So much for a summer slowdown in the housing market! Bay Area home prices surged to a four-year high in July and the region turned in its 13th consecutive month of year-over year sales increases, according to a new report out this week from DataQuick, the La Jolla-based real estate information services company.
The median sale price for all new and existing homes in the nine-county Bay Area jumped 12.6 percent to $421,000 from $374,000 a year ago and the highest price since August 2008. Sales gains were even more dramatic with 8,461 properties changing hands, nearly 23 percent more than a year ago.
If there was any doubt left that our housing market is on the rise I think this spring and summer’s performance should put that to an end. The median price increase can be attributed to fewer distressed home sales and more “normal” market activity. Additionally, the shortage of inventory for sale is resulting in buyers bidding up prices on the relative few homes out there.
As I said in an interview with the San Jose Mercury, this is a very good problem to have – for now, at least. It’s a sign of an extremely hot market, something we sorely needed after several years of a downturn in real estate.
But, the shortage of inventory is not a good long-term problem to have because eventually we need homes to sell. Without more inventory, it’s impossible to get the housing market back to normal, healthy levels. Usually by this time of year inventory has reached its peak. But this year, we’re 50 percent below normal in many markets.
My hope is that word will continue to get out to potential sellers who have been sitting on the sidelines that now’s a great time to list their properties. Buyers are lining up for good, fairly priced homes. I never thought I’d be writing this a couple of years ago, but this truly has become a raging “sellers market.” How times have changed in a couple of short years!
While the housing market nationwide continues to gain momentum, we saw other encouraging economic signs this week in the latest round of economic reports. The most prominent was the July index of leading economic indicators, which moved higher for the fourth time in the past six months. Industry production, building permits and retail sales also showed strong gains.
The stock market has taken notice lately with the S&P 500 approaching its four-year high on Friday. Interesting to note that both Bay Area housing prices and the stock market are at four-year highs. Talk about a strong correlation between stocks and real estate!
To be sure, there’s still plenty of reason for caution given the economic headwinds here at home and internationally, especially in the Eurozone. As noted below by our Menlo Park manager, there is a positive note for us here in the Bay Area regarding the shaky overseas economies: Bay Area real estate has become a “safe haven” investment destination for some of the European and Asian wealthy who wish to put their money elsewhere. All in all -it’s gratifying to see many economic indicators moving in the right direction again. And that can only bode well for continued improvement in the housing market.
Below is a market-by-market report from our local offices:
North Bay – The Northern Marin market remains basically unchanged from the last report. We are seeing some small inching up of prices, but the lack of inventory and buyer demand is not translating into the usual upward pressure on prices. Buyers remain enthusiastic but practical. In Sebastopol, agents are still seeing huge demand in the entry level with one new Sebastopol listing attracting 67 people to the open house. The Previews high-end market activity is better than it has been in a very long time, however the prices are not improving with the increased activity.
San Francisco – Our Lakeside office manager asks: Why are some properties not getting multiple offers in this climate of high buyer activity? 1) Some listing agents are not getting their properties exposed properly through the MLS, 2) Some sellers are choosing to sell without extensive exposure to the market and, even in this environment, 3) some properties are coming on the market over priced. The moral is to choose your listing agent carefully and work with them to make sure the property is well prepared, well presented and broadly exposed. Multiple offers and cash deals remain prevalent, according to our Lombard office manager. A few appraisal issues are appearing. Open house traffic remains high and most agents are more active than a typical August. Beside the single family and condo market, the investment market is definitely on fire as well, our Sunset office manager notes. One listing, a six-unit apartment building listed for $1.5 million, had 30 offers. Our office had submitted five offers and the highest one submitted was over $1.9 million with approximately 70% down but did NOT get it, not even an invitation to be a backup.
SF Peninsula — The buyers are waiting and desperate for that pent up inventory to come on the market, reports our Burlingame manager. While families are taking their last vacations before the start of the school year, many buyers are in their 5th offer or more. Everyone is seeking that elusive “off market” listing with many sellers preferring to try this route before going into the MLS fearing the sigma of too many “days on the market.” Every price point from entry level to $3 million is experiencing this. Listing activity in the high-end Previews segment of the market is in a seasonal slowdown. Sales through the month of July and early August have been strong, although $5 million is proving to be the high-end number for this year to date. Hillsborough with large lots, great schools and easy access to S.F. is a terrific bargain right now. The Half Moon Bay area is experiencing a slow down this August, which is typically for this time of year. Agents are looking forward to an uptick after Labor Day. The Menlo Park market is a bit slower but still robust for August. The area’s international buyers have arrived. Chinese, Russian, French – open houses are much more cosmopolitan in Menlo Park, Atherton and somewhat in Woodside. The US is still ground zero for ‘safe’ investing when other countries get nervous. Palo Alto area inventory rises and falls on a week-to-week basis. There were only four homes on the broker tour in Palo Alto last week. There still is a lot of activity at the open houses, according to our Redwood City manager. Lots of multiple offers but the number of offers is declining – usually two or three instead of six to 10. The multiple offers are in all price ranges. Our San Mateo manager says there’s market movement in all areas but the amount of multiple offers per house has dropped off. Low inventory continues to plague sales. Active inventory for our six primary market communities was down 45% from the same period last year. July ratified sales increased 22% and July closed transactions increased 26% over last July. The percentage of short sales and REO’s has decreased dramatically. There still is quite an inventory of high-end homes available in Woodside both on and off the MLS. Sellers will absolutely sell “at the right price,” our local manager says. Woodside sellers are still suffering from “My house is worth this amount” – when there is no evidence of such a price. Portola Valley is still the best-kept secret in the hills. You can get a nice house on an acre for the same price that you pay for the same house in Menlo Park on a 10,000 ft lot.
