You are viewing category: San Francisco Real Estate WEEKLY Market Update (City Reports)
Home prices all across the country are bouncing back sharply from their recessionary lows. In fact, the latest S&P/Case-Shiller report found prices in major cities were up nearly 11 percent in March from the same period in 2012, the biggest year-over-year increase since April 2006.
NPR’s All Things Considered, in its report on the rise in home prices, said that while this is obviously good news for homeowners, there’s still a long way to get back to the market’s peak prices of the mid-2000s. But as it turns out, a number of Bay Area cities have already bounced all the way back and are setting new price highs.
The strongest price gains have come in San Francisco and the Peninsula, where a severe shortage of listings and a great number of ardent buyers have pushed prices past previous records. In addition to San Francisco, Palo Alto, Cupertino, Menlo Park and Burlingame have all surpassed their 2007 highs.
The biggest increase was in Palo Alto, where the median sale price is up an astounding 35 percent from their previous peak in 2007 peak to stand at $1.9 million year to date. The average sale price is also up 30 percent and now exceeds $2.1 million.
Other cities saw sizeable jumps as well:
- Cupertino’s median price is up 19.2 percent from its previous high to $1,252,000;
- Burlingame’s median price is up 16 percent to $1,466,808 and its average is up nearly 12 percent;
- San Francisco’s median is up 6.1 percent to $849,000 and its average is up 10.2 percent; and
- Menlo Park’s median is up 7 percent to $1,337,500 and its average price is up 5.6 percent.
Nationally, some of the biggest gains in prices over the past year, according to S&P/Case-Shiller, were in the hardest hit cities like Phoenix (up 22.5 percent) and Las Vegas (up 20.6 percent). But San Francisco also saw a 22.2 percent spike over the past year, according to the report.
As NPR noted, this latest news follows many other signs in recent months that the housing sector is indeed on the rise again. And once again, it seems the Bay Area is leading the way on this strong housing recovery.
This week saw some upward movement in interest rates amidst concerns that the Federal Reserve will taper its purchases of mortgage-backed securities and Treasuries in the coming months. Homebuyer’s purchasing power is already challenged by this high-demand low-inventory market in the Bay Area. Continued increase in interest rates could make things that much more difficult for Buyers to find the right home in the neighborhood of their choice at a price they can afford.
Below is a market-by-market report from our local offices:
- North Bay – No changes in the Marin market, according to our Central and Southern Marin manager. Buyers are still stacked up four (or more) deep. Still not as much inventory as we’d like. Cautioning sellers NOT to sell off market – they could be leaving money on the table as the market is still hot with multiple offers. More inventory over the past few weeks, but still being absorbed quickly by Marin buyers. There is no price limit to buyer demand (multi-million dollar homes are selling as fast as the under $500,000 range – if any of those exist anymore). There is also a seemingly endless supply of “all-cash” buyers who are keeping the market hopping. Investors are outbidding first-time buyers, but those first-time buyers are getting sick of that and are stepping up big time. The Sebastopol market is red hot. It still is in need of inventory and motivated sellers. Many well-priced properties are selling 10-20% above asking while overpriced listings continue to languish. Some agents feel the market may be a little “frothy” due to the lack of inventory and the competition for what little inventory there is. Cash remains king in all price ranges.
- San Francisco – Our Lakeside office manager says agents are beginning to have a few more listings that over time may reduce the pressure on buyers a little. As of now, we’re still seeing mostly multiple offers and often with remarkable and surprising seller-pleasing results. As we’ve grown accustomed to, all the transactions that got ratified by our Market Street office during the past couple of weeks did so against multiple offers. However, while one listing received 17 offers, the vast majority only received only 2 or 3. Looking down the road, we anticipate the listing inventory to decrease as SF hits its usual summer slowdown. Open houses are extremely busy, our Sunset office manager notes. One new listing had over 100 groups in 2 hours on their first open house. It’s the same story with every agent – we need more inventory. Multiple offers are still the norm in all price ranges.
- SF Peninsula — Peninsula wide, the inventory problem continues with a waiting pool of buyers snapping up every listing within days of coming on the market. One Burlingame property was won in a multiple offer with an all cash offer and closing in 8 days. List price was $1,895,000, sale price 2,240,000. And, by the way, it was a complete “fixer-upper!” Although multiple offers are the norm, the number of offers seems generally to be smaller than last month. This may be due to the usual slowdown over Memorial Day and Graduation time, also an up-tick in interest rates. There are currently 63 active and 20 pending sales in Hillsborough. This reflects a slight increase in inventory while at the same time the pending sales are increasing as well. Sales and listings are brisk on the coast with more substantial overbids on the listings due to the Peninsula buyers coming to the coast as they see less competition in the home buying process. The “core” markets in the most desirable parts of Menlo Park are still hot. Multiple offers still abound and competition is ferocious for the heart of Menlo Park. Teardowns are $2.2 mil for an 11,000 square foot lot. Menlo Park has been the least international area in the entire Peninsula and is now seeing foreign money come in. First time opens in these core areas are still seeing 50 to 75 groups. As we are beginning to see some rate creep, our local manager suspects buyers will stay in the market for the summer months. The Palo Alto market is slowing down as far as the number of offers on a property, but prices continue to increase. Attendance at open houses in the San Carlos-Redwood City area is incredible. There is an amazing buyer demand in all price ranges. One San Carlos property listed at $700,000 that was a true “fixer” had 11 offers and went considerably over asking. Another Redwood City property listed at $579,000 but in very good condition had 12 offers and also went considerably over asking. Sales remain strong in Woodside and Portola Valley up to about the $3.5 million mark. Agents typically work a broader area to keep the sales coming – the Redwood City and San Carlos markets continue to be very strong (especially San Carlos) due to the schools. Prices have taken a quantum leap there – literally, the $700k to $800k house of eight months ago is now $1.1 to $1.2 mil in the prime areas.
- East Bay – CAR’s chief economist, Leslie Appleton-Young, confirmed in a speech in Berkeley this week what we all already know: The economy is improving, consumer confidence is up, REO’s and Short Sales are declining, there is not enough inventory (down 40-70% in some areas), multiple offers abound, 35-70% of buyers are bringing in all cash and inventory remains at 1-2 months’ supply. In spite of the rising interest rates over the last 30+ days that are sending some buyers to the sidelines, open house activity in the Oakland-Piedmont area is still strong with more than 100 people attending one Sunday open house. All but two ratified deals were multiple offers ranging from three in the Previews price point to a single-family fixer with 48 offers. The Lamorinda market is still very active but seems to have slowed ever so slightly. Buyers may be taking a little longer to submit offers as interest rates have inched up a bit. Multiple offers continue, as does strong attendance at open homes.
- Silicon Valley – Our Cupertino manager says the local market maybe is not quite as wild as the past few weeks, but still crazy. Renters who are having trouble finding rentals in Los Gatos are now pursuing their options to purchase homes in the local area. Not much change in the San Jose Almaden area: inventory is increasing, albeit at a slow pace. In the Willow Glen area, it has been kind of a paradox couple of weeks. Agents have seen inventory shrink in all the local markets in and around the Willow Glen area, however the buyer side sales are up. We are seeing the playing field slightly balance for all those pent-up buyers. They are backing off on the skyrocketing over bids and some properties are only receiving one or two offers at or near asking price. There was a slight lull the last two weeks with families preparing for the end of school / graduation season. The Saratoga market is gaining momentum, our local manager reports.
- South County – The seasonal slowdown for the summer has started in South Santa Clara County, as well as San Benito County. It is finally a great time for buyers to have the ability to shop for a house and while multiple offers are still prevalent with every new listing, it has not been the feeding frenzy. The average list to sale price ratio for the last year has been 104%. The luxury market is moving as well with a new pending sale in Gilroy over $5M. There are no active REO’s in all of San Benito County and short sales are few as well. All in all the market seems to be stabilizing. The Morgan Hill office toured seven new listings (taken within the last few days). The South County Broker tour (Morgan Hill, Gilroy and San Martin) had 18 new listings. As the inventory is clearly increasing, multiple offers are still common. These multiple offers also include no contingency for appraisal and many are written as cash offers. This multiple offer phenomenon, however, seems to be limited to properties with list prices under $1 million. Homes listed above a million are still moving slowly.
- Santa Cruz County – The inventory levels remain low as we move into the summer months. Year over year, the total number of listings is down approximately 22% with 624 homes currently listed. This is the fewest number of listings on the market since 2005. This is impacting the total number of sales with fewer homes to choose from there are fewer sales occurring. In May there were 143 closed SFR home sales in the County. The unsold inventory index is about 4.4 months and continues to be way below normal. All of this is driving prices higher starting at the lower end and moving upward. The median price for May was $640,000, which represents a higher price point than we have seen for quite some time. Short sales and Bank Owned properties represent less than 20% of the local market, 26% of the sales are under $500,000 and 15% are over $1,000,000.
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
The Bay Area’s housing market is red hot these days with so many qualified buyers chasing so few homes for sale. Multiple offers and properties selling well over the asking price has become the norm in many communities. Now, the national – and even international – news media is catching onto the trend with stories about the robust seller’s market here and elsewhere in the U.S.
I was just interviewed by USA Today for a story that ran a couple of weeks ago, Homes sellers are scarce as spring buyers stir. And I also recently spoke with Money magazine, which just came out with a similar story on the hot housing market here in the Bay Area and elsewhere around the country. Finally, I spoke Friday with a reporter today from the Wall Street Journal’s Hong Kong bureau about Chinese buyers investing in our local housing market.
USA Today’s story led off with our very own suburb of Lafayette, pointing out there are no for-sale signs on one of the town’s busiest streets with 116 homes. As I told reporter Julie Schmit, in some areas like the Silicon Valley the supply of homes is down to a week. Bear in mind that a normal healthy market might have a four-six-month supply of homes.
Buyers and agents are literally waiting for the next house to come on the market in many neighborhoods, I told USA Today. And although listings have ever so gradually crept up since January, they are nowhere near enough to meet the strong buyer demand.
A big reason for the shortage of listings is that many homeowners who might like to sell may not be listing because they are underwater on their mortgage or don’t think they have enough equity to sell and buy elsewhere.
However, that’s changing all the time as multiple offers and bids over asking price are pushing up home prices. Properties that looked like they would have to sell as a short sale have ended up pricing out as a traditional equity transaction. We’re seeing it happen every day around the Bay Area.
Many homeowners might be surprised to learn that they no longer fall into the “distressed” sale category and may have equity in their home after all.
In the Money article, reporter Beth Braverman reminded readers that sellers have the upper hand in many parts of the country. She also made mention of some Sellers getting overly aggressive with a list price, and that over pricing, even in today’s market can lead to longer shelf life and not the best result for sales price. She quoted me as saying: Catch buyers’ attention – and get multiple offers – by pricing your home in line with comparable sales, “then let the market take it higher.”
Money reiterated what we’ve been saying to homeowners: “It’s tempting to postpone selling to hold out for a better price. But if you want to move to a larger place, act sooner rather than later. While you’ll be able to sell your home for more if you wait, the appreciation on the trade-up home will be greater.”
My hope is that as prices continue to improve and word gets out – thanks to news stories like USA Today’s, Money magazine’s and the Wall Street Journal’s, more listings will hit the market and move our housing market back toward a better balance.
