More “green shoots” sprung up for the nation’s housing market this week. On Tuesday, the National Association of Realtors reported that existing home sales rose in April and remain above year-ago levels, and home prices nationwide continued to rise as well. And on Wednesday, the Commerce Department said that sales of new homes rose 3.3 percent in April from March to a seasonally adjusted annual pace of 343,000. That was slightly more than what most analysts had expected.
Both reports are just the latest in a recent string of reports that suggest a housing recovery is finally taking hold across the U.S. We’ve certainly seen a good turnaround in many parts of the Bay Area for some time now. But the recovery has been more tepid in some other parts of the country, so these reports come as very encouraging news for the housing market as a whole.
The improving existing home sales and prices were across all regions of the U.S., NAR pointed out. Sales increased 3.4 percent to a seasonally adjusted annual rate of 4.62 million in April from 4.47 million in March. April’s total was 10 percent higher than the 4.20 million-unit level a year ago.
“It is no longer just the investors who are taking advantage of high affordability conditions,” said Lawrence Yun, NAR’s chief economist. “A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices.”
Yun pointed out that the decline in both listings and the so-called shadow inventory – the anticipation of distressed homes soon to come on the market – has shifted the housing sector in the U.S. from a buyers’ market “to one that is much more balanced, but in some areas it has become a seller’s market.”
That’s certainly the case for us here in the Bay Area, where a shortage of homes on the market – as much as 50 percent below last year in some areas – has led to many multiple offers for a single home and sale prices above the list price, sometimes way above.
Nationwide, NAR reported listed inventory of homes for sale is 20.6 percent below a year ago. As a result, there is a 6.6-month supply of homes on the market at the current sales pace, down from a 9.1-month supply last year at the same time.
At the same time, the national median existing-home price for all housing types jumped 10.1 percent in April from a year ago to $177,400. That followed a 3.1 percent increase in March and marked the back-to-back price increases from a year earlier since June and July of 2010, when the gains were less than one percent, Yun said.
New home sales also enjoyed strong gains in April to an annual rate of 343,000, almost 10 percent higher than a year ago, according to the Commerce Department. Gains were broad-based with three of the four regions in the U.S. showing improvement (only the South saw a decline). And the median sale price of new homes sold last month was $230,000 –up 4.9 percent from April 2011.
To be sure, the nation’s housing market still has a long ways to go to get back to peak of the market over the past decade when as many as two million homes sold in a single year. And economic headwinds still face the market, everything from high unemployment nationwide to a stubbornly slow economic recovery.
Nonetheless, we’re moving in the right direction once again heading back to a much more normalized market. And yes, we may have a long ways to go to get back to the top, this week’s housing reports serve to underscore just how far we’ve come from the bottom.
Below is a market-by-market report from our local offices:
North Bay – The Marin market is going gangbusters, according to our Central and Southern Marin manager. Spring inventory, although a bit late, is finally starting to hit the market and is giving buyers some new choices. Not enough to their satisfaction, but at least it’s getting them to make purchases and move swiftly when they see a property that suits their needs. We are seeing MANY multiple offers at ALL price ranges. The high-end market is seeing significant movement as well with homes in Kentfield, Ross, Tiburon and Belvedere fetching good $$ — perhaps not as much as they once might have, but still prices are significant and they are selling. Lots of investors, lots of cash offers, lots of first-time buyers re-entering the market. Apparently, now is the time for everyone to make their move. In the Sonoma County market, we are seeing multiple offers in most cases where the property is appropriately priced, and the contract price ends up above list. However, we are starting to see contracts fall apart due to appraised values falling below the contract price. Often the buyers are unable to make up the difference with cash. Our Santa Rosa manager feels agents will be seeing more of this as the market pushes prices above what the comparable sales have already supported, and will have the continual effect of dampening price increases across the board. Inventory in Sonoma County is VERY slowly growing in many of the cities we serve. We hope to see inventory inch up to correct some of the problems an overheated seller’s market can create. The trend could change overnight as people get past the activities of spring (graduations, etc.,..) and focus squarely on buying a new home.
San Francisco – San Francisco continues to be challenged with low inventory at all price points. Multiple offers are nearly expected at price points under $1.5 million if the home has a reasonable list price and presents well. San Francisco stats show at end of April we had a 4.1-month supply of inventory for luxury homes over the $3 million price point – 30% less than last April. In the $1 million to $3 million price range there’s a three-month supply – 31% lower than last April. And under $1 million a two-month supply – 61% less than prior April. We need more homes to sell! That story is echoed by our Lakeside office manager. Like a broken record – every agent’s mantra is “There are no listings. There are no listings.” And agents representing buyers are getting writer’s cramp from the many offers they are writing for each client. All cash no contingency offers are winning the day when a home has been well prepared and comes with seller inspections already done. Buyers are even resorting to budgeting for their own pre-offer inspections in order to improve the attractiveness of their offer. Prices have risen in many neighborhoods but others are still weighed down by short sales and bank owned properties, which sell for less for a variety of reasons. Our Lombard manager says agents are seeing more offers than opens, more buyers than sellers, more losers than winners, more over-asking than under, and more multiples than solos. The only change this week: more stories of buyers wanting to write, but dropping out on reports of the number of offers. As always: Time to List. Our Sunset office reports the multi-unit (6+) market is also on fire with very low inventory but high demand. Multiple all cash offers are the norm, investor are definitely out there buying these multi-unit properties. The GRM is starting to creep up as demand is driving the price upward. Caution to all as prices being push upward: we are seeing problems with appraisals not coming in at sale prices.
