Publication Date: Friday, July 23, 2004

Housing prices soar to record levels at mid-year

Continued low mortgage interest rates and a robust market pushed resale housing prices to record highs in the first six months of 2004.

And, for the first time, with only 140 homes for resale on the market at the start of the year's second half on July 1, Pleasanton had more homes priced for sale over $1 million than under.

According to brokers, 646 houses were resold here between Jan. 1 and June 30, down seven from the 653 sold in the same period a year ago. Even so, just 59, or 9 percent, of those homes sold last year were priced at $1 million or more. That number rose to 86 this year, or 13.3 percent. Not included in these figures are several hundred new homes under construction by developers that will be priced near or above $1 million.

"We are rapidly becoming a community of million-dollar homes," said Realtor Ed Kinney of Hometown GMAC Real Estate. "In fact, there was not one single family home available last week in Pleasanton that was priced under $500,000. There are some townhouses that were less expensive, but no single family houses."

"The signs are that prices are going to hold and even increase in the coming months," he added. "Even though the Feds raised their discount mortgage rates a quarter of a percent, it's had almost no impact on the housing market here. In fact, interest rates on most mortgage loans have decreased."

As Pleasanton nears buildout, fewer new homes are being added, placing more pressure on resales. With approximately 25,000 housing units now in place, the city expects to reach total buildout by the end of the decade with no more than 29,000 homes, and possibly only 27,300, based on current projections. Work is under way now on Ponderosa Homes' new 191-home Ironwood community at Busch Road and Valley Avenue and what city officials consider to be the last of large homebuilding projects in Pleasanton. Ponderosa's first homes, part of its Classic design category, are expected to be on the market next week priced from the mid-$700,000s.

"Most people like Pleasanton and want to stay here," Kinney explained. "Few of them move out and yet there's a tremendous demand for housing from hundreds more each month who ask real estate professionals for help in finding homes in our community. That's why we are seeing multiple offers on homes that are for sale, and it's why prices are continuing to rise."

Last February, Brian Wright at United California (UCB) Brokers handled a sale of a townhouse that was listed for $490,000. Because of multiple offers and fierce buyer competition, the townhome sold for $511,000, with the winning bidder offering $21,000 over the asking price.

"That same townhouse is now on the market again for $580,000, about a 20 percent increase," Wright said. "It's unbelievable. When we talk about the lower price range for single family homes today, we're talking in the neighborhood of $750,000."

Jim Lavey, a Realtor at Allied Brokers in Pleasanton who has been in the business for the last 30 years, said the current shortage of resale homes here is clearly causing price escalations. In the early 1990s, the last time home prices actually declined here, there were more than 600 homes for sale. Last January, there were only 69, an unusually low number in mid-winter when housing inventories usually are at their highest. As of July 1, his firm counted 149 homes on its list of available sales, up from 101 on June 1, but still under the 176 that were on the market at this time a year ago.

"There are far more prospective buyers than sellers, and that's the pressure we have on prices," Lavey said. "It's like having a shoe store with only three pairs of shoes, and 30 customers who want them. That store could raise prices significantly, and the buyers would still be there."

Housing inventories are traditionally at their lowest at the end of the summer sell-offs as owners and buyers make their moves before school opens. They increase over the fall months through the Christmas holidays, when sales are slow.

Last summer, however, banks and mortgage brokers arbitrarily raised interest rates in anticipation of an increase in the federal discount rate. When nothing happened in Washington, local lenders restored the old rates. But their action alarmed those who were thinking about buying or selling in Pleasanton, and the market sizzled.

"All of a sudden we had $100,000 price increases in Pleasanton, and it happened almost overnight," Lavey said. "Homes that had been priced at $620,000 moved quickly to $720,000, and they sold. We're seeing that now as buyers think that the recent hike in the federal discount rate will raise mortgage interest rates here, which it hasn't, and are buying up available homes as fast as they can."

Lavey doesn't look for any changes in mortgage interest rates until after the November election.

"The job market is not as strong as some people think, and the jobs themselves are different," Lavey said. "I know a guy who was making $100,000 a year and lost his job. He took another one that is paying $60,000. I think there's a lot of that going on and, to me, that's not real job growth."

Still, brokers believe the demand for homes in Pleasanton will continue growing. They are seeing many from Tracy and beyond who bought less expensive homes there and are now tired of the long commutes on overcrowded freeways to jobs they have here. With more than 17,500 now working in Hacienda Business Park companies, alone, Realtors are fielding more calls than ever from frustrated commuters who want to leverage the equity they have in San Joaquin County or southern Alameda County homes to buy in Pleasanton.

Realtors said those are tough requests because of the huge price differences, but they add that with lower interest rates and more flexible mortgage financing plans, including low down payments, more are qualifying for higher priced homes

"Still, with only nine houses available right now at prices under $600,000, it takes a sizeable income or lots of money down to buy in Pleasanton," Lavey said.

Even lots are expensive. Realtor Roger Manning of Hometown GMAC, who is also a developer, said the consortium he's with has prepared 34 housing sites along Clubhouse Road at the city's new Callippe Preserve municipal golf course, which will open next year. The fully improved housing pads on one-third to one-half-acre lots will start at $900,000, with most priced over $1 million.

Even with the higher prices for housing, however, Realtor Robin Dickson is optimistic for continued sales growth.

"I think the market will continue to be robust," said Dickson, who is Vice President and Managing Officer of Intero Real Estate Services on Hopyard Road. "In spite of what you hear that there have been many multiple offers and people aren't getting the houses they want, we saw more sales at Intero in the first six months of this year than we did in same period last year. And I think we will continue to see a lot of activity."

"Generally when people start hearing that interest rates are going up, the sellers start to think that this might be the top of the market and put their house on the market," she said. "At the same time, buyers also don't want to miss the boat, and they start looking seriously. Even with the recent market turnaround, a house in Pleasanton has proved to be a better investment."

"So I think the rest of 2004 will be very good for buyers and sellers," she added. "In fact, I'll predict that it will be phenomenal!"