San Francisco Trip - Homes and Napa Valley Vineyard Tours

By Mark J. Donovan

Last week I was in the San Francisco area visiting various tourist sites and checking out the home and housing markets. I also had a chance to meet up with an old friend and get his perspective on the housing market. As the rest of the country, the San Francisco housing market is still very soft.

I also had a chance to visit a few vineyards in the Napa Valley area including Robert Mondavi, Beringer Vineyards, and Sutter Home Winery. I took the tours at Robert Mondavi and Beringer Vineyards and got inspired on trying to make my own wine. I’ve already made my first batch of “Must” and am in the process of fermenting it. In a week I’ll rack it for the first time and transition it to a carboy for further fermentation and aging. I will rack it again three weeks later and then most likely bottle it in a couple of months.

While touring San Francisco I got to see a number of unique homes in the area and took a slew of pictures. Most interesting to me was some of the ornate fireplaces and interior trim work I observed.

I also had a chance to tour Muir Woods and get an idea and better appreciation of Redwood trees. They were absolutely giant and gorgeous. Some of the trees were well over 1,000 years old.

I also visited the Silicon Valley area and checked out some of my old haunts when I worked for a company located in the area. Not much has changed. Silicon valley is still filled with young high tech company’s looking to get rich quick, and add some value to the world – in that order I must add. Traffic is still a snarl during much of the day and early evenings.

Silicon Valley traffic aside, the trip was great. I got to see a lot of the area this time without having to visit customers and deal with pushy corporate management. I can’t wait to visit again.

New Home Sales Up While Prices Continue to Sag

By Mark J. Donovan

Well the good news is that new home sales were up in March. New home sales were up 11.1% in March compared to February. Also, the supply of new homes was at a 43-1/2 year low. Both facts suggest a glimmer of hope in the housing market. But not so fast! The bad news is that the average sale price on a new home fell 4.9% from a year ago to $213.8K.

How can this be? With limited supply home prices should be going up. The problem is that this data is solely for the new home construction market and does not take into account all of the homes on the market. The housing economy’s natural equilibrium point is about 2 to 2.5 million homes for sale at any one time in the U.S. Unfortunately there are 3.55 million existing homes on the market today. In addition, when foreclosures or near foreclosures are included in the mix there are approximately 8-9 million homes on the market. Consequently new home construction has to compete with this entire housing market supply, and traditionally older homes are priced less than new construction. Thus the reason for declining prices on new home construction.

Data suggests that foreclosures should begin to dry up in the next 6 to 12 months. When and if this occurs, the housing market should begin to recover. However, the recovery will most likely be a slow process over a number of years.

So in the mean time, if you own a home continue to make the best of it. Make repairs as required, invest in it as your family and income grows, and enjoy what many people have always wanted and have been unable to have, a home they can call their own.

Home Construction up 4% in August, But Stormy Skies Still Ahead

By Mark J. Donovan

Though not a grand slam, seeing single family home construction increase 4% in August over the previous month was a welcome sign. Apartments and condominiums also shot up a whopping 32% during the same timeframe. This said new home construction starts are still down 78% from their peak in January of 2006.

Though this news was encouraging I am still not optimistic that the housing market is on a clear path to prosperous times again. With unemployment ticking up to 9.6% officially and slated to go even higher before year end, its unimaginable that sustained improvement in home construction starts will continue unabated. In addition, with so much uncertainty in the national politics, massive tax increases kicking in January for everyone, and expected large health insurance premium increases starting soon, it’s hard to believe that there is smooth sailing ahead in the home construction industry. On top of these harsh realities there are still many prospective home buyers waiting and hoping on the sidelines for even lower house prices. Couple all of these facts with a high inventory of existing homes on the market and increasing foreclosures and the prospects of a sustained improvement in the home construction business seems highly unlikely.

It appears builders feel the same way about the home construction market prospects. The National Association of Home Builders (NAHB) also reported its monthly index of builders’ sentiment in September, and it remained unchanged at 13. This is the second month that it has been at this level, the lowest since March of 2009.

Until there is a change in the national politics, less uncertainty with out-of-pocket expenses, and more income into the savings accounts of the average homebuyer, the home construction business is likely to stay in the doldrums for the foreseeable future, regardless of this positive blip of news.