide to hold off on purchases. Until oil prices stabilize or head downward, negative consumer confidence could spill over in slowing the recovery in the housing sector.
 
One part of the market that is less impacted by the machinations of the stock market is the high-end. Two high-end listings in Piedmont went into escrow. One listed at $7.8 mil. and another at $5.6 mil.  In San Francisco a home listed over $6 mil. was put into escrow this past week. Obviously, the wealthy feel real estate is a high quality asset during times of financial instability.
 
The next few weeks we may find a receding of activity due to the Memorial Day holiday, graduations and weddings. This is typical. Much will depend on what occurs in the financial markets.
 
One potential bright spot is we are hearing that a number of sellers will be bringing their homes to market.  The word is that these properties are in desirable areas and will be priced for current market conditions. The demand is there and these new listings could give a nice boost to the market to off set any negative influence of the stock market.

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This is a synopsis from the NY Times– two realistic views of the market, both quite valid:
 

A few years ago, when multiple bidders would show up at a real estate open house, the truly desperate resorted to writing love letters to the sellers, dripping with compliments for the property and ended with a plea for mercy (and a signed contract).

Today’s real estate market calls for a different kind of letter, less a fuzzy valentine and more like a cold splash of water. . .

Dear Seller:

I’m writing to let you know that I would like to make a bid on your property. I love the area and am committed to buying a house nearby. And your home fits my needs.

But given that my offer is well below your asking price, I also feel I owe you an explanation.

First, consider the big picture. Nationwide, home prices in the first quarter of 2008 fell 14.1 percent compared with the same period a year earlier, according to the Standard & Poor’s/Case-Shiller U.S. National Home Price Index.

That’s the biggest decline in the 20-year history of the data. And just in case you’re wondering, during the housing downturn of the early 1990s, the decline was never worse than 2.8 percent.

Not only that, earlier this month, the National Association of Realtors pointed to the huge number of existing homes on the market. As of the end of April, the total number was 4.55 million. At the rate people are buying right now, that represents an 11.2-month supply.

So buyers have options right now. A lot of them. I’m no different. Your home is great, but it isn’t unique. Few homes are. I know this may be hard to hear, since you’ve spent years creating memories here. But you may be waiting a long time if you hope to find a buyer with the same emotional connection that you have.

My mindset is hardly unique. We’ve all been reading the headlines. The accompanying articles appear prominently in major newspapers and sit on the Web pages where people check their e-mail every day. Everyone sees them, and the psychological impact is real.

Has your real estate agent laid any of this out for you? Maybe so, and you didn’t want to believe it. But it’s also possible that your agent, afraid of offending you and losing the listing, simply doesn’t want to initiate that sort of discussion. It may be worth sitting down for a candid reassessment.

It will be tempting to view my low bid as an insult. Please don’t make that mistake. Your home is genuinely appealing, and I wouldn’t have written this note unless I was serious about buying it. Getting a firm offer in this market is an accomplishment. So congratulations!

Oh, and one more thing. You presumably need someplace to move. My guess is that you’ll find these same points compelling when it’s your turn to buy. You just might succeed in buying for a better price, too.

I look forward to hearing from you soon.

Yours Truly,

The Realist

Now for the Seller’s response:

Dear Bidder:

Thanks so much for your note. I’m truly glad that you like our home as much as we do. You’re right that my family and I have many great memories of this place, and we hope someday you will, too.

And I just want you to know that I’m not insulted in any way by your offer. The fact is, none of us are very good at buying and selling homes. We don’t do it often, and as much as we know we’re not supposed to let emotions get in the way, it’s hard not to. After all, few people buy or sell anything else as expensive as a home in their lifetimes.

That said, your offer disappointed me. You seem to believe that I’m not aware of how bad things are out there or that I’m in denial. But I do read the headlines, and I priced the house accordingly. I knew I might have to wait awhile to sell it.

I should point out that your data draws on what has already happened in the housing market. Instead, I’d ask you to consider what’s about to happen.

