Real estate industry observers are busy trying to decipher a handful of key reports out last week that offer a mixed view about the housing market’s recovery nationwide and here in the San Francisco Bay Area.
DataQuick, the La Jolla-based research firm, reported that Bay Area home sales in April fell slightly below the year-ago level and remained well below average as “increased high-end activity couldn’t offset sales declines in the lower-cost areas and in the new-home market.” The shift toward more sales in higher-cost countries helped push the Bay Area’s median sale price up nearly 22 percent from last year, but the median fell from March. (See county-by-county chart below)
Also out last week was the S&P/Case-Shiller Indices for the first quarter, which indicated some weakening in home prices nationwide. The National Home Price Index fell 3.2% in the first quarter of 2010, but remained above its year-earlier level. Analysts said housing prices have rebounded from crisis lows, “but recently have seen renewed weakness as tax incentives are ending and foreclosures are climbing.”
Interestingly, the region that showed the biggest increase in prices from first quarter 2009 to first quarter 2010 was the San Francisco metropolitan area, which saw a 16.2 percent year-over-year change from its recessionary lows. S&P/Case-Shiller defines the San Francisco metro area as the counties of San Francisco, San Mateo, Marin, Alameda and Contra Costa.
So what to make of all this? A couple of things: First of all, these reports are a strong reminder that real estate – like politics – is a very local business. By all signs, the housing market recovery is slowly moving forward but the speed and degree of the rebound varies from region to region, from county to county and even from town to town.
While the S&P/Case-Shiller indices show our local region’s prices up 16.2% from last year’s crisis levels, many of our cities have only seen modest median price increases of around 2 percent (including San Francisco itself). What’s really happening is that the mix of homes that are selling in our region is changing. A year ago, most sales seemed to be foreclosures and other distressed properties. Today, we’re seeing many more sales in the mid- and even upper-end of the market, which is driving up median prices for the region.
In our recent Coldwell Banker Residential Brokerage luxury reports, we have seen strong increases in home sales above the $1 million level and even (in the case of San Francisco) above the $2 million. Million-dollar sales in Silicon Valley in April, for example, were more than double last April’s level. At the same time, the median sale price climbed 7.3 percent over the same period a year ago. This trend away from entry level and distressed sales to higher-priced properties is a healthy sign that our market is steadily moving back towards normalcy.
While the improvement in the market so far this year give us reason for optimism, we must be mindful that we have our share of storm clouds overhead. The federal home buyer tax credit has ended, and it’s uncertain what that will mean to the market. The financial markets, while greatly improved over last year, as still seeing a lot of volatility of late. And our unemployment rate remains stubbornly high.
Nonetheless, it’s important to remember that economic recoveries are rarely smooth. There will be potholes along the road, and lots of fits and starts. But given all the data in recent months – and what I’m hearing from agents and buyers out in the market – I’m cautiously optimistic that our local market is indeed on the road to recovery.
Below is a market-by-market report from our local offices:
North Bay — Greenbrae and Corte Madera are hot markets right now. The under $1 million segment of the market is gaining momentum and the high end continues to attract new buyers. One Tiburon property had been reduced a couple hundred thousand a few months ago and finally got into contract on a contingent offer. When buyers couldn’t sell their home, one agent put the listing back on the market and had multiple offers going well over asking price. Over the past two weeks the Southern Marin office has seen offers come in on listings that have been on the market for several months. Buyers are coming in so low, sometimes the sellers are not even countering. On lower end properties we have had a few multiple offer situations, but the offers are not at full price. There has been a slight upswing in sales activity in all price points in the Northern Marin area. The majority of the new inventory coming on is non-distressed. Short sale approvals from various banks are moving a bit faster. Our Santa Rosa office reports that for weeks the market has been active below 350K and increasing activity above 1 million. We are seeing an increase in activity up to 500K now, with 500K to $1 million quiet.
San Francisco— The Lakeside office reports the local market is steady, but there’s a definite need for more inventory. Meanwhile, the Lombard area had a slow start to May, down in all activity from April, but a more balanced market. More inventory is needed in this neighborhood as well. The Market Street office reports good attendance at most of the properties being held open. Per our weekly inventory reports, inventory for SFR and Condos, Lofts, TIC’s is increasing. Some 70% of ratified offers are in a competitive situation. It appears that a lot of the buyers are looking for the same property!
