Summer is typically the time of year that our housing market slows down as buyers, sellers and agents all take time to enjoy the great weather and go on holiday before school resumes. But for the most part, we are still seeing a vibrant market around the Bay as the calendar turns to August and the final month of summer.
From the entry-level market to the Previews luxury end, sales remain very strong for this time of year. Lack of inventory remains the number one challenge for many parts of the Bay, especially San Francisco, the Peninsula and Silicon Valley, although we are seeing listings gradually creep up in parts of the South Bay and East Bay.
A couple of highlights from our most recent office reports tell the story of a resilient housing market around the Bay:
- The Previews market in Marin is strong with several multi-million sales in contract in Ross and Kentfield. Our local manager reported that just this week we closed an $8.35 million sale in Kentfield, representing the buyer with all cash.
- Our Sebastopol manager says he’s seeing as many as 20-30 offers on a single home as a result of the incredibly low inventory of homes for sale.
- In San Francisco, virtually every sale brings in multiple offers, according to our Lakeside office. A new listing near the $4 million mark sold in three days, over asking price, all cash, and closed in five days, our Lombard office reports.
- The shortage of homes is particularly acute on the Peninsula, leading some agents to wonder what will happen when the hundreds of newly minted Facebook millionaires (and a few billionaires) begin searching for homes once they’re allowed to cash in their shares.
- Even in South Santa Clara County, which had its share of distressed listings a year or so ago, it’s hard for buyers to find a home to purchase. Gilroy is down to one month of supply – only 55 homes in an active status. Of those only 16% are distressed – short sales or REO’s. Oh how things have changed!
While the entry level – and mid-level – markets are experiencing the greatest shortage of inventory, the upper end is also seeing a striking imbalance between supply and demand as a result of very strong sales of luxury properties.
Our latest Coldwell Banker Residential Brokerage luxury reports show the high-end Previews market continuing to heat up all around the Bay. Luxury home sales in Silicon Valley over $1.5 million soared 27% in June. The upper end of the Luxury market – homes over $3 million – nearly doubled from last year. In San Francisco, there were 90 sales over $2 million in the latest quarter compared to 55 homes sold the previous quarter. And East Bay luxury sales were up 19%.
No one knows what the future will hold. We certainly have our economic challenges, both in the U.S. and overseas. The latest jobs number did offer some encouragement with hiring up much more sharply than expected. But I suspect we’ll continue to face economic headwinds for a while, which of course will impact the housing market.
But having said all that, we are seeing a very strong, resilient market – especially for the lazy, hazy, crazy days of summer!
Below is a market-by-market report from our local offices:
North Bay – Prices have come down, but there still seems to be a lot of interest out there for luxury properties. The good ones go fast. Inventory levels on available single-family homes in Sonoma County are down approximately 5% from June 1st levels, our Santa Rosa manager says. As a general rule REO inventories are much lower than any time in the recent past while short sale inventory has increased as an overall percentage of available inventory (although short sale properties are quickly being snatched up). We still see a lot of cash buyers in the marketplace and the market for properties under $400k is hot. As a result we are seeing Open Houses being heavily attended even though a property may have been held open 3 or 4 times in the past. There is not a lot for buyers to look at. Appraisals are proving to be a continuing challenge due to over-bidding on properties because of the lack of supply. A property is basically overpriced if there is not an offer within the first 5 days for those properties under $600K. Many properties listed for sale are stating that offers will be reviewed within a week of hitting the MLS. This leaves about 3 days for showing the property and then about a day to write it up. The lack of inventory is forcing people to make decisions more quickly. Our Sebastopol manager says a distinct lack of inventory is creating multiple offers in all price ranges. Cash remains king when more than one offer is received. We are seeing as many as 20-30 offers for some properties. Equity sellers remain hesitant to bring their homes to market.
San Francisco – Our Lakeside office manager says it defies logic: New listings are down, new sales are up. What doesn’t defy logic is that virtually every sale is in multiple offers. In this market where houses are very hard to secure, Agents say cash is highly valued but also highly appreciated (and effective) are good buyers’ agents who help them to understand the process correctly and to tailor their offers to the tastes of the sellers. The Lombard office reports more solo deals this week, but popular properties are still garnering multiple offers. Inventory continues to shrink. A new listing at $3.95m sold in 3 days, over asking, all cash, closed in 5 days. Our Market Street manager says they are still in the usual summer doldrums, though the buyers are out there and eager to pounce. While a smaller number of ratified deals had multiple offers, an increasing number were wrapped up preemptively or even pre-MLS. Listing inventory continue to go down but open houses continue to be very active, our Sunset office manager says. More than half of the ratified offers were in multiple offer situations. Be aware: He’s seeing a lot of buyers making multiple offers on several properties at the same time in hopes of getting one.