Below is a market-by-market report from our local offices:
- North Bay – As the market continues to challenge buyers, we are beginning to see signs of more sellers entering the market, according to our Santa Rosa manager. Many of our agents are talking to sellers who have recently contacted them to put their homes on the market. Our hope is all of this talk starts to reward us with an overall increase in inventory levels. While the number of single family homes sold year over year for the month of February was down about 20% overall, the median sales price increased at about the same percentage. In the million-dollar-plus category, there is approximately the same number of units for buyers to choose from as there were last year, although the number of units sold has increased year over year by approx. 40%. In the Sebastopol area, new listings (the very few we see) are flying off the shelf. We are experiencing a sellers’ market unlike anything our local manager has seen in maybe a decade. He is consistently seeing just a 5-6 week supply of inventory year to date in Sonoma County. In Southern Marin, the report is lack of inventory, multiple offers, more properties coming on in the $3 million range (and selling quickly). The market is still hot and hungry for new listings.
- San Francisco – Preemptive offers are so common now, our San Francisco Lakeside office manager reports. Buyers and their agents are getting the idea that the preemptive offer really has to be significantly over the asking price. However, there are a few more properties coming on the market, which has given agents hope that the desperate shortage of listings may not last too much longer. Our Lombard manager says he’s seeing record-breaking prices over asking, especially on homes under $1.5 million, with some signs of overly aggressive high pricing. So while the market is extremely hot, it’s not stupid, he notes. Cash still carries the day. It’s “more of the same,” according to our Market Street office – more buyers hoping for more houses to come on the market, and more sellers achieving prices not seen since the height of the market. Due to the frenzy, even the most recent comps are a poor indicator of what a house will actually sell for. The only way to not compete with multiple offers is to get the inside track on something that’s pre-MLS or is a pocket listing. Demand for housing continued to be strong in the Sunset area, but inventory levels remained extremely low. Prices continued to move up in a rapid pace. Most listings are getting anywhere between 10-30 offers. The question to buyer is: It’s not how much the house is worth, it’s how high are you willing to pay to beat the competition.
- SF Peninsula — Burlingame agents continue to sing the “multiple offer blues” with buyers chasing every home that meets their needs and finding lots of competition. The number of offers can be from 50+ to as few as 3. The game definitely changes daily and agents are working hard to keep up and make sense of things. More activity occurring in the high end (10+ mill.) Some beautiful new listings have come to the Hillsborough market. One recent sale at $11.1 mill. has set the stage for buyer confidence. We are seeing cash offers in this price point. Hillsborough currently has 48 active and 20 pending sales – the most pendings in months. Our Burlingame North manager reports inventory is roughly 40% lower than last year at this time. More than 71% of all the SFR closed transactions (reported in the MLS) in the six cities he survey sold for the list price or more. Sales in the $5 million+ range are improving. Across the hills in Half Moon Bay, our local office said many mid-Peninsula buyers are looking for properties on the coast. They are being pushed out of the crush of multiple offer frenzy they have seen on the mid-Peninsula, which is starting to drive up our prices. Our Menlo Park manager notes that both the stock market and local real estate market are at their pinnacle since 2008. She said she has never in 37 years seen so many buyers chasing so few properties. Anything listed from $700,000 to about $1,100,000 is getting bid up at least 10%, up and down the central Peninsula. Even some properties are getting over bids when there are no other offers presented, which speaks to the ‘fear’ that another offer will show up very quickly if the buyers do not ‘buy’ the property off the market by offering a higher than list price. Dirt in Palo Alto is going for about $400 dollars a square foot, commensurate with prices in Beijing or Singapore. If Atherton acres were selling for that price, they would be selling for $17 million. In the Palo Alto area, the market remains consistent: low inventory, high demand, multiple offers. It’s a similar story in San Mateo, Redwood City, San Carlos and elsewhere. A three-bedroom home in Belmont listed under $500,000 received 39 offers including the winning offer of all cash, no contingencies, a 10 day close and a possible 90-day rent back at an extremely low rent. Woodside has had some action with the $4-6 million range moving. Interestingly, our local manager notes, buyers can get a fabulous 3 acre parcel with incredible views and a reasonable house for the same price as a home on a half acre in Menlo Park. Prices in Menlo have increased so greatly and Woodside prices have eased, so the typical sale prices seem to be getting closer.
- East Bay – Listings are finally flowing in and beautiful ones at that, according to our Berkeley manager. Still, multiple offers on 99% of sales with listing agents reporting 37+ disclosure packets requested and offers 5-24 for each property in just this past week. When her agents check recent sold prices, she can hear them gasp. Happy sellers of course, but frustrated and stressed buyers. There is no sign of the Oakland-Berkeley-Piedmont market cooling down. As we are seeing the closed prices come in, some are going over as much as 47%. The buyers are still out in droves at the weekend open houses, with groups waiting to get in before they open and hanging out long after they are closing. Multiple offers in the East Bay have ranged between two (and there were only a couple of those) to a high of over 30 for a single family 3/1 just over 1,000 sq ft in Union City. In the Lamorinda area, homes that are priced well continue to go into contract immediately – most with multiple offers and over asking price. Buyers are frustrated but continue to make offers and understand fast action is required in the current market. Our Walnut Creek manager says there are multiple offers on every listing and some listings are selling prior to going on the market. A good number of cash sales occurring in all price ranges. All corners of the market are showing strong signs of appreciation. The agents are feeling like it’s 2005-2006 all over again. Some are concerned and wondering how long this can last. The good news is that we are seeing more new listings come to the market. Most are equity sales, very few bank owned or short sale listings.
- Silicon Valley – Our Cupertino manager senses a slight change in the market. Some buyers are still making “crazy” offers, but a number of properties are getting fewer or no offers. In the Los Gatos area, multiple offers and over-bidding continue to be the norm at all price points, according to our local manager. Active inventory is down 34% in the town of Los Gatos from the same period last year. Inventory is growing as are sales in the San Jose Almaden area. Every single agent in our office is in a multiple offer situation. As we move into the spring selling season its full steam ahead in the Willow Glen area – listing inventory is slightly increasing , buyer demand is still outpacing listing inventory, and agents are still seeing multiple offers for most properties. However within the last two weeks several agents have been successful in getting their buyers into contract. So there is some light at the end of the tunnel for buyers. However they need to be “strong” buyers – either all cash or 50% down seems to be the winning formula.
- South County – As of Thursday there are only 31 single-family homes listed in Morgan Hill under $1 million and only three condos. There just are slim pickings for buyers, our local manager laments. At this point, sellers are driving the market and, in most cases, receiving multiple offers and selling their homes in excess of their asking price. Almost all offers are being written without an appraisal contingency—with the buyer guaranteeing that they have funds to close regardless of a lender’s appraisal. We are also seeing an increase in interest in homes listed over $1 million. Our local office just sold several properties listed over $1.5 million, which is the high end for South County.
- Santa Cruz County – More properties are coming on the market and selling as quickly as they are listed, usually with multiple offers (as high as 14 offers on a property priced at $360K). That is if they are priced right. Those seen as undervalued or right-valued in the right neighborhood are moving rapidly. Tip the price a little too high and the property languishes. An indication of the finicky buyers and sellers and the difficulty of pricing today.
- Monterey Peninsula – The real estate market on the Monterey Peninsula is hot—even busier than last year, which was nothing to complain about. Agents are writing offers fast and furiously as buyers see inventory shrinking. This spring will be an excellent time for sellers to get their homes on the market in this region, but they need to be ready to move quickly.
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
At long last, our 49ers are back in the Super Bowl. It’s been 18 long years since they last played on the world’s biggest stage for the ultimate prize. And if history is any indicator, the entire country should be rooting for the Niners – not just fans like us around the Bay Area.
That’s because when the 49ers win the Super Bowl, it almost always bodes well for the stock market in the coming year – and usually the housing market, too.
When the Niners won their first Super Bowl in 1982, the Dow proceeded to climb 19.6% during the year. And things got only better with subsequent Super Bowl victories. In 1985, the Dow finished up 27.7% and again 27% in 1989. The biggest year: their last Bowl win in 1995, when the Dow was up 33.8%.
The only down year in the string was 1990, when the Dow fell 4.3%. But on average, the market enjoyed a better than 20% gain during those five Super Bowl years.
The housing market has also seen fairly strong appreciation along with most of the Niner Super Bowl victories.
Data from the Federal Housing Finance Agency shows San Francisco’s home price index climbed an average of 5.4 percent during the years they won the big one. Four of the five years saw gains with the highest being 16.6 percent in 1989. The one exception was 1990, when the index fell 2.6%.
California averaged a 4.1% annual median sales price gain during those years as well, rising three of the five years, according to figures from the California Association of Realtors.
Certainly, the weekend started off well on Friday with the Dow surpassing the 14,000 mark for the first time since 2007. Stocks rose Friday after the latest employment report showed that the country added 157,000 jobs in January, and that hiring for the past two years was better than thought.
So as we root for a Niners victory in the Super Bowl Sunday afternoon, don’t forget – what’s good for Bay Area football fans could also be great news for the rest of the country and the housing market as well! (For those of you who may doubt my economically and scientifically sound approach to predicting our markets based on a Super Bowl win, I have provided to you below the actual facts from our offices, indicating robust activity, majority of sales in multiple offers, and not enough homes to sell)
Below is a market-by-market report from our local offices:
- North Bay – Marin County continues to struggle with inventory, yet there is so much activity. When properties come on the market, everyone must see them and act quickly. Multiple offers and over bids are de rigor. We are seeing a trend of off-market listings and properties going into contract without being fully exposed to the market. This is NOT in anyone’s best interest. Sellers may be leaving money on the table, while buyers may be overpaying. There is nothing like the open market to determine true market value. Best to under-price in this market than overprice. If it’s worth more, the market will take it there. If you start too high, you will be quickly looked over and your property will have a stigma attached… eventually fetching far less than the seller would have hoped for. The good news is that sellers do see this as a good time to act. $2 million range is hot in all markets – Larkspur, Ross, Kentfield, Tiburon, Mill Valley, and Sausalito. Our Petaluma manager says the normal market now features multiple offers. Some 32 offers were submitted on a property in Petaluma in the $250,000 range. There have been double-digit multiple offers in all price ranges. In Sebastopol, our local manager says sellers who may have been upside down last year are holding off listing in the belief if they wait they will return to an equity position. As of this morning there are only 602 homes available for sale in all of Sonoma County for all price ranges.
- San Francisco – Offers in double digit multiples, open house visitors in droves, but houses to buy in incredibly short supply, our Lakeside office manager reports. Buyers are feeling terribly frustrated after missing out on multiple offers multiple times. Yet they don’t want to give up because prices seem to have an upward lift and interest rates are excellent so waiting could cost them money. Our Lombard manager says prices are way up and interest rates inching up, which may bring some sellers into the market. Everyone is looking for inventory. The smart buyers are compromising on their dream home, looking at lower price points, then jumping in aggressively. Others are on the sidelines. Our Market Street manager notes that inventories remain at way-too-low levels. Everyone is hoping it will increase following the Super Bowl. With so few homes available, buyers are climbing on top of each other to scoop up those few properties that are for sale. The lack of inventory continue to drive prices upward, our Sunset manager reports. Open houses continue to be extremely active. A typical open house will have 50-100 groups though in a two-hour period. One “fixer” listing, price at $800,000, that is not financeable, received 19 cash offers with the highest bidder offering more than 30% above asking. At the end of the day, there are still 18 cash buyers looking to buy. And our Van Ness manager says December 2012 and January 2013 are roughly twice as busy as the prior year.
