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Investors with Cash Fuel Uptick in Home Sales

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Regional Spotlight—Investors with cash continued to reap a harvest of bargain-priced bank-owned and short sale properties across the San Francisco Bay Area in the fourth quarter of 2011, sparking a slight uptick in home sales compared with the same period a year ago, according to an analysis of MLS data by the research division of Better Homes and Gardens Mason-McDuffie Real Estate.

In the nine-county Bay Area, 12,404 existing, single-family detached homes changed hands during the fourth quarter of 2011, 49 more than were sold in the fourth quarter of 2010. The most recent figure was down 8 percent from 13,484 homes sold in the third quarter—normally among the most active periods for home sales and purchase activity.

Fourth-quarter sales might well have eclipsed the previous quarter’s figures were it not for a shortage of homes on the market in the majority of Bay Area geographies and across most price ranges. One indicator of the level of inventory on the market is how many days it takes, on average, for homes to attract a formal offer to purchase. For the greater Bay Area, homes were on the market an average of 68 days in the fourth quarter, up slightly from 63 days in the previous quarter but down from 70 days in the fourth quarter of 2010. Average days on market ranged from a low of 47 in San Francisco to a high of 106 in Sonoma County.

For the quarter, Contra Costa County reported the greatest number of home sales (2,564), followed by Alameda County, with 2,503 homes sold, and Santa Clara County, with 2,423. Sonoma County recorded the highest percentage increase in sales on an annualized basis, with a 20 percent increase, while Santa Clara County experienced the greatest decline, with an 8 percent year-over-year drop in home sales. On a quarterly basis, San Francisco led the way with a 9 percent quarter-over-quarter improvement, while San Mateo reported the highest percentage decline with 16 percent fewer sales between the third and fourth quarters.

The continued presence in the market of investors offering cash for entry-level bank-owned and short sale properties helped speed the pace of home sales and boosted the number of closed home purchase transactions. But it also continued to put downward pressure on the median price of homes sold.

The median price of a home sold in the Bay Area during the fourth quarter was $485,411, down 5 percent from both the previous quarter, when it was $509,876, and the comparable year-ago period, when it stood at $508,336. Among Bay Area counties, only Napa County reported both quarter-over-quarter (+2 percent) and year-over-year (+8 percent) increases. Elsewhere in the region, county-by-county median home prices varied by no more than 9 percent on both a quarterly and annualized basis.

Bay Area homeowners and homebuyers seem to have adjusted to a real estate market characterized by modest ups and downs from month to month and quarter to quarter in response to economic news and other factors, including the inventory of homes for sale, the presence of large numbers of distressed properties and a shortage of traditional home sellers. Motivated home sellers with equity may find they have a window of opportunity in the coming months in those communities where there are more buyers than there are move-in-quality properties available. Pricing to the market will continue to be a critical factor. According to Keith Robinson, Better Homes and Gardens Mason-McDuffie vice president, “Entry-level homebuyers and many luxury-home seekers should expect continued competition from investors with cash.”

For more information, go to www.bhghome.com.

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