There was some welcome news for the housing market this week, both here in the Bay Area and nationally. The biggest headlines came on Thursday when the Federal Reserve, as expected, announced plans for further stimulus for the sluggish economy. And here at home, the local housing market continued to gain strength with luxury home sales improving once again last month (more on that later).
The Fed surprised no one when it said it plans more economic stimulus. But what did take some by surprise was the approach Chairman Ben Bernanke and fellow governors chose. With its new quantitative easing, or QE3 effort, the Fed said it plans to begin an open-ended program to purchase mortgage-backed securities – a move aimed at bolstering the housing recovery and the overall economy as well.
The Fed will buy $40 billion of mortgage debt each month until job growth picks up, a move that was greeted with enthusiasm by the financial markets Thursday with the Dow rallying 206 points. In a statement released Thursday, the Fed’s Open Market Committee acknowledged concern that without “further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.” Here’s a link to the Fed’s news release: http://www.federalreserve.gov/newsevents/press/monetary/20120913a.htm.
The Fed was widely expected to act at this week’s meeting in light of a weak jobs report and continued anemic GDP growth in the economy. While the mortgage-buying program in itself certainly is no panacea for the housing market or the economy, it can only help real estate sales across the country by making it even more affordable for potential buyers to jump into the market.
Here in the Bay Area, we’ve actually seen steady improvement in all segments of the housing market, but perhaps none more than the luxury end. From Marin County and San Francisco, down through the Peninsula and Silicon Valley, and across to the East Bay, the demand for premium properties continues to be on a tear.
In many cases, the high-end Previews segment of the market is enjoying its best period since before the financial crisis and recession took its toll on real estate.
We’ll be releasing our Coldwell Banker Residential Brokerage luxury market reports to the news media in the coming weeks, but I wanted to share a sneak preview of the findings with you:
- In San Francisco so far this year there have been 201 home sales in excess of $2 million, up 14.2 percent from the same period in 2011.
- Million-dollar home sales in Marin County in July soared 29 percent in August compared to a year ago, with 75 high-end properties selling last month.
- Silicon Valley’s luxury home sales jumped again in August, surging 36 percent from a year ago with 117 sales over $1.5 million.
- The upper end of the Valley’s luxury market continued to be especially robust with 46 sales above $2 million and 16 deals over $3 million, up from just 11 a year ago.
- The East Bay saw 157 sales in Alameda and Contra Costa counties over $1 million, up an astounding 34 percent from the 117 sales during the same month last year.
- In the upper end of the East Bay luxury market, 15 homes sold for $2 million compared to just nine last August. .
As our agents and buyers know only too well, the only thing that seems to be holding back this market is the lack of homes for sale. That’s just as true at the luxury end of the market as it is for the rest of the real estate market. My hope is that word will get out to sellers as we approach the fall selling season that it’s time to take advantage of this terrific market.
Below is a market-by-market report from our local offices:
North Bay – The luxury market continues to be hot in Marin with properties between the $2 to $5 million range in most demand. Inventory is still an issue here, and although there was some promise of a fall rush, we are not seeing as many homes come on the market as we’d like. We currently have the highest level of sales in the past 18 months, yet the lowest amount of inventory in that same period. An article in today’s SF Chronicle pointed out that sellers are regaining equity. This is a good sign as many might now feel they would take less of a hit by putting their property on the market now (perhaps after holding out through the down cycle). In Sebastopol, agents are dealing with record low inventory. Properly priced, well-maintained properties are selling at a premium. Appraisals remain a challenge.
San Francisco – Finally there is a post-holiday listing bump, according to our Lombard office. Our local manager says 50 more homes and 70 more condos are hitting the SF market. Let’s hope inventory growth continues. Some homes selling for far more than the asking price went into contract this week, one 33% another 30% over. And no appraisal issues so far. Open and broker traffic remains high. Even during the typically slow Labor Day holiday week, buyers remained eager and ready to buy, our Market Street office says. Sellers who accepted offers during this period got multiple bids (even a short sale condo with a large upcoming special assessment received eight offers).
SF Peninsula — The fall market is kicking off with a bang. One new Burlingame listing at $1 million had 250 at Saturday’s open house and 350 on Sunday. The pent up buyers are back and hoping to settle into a new home for the holidays. In Menlo Park, the local market has been very quiet in the last few weeks but agents are gearing up for the anticipated busy fall season. One week the inventory in the Palo Alto area is low, the next week it is high. The trend continues, as it has all this summer. Multiple offers are still common on properties priced right. Things have seemed to slow down a bit in the Redwood City-San Carlos area with the end of summer and children returning to school. There definitely is still a lack of inventory. The San Mateo market is heavily influenced by the continued lack of inventory. The number of active listings is down 46% compared to last year. Low inventory and steady demand caused more than 60% of the homes that closed escrow in August to sell for the asking price or more.
East Bay – A flood of listings came on the market in the Berkeley area following Labor Day, but there is still great buyer demand. Pre-emptive offers are back. All cash and fast closes still reign. It’s tough on the average homebuyer. Properties that hesitated to go over the one million dollar price point six months ago are now anywhere from $1,050,00 to $1,150,00 and going pending in fewer DOM. Inventory is inching up, according to our Oakland-Piedmont office, but not in the first-time homebuyer category. One of the agents had a listing in the San Lorenzo village area (first time home buyer/investor entry price), 60 disclosure packets were sent out and at last count 22 offers were received. Open house attendance was still going strong over the weekend trying to take advantage of the low mortgage rates. Although the Lamorinda market seems to have slowed a bit, sales remain steady. Several of our listings continue to go into contract over the asking price. The Pleasanton-Livermore market typically cools down this time of the year. Homes priced right will sell faster and homes $300K and under are still seeing multiple offers. Our Walnut Creek office says agents are starting to see multiple offers on every property – some of them all-cash offers for high-end homes.
Silicon Valley – Listings are flat, our Cupertino manager says, but agents are working hard with strong sales activity for this back to school time of year. Sales activity has been steady in Los Gatos and buyers were out in force for the Los Gatos fall mountain tour – one of its best turnouts in 5 years. Dwindling inventory in the San Jose-Almaden area makes it feel like September is November, our manager reports. Buyers who are dedicated to getting a home are continuing to hang in there. Some of those who have little down or are in the lowest of price ranges are have given up in frustration. Multiple offers are common in the San Jose Willow Glen area, especially in the planned unit development and condo market. The Saratoga market is still very strong and new sales were 20% over expectations, our local manager says. Listings seem to be slightly increasing as well.
South County – As we enter the last quarter of 2012 it’s clear that the South County housing market is very well on its way to showing strong signs of recovery. Though the lack of inventory is holding back some sales statistics, demand remains high for all price ranges—especially for entry-level and investment properties. In addition, agents are witnessing the resurfacing of “move up buyers” –those with new found equity looking for larger homes with more amenities. The average price of a single-family home sold in the Morgan Hill office is up almost 10% from what it was at the beginning of the year. South County remains a seller’s market, but as more listings become available, perhaps some normalization will take place.
Monterey Peninsula – It’s the last hurrah of summer with many visitors making the trek down to the Monterey area for Labor Day weekend. The area was busy as was real estate activity. The beat of new escrows continues on at a more rapid pace than usual. Our local manager said agents opened 42 new escrows again in the last two weeks. Though the REOs are becoming less common, we have many short sales, which are closing more smoothly and quickly than in past. She said the market is seeing more “regular,” non-distressed listings come on the market and go into escrow.