No Skinny-dipping Allowed

Statistics are like bathing suits—what they reveal can be suggestive, but what they conceal is vital. This is especially true about facts and figures in today’s real estate market, particularly in Marin.  

For starters, there is no single Marin real estate market. The county is divided into many micro-markets fragmented among various towns and a wide range of property types and values. The price performance of a six-bedroom Ross estate should not be compared with the distressed condo sale in San Rafael. They are not just apples and oranges in size and value; they also attract completely different buyers who have as much in common as a private jet owner and a frequent-flier on Southwest Airlines. Similarly, properties in the same town can have little in common. The person who buys a $1 million property in Mill Valley contrasts greatly with the one who pays cash for a $3 million property.  

With those disparate conditions in mind, how is real estate doing in Marin? The answer here also depends on a great number of factors that go well beyond just being in the same county. To say the median home price in Marin is down 20 percent year over year doesn’t necessarily mean your particular home is worth 20 percent less today than a year ago. If your property is a 1,000-square-foot, two-bedroom in San Anselmo (in need of repair) that is comparable with a large number of neighboring distressed or foreclosure properties, then, yes, it is probably worth a great deal less than it was last year. However, if you own a 3,500-square-foot, four-bedroom home in Kentfield, you might be surprised how well that particular market has held up in these tumultuous times.

Real estate appraiser Philip Bruce Raful believes most people in Marin feel the Novato market is weak. But that really depends on how we torture the numbers and what they confess to. According to the Multiple Listing Service, the median sales price of detached single-family homes in Novato during the first half of 2008 was $706,250. During the second half of 2008 it was $625,000. So far in 2009 it’s $535,000. Raful, however, points out that 55 percent of Novato homes sold in 2009 have been distressed or short sales of properties valued at less than $800,000. The incongruities in today’s real estate market appear in sales of more expensive homes in Novato, Raful says. Of the Novato homes that sold for more than $800,000 and were not short or distressed sales, the median sales price during the first half of 2008 was $1,129,500. In the second half of 2008, it fell to $1,071,250. And so far in 2009 it’s bounced back to $1.2 million.  

Intrigued? Consider that the median price for homes in Tiburon during 2006 (per county assessor records) was $2 million. In 2007, the median dropped to $1.92 million and in 2008 it rebounded to $2 million. But, so far in 2009, after you remove the short sales and foreclosures, the median value in Tiburon is $2.1 million ($1.9 million including all sales). Of course, a price has to be determined in the context of all the inventory on the market, but it’s hard to argue that short sales and foreclosures will impact the market indefinitely. These “less than optimal sales” are working their way through the system and this view is one way to normalize the data for the true value of some (not all) real estate.

It’s almost an innate human reaction to think that the value of our home has been affected less than that of others in our community. This perception may not be that far from the truth when you look more deeply at the numbers specific to your property. So, the next time someone asks about the state of the Marin real estate market, remember that when the tide goes out it’s easy to see who’s not wearing a bathing suit. But that doesn’t necessarily mean that the rest of us are skinny-dipping. 

Ian Charles, Cofounder and CFO of Rex & Co., has spent over 15 years in real estate finance modeling and equity research; and earned an MBA in finance from USF.