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Real Estate - April 10, 2009

Condos and Land Year in Review: Glimmers of Hope

We spend a lot of time talking about real estate from the perspective of single family homes. Today we thought we would take a look at all that has happened in the rest of the market for townhomes, condos and land. For the purpose of this review we have combined the geographies of Alamo, Blackhawk, Diablo and Danville into a single market for both multi-units (condos) and land.

During the year ended Dec. 31, 2008, the total value of the condo market as represented by sold units was $44,818,250. The market in 2007 was $76,336,050 for about -41 percent decline in overall market value. In 2007 a total of 129 condos changed hands while in 2008 only 86 units were exchanged. This represents a unit decline of -33 percent and hints of continued price erosion. The average sold price in 2008 was $521,142 per unit while in 2007 the average sold price equaled $591,752. This works out to be about a -22 percent price decline year on year suggesting that no bottom is within sight.

Dollars paid per square foot in 2008 averaged $333 compared to $398 per square foot paid in 2007. This represents a -16 percent price erosion on this measure and while obviously negative can be viewed as modestly encouraging. That this decline is not equal to or greater than the declines on our other measures may be noted as a positive sign of beginning resistance to declines in value and could possibly point to decelerating decline and possible stabilization in the months ahead. Not surprising, days on market increased between 2007 and 2008 from 49 to 65.

OK, that's what happened. Let's take a look at what's happening in 2009. As of this writing, (Feb. 18, 2009) there are 72 multi-units listed as active, pending and sold. Fifty-two are listed as active. Their list prices range from $277,900 to $999,000 and carry an average price per square foot of $333, which is right in line with recent historical sold data. Sixteen properties are listed as pending and range in price from $345,000 to $665,900 and are pending at an average square foot price of $336 per square foot. Four properties are listed as sold and carry an average selling price of $485,250 and an average price per square foot price of $291.

This definitely represents the further anticipated price decline mentioned earlier. We should not be surprised if the current pending sales close nearer to this number. That said, it is very encouraging indeed that 20 properties are pending and sold at this early stage of 2009 and if we extrapolate these more recent data throughout the new year the condo market for 2009 might possibly exceed 120 units sold and top $60,000,000 in overall sales. That would clearly signal a turnaround. As markets typically turn positive at the lower end first, this may likely be our first hopeful sign in months and it is important to note that it is occurring absent the latest stimulus package which may tend to accelerate a rebound in the condo market. This bears watching, particularly for investors on the side lines and first time home buyers.

Land development may well be riskiest of all real estate investments. In 2008 only eight parcels changed hands in our market of Alamo, Blackhawk, Danville and Diablo. That is down from 12 in 2007 and represents a decline of 33 percent in units sold. The market for raw land in 2007 stood at $14,733,500 and declined to $9,936,000 in 2008 for a decline of -33 percent in overall market value. While the matching rates of decline may be comforting at first blush, one must consider the value change as measured by dollars paid per square foot, which declined from $35 in '07 to $22 in 2008 for a -37 percent drop in value.

Currently 39 parcels are listed as active pending and sold. Thirty-five are listed as active and carry a price per square foot of $20. Three are pending at $29 per square foot. One is listed as sold at $22 per square foot. If we extrapolate the early 2009 market data as we did for condos, land units sales might possibly exceed 24, eclipsing the combined performance of 2007 and 2008 and account for as much as $20 million in sales. If only half of these sales are achieved, the market will match 2008 performance and this limited performance in itself would indicate a bottoming.

In either the land or the condo market we should not count on a rapid upward price movement. This would require both a significantly increased demand and a scarcity of available units. It's not likely that we will see both of these conditions together for some time.

If you would like to receive a copy of our Condo and Land Review including the raw data, e-mail me at joecombs@thecombsteam.com with "Land" in the subject line.

Data presented in this column is based in whole or in part on data supplied by the Contra Costa and Alameda Multiple Listing Service and other quoted sources. Joe and Nancy Combs, Remax and the MLS Service do not guarantee the accuracy of this information.

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