SF Peninsula — The high end is starting to move but not to “Facebook” prospects, our Burlingame North manager says. Facebook buyer expectations have diminished. Mega mansions are no longer desirable to the y-generation. Open home traffic remains active. Brisk sales are happening across the hill in Half Moon Bay, although agents are having problems with sales appraising at the sales price – not enough comparables to support the value. Finally, listings are cascading in, according to our Menlo Park manager. Where were they a month ago? Most are selling really fast. A sign went up on Menlo Park and in 24 hrs it had four offers from each agent that had helped price it. Agents are really working hard and being up on MLS properties is just half the battle. You practically have to be cruising the streets for signs or scouting out ads in the papers or the Internet. The market is very, very tight! That story is echoed by our Palo Alto manager, who said inventory is at an historic low. They continue to get multiple offers on well-priced listings. Sales are steady and our Portola Valley office has good buyers in the pipeline. They also have big sellers coming out of the woodwork. Five new listings are coming on the market – from $17 million to over $50 mil. Sellers are seeing a window that may enable them to sell their substantial properties. Lack of inventory is still causing a lot of frustration to Redwood City agents. The good news is that even though buyers involved in multiple offers might not get a property right away they are staying with agents until they do. The open homes are getting heavy traffic, our San Mateo office reports. Multiple offers are still the word of the day and inventory remains low. There are also improving numbers of higher list priced ratified sales.
East Bay – Agents are writing several or more offers per buyer, our Berkeley manager reports. There’s just not enough inventory. Listing agents are demanding that buyers do pre-inspections and sometimes asking for no appraisal contingencies. More million-dollar-plus homes are on the market, and being sold fairly quickly, if appropriately priced. DOM might be even lower, but listing agents are beginning to insist on two Sunday open houses prior to hearing offers, another sign of a faster market. Our Oakland-Piedmont manager says the market is still hot, hot, hot – with multiple offers abounding. Offers are being written with terms favorable to the seller: no contingencies, seller’s occupancy after close, pre-inspections, heartfelt letters/pleas – anything that will give the buyers an edge in the game. An appropriately priced single-family home that one agent wrote and offer for her clients received 30 offers and shot the moon. The office listings are routinely receiving between five and 15 offers and going over asking. After a few years of buyer’s being in the driver’s seat the sellers are becoming more confident and sticking to their guns as far as credits for repairs, etc. Orinda agents report that multiple offers are now the norm. Buyers are patient and steadfast in their search. They feel that now is the time to buy and are not discouraged with the multiple-offer market. Pleasanton is also battling low inventory. In turn, buyers are very anxious to make offers but seem to be backing out after thinking into it over a bit. Finally, our Walnut Creek manager says sellers may be holding out on listing their properties believing they can get higher prices. Appraisals are all over the board with some low and some at price and some even over price.
Silicon Valley – Inventory is starting to increase in certain areas and things seem a bit less frenetic, according to our Cupertino manager. Buyers who have almost given up in this over- heated market might have some better opportunities in the months to come. Our Los Altos manager says the market started picking up ahead of the Facebook IPO. For single-family homes, there are currently 74 pending and only 100 active in Los Gatos. For condos and townhomes, there are 25 pending and only 11 active in Los Gatos. The Previews high-end market is starting to show signs of life in San Jose, our Almaden manager says. The Saratoga market is still experiencing many multiple offers. It’s not uncommon to hear that there were 10 to 15 offers on one property. As a result we’re seeing cash offers and buyers bidding the prices up.
South County – The South Santa Clara County and San Benito markets are experiencing a severe shortage of supply. Only 1.3 months’ worth of homes are available in Gilroy and Hollister. Morgan Hill has 3.2 months. 33% of Morgan Hill’s inventory is over $1M. Every new listing seems to get multiple offers within a week – and in some cases the number of multiple offers is double digit. Many sellers are asking for appraisal contingencies to be removed and cash offers are plentiful. The higher end properties are getting a lot of activity as well. Only 22% of the active inventory in Gilroy is either REO or short sale, compared to 42% back in November. Hollister is down to 33% (from 46% in November) and Morgan Hill is down to 18% from 33%. Issues with appraisal are common. The average and median sale price has increased by nearly 10% since January. The local MLS shows the current inventory of single family homes in Morgan Hill at about 300 units. Of that number over 50% of these homes have a pending sale—leaving only about 150 homes available. Of those only 16 are priced under $500,000 and 11 more are priced between $500,000 and $600,000. There are 30 homes priced at $1 million or above, leaving the number of moderately priced homes available at a very low level. In addition, the average sales price of homes sold in Morgan Hill has increased significantly since January 1. We definitely are experiencing a “sellers’ market” in Morgan Hill. High buyer demand coupled with attractive interest rates contribute to this phenomenon. As the housing market continues to recover, Morgan Hill agents are working hard to obtain local listings.
Santa Cruz County – The Santa Cruz County market is surging with significant daily new listing inventory coupled with numerous listing price reductions and pending sales. Closed sales in all price ranges are also on the increase. It appears that the market is truly picking up in the county, and even the high-end Previews market is seeing an increase in sales.
Monterey County – While the Monterey Peninsula isn’t seeing the frenzy we hear about in the Silicon Valley/SF Peninsula areas, our local manager says that market is generally a few months behind those areas. They are more of a second-home, discretionary-purchase market, especially in the higher price ranges with those homes generally selling to out-of-area, all-cash buyers. Nevertheless, this market continues on a steady, active pace with lower-priced properties in short supply and generating multiple offers as they come on market. And agents are seeing increased showings on higher-priced properties and expect to see increased sales activity in coming months as a result, especially with sales to newly minted millionaires from Silicon Valley techie world.