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March 3rd, 2007 05:51:04 PM PST Marin Independent Journal By Gary Klien Buyers, sellers, brokers ponder housing market as prices rise, sales dipFive years ago, Sean and Stephanie Mohan bought a condominium in Fairfax for $393,000. Last year, they decided they wanted a bigger home in Marin, so they put the condo on the market. It just sold for $550,000, a tidy profit, but it sat on the market for six months. In the meantime, several homes the Mohans liked slipped through their fingers because they hadn't unloaded the condo. Now the couple is seeking a detached home for around $700,000, but Stephanie Mohan said most homes currently in that range aren't as nice as the condo they're giving up. "My plan was for us to move up in this market," she said. "We would've had to take advantage while the market was bad. We thought our place would sell very quickly. "I'm definitely nervous. I thought our place was nicer than many of the houses available." Like hundreds of buyers, sellers and brokers, the Mohans are trying to figure out where Marin's fabled real estate market is headed. The answer: No one knows for sure, but there's enough evidence to support both bulls and bears. On the one hand, Marin's median home prices continue to rise amid softness in the broader market. According to the county assessor's office, the median detached home price for 2006 was $960,000, up 1.59 percent from 2005 and 152.65 percent from 1996. Larkspur has led the way in detached home appreciation over the past decade, with prices rising more than 183 percent since 1996. For condos and townhomes, Fairfax led Marin with a 206 percent appreciation between 1996 and 2006. "I think (the market) has softened some, but I don't see much of a decrease in values," said Joan Thayer, the county assessor. "I think they're holding fairly steady." But sales volume is another story. Last year, 2,400 detached homes were sold in Marin, down 21 percent from the previous year. In the condo market, 945 units were sold last year, down 25 percent from 2005. Thayer said the sales decline won't have much of an impact on the county's coffers - she expects the assessment rolls to increase 7 percent this fiscal year, as opposed to 8.4 percent last year - but real-estate agents are feeling the difference. Tracy McLaughlin, principal of the Morgan Lane Marin brokerage, had $75 million in sales last year - the most of all Marin agents who are members of the Bay Area Real Estate Information Service, or BAREIS. But her performance was flat against 2005 and down from her peak of $90 million in 2004. "We all had to work harder for our money last year," said McLaughlin, who specializes in homes in Ross, Kentfield, Tiburon and Belvedere. "The deals are harder to make happen." Corina Rollins, a Greenbrae appraiser and real-estate instructor at College of Marin, is, if not quite bearish, then certainly concerned about current market conditions. Rollins analyzes the number of listings versus the number of closed sales, and she now sees "a significant and growing backlog of inventory." According to Rollins' analysis of the Marin market, which she derives from the BAREIS database, there was 20 months of available detached-home inventory in the year ending Feb. 1, versus 15 months the previous year. For condos and townhomes, there were 21 months of potential sales on the market in the year ending Feb. 1, versus 14 months the previous' year. The market is absorbing properties faster than it can sell them off. "Your absorption rate goes down - the speed with which you can absorb the valuable inventory," she said. "It's supply and demand, is what it is." And as inventory increases, buyers feel empowered to negotiate, homes can sit on the market longer and prices can be depressed. "There have to be market corrections that allow wages to increase sufficiently to absorb some of the increased costs," Rollins said. "We haven't had that kind of a correction for a while. Given that, my best guess is that it is likely prices will move upwards more slowly, or stabilize after a correction where some declines will be seen, then a period of waiting for incomes to improve for the broader base of the marketplace - the mid-range buyer." The drop in sales has been felt in corollary businesses. Scott Hunt, of NorCal Property Inspections in San Rafael, said business has dried up recently for him and other inspectors. Hunt said he usually gets six or seven jobs a week, but lately he has gone for more than a week at a time without an assignment. "I just lost a huge chunk of the market, so I don't know what's going on - the war, the stock market," he said. "I called myself yesterday to see if my phone was still working. My phone hasn't rung in two weeks. "It seems like the whole world's for sale, and there's no buyers. It's been dead as a mackerel." Bill Powell, a flooring and carpet specialist who works closely with real estate agents, said business was slow in the latter half of 2006, but it began to show life at the end of January and in early February. Powell said the existing inventory is growing, so sellers are starting to realize their homes must be in top condition to be competitive. "It's not a time to put a fixer-upper on the market," said Powell, proprietor of 123-Floor Inc. in San Rafael. "You're going to have to discount deeply or let it sit on the market for a while." Yet agents still say anecdotal evidence often defies the dry statistics on median prices, particularly in Marin's unique market. David Gilbert, founder of the Tiburon Land Co., said he recently sold a $1.9 million waterfront home at 85 Seafirth Road in Tiburon that had been on the market for only one week. And from June to December last year, he sold three west-facing "tear downs" on Belvedere Lagoon for $3 million each. "Basically, Marin is a supply-driven market. You can whack the demand off by 75 percent, but that doesn't increase the supply," he said. "The economy's generally slower; on the other hand, Marin is Marin." McLaughlin said that many of the higher-end buyers - those in the $4 million to $5 million range - have been sitting out the market the past several years. When the market started going soft, they got off the fence. "Those people that have that money that aren't interest rate-oriented, that have cash, they're getting in the market," she said. "You can't just blanket it all together and say the real-estate market is X." The story of 68 Madrone Ave. in Larkspur illustrates how aggregate statistics can obscure case-by-case market realities. Knox Lundgren, a marketing executive, bought the aging three-bedroom home in 2004 for a little over $900,000 and planned to tear it down, build a new home and resell it. "It's in pretty bad shape," he said. But he ran into stiff resistance from city officials, who noted that the house, built in 1898, is on the local list of historic structures. "If you want to tear it down, there's California Environmental Quality Act issues that come into play," said Nancy Kaufman, Larkspur's planning director. "There are quite a few historic buildings that have gone through a remodel. He just wanted to tear it down, so that created extra obstacles for him." With the approval process in limbo, Lundgren decided to place the home on the market to see if a seller emerged. He originally listed it for $999,000 before reducing it to $899,000 - meaning he will lose money in an otherwise torrid Larkspur market. "My wife wants a bigger house and she wants it now, and she's not willing for me to wait or build a new house," said Lundgren. "She wants to get going." For the Mohans, the unexpectedly long turnover on their Fairfax condo created considerable stress. It meant keeping the home presentable for week after week of prospective buyers, while raising their 7-year-old son and running their two businesses. Stephanie Mohan, 43, is a commercial photographer, and her husband, 47, is an electrical contractor. "We put white carpet in, thinking it would sell it in a week," Stephanie Mohan said. "It's hard to keep your house spotless." Sean Mohan said he thinks their timing was off when they listed the condo but, on the upside, they only had to reduce the price $10,000 from the original list price. "We're happy with what we got. It's always a dance," he said. "Now that we sold it, the houses we had hoped to buy got sold out from under us because we didn't sell ours. "We could be in the driver's seat a month from now." Back to main Press page 
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