- SF Peninsula — There are 14 active and 16 pending sales in Burlingame. Low inventory continues to be a problem everywhere. It is amazing how agents keep coming up with properties to sell to their waiting “pent up” buyers. Our Burlingame office just had 50 offers on a pair of fixer properties in San Mateo, which sold all cash substantially over asking price. There is little new inventory coming on in Hillsborough, however the high end is starting to show movement with four properties over $10 million and two over $5 million now in escrow. This is very encouraging to see high-end buyers actively in the market. Our Palo Alto manager says the inventory is even scarcer (if possible) than last year – while the demand is higher. Lack of inventory is the biggest concern for agents and clients in the Redwood City-San Carlos area. Agents are working in a wider area in order to find properties for their buyers. In San Mateo, our manager sees a slight increase in listings. Homes that are off-market coming back on the MLS in the Woodside and Portola Valley area. Sales have picked up over the past two weeks. Everyone has lots of buyers – not too many sellers yet.
- East Bay – Inventory shortage continues: Only seven Berkeley houses on last week’s brokers’ tour and eight for sale in Berkeley. There were only 24 on a tour that covers Hercules through Oakland. Our Oakland-Piedmont manager reports that the only sale that did not have multiple offers was a pre-emptive offer that was received, evaluated and accepted by the seller. The number of offers range from two to 13. Open houses have become inundated with buyers; several open homes throughout the city had over 80 groups through. The majority of open houses need to have at least two agents holding them open in order for anyone to have a meaningful conversation with potential clients and get contact information. Listings are very slowly coming on the Lamorinda market. Buyers continue to be very active. Open homes are heavily attended with large groups of buyers. Our Walnut Creek manager says inventory seems to be disappearing. Agents have buyers ready to buy, but nothing to sell them. Agents are still selling new construction when possible.
- Silicon Valley – Things are heating up in the Cupertino market. Most of the agents are working hard to find homes for their many buyers. According to our Los Gatos manager, agents’ biggest challenge is keeping sellers out of the stratosphere and realistic on their pricing when they hear about the hot seller’s market. Our San Jose-Almaden manager says inventory is increasing, although at a slow rate. Almost all offers seem to be multiple offer situations. That’s echoed by our San Jose-Main office. And the Willow Glen manager reports agents continue to bring in new listings even though the local market inventory continues to shrink. Agents are still facing challenges getting buyers into contract, however buyer demand has not declined. With the Super Bowl weekend coming up, non- football fans may have the leg up on securing a home this weekend. In Saratoga, the local market is “warm above $3 million, hot below $2 million,” according to our local manager.
- South County – Gilroy is experiencing an extreme shortage of inventory. There are 47 homes for sale – and 42% of those are in the luxury market – according to our Gilroy manager. Every single sale year-to-date has been a multiple offer situation. New listings are not lasting long enough to hold open – and those that are have are getting 25-50 groups through. Many buyers are calling the listing agents directly to see if they can somehow get an “in” working directly with the listing agent. We have seen a 25% increase in price in the entry-level market since this time last year. San Benito County is also experiencing a similar phenomenon. Lack of inventory – down to a mere 51 homes for sale in the entire county – only one is an REO and four are short sales. For all of South Santa Clara County and San Benito County we have less than 1 month of supply. Our Morgan Hill manager says there are a few more homes on the market in that area. Of course, the demand is such that multiple offers are still the rule of the day. More sellers are discovering that their homes are no longer “under water” and that they can either get out from under their mortgage or actually move up to a larger home. This is a very encouraging sign as the market continues to right itself.
- Santa Cruz County – Sales in January are consistent and may already be giving us a preview of the promising real estate year to come. Low inventory remains the challenge and agents have had to address this with reaching out to homeowners via letters, door knocking, and calling to find out if have an interest in selling their property. This has been very successful. There is less than a three-month supply of inventory and properties priced well are receiving multiple offers. Prices are inching up. There is a strong sense of optimism and there is an expectation of a very good year for real estate in Santa Cruz County. Buyers have heard the message loud and clear that they need wait no more, and the sellers are smiling again. There is increased activity in all market segments including the Previews (over $1,000,000) in Santa Cruz County.
- Monterey County – Sales in last two weeks continue to be as steady as the beautiful weather on the Monterey Peninsula. Still, the last couple of weeks have been a bit quieter both in town and in real estate showings, as it usually is after the holidays and up to the AT&T Pro Am, which gets underway next week. Then the area will be bustling with people, though mostly only interested in the golf tourney. But if the beautiful weather holds out and shows well on TV it sometimes gets people introduced to the area at that time and come back later to look at property, according to our Monterey Peninsula manager.
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
As the Bay Area’s housing market continues to heat up once again, it’s catching the attention of the local news media in a big way. Just in the past week or so I’ve been on KQED, the local PBS radio station to speak about our market, and have been interviewed by the San Francisco Chronicle, talking about why the housing market is rebounding in such a big way.
In a front-page story in Thursday’s Chronicle entitled Bay Area Home Sales, Prices Surging, reporter Carolyn Said reported on the extremely strong housing numbers just released by DataQuick, the La Jolla-based information services company, and examined what is driving the housing turnaround.
In its monthly report, DataQuick said the median sale price in the Bay Area in December rose to $442,750, a stunning 32 percent increase from a year ago and the biggest jump in 25 years of record keeping, according to DataQuick.
Additionally, sales increased year-over-year for the 18th month in a row, climbing 4.5 percent last month. In fact, San Francisco and Santa Clara County both recorded double-digit sales growth year over year at 29.5 percent and 13.1 percent, respectively.
It’s good to see the Bay Area news media on top of this story, but what’s especially gratifying is that they’re getting out the message that we have a severe shortage of homes for sale in the region and sellers are getting good prices for their homes once again.
As all of our sales associates know all too well, there just aren’t nearly enough listings to meet the surging demand of buyers. And the Bay Area isn’t alone in that regard.
A look at unsold inventory statewide tracked by the California Association of Realtors found that listings were down to just 2.6 months in December, half of what they were a year ago and down precipitously from their lofty level of 7.5 months less than two years ago.
The more headlines and stories that spell out the critical need for listings, the better.
My hope is that homeowners who have been sitting on the sidelines will begin to realize that this market presents a tremendous opportunity for them to get top dollar for their home. Right now, it’s a red-hot seller’s market. But as we know, it won’t always be that way. If traditional patterns apply this year, there will be some added inventory in March / April. This will bring more opportunities for Buyers, but also brings additional competition between Sellers, as compared to today.
Below is a market-by-market report from our local offices:
- North Bay – Our Central and Southern Marin manager echoes the sentiment of others – not enough inventory to meet buyer demand. Now really is the time to put a property on the market instead of waiting for spring when the buyers will then get to pick over their favorites, he advises. Low, low inventory in Sebastopol. One new listing had 8 offers and they were all cash. Another new listing garnered 5 offers, and 4 were cash. Agents are pulling out all stops searching for sellers but the buyers are piling up like cordwood.
- San Francisco – Our Lakeside office manager says somehow agents are continuing to come up with more sales even though there is virtually nothing on the market publicly. Several agents last week with buyers found a property by canvassing the buyers’ top choice neighborhood. Buyers, Sellers, and agents seemed to have taken the last two weeks off after a big year-end flurry of closings, our Lombard office manager reports. Record-low inventory, but hoping a post-cliff, post-football season will bring on some new stock. Our Market Street office says that with the holidays over, listings are starting to slowly increase, but not nearly enough to meet the buyer demand. As such, offer dates and multiple offers remain the order of the day.
- SF Peninsula — Our Burlingame office said the local market is still so very tight in all cities. Pre-emptive offers are happening as buyers will do whatever it takes to secure a property. Our agents came straight back to work from the holidays and hit the ground running. A few new listings came to the market this week in Hillsborough. The inventory that came off the market for the holidays has yet to come back on so a well-positioned property is getting attention and showings. The overseas cash is back and looking now. Across the hills in Half Moon Bay, agents are gearing up for the new year with listings on the horizon. We’re seeing strong activity from Peninsula buyers looking for an area they can purchase a home without so many multiple offers. Our Menlo Park manager says agents are busy with new-year sales. Top agents are slammed. More listings seem to be coming on than anticipated and that’s good. Inventory is at an all-time low, reports our Palo Alto manager. Open houses are very busy – lots of buyers out there ready to buy. Our Redwood City-San Carlos office says it’s been a sluggish beginning of the New Year – everyone is out looking for potential listings. Without inventory, both open houses and sales activity are affected, our San Mateo manager says. There is some promise of inventory but not in the numbers agents need.
- East Bay – At the beginning of the year, there were only 19 homes for sale in Berkeley and only 2 were new listings. Six of the 19 are distressed sales (REO’s or short sales), with 3 being REO and 3 short sales. There has been a .4% month’s supply of inventory for a while now. With many visitors to the few properties and multiple offers on many, it is a real supply and demand illustration of a Sellers’ Market. The Oakland-Piedmont market is still teeming with anxious buyers and not enough homes to buy. Open houses were slammed this week with several properties having over 100 groups through. This resulted in agents speaking with groups and not individual buyers coming through. One agent has been calling clients she has had over the last couple of years talking about the rising value of their properties. This has resulted in a listing that sold well over expectations in a week (with 25 offers) and two previous sales that were going to be short sales in to non-distressed sales. Inventory continues to be the focus for Orinda. Market appears to be slowly ticking upwards. Multiple offers everywhere, our Walnut Creek manager reports. Buyers are starting to feel less hopeful in regards to getting their offers accepted. This leads to buyers making offers over asking. In some cases they are also paying over appraised value, reminiscent of 2005.
- Silicon Valley – Lots of buyers and nothing to sell, our Cupertino manager laments. Great news, our Los Gatos manager says: Prices are up across the board in Santa Clara County. The average sales price for single-family homes in Santa Clara County for 2012 was $834,417 up 12% from $743,893 in 2011. Average sales price for condos and townhomes in Santa Clara County for 2012 was $413,725 up 16% from $356,112 in 2011. Our San Jose-Almaden manager says inventory keeps decreasing with just about every offer being a multiple offer. Our Willow Glen manager says agents are seeing a steady stream of new listings coming into the office and are anticipating listing inventory will continue to increase as January turns into February. Crowded open houses are the norm with multiple offers taking well-priced homes well over asking price. Even homes that are priced what seems to be on the high side are still selling quickly. Agents are running out of seasoned listings as everything is selling. Santa Clara County is near a record low number of active listings with 623 actives, second lowest ever.
- South County – The markets in south Santa Clara County are taking some time to wake up after the holidays. There are only four properties that have closed escrow in all of Gilroy since January 1. There are 12 new listings for a total of 39 homes to sell. 45% of those are the luxury market in the area. So, it is slim pickings for buyers. New construction is nearly all sold out with only one homebuilder with an active subdivision left. There is one large subdivision coming in the spring-summer 2013 that should provide us with some new inventory. San Benito County has only 12 escrows that have closed since the year started and only 14 new listings coming on the market since then. The listings that are coming on are all receiving multiple offers. One entry-level home in Gilroy received 40 offers. On January 17 there were just 41 homes for sale in all of Morgan Hill, only two of which were distressed listings. In December available inventory was well below one month—a healthy and normal figure is a three-month inventory index. In addition, pending sales are outnumbering new listings. All of this, of course, is driving prices up. The average sales price of a single family home in Morgan Hill is up over 20% from that just one year ago. The seller’s market continues but most agents are hopeful that potential buyers will realize that the time is right to list their homes.
