It’s an old real estate adage, but it couldn’t be truer today. When it comes to the health of the Bay Area (and the rest of the country, for that matter), the three most important rules for the housing market are location, location and location.
As readers of this column know by now, the upper end of the Bay Area market has fared relatively well in recent years while entry-level and mid-priced communities around the Bay have struggled far more to recover from the recessionary downturn.
I talked about this disparity in an interview with the San Jose Mercury for an article that was published on Sunday. As the Mercury noted, housing prices in many affluent cities in Silicon Valley and the Peninsula are nearing their pre-recession highs while other working-class communities have a long ways to go in their recovery.
One reason for this trend, as I pointed out to reporters, is that more-expensive markets never saw home prices drop as sharply as the areas with more subprime lending and subsequent foreclosures. Lower-priced communities had more marginal buyers, many of whom also made zero or small down payments. More of those buyers also took out resetting adjustable loans.
On the other side of the coin, residents and potential buyers in high-end communities generally haven’t been impacted by the overall economic downturn as much as homeowners in other areas. In Silicon Valley in particular, the strength of the tech industry and the growing number of successful start-ups and initial public offerings have created a tremendous number of affluent, well-capitalized buyers who are bidding up prices of a limited number of homes.
Because home prices in affluent communities never dropped as much as those in entry-level markets, these cities have less ground to make up in recovering from the downturn. Palo Alto’s median sale price, for example, is off about 12 percent from its peak in 2008 while the median in several low-to-middle income markets is still down nearly 50 percent, according to the news report.
Two of the largest Bay Area cities with a diverse mix of housing are recovering, albeit not quite as fast as Silicon Valley, according to the reports. San Francisco’s median sale price is about 22 percent below its 2007 peak while San Jose is 36 percent below its high-water mark. It’s important to note the sheer size of San Jose and San Francisco populations reflect diverse housing and incomes, compared to a small upscale community such as Palo Alto or Hillsborough. The same would hold true for Sausalito’s recovery versus County of Marin, for example. The smaller the community, the quicker median prices can move in either direction with just a few sales. In the East Bay, prices are rebounding faster in high-end communities like Orinda, Lafayette and San Ramon. Never before has the role of the local real estate professional been more important to help customers understand all the data available and sort through the appropriate comparable properties when home shopping or selling.
The market figures came from DataQuick, the La Jolla-based real estate information service. DataQuick compared quarterly median prices for single-family resale homes in 74 Bay Area cities since 2007 for stories that ran in the Mercury, Oakland Tribune and several other Bay Area news organizations.
If you’re interested in reading more, here is the San Jose Mercury story: Bay Area housing market reflects different rebounds. The Merc has created a link within the story to a table with many Bay Area communities listed, showing current, peak, and low points in median price.
Below is a market-by-market report from our local offices:
North Bay – There is still plenty of buyer interest in Marin, according to our Greenbrae office. Buyers are all hoping to find that diamond in the rough. We are seeing a steady stream of new listings this summer, but the market can still use more inventory. Northern Marin agents report that there’s much interest in the $400,000-$600,000 range. June was the highest closing month this year, our local manager said, with sales in all price ranges. There are more multiple offers than in past months, especially on “move-in-ready” properties and those with updated kitchens and bathrooms. In Petaluma, many out of area buyers are visiting open houses. They’re coming from Marin County, the Peninsula, San Francisco and the South Bay. Many are seeing the value of the North Bay and what their dollars will buy. Our local manager says there are more all-cash buyers in the $600,000 -$900,000 range. That story is echoed by our Sebastopol office, which is seeing cash offers in all price range. There are some good values, including a three-bed, two-bath home on 10 acres under $700k and a coastal home with its own cove for less than $600k. Sales activity is also increasing in Santa Rosa. Finally, in Southern Marin, sales are flat for the first half of the year versus last year. The median sales price dropped between 7% and 12% in Tiburon, Mill Valley and Belvedere versus the same period a year ago. Sausalito was the exception, increasing 40% in both median price and units sold.