One big reason for the falling prices is that it’s harder to get mortgages. Lenders went from giving money to anyone with a pulse to demanding higher credit scores and larger down payments. All sorts of buyers simply couldn’t make the numbers work anymore.

That may now change. Starting June 1, Fannie Mae and Freddie Mac, which buy mortgages from lenders and help make it possible for them to lend more money, are loosening restrictions on the sorts of loans they’ll buy in many markets. That is supposed to make it easier for people to buy a home with a down payment of 5 percent, or even less. Many more qualified buyers should mean more bids, and I’m willing to wait to see if it turns out that way.

I know you talked about having choices, but presumably we wouldn’t be engaging in this correspondence unless you liked my home best. Given that, I’d ask you to think about something: How often do you find a place that you can actually imagine living in? Sure, there are a lot of other properties out there. But an increasing number are in foreclosure and probably have problems lurking within the walls. So don’t let fear of a falling market keep you out of a home that you truly want.

It’s probably obvious by now that I’m not going to counter with a particular number. This doesn’t mean that I do not want to negotiate. I’d just like you to consider what I’ve said and see if you find it convincing. In the meantime, other shoppers who are interested in my home now have a price to beat. So thanks for helping me out with that.

Just one more thing. Please take another look at whatever mortgage calculator you’re using and see how your monthly payment will change if you brought your price up a bit. It almost certainly is not going to be enough to break you. But it may be enough to get us to a deal.

I look forward to your reply.

Yours,

The Undaunted

The Seller’s best points are scored with asking the buyer to calculate mortgage payments at a slightly higher price. At 6% interest only, each $10,000 increment costs $50/month.

But thanking the Buyer for offering a ‘price to beat’ sounds a little snarky. I’d leave it out if I sent a letter like this.

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This is a synopsis of a recent Chronicle article which outlines an important way we calculate supply/demand for homes– by measuring how long it would take at the current rate of sales to sell all homes on the market. It’s often a good indicator of where prices are headed based on supply and demand. In San Francisco this number is dropping.

Home Sales Get Lift, But Lid Still On Prices

On Tuesday, DataQuick released numbers showing that sales of existing Bay Area homes jumped 33 percent in April from March - the biggest month-to-month increase in at least 20 years. Compared with the previous April, however, sales were still down a painful 14.2 percent.

Some people saw last month’s unusually big surge as a sign the market may be bottoming out. Others see no relationship between the volume of sales and prices, and believe home values will continue to drop.

One of the more useful ones is days of unsold inventory, which measures how long it would take, at the current rate of sales, to sell all homes on the market. It’s often a good indicator of where prices are headed based on supply and demand.

In Santa Clara County, it would take 149 days to sell all the single-family homes on the market. That’s way down from the 335 days it took at the beginning of this year, but still well above normal. Historically Santa Clara homes would take 45-90 days to sell.

What’s most striking about the inventory numbers is how they vary within the county. Outlying areas like Morgan Hill, San Martin and Gilroy hit 600 days of unsold inventory last fall. Now they’re around 250 days.

In the county’s expensive northwest quadrant - Sunnyvale, Cupertino, Los Altos, Mountain View and Palo Alto - they are only at 60 days unsold inventory. Prices in these communities are continuing to rise.

Different markets in the same county - even in the same city - are wildly different. In San Mateo County, it would take 122 days to sell all the single-family homes on the market. The normal range for San Mateo is 40 to 80 days.   Foster City and Redwood Shores have roughly 80 days of inventory and the balance of San Mateo County is at 100 days with the exception of the coast, which is at 200.  Experts speculate that slower sales in some communities involve the commuting costs.

Subprime lending was concentrated in affordable and outlying markets. From 2002 through 2006, these areas saw rapid price appreciation. Expensive communities were having more normal increases.  

When the financial crisis hit in 2007, lower-end neighborhoods were hit hardest. Because they had not gone up as fast, prices in higher-end neighborhoods didn’t come down as much. In some cases they continued to rise.

San Francisco, for example, has 4.6 months’ worth of inventory. ,  While that seems like a large number, it’s actually reflective of a fairly balanced market.

