2012 has certainly started off on the right foot. Home sales in the Bay Area were up in January. Several key economic reports showed surprising gains. And even the long beleaguered job market turned in positive numbers in the initial weeks of the new year.
Bay Area home sales in January jumped to their highest level for the month in five full years, according to DataQuick, the La Jolla-based real estate research firm. A total of 5,479 new and resale houses and condos sold in the nine-county region during the month, up 10.3 percent from January 2011. This marked the seventh straight month of year-over-year sales gains.
DataQuick attributed the improvement to lower home prices, record-low mortgage interest rates, a surge in investor purchases and an improving economy.
While the jump in sales is encouraging, the firm cautioned that activity was still tilted heavily toward distressed sales in many Bay Area markets. As a result, the median sale price dipped 2.8 percent from the previous month and 3.6 percent from a year ago.
Meanwhile, the U.S. economy finally appears to be gaining some traction. The government reported that the GDP grew at a 2.8 percent annual rate in the final quarter of last year, up sharply from the third quarter’s 1.8 percent rate. And there are indications that the latest GDP figure could actually be revised higher due to wholesale inventories rising in December.
Even more encouraging for the housing market, the labor market is steadily improving. Initial weekly unemployment claims fell 15,000 to 358,000 in a new report by the Labor Department. And the four-week average fell to its lowest level since April 2008, the period before the financial crisis. Finally, the unemployment rate has dropped to a three-year low of 8.3 percent.
Most analysts agree that in order to have a self-sustaining recovery in the housing market we first must have a significant turnaround in the job market. There are indications with improvements in recent months that could be happening at long last.
While all of these economic and employment reports give us reason for optimism, we can’t ignore the fact that the housing market still faces some challenges before returning to normalcy.
Sales have rallied in the new year, but we’d like to see the mix of homes selling move more towards the center of the market and become less reliant on distressed sales. That’s happening in many communities, but far from all.
Additionally, while buyers have gotten the message that things are turning around and they’re jumping back into the market with both feet, the same can’t be said of sellers. In many communities there still is a drastic shortage of homes for sale, which is frustrating buyers and leading to multiple offers in many cases.
Things are out of balance right now and that needs to change for us to have a healthy market. I suspect it will as the spring selling season comes along and homeowners realize that the market and economy have both turned the corner.
Buyers are out there and willing to pay fair prices for attractive, well-priced and well-maintained properties. Now we just need sellers to join the party.
Below is a market-by-market report from our local offices:
North Bay – Our Greenbrae manager is hearing from his agents that the market is extremely active. This comment from one agent who just had an open house typifies the feedback: We’ve had great turnout–100 agents, some with their clients. I sense there is a lot of pent up buyer demand and there’s very little inventory right now, at many price points. This may be a good sign–that demand is outweighing the supply. Is it sort of a bottom?? Distressed sales seem to be slowing, and sellers who are “sitting out the market until it gets better” may be willing to bring their homes on the market now at realistic prices. Pricing’s critical as always, and homes that are price slightly below market value seem to be getting multiple offers. Our Southern Marin manager concurs, noting there is an extreme lack of inventory versus the number of motivated buyers. The effect is multiple offers on good properties in every price range, from short sales/REO’s to Previews properties. There is an energy that we haven’t seen since the beginning of the financial crisis, as record number of buyers are showing up at open houses, and buyers are much more eager to step up to the plate with offers on what they perceive to be well priced properties that offer a good value. In Sebastopol, we are seeing a lot of multiple offers in the sub $400k range. One new listing had over 17 offers with three of them written by this office. We have buyers stacked up like cord wood and not enough inventory.
San Francisco – Open houses are going wild, our San Francisco Lakeside manager says. One agent reported 400 attended a weekend of open houses and other agents are generally reporting very busy traffic. Agents report that our regular Tuesday Broker’s tour is populated with homes that have already received offers – sometimes before the Broker tour and after a single weekend of open houses. Inventory remains a fraction of levels from a year ago. The same is true in the Lombard area, according to our local manager. There has been good recent activity but the listing shortage is getting critical. Many multiple offers. Our Market Street manager says the local market is very heated. He recently sat in on a multiple bid situation where the seller was presented with 7 offers within a week of being on the market. All 7 offers were at ask or above, with two top offers to be considered. One buyer had well over 50% down, the other waived all contingencies. Offers are very competitive, so in addition to price, buyers are tightening up the terms of their offers to be considered. 70% of our offers over the last two weeks saw multiple bids, as inventory is down roughly 45% from a year ago the same period. Our Sunset manager says he’s seen very active open houses – a lot of buyers looking for the right property. Problem is, there is no inventory. Many of the agents are saying they are working with many buyers but there is nothing to sell. Listings that have been on the market for months are getting into contract.
