A quick look back at 2011, and a few hasty predictions for 2012.
2011 will always stick in my mind as the year the comps didn't work—when you could find them—at either end of the price range. I don't know how the appraisers did it: the only thing thinner than inventory was sales.
I haven't run the numbers, but my gut tells me that there wasn't nearly enough inventory this year. And if my gut didn't tell me that, my buyers did. Homeowners in this area's favorite neighborhoods, those least hit by the downturn, weren't selling unless they had to, while buyers inundated those neighborhoods bidding up prices. Homeowners at the lowest end of the price range weren't selling either, unless they had to or were masochistic.
I'll give you an example: a nice, newer townhouse development in the Midtown area of downtown San Jose, entry-level priced, where of the twenty-plus sales this year, all were either short sales or bank-owned. Not one regular "equity" sale, just a whole bunch of distressed sellers. Why? Because most of the homeowners there are original owners who bought back in 2005, when prices were twice what they are now, and not many homeowners can afford that kind of haircut—unless, like short sellers, they expect the bank to take the haircut. Prices there are lower than they were last year, and the glut of distressed sellers says things ain't getting better anytime soon.
Yet despite this dismal state (or, more likely, because of it), opportunistic buyers poured through the open houses I saw there. Young professionals, the kind of buyer you'd expect given the newness of the properties and their location near a great downtown, but also beginning investors looking for good deals and getting them. And all of them so focused and motivated that I wanted to take them home with me.
At the other end of the spectrum, say, Palo Alto neighborhoods in the $2-4M range, sellers weren't selling either, although if they'd known that the market value of their homes had gone up 10-15% this year they might be tempted. Prices for newer or substantially renovated large homes in prestigious Palo Alto neighborhoods are now above their previous peak of early 2008. When you can find them.
Somewhere in the middle was my excursion to pleasant and highly-regarded Almaden Valley in San Jose, where I was looking in the "affordable" range, single-family homes under $1M. It's an area of great schools, nice newer homes and premium German cars, yet about one-third of the active listings under $1M were short sales. But maybe only one-tenth the closed sales were short sales. So where do short sales go when they don't close? Usually to the bank.
But that's the South Bay, and an area that's a long way from anything except maybe the IBM plant in Morgan Hill. Go up to Burlingame, a well-located mid-Peninsula city with great schools and not one but two popular downtowns, and under $1M gets you something with one bath and built in 1948. There, short sellers are uncommon, and homes were commanding prices late this year that would have been impossible early this year.
So that's 2011 in a nutshell, at least in my experience, and I was busy in all kinds of neighborhoods, selling all kinds of homes, from a $200k investment condo to one of those pricy top-end Palo Alto homes I mentioned. I am your eyes and ears in the marketplace :-)
What's 2012 going to look like? I'll take a page from the pundits, professional and otherwise, and inform you that next year will be like this year, only more so. Because, for once, it's true, or at least I think it's true. I see more short sellers at the low end than I ever have, an indication that either a) they're the latest victims of the Great Recession and can't pay their mortgages, or b) life goes on, as it does for most of us, and these folks have to move, and they don't have the cash to pay off what they owe on a house that's worth maybe 50-60% of what they paid back in the mid-2000s. So why buy at the low end if the prognosis is that grim? Low prices, rock-bottom interest rates and the fact that you're buying in a region that typically bounces back strongly (and quickly). And, oh yeah, you want to own your own home. Because if you don't want to own your own home, prices and rates won't tempt you.
At the top end I see continued huge demand and tiny inventory for the homes the accomplished and affluent really want, large turn-key homes in flatland towns with great amenities. Late 2011 reminded me a lot of late 1999, the IPO-fueled prelude to the unbelievable 2000 market.
What if I'm wrong? Well, if I'm like the pundits, professional and otherwise, I probably am wrong. But like them, I'm counting on you to have a short memory. And if I'm right, you read it here first.