End of Year Marin Market Analysis: A Return to Normal?

Everyone is asking us, “How’s the market? Is it slowing down?”

A careful review of data shows the relatively strong 2018 market to be clearly leveling off. We’ve enjoyed seven years of steady price increases, which we are still seeing, but a bit of a slowdown would not be unexpected at this time.

We do not expect a massive market correction in Marin like the one we experienced in 2008-2010. We expect a return to a normal market. Here’s what we are seeing at the end of 2018:

1.Inventory is up. As of today there are 447 homes for sale in Marin County. That is high for this time of year, and about where we were in the spring, when there were usually less than 500 homes available. It is even more telling that in mid-November, when inventory usually declines, we had over 650 homes available, far more than in the spring.

  1. Percentage in contract has fallen for the last few months, but now is up. Only 32% of homes were in contract a month ago, which is considered a “balanced” market. Amazingly, we are now up to 53% in contract – but that can be attributed to the great number of homes that have been withdrawn from the market that had not sold, possibly because of the holiday season, which is typically slow. In the spring, we were typically at 50% of homes in contract, meaning that almost half of the available homes for sale were in contract.
  2. Since November 15, 144 homes have either been withdrawn from MLS or allowed to expire. That is a very large number of homes. As a result, percent in contract has actually risen, to 53% in contract from 32% a month ago.
  3. Year to date, average sale price is up 5.1%, to $1,456,064. We were looking at nearly double digit increases earlier in the year.

Many signs are pointing to a decided market shift – something that is more “normal”, although we are beginning to wonder if Marin County ever qualifies as normal. But it does feel a little different out there right now, and a lot of market data verifies our thinking. It is also clearly happening on a national basis, as numerous stories show.

Barring an unforeseen national economic calamity, we expect this to be much more gentle than what we saw in 2008- 2010, and really just a return to a normal market. The main reason is that financing of home sales is very different than what we were experiencing in that market.

There were a number of homes purchased in that market with “innovative” financing, ranging from 100% financing, to stated income loans (aka Ninja loans: no income, no job), to my personal favorite,”pick your payment loans”, where the buyer chose to pay based on either 1) the actual loan interest rate, or 2) a 0% interest payment, or 3) “negative amortization”, which was less than the actual payment due and increased the size of the mortgage. Not surprisingly most buyers chose the negative amortization rate, and when forced to sell they ended up doing a short sale.

But that was then.

These days, every transaction we have seen includes at least a 20% down payment, and often more. There is a lot of cash out there, and we see many all cash purchases. In fact, we recently listed and sold 83 Madrone in Larkspur, listed at $949,000. There were eight offers, and seven of them were all cash!

So maybe the government did something right after the last crash, and maybe the banks learned something last time around. But then again, in these tumultuous times, what the future holds is really anybody’s guess. As we begin this year’s holiday season, the real estate market takes its collective annual breather, and the one thing we do know is that those who plan ahead do best. Some things never change.

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