East Bay – Berkeley area prices are back to 2006 levels as are the number of properties being sold, according to our local manager there. The average days on market is 26, down 33% from summer 2011 and months supply of inventory is below 1%. That is a 68% drop in inventory from last summer. Average sales price is up 19% with properties closing at least 7+% over asking. Million dollar plus properties are moving quickly, with an average 19 days on the market, down 44% from last summer. They are also going at least 7% over asking and inventory supply is down 80% from last summer, with .09 months supply. While the inventory keeps declining, our Oakland-Piedmont manager says agents have been hearing from stagers and other real estate service providers that they are very busy with listings coming up in September. It will be interesting to see what that translates to inventory-wise. Will there be an influx of listings after Labor Day? We’ve been expecting the influx to come after each holiday all year to no avail. Open house activity has been brisk with many new buyers turning out on Sunday. Our Orinda manager says there is still a shortage of inventory on well-priced homes. Those homes that are well priced move quickly. Buyer activity remains high and open homes are heavily attended. Our Pleasanton-Livermore office reports that inventory remains low and he’s still seeing multiple offers on right priced homes. Seeing less activity due to time of the year. Finally, our Walnut Creek office says she’s seeing multiple offers on most every property. Agents are still having some lending challenges. Short sales in some corners of the market are increasing. Inventory is still very low.
Silicon Valley – Our Cupertino manager says it seems a bit quieter right now, but the best properties are still receiving a tremendous amount of attention. Sunnyvale is particularly active. An attractive 3 BR (1600 sq. ft.), listed in the high $800’s got ten offers and was bid up more than $100K. The San Jose Main office reports active open houses this past weekend with anywhere from five groups to 23 groups on various properties. Low inventory and low interest rates continue to fuel the market. The Willow Glen manager says agents continue to see multiple offers with limited inventory. It’s a very competitive environment and sales prices are going over the asking price in the market. Saratoga sales have slowed to keep pace with budgeted expectations. It appears the market is on track for sales to match last year’s pace. This activity level follows two months of higher than expected sales activity.
South County – Competition among Morgan Hill agents to obtain listings is fierce and aggressive, our local manager says. With so little current inventory sellers are not only striking excellent deals by receiving over list price offers from potential buyers, but are also using this leverage with listing agents as well, asking for and receiving deep discounts. As home prices increase (with high demand and low supply) the market seems to be responding in two ways: agents are seeing an increase in the number of “move-up” buyers (those attempting to sell a smaller home in order to purchase a larger property) AND with sellers now listing homes that were previously “under water” in lieu of having to experience a short sale.
Santa Cruz County – The Santa Cruz area market seems to have slowed as it usually does in August due to last minute vacations, back to school, end of summer activities. Year over year, inventory is down 16% from last year at this time while closed sales in the county are up 13%. Our manager continues to see a lot of short sales and some REO’s are trickling in to a couple of agents. Santa Cruz is a non-traditional area for real estate as the coastline and casual lifestyle attracts second homebuyers and investors who are out there actively trying to purchase homes.
Monterey Peninsula – For what is still sometimes referred to in the media as a buyer’s market, this market certainly isn’t favoring the buyer any longer, our local manager reports. Just six-eight months ago buyers thought they were in control, could make low offers, ask for property to be in tip-top condition, etc. Of course, even then, they couldn’t really but they didn’t know it, as there was some competition. But now, agents say, the buyers are not in the dark any longer and do understand that properties, except in the high price ranges, are getting multiple offers, and they have to come in over asking price with clean contract, asking for little to be done if they want to secure the property. And even then someone might beat them out with a higher price. So the strong beat of activity continues on here on Monterey Peninsula and as long as we continue to have sufficient inventory and low mortgage rates, we don’t see the end in sight.