San Francisco – The local market has been stable overall, according to our Lakeside office. There are lots of buyers with cash, but they are very selective. Two great homes in the San Francisco Country Club area received multiple offers, and several were all cash. One property in Parkside had 27 offers and sold for 20% over the list price. However, if a property is over-priced or under prepared it just sits and sits. Our Lombard manager says they’ve seen the usual summer holiday slowdown. The exception is that when somebody wants that one property, inevitably someone else does, too, and out come the multiples. One Pacific Heights three-unit fixer upper went 26% over its contracted price in bankruptcy court. Eleventh hour lending challenges are still prevalent. Meanwhile, our Sunset office says that open houses are very well attended. Pricing is still key to translate that interest into a sale. Almost half of the ratified offers were multiple offer situations. Activity overall is a little slow probably due to summer vacations.
SF Peninsula — Our Burlingame office reported the typical early summer slowdown with school graduations and the start of vacation season. But activity has been increasing lately, and more listings are expected to come to market soon. Across the hills in Half Moon Bay, the local market has also seen a summer slowdown with many people on the coast visiting but few house shopping. Our Menlo Park manager says there’s strength in the market with many properties selling swiftly – from a $300,000 condo that attracted three offers to a $3.5 million house with two offers. The Palo Alto market slows when there is any kind of holiday – at least as far as listings coming on the market. But our local manager expects momentum to pick up soon. Sales are still steady with many resulting in multiple offers. The Portola Valley market has been pretty strong despite the 4th of July holiday. Meanwhile the Redwood City market has been quiet with the summer in full swing. One property in San Carlos did attract six offers. Listed in the low 900,000 it sold for close to $1,000,000.
East Bay – In Berkeley, sales activity is on the rise. Our local office reported that the June board filled up dramatically and they’re looking forward to a hot July, both sales and listings. Our Fremont manager reports that with the middle of summer and people on vacation, the local market seems to be moving slowly. In Livermore, total pending sales in July to date are below the monthly average, which may have something to do with the extended 4th of July weekend. There have been 14 pending sales, all but two with list prices below $420,000. More than half of the new pending sales were distressed sales. Our Orinda manager reports that open homes are on the increase and have high attendance. A third of ratified sales are from multiple offers.
Silicon Valley – In Cupertino, multiple offers abound. Half of the ratified sales are multiple-offer situations, our manager reports, adding that agents need more good listings. Los Altos buyers are focusing on single-family homes while condos are moving slower, our local manager reports. The Previews market is good up to $2.5 million, then slower after that. Meanwhile, inventory is down about 20% from the same time period last year in the Los Gatos market. There is a lot of activity in the $1.3-$1.8 million price range. Buyers are being selective, waiting for the perfect home, but there just isn’t much to choose from. Our San Jose offices report that they’re seeing the normal summer slowdown. Some of the listing prices are getting reduced, which seems to be enticing buyers. Open house traffic has slowed down a little as well. The same story is true in Saratoga, where the local market has quieted down recently.
South County – The 4th of July weekend showed very little activity between traffic at open houses and ratified contracts, according to the Gilroy office. Our local manager says that hopefully, buyer distractions are now behind them, and serious buyers and increased traffic and purchases will prevail.
Santa Cruz – Our Santa Cruz manager says that local real estate indicators are mixed. Prices are still declining, and to date, are down about 19% from last year. However, the number of closed sales is up about 8% and there currently is a 34% increase in properties in contract, which is a great sign. Inventory levels are down 15%, and it’s taking more time to sell a home on average. Open house activity has been very good in certain areas and the agents are meeting many out of town potential Buyers who are ready to move ahead with purchases. Twice last week buyers walked into an open house, met the agent, and within five days had made offers on other properties and are now in escrow.
Monterey Peninsula – Carmel, Pebble Beach and the Monterey Peninsula market overall has been steady in recent weeks with 21 ratified offers, several of which attracted multiple bidders.
A final note on the Previews market – As noted earlier in this column, the high-end market continues to do relatively well. The latest example is Santa Cruz County, where inventory of million-dollar listings has declined dramatically – half of what it was a year ago. Agents are seeing cash buyers in the upper price ranges. One of our agents just closed a $2 million property and the same agent will be closing another property over $2 million home within a few days.
That’s it for now. Have a good week!