- Santa Cruz County – Low inventory levels continues to be the driving force in this market like other areas in the Bay Area. This is the biggest challenge the agents are facing and we have been having a lot of conversations about how to identify sellers who do not have their homes listed but may be interested in selling. Agents are having to be creative to find interested potential sellers, and match those people with the buyers looking in a specific area and price range, and experiencing success with that effort. Our local office had several “off market” sales and this is all due to the agents taking that extra step and hunting down those sellers. Inventory levels are down 26% from a year ago and agents don’t see a lot of change in that trend so far. However, they are expecting the best as we move toward warmer and sunnier days. Sales overall in Santa Cruz County for single-family homes year over year were up 18%, and that is wonderful news. The agents are optimistic and expecting that trend to continue as we move further into 2013.
- Monterey County – While there was a bit of a lull over the holidays and start of the new year, the beat has picked right up and our agents on the Monterey Peninsula are once again busy showing properties and writing contracts. The high-end Previews market is also showing improvement as the year gets underway.
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
(Editor’s Note: Appearing below is the Association’s Market Focus report for January 2013. A report is issued each month by the Association. The reports are intended to provide the media and REALTOR® members of the Association with brief monthly analyses of the state of the housing and mortgage markets, as well as the local economy. As always, comments are solicited concerning how the Market Focus reports can be made a more effective marketing tool for members.)
San Francisco Housing Market Maintains Positive Outlook for New Year
Much like the rest of 2012, December produced improved buyer demand, steadily rising home prices (the median now at $850,000, up by 39.3 percent) and pockets of robust activity throughout the city.
With such a strong buyer demand, the current inventory has been gobbled up quickly, with the average days on market at 41.
As sharply rising rents and low interest rates continue to drive the market, it makes financial sense for buyers to purchase now than rent, to lock in at these low 30-year rates and wait for appreciation. And, with job creation remaining at the forefront for the city’s leaders, we can all maintain a positive and fruitful outlook as we embark into the next twelve months.
Single–Family Home Sales
Since December of last year, the inventory of single–family homes for sale in the city fell by 40.8 percent, to a total of 379 properties. The number of homes under contract increased by 13.4 percent, while the number of homes sold dropped by 13.9 percent, to a total of 199 properties sold.
For homes that were priced below $700,000, the months of supply inventory dropped as much as 74 percent to a reading of 0.7 months. For higher-priced homes between $700,000 and $1.2 million, the months of supply inventory also fell, by 40.2 percent to 1.3 months.
(These exceedingly short time frames are indicative of a seller’s market, where sellers have more leveraging power over buyers who are all vying against a limited amount of properties.)
One area of the city which sustained positive sales activity is in the Central District, located in the geographic center of San Francisco. Compared to December 2012, the number of homes under contract here rose by 46.2 percent, while the total number of homes sold surged ahead by 42.9 percent, to 30 properties sold. The Central District includes such desirable neighborhoods as the historic Haight Ashbury, which until this day, still retains its bohemian quality from the 1960s, to the more clean-cut and family-oriented Noe Valley, whose typically sunnier weather and rows of merchant shops highlight the wholesomeness of its predominately young family community, and Twin Peaks, which offers some of the city’s most remarkable views, thanks largely to its steep streets and high vantage points. The median price for a home here is $1,517,500, which is up by 12.4 percent from last year.
In the same market behavior as single-family homes, the inventory of condominiums for sale in the city fell by 41.4 percent, to a total of 487 condominiums. The number of condominiums under contract rose by 29.9 percent, while the number of condominiums sold increased by 20.6 percent, to a total of 240 units sold.
For condominiums that were priced between $500,000 and $900,000, the months of supply inventory greatly tapered by 74 percent to a reading of 0.7 month. For luxury condominiums priced above $900,000, the months of supply inventory also dropped by 44.6 percent to 1.6 months.
One region which saw a tremendous increase in condominium sales activity is the South Beach and SoMa (South of Market) neighborhoods in the central–eastern portion of the city. Compared to this time last year, the number of condominiums under contract here rose exponentially by 143.3 percent, while the number of condominiums sold also increased by 25.4 percent, to a total of 79 units sold. Home to AT&T Park and Caltrain, the continuously expanding South Beach area offers some of the city’s most sought-after and stylish condominiums, while SoMa is the center of the city’s art community, with SFMOMA, the Yerba Buena Center for the Arts, the Academy of Art College, and throngs of small galleries all around. The median price for a condominium here is $677,000, which is up by 17.6 percent from 2012.
The consumer confidence index, which had declined slightly in November, posted another decrease in December. The index now stands at 65.1, down from a reading of 71.5 in November. Lynn Franco, Director of Economic Indicators at the Conference Board, says that, “Consumers’ expectations retreated sharply in December resulting in a decline in the overall Index. The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff. A similar decline in expectations was experienced in August of 2011 during the debt ceiling discussions. While consumers are quite negative about the short-term outlook, they are more upbeat than last month about current business and labor market conditions.”
Business Insider reports, “Going into 2013, home prices are expected to rise 6 percent driven by steady demand, lower bank-owned (REO) sales, and lower inventory of unsold homes. This is according to CoreLogic’s latest report. The CoreLogic Home Price Index (HPI) increased 6.3 percent in 2012, the largest increase and highest level since 2006. And year-over-year home price increases were more widespread. This increase in home prices across a broader geographic spread is expected to continue in 2013.”
In another sign of an improving housing market, California home buyers are more optimistic about the housing market now than they were three years ago, according to the California Association of REALTORS®’ recent “2012 Survey of California Home Buyers.” The survey found that more home buyers this year believe that home prices will rise, with 25 percent saying prices will rise in one year; 41 percent saying they will rise in five years; and nearly three-fourths of buyers (73 percent) believing home prices will rise in 10 years. This compares to only eight percent, 35 percent, and 60 percent, respectively, in 2009, when the question was first asked.
From the SF Chronicle, “Congressional efforts to reduce the U.S. deficit revived tax breaks for mortgage insurance and extended interest deductions for homeowners that will cost the government $600 billion over five years. Congress raced to pass the ‘fiscal cliff’ bill before Jan. 1 to avoid sweeping spending cuts and tax increases that jeopardized the economic recovery. Legislators also left in place a 2007 tax break for homeowners whose debt is forgiven by lenders and preserved exemptions for profits on home sales, while maintaining mortgage-interest deductions. The moves could help a housing market that last year started to reverse a five-year slump that pushed the U.S. economy into the longest recession since the 1930s.”
As we begin the third quarter and the final weeks before the presidential election, more eyes will be focused on the nation’s economy, which continues to struggle to gain traction. The most recent data showed the U.S. economy grew at a seasonally adjusted annualized pace of just 1.3 percent in the second quarter, down from the previous estimate of 1.7 percent and well below the target growth rate of 2.5 percent.
But while job growth has been anemic and broader U.S. economy sluggish at best, the housing market certainly is not. For the first time in years, the housing sector is a significant positive contributor to the nation’s GDP growth. A new report out today shows we’re in the midst of a “durable housing recovery,” one that is spreading across more and more states and regions of the country all the time.
CoreLogic, one of the nation’s leading real estate information companies, said in its report that the 2012 housing recovery is expected to be more durable than in prior years because of an improved balance between supply and demand. Among the findings in the latest analysis:
- The most recent CoreLogic Home Price Index showed a 4.6 percent year-over-year increase and, more importantly, prices increased in all but six states;
- According to CoreLogic estimates, new home sales are up 24 percent over a year ago and existing home sales are up 11 percent over a year ago.
- Given the solid performance of home prices in the spring of 2012, even a stronger-than-projected decline in the fourth quarter of this year is unlikely to diminish the gains made.
- Demand is fundamentally being driven by institutional investor interest in single-family residential properties as an asset class, pent up demand returning to the market, and increasing consumer confidence in housing.
CoreLogic economists say the housing recovery is much sustainable now than in past years because of an improved balance between supply and demand. The current supply nationally is 6.4 months, and analysts say it’s much tighter in many large markets.
We know that all too well here in the Bay Area where many of our markets are being constrained by extremely limited inventory of homes for sale. In some of the hottest markets, such as the Peninsula and Silicon Valley, it’s not unusual to see the days-on-market average dipping below a month or two and multiple offers on many homes for sale.
While record low mortgage interest rates are helping fuel demand, CoreLogic noted that many borrowers have been unable to take advantage of these attractive rates.
“Supply is being constrained in large part by negative equity, a unique feature of this housing recovery compared to past regional housing recoveries,” said CoreLogic Chief Economist Mark Fleming.
Fleming estimates that 45 percent of all mortgaged homeowners are what he terms “under-equitied,” meaning they have insufficient levels of equity in their current home to provide a down payment on a new home. That’s because they’re either underwater on their current mortgage or don’t have the 20 percent needed for a traditional down payment.
So while the CoreLogic report is very encouraging overall, it’s clear that we still have some hurdles to overcome as we move back towards a more normal housing market in this country. Here’s a link to the report: http://www.corelogic.com/downloadable-docs/MarketPulse_2012-October.pdf
I can’t recall going into a fourth quarter and sharing a market report this strong in many years. With the limiting factors of tighter lending restrictions and certainly a tight inventory, I believe we are able to sustain a healthy Bay Area real estate market through the close of the year. There’s always a Wild Card, however. Whether it’s close at home such as election results, or across the Atlantic with deep concerns over European debt, if I were a potential home seller, I wouldn’t wait for the unknown. We know what it is today, and it’s a high demand, limited inventory market.
Below is a market-by-market report from our local offices:
- North Bay – Our Central Marin manager reports the luxury market is moving, but at reduced prices. Investors are looking for bargains and their next projects. We just had four offers on a $2 million property (land value mostly) in Mill Valley. A bit of a slowdown in the market overall last week, but activity holding steady this week with more multiple offers and properties in contract in all price ranges. Our Sebastopol manager says buyers are out there begging to be shown a property but nothing new is coming to market. He had Previews clients lined up with nothing to show. Cash remains king, easily accounting for 35% of all offers.
- San Francisco – From our Lakeside office manager, the local market is good; buyers are steadily pursuing properties but with some reserve. There are multiple offers but in fewer numbers per offering. The momentary increase in listings seems to be dissipating. Our Lombard manager says there is slightly less frenzy than two months ago. The inventory has neither surged nor dropped significantly since Labor Day. Most well priced properties are selling within a week. Loan conditions are time-consuming, but no appraisal issues of late. After a slow September, things are once again picking up in San Francisco’s Market Street office . The majority of deals during the past two weeks were the result of pre-emptive offers or ones that were sold prior to hitting MLS. Those sellers that waited for offer dates were rewarded with multiple offers. The multi-family market is just as tight as the rest of the market, our Sunset manager reports. A six-unit building in the Richmond District received 16 offers, with six of them “all cash” and all the offers were over asking price. The listed price was 12.8 GRM and it end up selling for over 16 GRM, or more than 25% over asking.