SF Peninsula — Our Burlingame North office manager reports the Previews high-end market activity is continuously slowing during these summer months. Across the hills our Half Moon Bay office manager says Pacifica seems to be the hot spot on the coast – low inventory with multiple offers on homes, especially in the $500-600k range. The Menlo Park area market is still good for summer – very good open houses, but fewer sales. Buyers are still looking and there are more buyers looking now than there are sellers coming to market – based on an informal survey. We have no doubt that when Facebook people actually get liquid (mid November) we will see a bump in the market from that money. Many will sell their stock right away to avoid the increase in cap gain tax in Jan of 2013. They may not buy right away but they will soon, our local manager suspects. After a strong week of sales, inventory has now depleted, according to our Palo Alto manager. The roller coaster of inventory is still experiencing ups & downs, however demand to get on that roller coaster is still very strong. Lack of inventory is still causing frustration for many of buyers, our Redwood City manager says. One of our properties, a 3/2 ranch-style home, received four offers and actually sold for $100,000+ over asking. Open houses are attended by 50+ people every weekend. Some of the buyers are getting very discouraged but they are hanging in there. It’s difficult for agents to find open houses. Our San Mateo manager reports that the “hysterical” atmosphere of the market is generally quieting down. Price is now becoming a consideration by buyers, however open houses are still well attended. Buyers’ new mantra, “I want a home but not at any price.” Sales are still good in Woodside and its environs. Very few multiple offers in the area but fairly steady.
East Bay – The Berkeley market feels very active with lots of agent interest in any new listing and lots of visitors to open houses, offers and sales. Still experiencing multiple offer competition, a notice to buyers to make their best offer first. Not experiencing the typical summer slowdown and some listings are trickling onto the market, not waiting for after Labor Day. The Previews high-end market is much more active than previously. Properties that were being held priced under a million are now comfortably going on the market for over a million. The million “something” price is not deterring showings, offers and sales, as last year, or even a few months ago. Our Oakland-Piedmont manager says listings have slowed from the lower-than-normal pace we were on before. Most agents believe it is for the month of August and that it will pick up in September, although we expected listings to surge several times this year after key holidays or vacation times, and the surge never materialized. Plenty of activity at open homes and buyers are still writing offers time and time again to get into a home. In Pleasanton, multiple offers are still happening mostly on homes priced in the $400K to $600K range. We are seeing some slowing due to school starting. Prices among entry-level homes are increasing, according to our Walnut Creek office. Buyers are still competing with multiple offers. Inventory remains low. Sales are still steady with an increase in new home sales being the alternate option for new buyers not finding resale homes available.
Silicon Valley – Sales activity is steady, according to our Cupertino manager, with lots of multiple offers, but not as many per house as we would have had a month ago. The activity is still impressive for this time of year. The seller’s market has now expanded into the Los Gatos Mountains. Sellers are starting to receive multiple offers from buyers who are competing for the mountains. Our San Jose Almaden manager says the Preview high-end market is picking up.
South County – A shortage of inventory is now an understatement, our Gilroy manager says. Gilroy is down to one month of supply – only 55 homes in an active status. Of those only 16% are distressed – short sales or REO’s. San Benito County is tracking similarly. There are only 10 REO’s in ALL of San Benito County. We have buyers who have put in offer after offer – many homes receiving multiple offers in the teens and twenties. We have seen a tremendous improvement in short sale approval time periods with some banks able to turn around an approval in a matter of a month. This has enabled us to push through the backlog of pending properties that were short sales. Appraisals are still a huge issue while the market catches up and the proliferation of all cash buyers makes it hard to be a buyer in South County and San Benito County. The current Morgan Hill market can best be summarized as “Happy Sellers and Frustrated Buyers.” The lack of inventory coupled with the large number of ready and willing buyers certainly has resulted in a Seller’s market. Listing agents are garnering multiple offers and buyers are finding that they must offer substantially over asking price to have their purchase contracts considered. In fact the average sales price in the Morgan Hill Office has gone from about $464,000 in January to over $544,000 in June. In addition, many buyers are removing appraisal contingencies in order to obtain a property. The good news is that as final sale prices continue to increase, many sellers who were previously “underwater” can now list and sell their homes without the restrictions of a short sale.
Santa Cruz County – The local market is steady although August may not shape up to be the very best month. Usually a time for vacations and back to school – we have usually experienced a bit of a lull in years past. So far sales continue to come in. It’s the same story as most other markets, very limited inventory, down 15% over the same time last year. Buyers are scrambling to find a property that fits their needs and a lot of transactions are cancelling so being in a back-up position these days is not such a bad thing. The biggest challenge we are facing is a lack of homes for the demand of Buyers. The good news is some homes are selling this year in the over $2 million range. There are Buyers out shopping for that once in a lifetime beach home that they have always wanted. A home that sold for $3.8 million a couple of years back, just sold again (same CB agent) and he represented both Buyer and Seller without going on MLS. This is an anomaly as prices have gone down not up especially in the higher end properties. The sale price was $4.25 million. It was a relatively easy transaction for the Agents, and the Seller is now trying to purchase a property listed at $6.75 million. Our offices have closed several over-$1 million properties this year and we have more in the pipeline. A far different story than 2011!