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Tri-Valley Area 2010 Real Estate Review and 2011 Predictions

I am envisioning him now – a fraction of the man he used to be.  This is no dig on Al Roker for his amazing weight loss.  Strictly an opportunity to use a phrase he casts out to millions of viewers on a daily basis, “Here’s what’s happening in your neck of the woods.”  The goal of this article is to give you a clearer understanding of what happened in your “neck of the woods” (the Tri-Valley area) for real estate in 2010 and to offer my predictions for 2011. Let’s dig in. 

The Tri-Valley area has been a very interesting place to conduct real estate transactions over the last year. Not only is every transaction more difficult to complete, there are numerous outside influences impacting the real estate trends in the Tri-Valley.  I feel there are four primary factors that influenced Tri-Valley real estate in 2010 and these items will continue to impact the real estate market in the near future.  These four factors are the number of foreclosures/short sales in the market, interest rates, lending ability and inventory numbers. 

The wave of foreclosures/short sales has taken its toll this year on the market.  For most of the year in the Tri-Valley, the percentage of active homes that were foreclosures/short sales was between 40 and 50 percent at any given time.  In some specific subdivisions, those numbers were closer to 75 to 90 percent at times. For instance, in the Tassajara Creek, Tassajara Meadows and Roxbury neighborhoods of Dublin, 9 out of the 10 currently active/pending homes are foreclosures or short sales.  What contributed to this high percentage in the Tri-Valley?  It is my belief that it is directly related to the large number of homes purchased between 2005 and late 2007.  This was during a time period when home prices were at their highest and loans were being handed out with little scrutiny.  Despite the tightening of nationwide lending practices and the fact that we have seen a significant decrease in home prices, I still expect the percentage of short sales and foreclosures to continue at around the 40 to 50 percent range well into 2011. This is based on my current discussions with sellers and other Realtors around the area.

Secondly, interest rates have been at historic low levels for most of 2010.  Bankrate.com shows the current interest rate as of construction of this article at 4.96 percent.  I expect a slow and steady increase of rates to continue into 2011.  However, I have mixed feelings about how this will impact buyer demand.  First, I do believe that there are a number of individuals currently living in the Tri-Valley area who have only been accustomed to interest rates in the 4 and 5 percent range.  These individuals have relocated to the area from out of the country or have only become interested in home ownership in the last few years.  The fact that they have only experienced interest rates at these low levels will create a greater “sticker shock” as interest rates continue to rise in the future and may sideline many of these buyers in the short term.  However, once interest rates reach a certain higher level, it would seemingly have to put downward pressure on home prices.  If this is the case, prices will reach a point where buyers find values acceptable and will reenter the marketplace.

A third factor impacting the direction of the real estate market is the lender’s ability to lend.  For 2010, this really limited the ability of buyers to obtain loans and purchase housing inventory.  Right now, the requirements continue to be tight and my expectation is that this will continue through 2011.  I do expect some loosening to occur.  However, I do not believe it will be enough to help propel buyer demand.

A final factor is directly tied to inventory numbers across the Tri-Valley.  Over the last few months, we have seen a drop of inventory in the marketplace.  This is indicative of a normal trend for this time of the year. The starting number of active homes for 2011 is less than the last two years and is returning to starting numbers that we similarly had back in 2007 and 2008. I anticipate the drop-off in inventory to continue through the first few weeks in January.  After January, more inventory should hit the market, creating opportunities for prospective buyers.  The big question is how much inventory is waiting on the sidelines in the form of normal transactions and how much will come on as short sales/foreclosures.

Overall, I anticipate 2011 to have very similar characteristics to 2010. Regardless, transactions will happen and buyers will continue to seek out good values on homes. If you’d like to discuss your personal real estate situation, I am happy to speak with you about what I see in the market and help you strategize next best steps. Please contact me at 925.899.6103 or at adam@adamgolden.com.

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