- SF Peninsula — So many multiple offers, our Burlingame manager says. Buyers are coming through open homes well-conditioned to ask for disclosures and offer date. Two recent Burlingame listings sold for $200k over asking in multiple bidding. There have been fewer listings coming on the market the last few weeks. There were several Hillsborough sales in the $4-5 million range, which indicates that buyers are taking advantage of those amazing low interest rates, which are translating into more buying power. However, our Burlingame North manager says if a listing doesn’t sell quickly (i.e., first week) it tends to stay on the market. This quarter so far is quieter than our Menlo Park manager expected. She suspects that the flatness of the recent IPO market has calmed some of the buying frenzy. Open houses are still quite busy, but now only the best locations and best houses are still attracting the greatest interest. Still, houses are moving, albeit, slower. Rates continue to be compellingly attractive and buyers are certainly aware of this. All are exercising caution however. In Palo Alto, agents are seeing an unusually heated market that hasn’t slowed down. There still are multiple offer situations on well-priced properties – all cash – 20% over listing price. Several of our Redwood City-San Carlos buyers have waited too long and have now priced themselves out of the current market, the local manager says. There seems to be more buyers wanting to negotiate after they are in contract, which is irritating sellers. We seem to be seeing a small spike in inventory in selective towns, according to our San Mateo manager. There’s been a slowdown in the Woodside market, even the higher end.
- East Bay – Last weekend was quiet open houses, due no doubt to all the activities in the Bay Area. Agents staying late into the evenings writing offers and we eagerly await each “coming soon” listing. We echo the same song heard throughout the market area, not enough homes for the number of buyers. It’s been noticed by our Oakland-Piedmont agents that the number of multiple offers has dropped as many buyers are holding back not wanting to be in competition any longer. They are still actively looking but are not as eager to jump in to the fray. The number of offers received proportionate to the number of disclosure packets out have dropped. Open houses are still very well attended and homes are selling but not quite as quickly as a month ago. Inventory has leveled off in the Lamorinda area even as sales increase, our Orinda manager says. Buyers are not letting multiple offer situations discourage them and agents continue to write offers. Open homes are seeing heavy traffic. There still is a low inventory in the Walnut Creek area. Appraisals are all over the place, some high, some low. Still seeing lots of cash buyers, as well as an increase in sales and listings in the high-end market.
- Silicon Valley – Nothing has changed, according to our Cupertino manager. Everyone except sellers are complaining about a lack of inventory. In Los Gatos, the lack of inventory continues to be a challenge while the high-end market is improving. Our San Jose Almaden manager says there is no sign of inventory increasing. Prices have increased about 15% over last year. One example: A recent Blossom Valley listing that would not have sold last year for $600K listed for $649K and sold with multiple offers above $700K. What a difference a year makes! Our San Jose Main manager reports an extremely low inventory in all price ranges. Meanwhile in Willow Glen, It appears that the multiple offers are leveling off a bit and the amount of bidding on most homes now is also leveling off. Most multiple offers are now coming in close to asking and slightly over. The sales activity seems to be continuing at a fast pace in the Saratoga area. Listings are low since they are selling so quickly. Listings sold are 20% higher than last year.
- South County – The lack of inventory seems to be impacting every aspect of the housing market, our Morgan Hill manager says. Low inventory translates into fewer open homes and thus less interaction with potential buyers. The low inventory is obviously impacting the number of sales that are being reported and agents who are working with buyers are very frustrated. Perhaps the biggest bright spot in the present market is that sellers are receiving multiple offers and are often selling their properties for over asking price. Multiple offers are certainly the norm in South County—in all price ranges. A Morgan Hill “fixer” was listed for $279,000 and received seven offers and sold for substantially over asking price. Another Morgan Hill agent wrote an offer for a buyer on a San Jose condo that was listed for $250,000. There were 40 offers!
- Santa Cruz County – 2012 has been a much better year in real estate overall for Santa Cruz County. There are challenges like other markets in the Bay area, lack of inventory being the biggest. Our SFR inventory is just above 800 homes leaving us with a 2.4 mo supply currently. The median price is currently at $540K, up 10% year over year, a very encouraging sign. Every real estate market is different and this one is no exception. The low inventory and the number of buyers ready, willing and able to buy has created a multiple offer market. Buyers are feeling the pressure going into escrow and later changing their mind is causing about 25% of our contracts to cancel. The number of distressed properties has decreased from a high here of about 44% of the total market down to about 25% of the sales. There remain lots of sellers upside down, still making their payments, but unable to move forward. The Previews market has greatly improved year over year. Our prices are still way off the mark from the downturn however. Buyers in the $1.5 price range and up are active, especially beach property buyers. Approximately 30% of these buyers are using cash for their purchase. There seems to be a much higher level of confidence in the upper end of the market and those that are getting a loan are finding rates so low and the prices so appealing that these homes are selling for once in our lifetime prices and terms.
- Monterey Peninsula – Sales on the Monterey Peninsula keep going at a steady pace, our local manager reports, with over three dozen new escrows bi-weekly for many months now. And increasingly these are “regular” sales and not REOs or Short Sales. News in the media of home prices increasing over most of the country coupled with the low mortgage rates, have made buyers more focused on – and less nervous about – buying these days. They’re also more willing to accept minor imperfections in a property than any time in the last 4-5 years.
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
Consumer confidence has long been a leading economic indicator for the housing market. The more we feel good about the direction of the economy, the stock market, home values, and improvements in the job market, the more likely we are to take the leap and buy a home. So it was encouraging to see Friday’s announcement that a key consumer sentiment index moved to a four-month high in September.
The Thomson Reuters/University of Michigan sentiment index rose to 78.3 this month from 74.3 in August, the highest level since May and one more sign that our slow but steady economic recovery remains on track.
Consumer confidence gains can be attributed to a number of factors, according to a report in Bloomberg news: Rising property values, higher stock prices and a stabilization in the cost of gasoline could all be combining to lift our view of the economy. (by the way, I’m late in getting this report out, and when I started a little over a week ago gas prices seemed to be stabilizing. Take nothing for granted – all week long we’ve been reading about new highs in prices at the pump!)
The stock market’s three-year rally has brought key indices to near their pre-recession high, making it a lot easier for all of us to open our monthly 401k statements. And certainly home prices – along with home sales – have begun to climb higher in most parts of the country, especially here in the Bay Area.
“The wealth effect created by rising home prices can lift consumer spending on other big ticket items,” Steven Ricchiuto, chief economist at Mizuho Securities USA Inc., said in a research note on Sept. 25, according to the Bloomberg report. “Households believe that the economy is getting better and will continue to do so.”
Of course, we’re not out of the woods yet, economically speaking.
The economy is growing at a very slow pace, unemployment remains above 8 percent, and stagnant incomes are undoubtedly holding back household spending, which accounts for about 70 percent of the economy. We continue to battle economic headwinds here and abroad, as well as the prospect of the “fiscal cliff” of sharp budget cuts and higher taxes if Congress can’t work out a compromise by year-end.
Nonetheless, steady gains in the housing and financial markets offer reason for hope that our recovery will continue to move ahead – and that the rally we’ve seen in the housing market will continue into the fall home selling season.
As you’ll see below in our branch office reports below, the Bay Area is still suffering from a lack of good homes to sell. Depleted inventory coupled with high demand. Multiple offers are still likely the norm when a new listing comes to market, provided it shows well and is competitively priced. A few areas are hinting at a leveling off, and a few cities report the higher end seems just a bit more sluggish.
- North Bay – Inventory in Marin continues to drop, as sales rise. There hasn’t been a flood of homes come on post-Labor Day as agents had hoped, but homes are trickling on the market and being received with multiple offers. Our Central and Southern Marin manager believes that sellers planning to put their home on the market from now through the end of the year may have a fairly easy time selling as long as the home looks good and is priced well. The luxury market continues to sell, though at reduced prices. The Northern Marin market is definitely picking up in terms of listings. Our local brokers’ tour is averaging between 15 + new showings each week, compared to three or four in the past. Inventory is still not high enough for demand, particularly in the lower price ranges, where multiple offers are still the norm and a number of sales are all-cash. The active listings have been on the market for an average of 53 days, half the norm. Prices for sold properties have risen from $256/sf to $280/sf a year ago, and the percentage of Sold/Asking prices has gone from 98.8% last year to 100.6% this year, so our market is definitely looking healthier. Our Petaluma office reports multiple offers in all price ranges – 21 offers on s Rohnert Park home listed at $275,000, 20 offers on a Petaluma home with a $305,000 list price, 15 offers on a Petaluma home listing at $500,000. Santa Rosa agents are becoming adept navigators in the marketplace. With Short Sales being a little squirrely, appraisal challenges, keeping buyers upbeat about their prospects of winning in multiple bid situations, assisting sellers with finding interim housing options if they are selling their home in order to buy up and a host of other assorted challenges, they go into the fray every day. All of these challenges will continue into the foreseeable future as our lack of inventory rules the market. Many of the higher-end properties that have been on the market before and did not sell are receiving attention.
- San Francisco – The local market has changed, according to our Lakeside manager. There are fewer offers, fewer multiple offers, and more listings. It appears to be the sign of a market that is becoming more stable. Fewer disheartened buyers because they are holding back on offers. Why? Some say it is due to the uncertainty of the election season. But there is no clear theme. And we are seeing more sellers intransigent in their price expectations so they are staying on the market longer. A good sign of a more stable market is that we are seeing a few more opportunities for buyers to actually negotiate with sellers because of the decreased competition. This assessment is echoed by our Market Street office manager, who says a gradual slowdown is causing SF inventory levels to tick up slightly over the past couple of weeks. Even so, the majority of sales still are multiple offers. Our Sunset office manager reports that September listing inventory grew slightly, but not enough to satisfied buyer demand. Investment properties are also extremely active with many buyers chasing after very few listings.
- SF Peninsula — One Burlingame listing at $1 million had 17 offers selling significantly over asking. Agents are looking for new and exciting inventory for a growing group of pent-up buyers who have been making offers in competitive situations. Hillsborough currently has 55 active and 18 pending listings. The pace has picked up since August. Inventory is increasing in the Previews market. The lower end of the market is moving well while the upper end is still sluggish. Some younger buyers are disenchanted with huge estate type homes and are drawn to close in locations and renovated homes, according to our local manager. Across the hills in Half Moon Bay, there has been good activity on the coast. Listings under $600k move within a week of being on the market, and agents are seeing many Peninsula buyers looking at ocean view home for their second home. Menlo Park continues to be hot. Six houses on tour last week in central MP – all sold, most with multiple offers. Menlo Park is pretty much a million-dollar town; most houses west of highway 101 are a minimum $1 million and houses west of El Camino are $2 million, even the dirt itself. Loans continue to be a nightmare – lenders keep coming back to the clients wanting more and more detail, verification of every little deposit, duplicates of many documents and even back balances taken off the internet to be a certain format. It creates an enormous amount of stress for buyers and sellers. The Palo Alto market is consistent with the rest of this year – a large number of multiple offers and properties selling 20% over list price. Some properties are valued at $1,400 to $1,500 per square foot. Only two new listings in San Carlos on tour Tuesday and sellers are still getting multiple offers on the mid priced homes. One of our listings in San Mateo priced at $650,000 received 10 offers. Our San Jose manager says the local market suddenly picked up speed again with good volume and open house turnout. Been quiet the last month, according to our Portola Valley-Woodside manager. There remains a dearth of high-end listings both on and off the MLS.
