Bay Area Real Estate Market Turns in Strong Performance in March

From entry-level homes to the luxury estates, the Bay Area’s housing market gained more momentum in March, according to a number of recently released industry reports.

March home sales in the region were at their highest level for that month in five years, the result of lower prices, low interest rates and an improving economy, according to DataQuick, the La Jolla-based real estate research firm.

Some 7,694 new and existing houses and condos sold in the nine-county Bay Area in March, up 34.9 percent from February and 9.1 percent from March 2011, DataQuick reported. Last month’s sales total was the highest for the month of March since 8,317 homes were sold in 2007.

The strongest sales gains were in Solano, Sonoma, San Mateo and San Francisco counties with 13.2 percent, 12.1 percent, 11.4 percent and 11.3 percent increases, respectively, from March 2011.

“This is the time of year when buying patterns usually start to normalize,” said John Walsh, president of the research firm. “And while the changes we’re seeing are incremental, they’re incremental in a positive direction.”

Having said that, DataQuick cautioned that there continue to be potential bumps along the road to a normalized market. Walsh said he’s watching closely the number of distressed properties coming onto the market, as well as the ready availability of mortgage financing – or a lack thereof.

The median price paid for all new and resale houses and condos sold in the Bay Area last month was $358,000, according to DataQuick. That’s up 10.2 percent from February, and down fractionally from $360,000 in March 2011. The decline on a year over year basis was the smallest since October 2010.

The luxury end of the market also turned in a strong performance in March:

  • In Marin County, both sales and the median sale price of million-dollar homes rose. A total of 48 high-end properties changed hands, up from 44 in February and 33 in January. The median sale price of a luxury home also soared 15.3 percent from the previous month to $1,525,000.
  • In Silicon Valley, 110 homes sold for more than $1.5 million in March, nearly double the 58 transactions in February and up from 86 in March 2011.  Of the total sales, there were 50 multi-million-dollar transactions compared to 36 sales over $2 million during the same period a year ago.
  • In the East Bay, luxury sales soared 23 percent from a year ago and more than doubled February’s totals. Some 111 million-dollar properties changed hands, up from 49 in February and 90 in March 2011.
  • And in San Francisco, a total of 55 homes sold for more than $2 million during the first quarter of 2012 compared to 50 sales during the same period a year ago. At the same time, the median sale price rose 2.7 percent from last year to $2.8 million.

The market will continue to face some headwinds in terms of the economy, distressed properties and even mortgage financing.  And it’s likely that the economies of Europe and China will continue to factor in to our recovery.  But it’s clear that locally, we are headed in the right direction regarding housing. Our biggest challenge isn’t a lack of demand; it’s not enough homes to sell. So if you’ve been thinking about listing your home, there couldn’t be a better time than now.

Below is a market-by-market report from our local offices:

North Bay – In Marin County, the high-end of the market in Central and Southern Marin is going strong with buyers stepping up and sellers willing to negotiate.  Inventory continues to be an issue. Homes coming on the market are getting LOTS of attention, our local manager reports.  One agent put in an offer for $200K over a $1 million property, free three month rent back and all cash.  Sadly, they didn’t get the house!  Buyers are starting to panic a bit and there does seem to be a bit of a frenzy at the moment.  In Sebastopol, the entry-level market remains exceedingly competitive with multiple offers being the norm. There is a lot of cash, which is beating the low down FHA buyers every time.  Agents there are also seeing improved activity in the Previews high-end market with more buyers in the marketplace then good quality homes for sale.

San Francisco – Our Lakeside office manager says the news from agents is very consistent: “I wrote an offer but there were XX other offers and I didn’t get it.”  Some agents are writing five or six offers in a week with buyers who are anxious to settle down and get themselves out of the buying fury.  Occasionally, an agent says, “I dug up a listing for my buyer and we got it.”  It is definitely a time for a buyer to have a close working relationship with their agent and work hard to get the deal done. Similarly, our Lombard manager reports lots of activity, and high open house traffic. Most deals are multiple offers and over asking price – some 25% over. No appraisal problems with this yet, but lot of winners are all cash. The Sunset office also says open houses are extremely busy.  A new Sunset listing priced at $890,000 had approximately 200 people during a three-hour open house.  More than 50% of ratified offers were multiple offer situations.  There are plenty of non-contingent cash offers out there trying to beat out the competition.

