Mill Valley CA. Real Estate Market Report (May 2009 Home Sales Update)

May 16, 2009

We are consistently asked by our clients (sellers), “when will our markets return to normal?” We formed our definition of a normal Marin County market in our Q3 2008 Luxury Newsletter (call us for a copy) only to be followed by the October ’08 stock market meltdown. A normal Mill Valley market over the past ten years has been an annual average of 377 single family homes sold (31 per month). For the past six months the total has been 78 (16 per month). The number of units sold is off roughly 50%. Without closings we have limited comparables to make investment decisions. We are all looking for recent closings to benchmark property values. In the stock market we know CitiGroup Inc. will not soon return to its September 2008 value of $25 per share. In turn, we do not expect Mill Valley real estate to return to early – mid 2008 values. The question is what will the going forward adjustment be? To address “the adjustment” we need to focus neighborhood-by-neighborhood and client-by-client. It is our feeling that Mill Valley, CA closings in December 2008 – April 2009 represent comparables based on sellers that had to sell, and quickly, or sellers that thought the market would fall faster in the Spring ’09 and elected to set the comparables vs. having them used against them.

In an attempt to quantify the “adjustment” we reviewed the new list prices vs. previous selling prices of six Mill Valley homes sold in late 2007 thru early 2008 and again currently active. The six properties ranged in price from $1.2 million to $3.3 million. On average the current list prices are 6% lower than their 2007 – 2008 closing prices. Four are over 10% below. The two homes over $3 million are 13% and 16% below their previous closing prices. None of the homes are in contract. Assuming these homes ultimately go into contract 10% below asking, we can extrapolate a downward shift in the Mill Valley market from late 2007 to today between 16% – 25%.
 
Current Mill Valley inventory (96 listings over $1 million) ranges in pricing from $1 million to $6.5 million and from $328 – $1,305 per square foot. Our review last week illustrated average price per square foot @ $595 for homes from $1 to $2.5 million, $779 from $2.5 to $3.5 million, $935 from $3.5 to $5 million and $1,155 over $5 million. It is very important to note that price per square foot is only one measure and does not take into account, location, noise, sun, condition of property, etc.
 
On the buyer side we are noticing a shift in the selection and valuation of homes. From 1998 – 2008 buyers place a high “prestige” value on certain Mill Valley neighborhoods and were very focused on “I want to live in Sycamore Park”. Now we see buyers seeking “value”. They are comparing like priced listings in multiple Marin communities and seeing what value they can get for their dollar. Essentially, a buyer shift in focus from “prestige” to “value”.  Sellers must be priced for perceived value.
 
Two other clear messages from buyers are:  
1.       A trend away from major remodels. This is likely a result of the changing credit markets and the loss of capital buyers experienced in the stock market meltdown.  
2.       A lack of willingness to write an offer on a property that is not priced in appropriate “strike zone”. Buyers seem to wait for appropriate pricing before coming forward with an offer vs. writing a low, more competitive offer. The rationale seems to be, “what if I write an offer and the seller accepts it? We will clearly have paid too much”. 3 – 5 counter offers are not unusual. Although buyers are more and more inclined to walk away if they don’t get their price.
 
These dynamics are not easy to anticipate much less manage.  We manage these issues every day. Only closings and comparables will add clarity and consistency.
Our advice to sellers:
1.       If you do not need to sell, this will not be the time in the market to maximize value. While we feel the “bottom is forming”, we are not projecting high-single digit year-over-year appreciation until we see the number of Mill Valley homes closed exceed the ten year historical rate of 377+ per year.
2.       Be informed; tour the competition in your price range in Mill Valley and the rest of Southern and Central Marin.
3.       Be realistic about your asking price. Serious buyers are generally represented by talented, knowledgeable agents with access to all the same data.
4.       If you are selling in Spring ’09, time on the market is not your friend. The “perfect home” for the “right price” should trade in its first 30 days.
 

Real Estate Market Chart by Altos Research www.altosresearch.com

The median price per square foot has dipped to about $575 per sq. ft. (which is down from well over $800 in mid-2007). While some buyers believe prices may slip a bit more, as noted above, most appreciate the fact that interest rates are very appealing. Indeed, mortgage math punishes those who don’t lock in at or near the lowest rate possible. For example, if prices dip another 5% and interest rates go up just 1%, the monthly payment would increase rather significantly for an $800K home with 20% down (call me for exact numbers relating to a given situation). 

Down from April 2009, the percentage of homes in escrow under $800,000 slipped to 21%. I have a fixer listed in Homestead Valley that is a super value play, priced at $768,800 (3 Beds/3 Baths, 14,000 sq. ft. lot backing Molino Park). If you would like my Mill Valley Hot List, call or e-mail me: (415) 350-9440 | Kyle@MillValley101.com.

Based on last month’s sales total of 14 (we had 11 sales in March), we currently have an overall inventory of homes (AR) sufficient to last a bit more than 11 months in Mill Valley, CA.

Overall, the number of homes for sale rose to 133 (way up from 90 in February). The number of “bread and butter” homes (those priced between $1 million to $2 million) currently in escrow is hovering at 1. Meanwhile, the luxury market in Mill Valley (homes from $2 million and up) seems to be improving as we have 5 such homes currently in escrow to go along with a couple of sales last month. 

Price Range

Total Active Homes

Pending Listings

Up to $800K

15 (up 4)

21%

$800K – $1 mil.

23 (down 4)

30%

$1 mil. – 1.5 mil.

41 (up 7)

16%

$1.5 mil. – $2 mil.

21 (up 6)

10%

$2 mil. – $4 mil.

29 (up 10)

18%

$4 mil. & Up

4 (up 1) 

0% 

Of the 14 sales to close escrow in April 2009, they averaged 64 days on the market and sold for an average price of about $1.41 million with about 2,394 sq. ft. (or about $575 per sq. ft.). Homes in Homestead Valley, Sycamore Park, Boyle Park, and Strawberry generated the most calls this month. If you would like more information about neighborhoods, sales, schools, or local Mill Valley services references, just give me a call at (415) 350-9440 or e-mail me at Kyle@MillValley101.com. It is always my pleasure to be of service.

p.s. I currently have a couple potential sellers waiting in the wings with homes not on the MLS, please contact me to determine if any of these opportunities fit your needs.