- East Bay – With 56 single-family homes on the market in Berkeley through August, inventory is down 46.7% from last year to a one-month inventory level. It’s definitely a sellers’ market, with increasing inventory, but not enough to assuage the many buyers. Agents spend a lot of time writing up to five good offers for a client, with buyers needing to offer way over asking or drop out at most price points. There’s an increase in the number of million-plus listings coming on the market and higher end properties, listed below a million, are now often closing over a million. Agents reported that there was much more traffic at open houses in the Oakland-Piedmont area than the past week and it was not just people looking around but those determined to buy. This included homes that have been on the market for quite a bit longer than usual. We have had multiple offers on all our entry-level transactions and the properties above $1m as well. In the Lamorinda area, homes that are priced right continue to go into contract very quickly. Multiple offers continue with competition ultimately driving up the sales price. Buyers seem driven by low interest rates and low inventory. Things appear to have slowed down in the Walnut Creek area general market. Sales are slightly decreasing, but inventory is still very low. There are still a lot of buyers but few homes available.
- Silicon Valley – In Cupertino, practically everything is a multiple offer sale and buyers’ agents are stressed. Open house activity is brisk and complaints about a lack of inventory are pervasive. Our Los Gatos manager says agents are still battling multiple offers everywhere. Low inventory continues to be a hot topic in Los Gatos, as well as San Jose. Our Almaden manager noted San Jose only has a one-month supply of homes on the market and Santa Clara County in general has a 1.4 month supply – the lowest numbers ever as we head into the holidays. Prices are up nearly 15% over last year at this time in the local market. The Willow Glen area continues to be challenging for buyers under the $500K range, where it’s extremely competitive. We see no slow down for buyer demand as we move closer to the Presidential election and the fall holidays.
- South County – Gilroy is having an extreme shortage of properties – only 60 on the market. For the past two weeks there have been no homes for Gilroy on the broker tour because they are all selling too fast. There are multiple offers on every property on the market. Low inventory is stifling this market. Short sales and REO’s are a much smaller percentage of the active inventory. It is as if we are cycling through our distressed inventory in 2012, and it will be interesting to see what 2013 brings. In Morgan Hill, a million dollar property is considered very “high-end”. This week the Morgan Hill office sold two such properties—both for cash. Agents report that well qualified buyers (including those with cash) are actively looking for elusive listings to buy. The inventory in Morgan Hill remains low, with only 99 active listings—ranging in price from $200,000 to over $3 million. Multiple offers are the norm—a recent South County listing (home on acreage) received 14 offers and ultimately sold for $100,000 over asking price.
- Santa Cruz County – Overall, the market appears much improved. Some statistics supporting this are less sales of distressed properties, down from mid 40% to 28% of the market, prices are up – median is now at $545k up from $490 a year ago, the number of sales are up, and the 3.9 mo supply of inventory is not enough to support the buyer demand currently. What we are seeing is multiple offers on the $500k – $600k price range, buyers jumping in, getting in escrow impulsively, and backing out. Currently there are approximately 822 homes on the market compared to 1028 a year ago. An agent in our Capitola office closed a $5.5 million home this month – a cash sale not on MLS, no sign, and listed just under $7 million. Sales in this high, high end of the market, while not the norm, are occurring. Agents have had a very busy summer with sales of luxury properties, which has influenced the prices going up overall.
- Monterey Peninsula – Sales activity has settled down just a bit on the Peninsula, not quite the frenzy of the summer months but still a good pace of sales in all price ranges. Of course the lower price ranges are still a seller’s market, with multiple offers coming in fueled by these extraordinarily low mortgage rates of late. But even the highest price ranges are moving, with those properties generally selling for higher prices than last year. At this time last year 11 homes had sold over $4 million, ranging from $4,000,000 – $8,600,000; while to date in 2012, 17 homes have sold, ranging from $4,100,000 to $10,500,000.
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
So much for a summer slowdown in the housing market! Bay Area home prices surged to a four-year high in July and the region turned in its 13th consecutive month of year-over year sales increases, according to a new report out this week from DataQuick, the La Jolla-based real estate information services company.
The median sale price for all new and existing homes in the nine-county Bay Area jumped 12.6 percent to $421,000 from $374,000 a year ago and the highest price since August 2008. Sales gains were even more dramatic with 8,461 properties changing hands, nearly 23 percent more than a year ago.
If there was any doubt left that our housing market is on the rise I think this spring and summer’s performance should put that to an end. The median price increase can be attributed to fewer distressed home sales and more “normal” market activity. Additionally, the shortage of inventory for sale is resulting in buyers bidding up prices on the relative few homes out there.
As I said in an interview with the San Jose Mercury, this is a very good problem to have – for now, at least. It’s a sign of an extremely hot market, something we sorely needed after several years of a downturn in real estate.
But, the shortage of inventory is not a good long-term problem to have because eventually we need homes to sell. Without more inventory, it’s impossible to get the housing market back to normal, healthy levels. Usually by this time of year inventory has reached its peak. But this year, we’re 50 percent below normal in many markets. Story: http://tinyurl.com/Bay-Area-Housing-Market
My hope is that word will continue to get out to potential sellers who have been sitting on the sidelines that now’s a great time to list their properties. Buyers are lining up for good, fairly priced homes. I never thought I’d be writing this a couple of years ago, but this truly has become a raging “sellers market.” How times have changed in a couple of short years!
While the housing market nationwide continues to gain momentum, we saw other encouraging economic signs this week in the latest round of economic reports. The most prominent was the July index of leading economic indicators, which moved higher for the fourth time in the past six months. Industry production, building permits and retail sales also showed strong gains.
The stock market has taken notice lately with the S&P 500 approaching its four-year high on Friday. Interesting to note that both Bay Area housing prices and the stock market are at four-year highs. Talk about a strong correlation between stocks and real estate!
To be sure, there’s still plenty of reason for caution given the economic headwinds here at home and internationally, especially in the Eurozone. As noted below by our Menlo Park manager, there is a positive note for us here in the Bay Area regarding the shaky overseas economies: Bay Area real estate has become a “safe haven” investment destination for some of the European and Asian wealthy who wish to put their money elsewhere. All in all -it’s gratifying to see many economic indicators moving in the right direction again. And that can only bode well for continued improvement in the housing market.
Below is a market-by-market report from our local offices:
- North Bay – The Northern Marin market remains basically unchanged from the last report. We are seeing some small inching up of prices, but the lack of inventory and buyer demand is not translating into the usual upward pressure on prices. Buyers remain enthusiastic but practical. In Sebastopol, agents are still seeing huge demand in the entry level with one new Sebastopol listing attracting 67 people to the open house. The Previews high-end market activity is better than it has been in a very long time, however the prices are not improving with the increased activity.
- San Francisco – Our Lakeside office manager asks: Why are some properties not getting multiple offers in this climate of high buyer activity? 1) Some listing agents are not getting their properties exposed properly through the MLS, 2) Some sellers are choosing to sell without extensive exposure to the market and, even in this environment, 3) some properties are coming on the market over priced. The moral is to choose your listing agent carefully and work with them to make sure the property is well prepared, well presented and broadly exposed. Multiple offers and cash deals remain prevalent, according to our Lombard office manager. A few appraisal issues are appearing. Open house traffic remains high and most agents are more active than a typical August. Beside the single family and condo market, the investment market is definitely on fire as well, our Sunset office manager notes. One listing, a six-unit apartment building listed for $1.5 million, had 30 offers. Our office had submitted five offers and the highest one submitted was over $1.9 million with approximately 70% down but did NOT get it, not even an invitation to be a backup.
- SF Peninsula — The buyers are waiting and desperate for that pent up inventory to come on the market, reports our Burlingame manager. While families are taking their last vacations before the start of the school year, many buyers are in their 5th offer or more. Everyone is seeking that elusive “off market” listing with many sellers preferring to try this route before going into the MLS fearing the sigma of too many “days on the market.” Every price point from entry level to $3 million is experiencing this. Listing activity in the high-end Previews segment of the market is in a seasonal slowdown. Sales through the month of July and early August have been strong, although $5 million is proving to be the high-end number for this year to date. Hillsborough with large lots, great schools and easy access to S.F. is a terrific bargain right now. The Half Moon Bay area is experiencing a slow down this August, which is typically for this time of year. Agents are looking forward to an uptick after Labor Day. The Menlo Park market is a bit slower but still robust for August. The area’s international buyers have arrived. Chinese, Russian, French – open houses are much more cosmopolitan in Menlo Park, Atherton and somewhat in Woodside. The US is still ground zero for ‘safe’ investing when other countries get nervous. Palo Alto area inventory rises and falls on a week-to-week basis. There were only four homes on the broker tour in Palo Alto last week. There still is a lot of activity at the open houses, according to our Redwood City manager. Lots of multiple offers but the number of offers is declining – usually two or three instead of six to 10. The multiple offers are in all price ranges. Our San Mateo manager says there’s market movement in all areas but the amount of multiple offers per house has dropped off. Low inventory continues to plague sales. Active inventory for our six primary market communities was down 45% from the same period last year. July ratified sales increased 22% and July closed transactions increased 26% over last July. The percentage of short sales and REO’s has decreased dramatically. There still is quite an inventory of high-end homes available in Woodside both on and off the MLS. Sellers will absolutely sell “at the right price,” our local manager says. Woodside sellers are still suffering from “My house is worth this amount” – when there is no evidence of such a price. Portola Valley is still the best-kept secret in the hills. You can get a nice house on an acre for the same price that you pay for the same house in Menlo Park on a 10,000 ft lot.
- East Bay – Berkeley area prices are back to 2006 levels as are the number of properties being sold, according to our local manager there. The average days on market is 26, down 33% from summer 2011 and months supply of inventory is below 1%. That is a 68% drop in inventory from last summer. Average sales price is up 19% with properties closing at least 7+% over asking. Million dollar plus properties are moving quickly, with an average 19 days on the market, down 44% from last summer. They are also going at least 7% over asking and inventory supply is down 80% from last summer, with .09 months supply. While the inventory keeps declining, our Oakland-Piedmont manager says agents have been hearing from stagers and other real estate service providers that they are very busy with listings coming up in September. It will be interesting to see what that translates to inventory-wise. Will there be an influx of listings after Labor Day? We’ve been expecting the influx to come after each holiday all year to no avail. Open house activity has been brisk with many new buyers turning out on Sunday. Our Orinda manager says there is still a shortage of inventory on well-priced homes. Those homes that are well priced move quickly. Buyer activity remains high and open homes are heavily attended. Our Pleasanton-Livermore office reports that inventory remains low and he’s still seeing multiple offers on right priced homes. Seeing less activity due to time of the year. Finally, our Walnut Creek office says she’s seeing multiple offers on most every property. Agents are still having some lending challenges. Short sales in some corners of the market are increasing. Inventory is still very low.
- Silicon Valley – Our Cupertino manager says it seems a bit quieter right now, but the best properties are still receiving a tremendous amount of attention. Sunnyvale is particularly active. An attractive 3 BR (1600 sq. ft.), listed in the high $800’s got ten offers and was bid up more than $100K. The San Jose Main office reports active open houses this past weekend with anywhere from five groups to 23 groups on various properties. Low inventory and low interest rates continue to fuel the market. The Willow Glen manager says agents continue to see multiple offers with limited inventory. It’s a very competitive environment and sales prices are going over the asking price in the market. Saratoga sales have slowed to keep pace with budgeted expectations. It appears the market is on track for sales to match last year’s pace. This activity level follows two months of higher than expected sales activity.