The same ways inventory amount varies from city-to-city, in SF it varies neighborhood-to-neighborhood. Inventory in Bayview is seven to eight months. And Prices in some lower-priced neighborhoods have come down so far they are beginning to attract buyers.

Sales in Solano and Contra Costa counties, which have been hit hard by the housing crisis, were up 5.3 percent and 8 percent, respectively, in April compared with the previous April. They were the only Bay Area counties to post annual sales gains. Prices in all Bay Area counties, however, showed annual declines.

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This article comes from Bloomberg Newswire– High point in it for me is  that San Francisco runs second to San Jose as the most expensive housing market in the country. Our median price as of end of April was $701,700.

California Home Price-Cuts End Losing Streak

Housing demand in California, where one out of every eight U.S. residents lives, is reviving as bargain hunters buy foreclosed properties, reversing a two-year slide in home sales.

Sales in the state increased 2.5 percent in April, following 30 consecutive declines, the California Association of Realtors said in a May 23 report. The median home price tumbled 32 percent in April from a year earlier to $403,870, the biggest drop in at least three decades, dragged down by sales of foreclosed properties, the Los Angeles-based trade group said.

About 30,000 foreclosed homes have been auctioned in California so far this year, the most of any U.S. state, according to RealtyTrac Inc. in Irvine, California. Banks holding repossessed properties are so eager to unload them they’ll give buyers discounts of as much as 40 percent, said Celia Chen, an economist at Moody’s Economy.com in West Chester, Pennsylvania.

“Lower prices will certainly entice buyers back into the market, especially in a state like California where the median home price is so high it’s made it very difficult for people to afford a home,” Chen said.

Foreclosure auctions are removing inventory and may lead to a faster housing market recovery as prices drop, Karl Case, co- founder of the S&P/Case-Shiller home-price index, said today. The measure of 20 U.S. metropolitan areas fell in March from a year earlier by 14.4 percent, the most on record.

`Prices Adjust’ Rapidly

“Banks don’t wait around,” Case said in an interview today. “They put it on the market and get rid of it. That means prices adjust more rapidly.”

Sales jumped 20 percent or more in April in Las Vegas, Fort Myers, Florida, and Riverside and Sacramento, California, areas that had “strong and sudden price drops,” said Walt Molony, spokesman for the National Association of Realtors. Those cities also ranked among the top 10 U.S. metro areas with the highest foreclosure rates, RealtyTrac said.

The most expensive U.S. metropolitan market for single-family homes in the first quarter was San Jose, with a median price of $780,000, the National Association of Realtors said in a May 13 report. The national median home price was $196,300 in the same period, the Chicago-based trade group said.

High-Price Sales

San Francisco had the second-most expensive home sales, with a median of $701,700, followed by Honolulu, at $620,000, and the Anaheim and Santa Ana, California, areas at $597,900, according to the Realtors’ report. The metropolitan area surrounding New York was fifth, with a median single-family home price of $491,900.

The biggest U.S. state also led the nation in home-price drops. Sacramento saw the biggest price decrease in the nation during the first quarter with a loss of 29 percent, followed by the Riverside and San Bernardino areas, down 28 percent, the Realtors said.

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Remember when we were little and the term “Million Dollar House” made us think of fancy mansions in Beverly Hills? Today, America’s million dollar mansions are more likely to be in a flat red states with a long cold winters.

In San Francisco we have to settle for more modest digs in the million dollar price range– like a  Mediterranean 3br/2ba house in the Mission or a big 5br/3ba home in the Outer Sunset.  If we want to boost up our price range to $1.5M our options widen to include big Noe Valley views  or a story book setting in Monterey Heights.

We’re told again and again that we’re one of the most expensive housing markets in the country, but we’re small potatoes when you compare our prices in the global real estate market. According to Business Week, properties in the world’s most expensive neighborhoods are still commanding ferocious premiums.

Some of the world’s most expensive cities are second home markets. Blame it on the new money — these newly minted millionaires from Russia, China, India, and the Gulf states don’t feel as pinch of current economic conditions and they love their sandy (or snowy!) playgrounds.  