SF Peninsula — Huge turnouts at open homes are common, our Burlingame manager reports. Multiple offers are pretty much the norm on the Peninsula. We have seen 20-40 offers fairly frequently and buyers are finding that it takes three-five tries before they succeed in getting an offer accepted. Everybody is pretty tired! There are currently 52 active and 18 pending sales in Hillsborough. The amount of inventory is pretty consistent over the last several months.  Inventory overall is starting to increase but sellers are now becoming a bit unrealistic on price, according to our North Burlingame manager. Well-priced, well-marketed homes are generating multiple offers. Atherton lots are in high demand. Lots from 1 to 2.2 acres have sold up to $9.5 million. Any central Menlo Park house goes out the door with multiple offers or it takes a very big number to buy it off market in a ‘preemptive’ sale. It is an extremely competitive marketplace. Inventory remains extraordinarily low in Palo Alto and the demand high.  Our local office got into contract on a property that had 19 offers. The high end of Woodside is still dormant but agents are seeing movement in Portola Valley. In Redwood City and San Carlos, there still definitely is a lack of inventory. Open houses are busy and well-priced properties are getting multiple offer.

East Bay – The Berkeley market has turned on a dime, but homeowners still seem unaware that it’s a HOT seller’s market.  Hopeful buyers know it and some are writing three to five offers before they get an acceptance.  Most buyers are stepping up to the plate after enough disappointments, even writing pre-emptive offers. Our Danville manager says local inventory is less than one month in some areas.  One home in Pleasant Hill garnered 23 offers.   The market is in dire need of listings. Our Oakland manager says that the heat is on to get offers accepted. Agents are running up against multiple offers in every community and at every price point. Buyers have started writing offers without contingencies again. So far we’ve not run in to any appraisal issues but based on the amount of dollars over asking that she’s seen written it is probably only a matter of time. Some sellers are holding their properties from going on market because they have not been able to purchase another home. The Lamorinda market continues to be strong and buyers are submitting offers. Homes that are appropriately priced go into contract quickly. While inventory is increasing they are still in short supply. The story is echoed in San Mateo – low inventory, plenty of buyers.

Silicon Valley – The market is highly competitive, says our Cupertino manager. There continues to be one winner and 10 losers for most homes. Hopefully the slight uptick in inventory is not an anomaly. Our Los Altos manager reports that the local market is very good in Los Altos, Palo Alto, Mountain View and Sunnyvale. The Previews end of the market is strengthening above $2.5 million. In Los Gatos, our local manager says agents are spending most of their time writing offers, presenting offers and counseling their buyers on creative ways to make their offers shine when competing in multiple offer situations against other buyers. Our San Jose Almaden manager reports that there continues to be multiple offers on everything.  Typical sales prices are 10% over list price. Both inventory and sales activity is also increasing in the Willow Glen area. The Saratoga market is still hot with listings selling very quickly. Our local office just closed a $4.1 million sale.

South County – The South County real estate market certainly reflects that of other Bay Area counties—low inventory, high demand.   With fewer homes from which to select, buyers are finding themselves in multiple offer situations.   One home in Gilroy, listed at $329,000 had 19 offers several days after hitting the MLS.   At the present time there are only 12 homes listed in all of Morgan Hill priced under $500,000.  Agents are reporting record turnouts at their open houses and many potential buyers indicate their ability to purchase without a loan—or are willing to waive appraisal contingencies if a loan is involved.  These are all good signs for sellers as they witness their homes finally showing an increase in value. 

Santa Cruz County ­– Overall, the perception of the market is that it is better than 2011, our Santa Cruz manager says.    In Santa Cruz County, the agent membership is down half of what it was at the market peak, less than 1,000 members.  Like other markets, activity is definitely up, inventory is down about 9% from last year, and agents are seeing the prices in the lower end go up slightly. But it really is too soon to tell if it’s a trend or not.    The average price for SFR in Santa Cruz County started out about 8% lower than Jan. 2011, and by March those numbers had shifted with the edge slightly higher than March 2011.    The number of closed sales through the first three months of the year is up 11% year over year.  These are all great signs for our market and homeowners.

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