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I recently received a query from a new Marin resident. He is renting in Southern Marin. The question went something like this:"While I am from the metropolitan East Coast and used to high home prices, I was simply unprepared for the sticker shock of homes in Southern Marin. Why should I even consider a home purchase in Marin? These prices are outrageous."

I am posting my reply: There is a very simple reason Marin is so unique and thus so expensive.

With very strict zoning and environmental laws, Marin is a Mecca of natural beauty and healthy living yet close to one of the most exciting major metropolises in the world. In a nutshell: Marin is utterly unique.

How did it get to this point? It almost didn't.

Consumer confidence rose to its highest level in more than four years while U.S. businesses increased their orders for durable goods

The figures suggest that consumers and companies are holding their nerve despite anxiety about the fiscal cliff. The Conference Board, an industry group, said its index of consumer attitudes towards the economy rose to 73.7 in November; the highest since February 2008. Interesting... was that before or after the election?

At the same time, mortgage rates have hit new lows. 3.25% for loans up to $417,000. 3.625% for loans up to 625,000%. Jumbos are also in the high 3's.

Caveat: you will need a good FICO of 740 to secure the best rates.

Home Prices Rise for the Sixth Straight Month According to the S&P/Case-Shiller Home Price Indices - (Calculated Risk)     

Data through September 2012, released this week by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, showed that home prices continued to rise in the third quarter of 2012.    

This summer season has not been typical as serious buyers remained in the hunt for a new home. Interest rates continue to hover in the mid three percent range. Home prices are reduced at some price points and neighborhoods with a few surprising statistics such as 11% year over year increase in Fairfax and 7% increase in San Anselmo.

Currently, there are 894 single family homes for sale compared with 1008 a year ago, down 11%. However, 42% of all homes offered are in contract creating a strong market with a lot of jostling amongst buyers especially in the $800,000 and below range. (I have seen  multiple offers of 10 plus participants and up-bidding for distressed properties under 700k)

National market indicators are mixed. While the Dow broke through the 13000 ceiling in July it continues to be a rocky ride above and below that ceiling.  The national Consumer Confidence Index declined to 60.6 in August which was its lowest level since late last year as nationally, consumers voice their apprehension about employment prospects.

I wanted to give you an economic snap shot of our Real Estate Market:

This summer season has not been typical as serious buyers remained in the hunt for a new home. Interest rates continue to hover in the mid three percent range. Home prices are reduced at some price points and neighborhoods with a few surprising statistics such as 11% year over year increase in Fairfax and 7% increase in San Anselmo.

Currently, there are 894 single family homes for sale compared with 1008 a year ago, down 11%. However, 42% of all homes offered are in contract creating a strong market with a lot of jostling amongst buyers especially in the $800,000 and below range. (I have seen  multiple offers of 10 plus participants and up-bidding for distressed properties under 700k)

Tales from the Trenches.

My condolences to new buyers seeking affordable housing in Mill Valley.These past few weeks,  I have seen numerous homes bid up to over $150,000 from the list price in a feeding frenzy of offers. The list agents look perplexed and unprepared for the avalanche of queries and offers.

In Larkspur and Mill Valley, expect to pay closer to $700,000 for the same home that was selling around $600,000 just six months ago .

Even Fairfax is seeing a flurry of offers riding up prices as well. From May 2011 to 2012 there was an increase of 22% in values as well as increase of 60% in units sold -- keep in mind that inventory is DOWN.... Crazy.

Belvedere homes increased in value year over year for the month of May by a whopping 69%. Units are up 50%. Tiburon is down for the month of May. Not sure if it is a blip. Let's wait and see what the quarterly reports look like in a few weeks.

May continued with a good selling pace here in Marin County with 273 recorded residential sales. This represents the highest total of May sales since 2007 when 324 sales were recorded. We are starting June out with good numbers as well with 132 "Pending" and 424 "Contingent".  We are still down considerably in "Active" listings which sit at 655 countywide.

The other interesting stat was that out of all the sales in May, only 20% were distressed sales. We have been hovering around 25-30% distressed sales this year. Also, even though we are seeing some listings go quickly, almost half of the "Active" listings have been sitting for over 60 days on market.

The New York Times published an article this past Sunday, May 27th, about new studies that highlight the increasing value of walk/bike locations for living. New research shows that real estate values increase as neighborhoods became more walkable, where everyday needs, including working, can be met by walking, transit or biking.

San Francisco ranked right up there as a biker friendly city; no surprise. I suspect that the "Cities" of Marin such as Mill Valley, Fairfax, San Anselmo, etc. would have ranked highly as well but for the fact that each "city" has a relatively small population. Fairfax comes in with about 7,800 souls. Sweet!

Most grocery stores in Marin have bike racks that are full every day of the week. No longer are the bike paths busy week-ends only. Instead you can find them filled with eager commuters on their way to the Larkspur and Sausalito ferries and other office locations such as Autodesk.  

Prices are rising dramatically this spring.

The total number of homes sold continues to rise as well.  216 single family homes were purchased in Marin County in the month of April compared with same month last year in which only 161 sold. That is an increase of 34%.

Median prices are up 2% from $760,000 to $775,000.

Avg. prices are up 1% from $1,016,000 to $1,0125,000.

Price changes alone would not signal a rebounding market. It is the combination of price and activity along with the amount of homes that are selling in the first 30 days for over the asking price that indicate a vigorous market.

These numbers are in stark contrast to the numbers from earlier this year as well as late 2011 statistics. While some of the activity is due to the usual spring uptick, not all of it can be attributed to a seasonal change since last spring while active, did not have price increases.

What to expect for the rest of this year? Well, there will be more distressed properties as banks release foreclosures. 

However, these properties will begin to taper off towards the end of the year and we will likely see an increase in sales during the second half of the year at all price ranges as money comes into the county from new SF and San Mateo employees seeking housing in Central and Southern Marin. Further, newly made millionaires from Facebook will be looking for larger homes. Some will undoubtedly begin to look in Southern Marin.

Will this activity drive prices up? In other eras, probably. But, there are two competing forces at work: the distressed properties and the bouyant tech economy.  Together, these forces will create a rather flat pricing landscape for this year. 

What could change that?

Foreclosure Settlement Courtesy of Terra Mortgage

After months of wrangling, the long-awaited foreclosure settlement between the government and the banks appears to be at hand.

A $26 billion settlement was announced Thursday morning between the federal government, state attorneys general and the five biggest banks in the mortgage market: Ally Financial (the old GMAC), Bank of America, Wells Fargo, JP Morgan and Citigroup. (Editor's note: An earlier version incorrectly identified Ally Financial as being the old GE Capital.)