SF Peninsula— The Peninsula market seems to be steady to flat right now. The Burlingame office reports that although things are a little slow in that community, this typically happens around Memorial Day. The good weather and some nice new inventory that is well priced and attractive should bring the buyers out over the weekend. The Half Moon Bay market seems to be lagging behind the Mid-Peninsula in listings and sales. But as usual, well-priced, good condition homes will receive an offer within the first 10 days of marketing. Both of our Menlo Park offices report the local market as steady. But things are actually picking up in the $2 million and above market. There are pockets of hot and cold areas in this price range. In Palo Alto, inventory remains low. What is listed between $1M – $2M have sold with multiple offers. San Mateo reports a steady, healthy market. Things seem to be moving in a positive direction in San Carlos. Homes priced correctly and shown well are selling quickly. And in Woodside, inventory and sales are decreasing. But there definitely is some life in the market – especially on the listing side. There are now 24 listings over $4 million in Portola Valley and Woodside.
Silicon Valley– Inventory is increasing in Los Altos, but single-family homes are still selling with multiple offers if they are in the good school districts and priced below $1.5 million, the hottest price range. Four and five-bedroom homes are getting the most offers. Condos are very slow. Los Gatos reports that inventory and sales are steady, with the Previews luxury market continuing to improve. Open houses remain very busy in Cupertino, but the market has definitely slowed down. New transactions are not keeping pace with closings. Market seems to have settled down a bit, according to our San Jose-Main and Willow Glen offices. Open house traffic this past two weeks was down compared to previous weeks. Activity seems to have slowed and buyers seem to be on the fence again. Meanwhile, the Almaden area is seeing inventory and sales activity increasing, with many homes still selling with multiple offers. A similar story is told in Saratoga, where there are numerous multiple offers for homes under $1 million – and even some under $2 million.
South County– Sales and inventory are decreasing, reports our Morgan Hill office as the market appears to be softening. There are fewer purchase contracts being written and accepted. This phenomenon is most likely attributed to the lack of inventory and the fact that the federal tax credit is no longer in play. In addition there seems to be a question as to the viability of the state tax credit (will there be enough money to fund the program?) Short sales still dominate the market but REO listings are less prevalent than before. Prices, however, continue to increase as demand does outweigh supply. Similarly, our Gilroy office reports the market has remained flat for the past month. Buyers are looking, but there seems to be no sense of urgency. Many buyers seem to be back to a “wait and see attitude” in regard to making offers.
Santa Cruz – The Santa Cruz County market is relatively flat in terms of closed transactions. Approximately 43% of the sales in April sold were under $500K, with a high percentage of those short sales. A beach property that sold 3 years ago for about $1.5 million, recently sold on the court house steps for $780K, cash, after the bank walked away from a $950k price tag and escrow. On the bright side, some extremely well priced homes (below the last comp in the area) are selling, some with multiple offers. The median price continues to inch upward since the low 18 months ago. In April, there were 7 properties sold in the $800 – $900K price range, 3 sold from $900,000 – $1 million. And over $1.1 million, 6 sales in April and there have been 20 sales at this point YTD.
Monterey Peninsula – The Monterey area mainly has short sales on the market now and they represent an increasing number of the local escrows. While we are seeing a couple of the lenders get more efficient and organized in dealing with them, in general they still require many months for agents to get approvals on the sales. And we are seeing more instances where the lenders come back and ask for an increase in the purchase price; and, if substantial, the buyers declining and the property goes back on the market.
East Bay – Berkeley agents are busy writing offers, and competing more in multiple offer situations. There still is a need for more listings to meet market demand. Castro Valley has seen a flurry of sales. The market is picking up speed as we hit the summer months. There is no shortage of buyers in all price ranges. Entry level and mid range price properties are going fast, and even the big ticket homes are starting to move. The market is steady in Danville and Fremont, with more activity in the moderate price ranges, the Danville office reports. In Fremont, listing inventory is increasing due to the approaching summer months. Traditional sellers (active detached listings) are starting to dominate the market in the Tri-Valley area again. Traditional sellers make up 61% of the detached active listings in Livermore, 75% of the detached active listings in Dublin, and 85% of the detached active listings in Pleasanton. The Oakland/Piedmont office is seeing average sales price continuing to improve as low-end foreclosures wane. Sales and inventory remain steady in Orinda and Walnut Creek.
A final note on our Previews Luxury market: Things continue to slowly improve in many areas, as evidenced by our Southern Marin office. In the $2 to $3 million range in Mill Valley, 32% of inventory is in contract and in Tiburon, Belvedere, and Sausalito, an average of 23% are in contract. Mill Valley has seen the most dramatic increase, with twice the number of properties selling over $2 million year to date versus same period a year ago.
That’s it for now. Have a great week!