- South County – Competition among Morgan Hill agents to obtain listings is fierce and aggressive, our local manager says. With so little current inventory sellers are not only striking excellent deals by receiving over list price offers from potential buyers, but are also using this leverage with listing agents as well, asking for and receiving deep discounts. As home prices increase (with high demand and low supply) the market seems to be responding in two ways: agents are seeing an increase in the number of “move-up” buyers (those attempting to sell a smaller home in order to purchase a larger property) AND with sellers now listing homes that were previously “under water” in lieu of having to experience a short sale.
- Santa Cruz County – The Santa Cruz area market seems to have slowed as it usually does in August due to last minute vacations, back to school, end of summer activities. Year over year, inventory is down 16% from last year at this time while closed sales in the county are up 13%. Our manager continues to see a lot of short sales and some REO’s are trickling in to a couple of agents. Santa Cruz is a non-traditional area for real estate as the coastline and casual lifestyle attracts second homebuyers and investors who are out there actively trying to purchase homes.
- Monterey Peninsula – For what is still sometimes referred to in the media as a buyer’s market, this market certainly isn’t favoring the buyer any longer, our local manager reports. Just six-eight months ago buyers thought they were in control, could make low offers, ask for property to be in tip-top condition, etc. Of course, even then, they couldn’t really but they didn’t know it, as there was some competition. But now, agents say, the buyers are not in the dark any longer and do understand that properties, except in the high price ranges, are getting multiple offers, and they have to come in over asking price with clean contract, asking for little to be done if they want to secure the property. And even then someone might beat them out with a higher price. So the strong beat of activity continues on here on Monterey Peninsula and as long as we continue to have sufficient inventory and low mortgage rates, we don’t see the end in sight.
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
Summertime not slowing down Bay Area housing market
Summer is typically the time of year that our housing market slows down as buyers, sellers and agents all take time to enjoy the great weather and go on holiday before school resumes. But for the most part, we are still seeing a vibrant market around the Bay as the calendar turns to August and the final month of summer.
From the entry-level market to the Previews luxury end, sales remain very strong for this time of year. Lack of inventory remains the number one challenge for many parts of the Bay, especially San Francisco, the Peninsula and Silicon Valley, although we are seeing listings gradually creep up in parts of the South Bay and East Bay.
A couple of highlights from our most recent office reports tell the story of a resilient housing market around the Bay:
- The Previews market in Marin is strong with several multi-million sales in contract in Ross and Kentfield. Our local manager reported that just this week we closed an $8.35 million sale in Kentfield, representing the buyer with all cash.
- Our Sebastopol manager says he’s seeing as many as 20-30 offers on a single home as a result of the incredibly low inventory of homes for sale.
- In San Francisco, virtually every sale brings in multiple offers, according to our Lakeside office. A new listing near the $4 million mark sold in three days, over asking price, all cash, and closed in five days, our Lombard office reports.
- The shortage of homes is particularly acute on the Peninsula, leading some agents to wonder what will happen when the hundreds of newly minted Facebook millionaires (and a few billionaires) begin searching for homes once they’re allowed to cash in their shares.
- Even in South Santa Clara County, which had its share of distressed listings a year or so ago, it’s hard for buyers to find a home to purchase. Gilroy is down to one month of supply – only 55 homes in an active status. Of those only 16% are distressed – short sales or REO’s. Oh how things have changed!
While the entry level – and mid-level – markets are experiencing the greatest shortage of inventory, the upper end is also seeing a striking imbalance between supply and demand as a result of very strong sales of luxury properties.
Our latest Coldwell Banker Residential Brokerage luxury reports show the high-end Previews market continuing to heat up all around the Bay. Luxury home sales in Silicon Valley over $1.5 million soared 27% in June. The upper end of the Luxury market – homes over $3 million – nearly doubled from last year. In San Francisco, there were 90 sales over $2 million in the latest quarter compared to 55 homes sold the previous quarter. And East Bay luxury sales were up 19%.
No one knows what the future will hold. We certainly have our economic challenges, both in the U.S. and overseas. The latest jobs number did offer some encouragement with hiring up much more sharply than expected. But I suspect we’ll continue to face economic headwinds for a while, which of course will impact the housing market.
But having said all that, we are seeing a very strong, resilient market – especially for the lazy, hazy, crazy days of summer!
Below is a market-by-market report from our local offices:
- North Bay – Prices have come down, but there still seems to be a lot of interest out there for luxury properties. The good ones go fast. Inventory levels on available single-family homes in Sonoma County are down approximately 5% from June 1st levels, our Santa Rosa manager says. As a general rule REO inventories are much lower than any time in the recent past while short sale inventory has increased as an overall percentage of available inventory (although short sale properties are quickly being snatched up). We still see a lot of cash buyers in the marketplace and the market for properties under $400k is hot. As a result we are seeing Open Houses being heavily attended even though a property may have been held open 3 or 4 times in the past. There is not a lot for buyers to look at. Appraisals are proving to be a continuing challenge due to over-bidding on properties because of the lack of supply. A property is basically overpriced if there is not an offer within the first 5 days for those properties under $600K. Many properties listed for sale are stating that offers will be reviewed within a week of hitting the MLS. This leaves about 3 days for showing the property and then about a day to write it up. The lack of inventory is forcing people to make decisions more quickly. Our Sebastopol manager says a distinct lack of inventory is creating multiple offers in all price ranges. Cash remains king when more than one offer is received. We are seeing as many as 20-30 offers for some properties. Equity sellers remain hesitant to bring their homes to market.
- San Francisco – Our Lakeside office manager says it defies logic: New listings are down, new sales are up. What doesn’t defy logic is that virtually every sale is in multiple offers. In this market where houses are very hard to secure, Agents say cash is highly valued but also highly appreciated (and effective) are good buyers’ agents who help them to understand the process correctly and to tailor their offers to the tastes of the sellers. The Lombard office reports more solo deals this week, but popular properties are still garnering multiple offers. Inventory continues to shrink. A new listing at $3.95m sold in 3 days, over asking, all cash, closed in 5 days. Our Market Street manager says they are still in the usual summer doldrums, though the buyers are out there and eager to pounce. While a smaller number of ratified deals had multiple offers, an increasing number were wrapped up preemptively or even pre-MLS. Listing inventory continue to go down but open houses continue to be very active, our Sunset office manager says. More than half of the ratified offers were in multiple offer situations. Be aware: He’s seeing a lot of buyers making multiple offers on several properties at the same time in hopes of getting one.
- SF Peninsula — Our Burlingame North office manager reports the Previews high-end market activity is continuous slowing during these summer months. Across the hills our Half Moon Bay office manager says Pacifica seems to be the hot spot on the coast – low inventory with multiple offers on homes, especially in the $500-600k range. The Menlo Park area market is still good for summer – very good open houses, but fewer sales. Buyers are still looking and there are more buyers looking now than there are sellers coming to market – based on an informal survey. We have no doubt that when Facebook people actually get liquid (mid November) we will see a bump in the market from that money. Many will sell their stock right away to avoid the increase in cap gain tax in Jan of 2013. They may not buy right away but they will soon, our local manager suspects. After a strong week of sales, inventory has now depleted, according to our Palo Alto manager. The roller coaster of inventory is still experiencing ups & downs, however demand to get on that roller coaster is still very strong. Lack of inventory is still causing frustration for many of buyers, our Redwood City manager says. One of our properties, a 3/2 ranch-style home, received four offers and actually sold for $100,000+ over asking. Open houses are attended by 50+ people every weekend. Some of the buyers are getting very discouraged but they are hanging in there. It’s difficult for agents to find open houses. Our San Mateo manager reports that the “hysterical” atmosphere of the market is generally quieting down. Price is now becoming a consideration by buyers, however open houses are still well attended. Buyers’ new mantra, “I want a home but not at any price.” Sales are still good in Woodside and its environs. Very few multiple offers in the area but fairly steady.
- East Bay – The Berkeley market feels very active with lots of agent interest in any new listing and lots of visitors to open houses, offers and sales. Still experiencing multiple offer competition, a notice to buyers to make their best offer first. Not experiencing the typical summer slowdown and some listings are trickling onto the market, not waiting for after Labor Day. The Previews high-end market is much more active than previously. Properties that were being held priced under a million are now comfortably going on the market for over a million. The million “something” price is not deterring showings, offers and sales, as last year, or even a few months ago. Our Oakland-Piedmont manager says listings have slowed from the lower-than-normal pace we were on before. Most agents believe it is for the month of August and that it will pick up in September, although we expected listings to surge several times this year after key holidays or vacation times, and the surge never materialized. Plenty of activity at open homes and buyers are still writing offers time and time again to get into a home. In Pleasanton, multiple offers are still happening mostly on homes priced in the $400K to $600K range. We are seeing some slowing due to school starting. Prices among entry-level homes are increasing, according to our Walnut Creek office. Buyers are still competing with multiple offers. Inventory remains low. Sales are still steady with an increase in new home sales being the alternate option for new buyers not finding resale homes available.
- Silicon Valley – Sales activity is steady, according to our Cupertino manager, with lots of multiple offers, but not as many per house as we would have had a month ago. The activity is still impressive for this time of year. The seller’s market has now expanded into the Los Gatos Mountains. Sellers are starting to receive multiple offers from buyers who are competing for the mountains. Our San Jose Almaden manager says the Preview high-end market is picking up.
- South County – A shortage of inventory is now an understatement, our Gilroy manager says. Gilroy is down to one month of supply – only 55 homes in an active status. Of those only 16% are distressed – short sales or REO’s. San Benito County is tracking similarly. There are only 10 REO’s in ALL of San Benito County. We have buyers who have put in offer after offer – many homes receiving multiple offers in the teens and twenties. We have seen a tremendous improvement in short sale approval time periods with some banks able to turn around an approval in a matter of a month. This has enabled us to push through the backlog of pending properties that were short sales. Appraisals are still a huge issue while the market catches up and the proliferation of all cash buyers makes it hard to be a buyer in South County and San Benito County. The current Morgan Hill market can best be summarized as “Happy Sellers and Frustrated Buyers.” The lack of inventory coupled with the large number of ready and willing buyers certainly has resulted in a Seller’s market. Listing agents are garnering multiple offers and buyers are finding that they must offer substantially over asking price to have their purchase contracts considered. In fact the average sales price in the Morgan Hill Office has gone from about $464,000 in January to over $544,000 in June. In addition, many buyers are removing appraisal contingencies in order to obtain a property. The good news is that as final sale prices continue to increase, many sellers who were previously “underwater” can now list and sell their homes without the restrictions of a short sale.