With $1.5M as a budget Business Week explored what they might buy where in the world’s most expensive cities.  Here’s what they came up with:

1. London
Price: $6,191 per sq. ft.
What you get for $1.5 million: Small studio apartment
Annual price change: 29%*

A housing boom began in Central London in September, 2005, and continued through 2007, as wealthy buyers flowed in from around the world. The annualized growth for prime real estate is slowing this year and is expected to weaken further. But the super-luxury segment remains incredibly strong. Sales for £10 million-plus homes in Belgravia, Chelsea, Knightsbridge, and Mayfair increased by 190% in the six months ending January, 2008, compared with the same period a year earlier.

* The annual price change compares the fourth quarter of 2007 with the fourth quarter of 2006.

2. Monaco
Price: $5,888 per sq. ft.
What you get for $1.5 million: Studio apartment
Annual price change: 25%

It’s not just the casinos, beautiful people, and staggering views of the Mediterranean that have made Monaco a popular home for the world’s wealthiest buyers. The real appeal is that its residents don’t pay income tax.

3. St. Jean Cap Ferrat (France)
Price: $5,853 per sq. ft.
What you get for $1.5 million: Small studio apartment
Annual price change: 39%

St. Jean Cap Ferrat on the French Riviera continues to be popular with European aristocracy and the super-rich– such as billionaire Paul Allen, who enjoy the gorgeous beaches and warm weather.

4. Courchevel (France)
Price: $4,710 per sq. ft.
What you get for $1.5 million: Studio apartment
Annual price change: 5%

Like to ski and shop? This resort town high in the Savoie region of the French Alps is favored by the Russian elite and is known for expensive hostelries such as the Hotel Le Lana, fashion boutiques, and wild parties.

5. Hong Kong
Price: $4,507 per sq. ft.
What you get for $1.5 million: Studio apartment
Annual price change: 21%

Hong Kong’s real estate market has been driven by China’s strong economic growth. Despite limited space, real estate demand on the island has started to slow, and prices are softening as the effects of the U.S. credit squeeze spread.

6. Manhattan
Price: $4,320 per sq. ft.
What you get for $1.5 million: Studio apartment
Annual price change: 25%

At the high end, Manhattan continues to boom even as the credit crunch deepens. In fact, in the first quarter of 2008 average prices were up 19% and the price per square foot was up 16%, according to the Corcoran Group. There are several reasons: First, the city has been shielded from the subprime crisis, largely because its co-ops and condos are well out of reach of most buyers with poor credit and shaky finances. Second, it remains a popular destination for movers and shakers in the financial, entertainment, and media world. Last, because of the weak dollar it is more affordable than ever for wealthy foreigners looking for a Manhattan pied-à-terre.

7. Cortina d’Ampezzo (Italy)
Price: $3,028 per sq. ft.
What you get for $1.5 million: 1 bedroom
Annual price change: 22%

The Northern Italian resort town is a popular second-home destination for ski buffs and Milan’s business elite. Prices for prime European vacation homes have benefited from the growth of the world’s population of high-net-worth individuals.

8. Portofino (Italy)
Price: $2,692 per sq. ft.
What you get for $1.5 million: 1 bedroom
Annual price change: 14%

Although there’s no beach, the harbor of this resort village on the Italian Riviera is packed with yachts owned by the world’s rich and famous. The village is about 20 miles from the Genoa airport.

9. Singapore
Price: $2,423 per sq. ft.
What you get for $1.5 million: 1 bedroom
Annual price change: 31%

The city’s high-end real estate has benefited from an influx of foreign buyers –and has been particularly strong close to the Orchard Road shopping area and on the island resort of Sentosa.

10. Tokyo
Price: $2,334 per sq. ft.
What you get for $1.5 million: 1 bedroom
Annual price change: N/A

Despite traditionally astronomical prices and cramped living conditions for all but the very wealthiest, Tokyo’s market is beginning to slow — the  result of the credit crunch and a heavy supply of new condos that have recently come on the market.
 

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