SF Peninsula — Generally we are back to multiple offers for anything new, well priced and well presented, our Burlingame manager says. They recently had 9 offers after 6 days on the market for a San Bruno property. There were 5 offers in 6 days in Burlingame etc. The pool of wonderfully prepared buyers is continuing to grow and they are all moving from property to property as each multiple offer goes down. Many sellers are of the opinion that it may be in their best interest to wait for Facebook to create new “millionaires” as they foresee (and hope for) higher prices in the wake of that big IPO. There are 46 active and 11 pending listings in Hillsborough. There is a lot of new inventory in the pipeline being readied to come on in the next 3-4 weeks. There is very scarce inventory in San Mateo Park with only 3 active and 2 pending listings. Multi-million dollar homes are starting to move, but there is still a lack of inventory. There were 10 offers on a property listed in San Mateo $1.2m range. An old listing on the coast is finally selling, our Half Moon Bay manager reports. Agents are starting to get calls on their expired listings asking if the seller would be interested in seeing an offer. Our Menlo Park manager has seen lots of moving around but very, very low inventory. This happens every year (more buyers than sellers) but this year it is extremely unbalanced. The same is true according to our Redwood City manager, and its driving multiple offers on many homes. One property in San Carlos listed at $965,000 had four offers and went over $1,000,000. Another property in Woodside listed at $1,295,000 had 6 offers and went over asking. Low interest rates and lack of inventory have buyers making offers. Our San Mateo manager is seeing a market that is “Shades of 2006.” The lack of inventory currently is causing more multiple offers on those properties.
East Bay – Listings remain a scarce commodity, our Berkeley manager reports. Buyers are attending open houses, even some properties that have had more than a few open houses, and we just received 22 offers on a fixer in Oakland, but there is not enough inventory. The agents report that sellers are hesitating, still expecting a boost in the housing market. At least buyers are getting the message that this is a great time to buy. Active inventory in Livermore remains very low. We have had 56 new pending sales in February, as of 2/14/2012. This is exceeding the daily sales that occurred in January 2012. 82% of the new pending sales were listed at $600,000 or less. Almost 68% of the new pending sales were distressed properties. Multiple offers are very common in this market. The lack of inventory currently on the market is driving the number of multiple offers, our Oakland-Piedmont manager says. While we are ratifying offers that have been in competition we are also losing out in competition as well. Agents bringing on listings currently are being contacted for showings within a short time of the property going up on the MLS. On the open house front there was a low count of 60 people to a high of 200+. Our Princeton Cap rep received 3 new applications between 6:30 one evening and the next morning. Orinda agents are reporting that buyers are ready to purchase. However, because inventory is so low, most good quality listings are snapped up, many with multiple offers. Even homes that languished last year with no offers, once back on market are selling quickly. At last inventory is coming on to the market, our Walnut Creek manager has observed. Buyers are out there looking and buying. Inventory is selling as fast as it appears, often times with multiple offers. Could this be signs of Spring? Or are they true signs of an improving market. Another good indication is that more than half of our sales are “equity sales”. And those tough “short sale” transactions are closing much easier and faster.
Silicon Valley – Lots of competition for well-priced homes in the popular areas, our Cupertino manager says. The Previews market is picking up, especially under $2 million. In Los Altos, more buyers are getting ready to move, trying to beat the Facebook crowd. Multiple offers are happening in half of the sales. Creating inventory continues to be the biggest challenge in Los Gatos. The same story is echoed by our Palo Alto manager, who says inventory is almost as low as in 2005 – with extreme demand. Lots of activity at open houses, reports our San Jose Almaden manager. Buyers are competing for homes under 500K. Sellers who feel the market has improved and now they can ask more don’t sell. However, buyers are willing to pay top dollar for “turn key remodeling.” In Saratoga, even though we’re experiencing multiple offers below the $2.5 million level, the inventory remains very low. Our manager is encouraging agents to tell their sellers that this is the time to place their homes on the market. We’re experiencing many multiple offer situations. Anything below $3,000,000, if priced correctly, seems to be selling fast. Buyer’s agents seem to be frustrated as there are 5 to 15 offers on each property. This is the time for agents to concentrate on getting listings as they are gold in a market like this.
South County – Morgan Hill agents who are doing open houses keep commenting on the number of potential (and well qualified) buyers who visit their properties. Demand is high and inventory is very, very low. In fact, the low inventory is reflected in every price range, from entry-level homes to those priced over one million dollars. There is just not a large selection to choose from. And of course well-priced properties are receiving multiple offers. In January of 2009 Morgan Hill had 15 months of unsold inventory. In January of 2012, that figure was down to only 6.9 months of unsold inventory. Obtaining listings is still a difficult task for agents, as many potential sellers have negative equity. With new optimism about the economy, however, the laws of supply and demand should help restore value, thus allowing more sellers to put their homes on the market.
Santa Cruz County – January came in with a bang, according to our Santa Cruz area manager. Our three offices opened twice as many new escrows as the same timeframe last year. The agent’s phones were ringing off the hook! This generated a lot of excitement for the agents and they are busy. Our average company price in January 2012 vs. 2011 was up $100K. It is not evident if that is a sustainable number. Sales were up significantly the 4th quarter of ‘11 and we seemed to be seeing that same trend moving into the new year. The biggest challenge we are facing now like other markets is an extreme lack of inventory and finding properties for buyers. The $500K and under market is hot, and if the home is perceived as a good value, there have up to 15 offers on a home. The Previews Market continues to lag and prices are way down, but there are some incredible ocean front properties that can be purchased in great neighborhoods for $2 million or less, depending. We are starting to see more short sales in the upper end. Recently our office sold one of our listings that was originally on the market for over $4 million, with multiple price reductions over a 2-year period. The property in one of the best beach neighborhoods sold short for $2.4 million. Property is on the bluff with the best ocean views.
Monterey Peninsula – The Monterey Peninsula real estate market continues to be very active. The pace has just continued on through holidays, January and now into February, in which we opened 20 new escrows the first week. Our sales associates are holding lots of open houses and reporting good attendance especially in Carmel and Pacific Grove. The number of multiple offers are increasing, even in properties over $1 million, in last few weeks—spurred on by these very low mortgage rates and, it seems, some renewed confidence in investing in real estate of late.