- Santa Cruz County – The local market is steady although August may not shape up to be the very best month. Usually a time for vacations and back to school – we have usually experienced a bit of a lull in years past. So far sales continue to come in. It’s the same story as most other markets, very limited inventory, down 15% over the same time last year. Buyers are scrambling to find a property that fits their needs and a lot of transactions are cancelling so being in a back-up position these days is not such a bad thing. The biggest challenge we are facing is a lack of homes for the demand of Buyers. The good news is some homes are selling this year in the over $2 million range. There are Buyers out shopping for that once in a lifetime beach home that they have always wanted. A home that sold for $3.8 million a couple of years back, just sold again (same CB agent) and he represented both Buyer and Seller without going on MLS. This is an anomaly as prices have gone down not up especially in the higher end properties. The sale price was $4.25 million. It was a relatively easy transaction for the Agents, and the Seller is now trying to purchase a property listed at $6.75 million. Our offices have closed several over-$1 million properties this year and we have more in the pipeline. A far different story than 2011!
The Bay Area’s housing market certainly has come a long way since the recession, with sales recovering in every price segment from entry-level distressed properties through multi-million-dollar Previews estates. And although prices took a hit from 2008 through 2010, valuations have also turned the corner and have been heading higher once again as well.
While the market improvement is to be celebrated, I’m constantly reminded of just how fragile this recovery is – and why we shouldn’t take it for granted. Don’t get me wrong: I’m the last guy to see the cup as half empty. But we continue to face serious economic headwinds that could slow down or even reverse the encouraging gains we’ve seen in the market over the past year or so.
I was interviewed by the San Jose Mercury on Wednesday and told reporter Pete Carey that improvement in the Bay Area housing market could quickly turn in the other direction if consumer sentiment grows worse over Euro-zone fears and economic troubles right here at home.
It’s no secret that the economic recovery has slowed way down in most of Europe, and some weaker economies may already be in recession. A stalling European recovery dragged down by nations like Greece, Spain and Italy could significantly reduce demand for our products in the U.S.
Here at home, economic growth – while slightly better than much of Europe – has also become far too slow. The job recovery remains tepid at best. And as anyone with a 401K knows all too well, the stock market continues to be volatile as the financial markets weigh the economic future here at home and abroad.
Those are just some of the reasons why Fed Chairman Ben Bernanke this week announced plans to continue the government’s accommodative monetary policy designed to keep long-term interest rates low. In his speech, Bernanke noted “significant downside risks” to the economy, and said the Fed was prepared to step in to do more if things got worse.
All of this isn’t helping consumer sentiment in the U.S., as you can imagine. And as we all know, consumer confidence is a big part of what keeps the housing market going. The recent Thomson Reuters/ University of Michigan index for June hit a six-month low, as you’ll read in this Bloomberg news report: June Consumer Sentiment Index.
Nationwide, home sales in May were up considerably from a year ago but actually declined from the previous month. One reason is that inventory shortages are constraining sales in many parts of the country, according to Lawrence Yun, the National Association of Realtors chief economist.
Yun said the supply of homes for sale is extremely tight in all price ranges in the western U.S., except for perhaps the upper end. “Realtors in Western states have been calling for an expedited process to get additional foreclosed properties onto the market because they have more buyers than available property,” Yun said in the recent NAR report.
We’ve seen a severe shortage of homes for sale throughout the Bay Area. Inventory is down as much as 50 percent over last year in some communities. While this shortage has led to multiple offers and sales over listing prices in many cases, we shouldn’t assume this trend will last forever.
I know that many potential sellers have held off listing their homes, hoping to get higher prices down the road – if and when the economy improves further. Additionally, they figure newly minted millionaires from Facebook and other tech IPOs could boost prices further when they hit the market. But this is a very risky gamble for a number of reasons.
First of all, as I’ve noted here, the economy could possibly get worse before it gets better. And counting on new tech buyers isn’t a sure thing, either (as Facebook investors found out with the disappointing IPO performance).
In fact, much of the improvement we’ve seen in the high-end market today is not coming from new IPO beneficiaries or other young, newly minted millionaires. It’s from buyers who most likely had the money in 2009-2011 and chose to sit on it as the housing market began to fight its way back from the recession.
The Facebook IPO may have made for interesting news stories talking about what the new wealth would do to the housing market, but the upper end of the market is still being driven by money that’s always been there. And it could turn the other way just as quickly.
The lesson here for anyone thinking about selling is this: Real estate has always been about supply and demand. That hasn’t changed. Right now, the demand is stronger than the supply by a long shot. But that could just as easily change tomorrow.
Below is a market-by-market report from our local offices:
- North Bay – In Northern Marin, statistically it appears that both inventory and prices are remaining fairly stable. But inventory seemed to open a bit in Novato. We went from three properties on the brokers’ tour two weeks ago to 17 this week. The median list price seems to have hit a plateau at $699,000. The average days on market is now at 99, and 38% of all active listings have had a price reduction. It is still considered to be a buyer’s market, but we are starting to see signs of some sellers moving toward listing. The Previews market is the exception to the lack of listings the north county is experiencing at other price points. There are currently 25 active listings, which is actually a slightly higher number than our average inventory runs, and an additional nine, which are contingent or pending. There have been lots and lots of showings in the Santa Rosa area. More properties are coming on the market. Offers are not quite as abundant.
- San Francisco – While inventory remains very low and demand high, the percentage of deals with multiple offers is down a little, as are the amounts over asking, according to our Lombard office manager. The frenzy is slightly reduced. As we approach San Francisco’s usual summer slowdown, our Market Street office manager says open houses continue to receive lots of traffic, and many listings continue to receive multiple offers (anywhere from 3 to 17). Our office just ratified two properties (one seller, one buyer) that were pre-MLS based on agent relationships. Activity has slowed down just a bit, our Sunset office reports, probably due to summer vacations. Half of the office’s ratified offers were in multiple-offer situations. Cash non-contingent offers are definitely winning. At the moment, it is definitely a Seller’s Market. And our Lakeside manager says lending is the bugaboo these days. Agents are seeing a broader array of financing options that are offered to buyers in theory, but in practice lenders are having difficulty producing results that meet the needs of the purchase market. Low interest rates have flooded lending officers with applications for refinances and underwriters are having difficulty keeping up with the review that is necessary for the continuously increasing scrutiny placed on borrowers. Real underwriter preapprovals have mostly gone by the wayside or are taking 30 days or more to obtain. And yet those real preapprovals can shave days off the escrow period, which means buyers can close on time rather than incur penalties for delays. Choosing the right agent and right lender makes all the difference in success for this market.
- SF Peninsula — Hillsborough currently has 65 active and 19 pending listings. Sales are happening, many all cash. Generally inventory has decreased. It may be reflective of the end of the school year, graduations and the start of summer vacations. Buyers are competing even more for the listings that are available. One Belmont duplex listed at $560,000 currently has more than 27 offers competing for bank approval on a foreclosure sale. This type of property is almost nonexistent under $700,00 countywide and the demand is very strong. While mid-range Hillsborough is in demand. The $5+ million market is still stagnant. Good buyer prospects attending open houses. Across the hill in Half Moon Bay, activity has slowed down on the coast. But well-priced listings from the $500-600k range sell quickly; the $800-900k range homes are typically sought out by buyers from the Peninsula. Our Menlo Park manager says the local market is slightly less frenetic – however, the under $1,200,000 range is still very competitive. He went in at 400k, no contingencies and did not get it. Woodside and Portola Valley have been lively markets of late. A good balance has been struck, generally, between buyers and sellers, as the market has been stagnant for quite a while. Buyers and sellers are coming to market and making deals so pent up demand is making its mark. It’s still a very busy market in Redwood City area with a lot of buyers and a lack of inventory. The positive is that the buyers are staying with their agent and continuing to make offers on other properties. Seem to be a large number of buyers looking for the same type of home. The number of new listings is starting to increase and sales are still coming in at a steady pace. Prices are increasing slightly due to multiple offers on most properties.
- East Bay – The higher end of the market is popping, according to our Berkeley manager. More million-plus homes coming on the market and going fairly quickly, even some with pre-emptive offers. One buyer offered 200k over list price on a million plus home and came in 5th. Open homes are receiving so many visitors, one host stopped counting at 130+. She’s hearing the same cry everywhere, not enough homes for the eager and frustrated buyers. There does not seem to be much of a change in the Oakland-Piedmont area from a few weeks ago. Agents are still writing several offers in order to get their clients in to contract. Multiple offers are still the order of the day with clients willing to go the extra mile (price, no contingencies, free occupancy after close, etc.) to get the property. “Is your client willing to look at a pre-emptive offer,” is one of the first questions asked of a listing agent. The Lamorinda market continues to be very active. Buyers are competing with multiple offers and many homes are going into contract over the list price. Inventory remains low. Floor duty is extremely active with callers and walk-ins. The number of new listings is starting to increase and sales are still coming in at a steady pace. Prices are increasing slightly due to multiple offers on most properties. Our Walnut Creek office reports that the number of new listings is starting to increase and sales are still coming in at a steady pace with prices rising slightly.
- Silicon Valley – It’s still crazy out there, our Cupertino manager says. Last week she saw diminished activity due to graduations and vacations. One Los Gatos agent had an off-market listing in Saratoga, not in the school district, where the comparables were $3.9 to $4.2 million max. The buyer wrote 500K over list and closed escrow at $4.7 because they were tired of getting beat out by multiple offers. It’s hard to buy if you have to have a loan contingency or any lengthy contingencies. One local agent made an offer on a $330,000 house in San Jose, which had 68 offers! Our San Jose Almaden manager said some buyers deciding to sit and let the market cool a little. After losing so many times in multiple offer situations and bidding over 10% for some homes, they are careful not to find themselves in a situation that they may regret later if this was just an anomaly. Other buyers have exercised their buyer’s remorse by either asking the sellers to reduce the price (once in contract) or backing out. But still on the whole it is a sellers’ market. Our San Jose Main office said there was excellent weekend traffic at open houses. Most properties are still seeing multiple offers in all price ranges due to low inventory and low interest rates. In Saratoga, we have more buyers, especially in the lower end of the market, then available inventory. We are also seeing increased activity in the formally very slow $500-700k range.
- South County – The lack of inventory continues to be a source of concern for most buyers and for Morgan Hill Realtors as well. As of June 19 there was less than a three-month’s supply of homes for sale. The “normal” monthly supply averages six to seven months. Another amazing statistic is “Days on Market” for Morgan Hill listings has gone from 137 days to less than 60 days. As fast as homes are being listed, they are selling and closing just as quickly. This is very frustrating for potential buyers but great news for sellers. It seems that the South County market has truly become a “sellers” market (disregarding Short Sales and REO properties).
- Santa Cruz County – Overall the market is improving, comparing 2011 to 2012. The number of home sales is up 17% year over year through May. This is a very positive sign as buyers are much more inclined to jump in. Many times are competing with other buyers for the properties especially in the entry level and mid-$500K price range. Inventory levels are down about 21% over the same time last year, which seems to be driving prices upward. The average price of a SFR is up 20% in May year over year. There is also a buzz in the upper end segment. We are seeing out of town buyers jumping in many times with cash and purchasing 2nd homes near the water. Open houses have been a great source of new business for the agents. The agents are very busy and are reaping the benefit of all their hard work the last 18 months.
- Monterey County – The local real estate market continues to be very active with lots of offers and lots of multiple offers, especially in lower price ranges, resulting in lots of sales. Right now, the Peninsula seems to be in a buyer’s market in some areas and where the prices are higher and inventory greater, and a seller’s market in others where inventory is getting tight. These very low mortgage rates are definitely fueling the sales of homes from lower to mid-range prices. The high-end Previews market continues to improve as well.
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
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