In March 2010, I wrote an article on the state of the San Ramon housing market. This month I revisited the article and added some comments on how the market has change and progressed in those 12 months.

Where is San Ramon real estate headed? 

2010 ARTICLE: As you no doubt have heard, real estate in San Ramon – and all over the country – has gone through a huge transition over the last three years. Aside from property value changes, many of the old rules don’t apply, which is both good and bad.

As an example, quality control in lending practices are improving, but many of the rules and restrictions do not make sense in the real world, as many buyers and refinancing owners have discovered. What’s more, many new laws and restrictions have also created unanticipated and unproductive change and chaos. 

So where are San Ramon property values headed this year and next? The quick, but accurate answer is, “We’re not sure.” Nobody knows if property values are heading up or down over the next year or two. There are just too many variables and uncertainties to create a predictable model. But it’s safe to say that if employment remains high, and if salaries continue to slowly decline or stay flat, property values will be hard pressed to improve.

TODAY: This year we experienced some depreciation in property values, but not on the scale of the years 2007 to 2010. Barely 50 percent of the home sales in San Ramon over the last six months have been “normal." In other words, they were not foreclosures or short sales. The good news is that homes are selling at a brisk pace; the bad news is that as long as the distressed properties are half of all sales, property values will struggle to rise.

Bottom line: The prognosis remains unclear. 

What the Federal Reserve Says      

IN 2010: Following its March 16 meeting, the Federal Reserve said it would keep with its plan to end their purchases of the $1.25 trillion of mortgage-backed securities by the end of this month. Federal officials also said that the Federal Reserve wouldn’t raise short-term interest rates for several months.

Analysts have worried that the end of the Fed's mortgage purchase program could lead to an upsurge in mortgage rates. But that hasn't happened yet, even amidst months of well-telecast pronouncements that the program would end.

So what does all this mean for San Ramon homeowners and homebuyers? The odds are clearly stacked in favor of higher interest rates, but the million dollar question is when and by how much. If you are thinking of getting a fixed loan, it may be time to pull the trigger.

TODAY: Low interest rates continue to give momentum to the market. There is fear of coming inflation and higher interest rates, but for now, it has not pushed up the cost of borrowing.

Short sales in San Ramon

IN 2010:  Just about 30 percent of all homes “for sale” in San Ramon are what are known as “short sales”— houses sold by the owners, with prior lender approval, for less than they owe on the property.

About 50 percent of San Ramon homes that sell are short sales. Consequently, the properties in financial distress are crowding out the “normal” home seller. All things being equal, short sales typically sell for less than a normal sale, and this has hurt that ability of the market to gain traction in terms of property value appreciation. Until these short sales (and foreclosures) thin out, they will depress home values.

TODAY: Short sales and foreclosures make up about 43 percent of the inventory, a higher number than a year ago. More troubling, they make up about 58 percent of the sales, and consequently are crowding out the normal home sales.

It is my opinion that the percentage of distressed properties must drop below 20 percent before there will be a substantial recovery in home values.