A new report out this week shows that the Bay Area’s housing market continues to gain strength with growing demand and a shortage of listings driving prices sharply higher and boosting sales once again in January.
DataQuick, the La Jolla-based real estate information service, reported that the local market turned in its strongest January sales in six years and marked the 10th straight year-over-year increase in the median sale price of a Bay Area home.
A total of 5,501 new and resale single-family homes and condos sold last month in the nine-county Bay Area, up 3.2 percent from January a year ago. Last month’s sales were the strongest since January 2007 before the downturn in the housing market.
The real story here, though, is the rapidly increasing median sale price for Bay Area homes. In January, the median price paid for a home in the region jumped to $415,000, surging 27.3 percent from a year ago.
DataQuick noted that half of the increase in the median price is due to changes in market mix with sales shifting from low-cost foreclosures and short sales to more of the mid-market and move-up home category. But clearly, a shortage of homes on the market is pushing prices higher as well, especially as multiple offers are becoming the norm in many communities.
The biggest jump in median home prices last month was in Santa Clara County where the median surged 31.6 percent year over year to $550,000. Alameda County saw a 30.5 percent jump, San Mateo a 29.1 percent increase, and Contra Costa County a 28.3 percent boost. The lowest increase was 14.3 percent in Napa County.
To give you an idea where we are in the recovery, the low point for Bay Area median home prices was March 2009 (also the low point of the stock market), when the median fell to $290,000. But at $415,000, we’re also still below the Bay Area peak of June and July 2007 when the median hit its high of $665,000.
But as we know, real estate is really about location, location, location. And some of our markets that didn’t fall as much as others in the Bay Area have already seen prices bounce back to their pre-recession levels. Indeed, some towns in the Peninsula are seeing some all-time highs for homes in certain neighborhoods.
Still, the takeaway from this report is that while the housing market continues to gain steam, home prices still have a ways to go in many markets around the Bay Area. That’s good news to those who have been thinking about buying but haven’t made your move yet. You’ve still got a great opportunity to buy a home at attractive prices and with near-record low interest rates.
But given the rapidly improving market, my advice is not to wait too long. You can read the DataQuick report here.
Below is a market-by-market report from our local offices:
North Bay – Our Southern Marin manager says he’s hearing more stories about too many buyers chasing too few listings. One agent said she wrote three offers over asking price this week and all of her clients were outbid. One home hadn’t even hit the market yet. “It feels like 2006!” she said. Agents in Northern Marin are beginning to see what might be a change in the market. From 1/28 to 2/8, there were over 20 new properties on the market, at a broad range of prices – from $190,000 up to $1.35 million. The majority are in the $500-700K range, so this might be the first price range that is getting a more normal selection of homes. Multiple offers are still the norm and the buyer demand remains fierce at all price points. One open house had 170 attendees, and we are seeing fewer short sales and REOs. Buyers are generally having to make 3-4 unsuccessful offers before realizing what is needed to get the house – over asking and short contingencies or cash. If priced inappropriately homes in the Santa Rosa area are receiving as many as 20 to 30 offers. Pricing strategy is key to an over solicited market. At some open houses agents have been limiting the number of people walking through to one at a time, which has resulted in huge backups outside the doors and down the front sidewalks of the homes. There is an increase in Buyer calls in the $1-2 million range. Agents in the luxury market are cautiously optimistic. Homebuyers in this type category are very price conscious. While there is an upward trend in pricing at the lower end of the market, this has not translated into an uptick in the pricing of the higher end market.
San Francisco – One measure of the health and strength of a market is whether it is stable enough to reward the effort of developers who purchase a property, rehabilitate and upgrade it and then market the new improved product. In today’s market the answer is a resounding yes, according to our Lakeside manager. Our office’s listing on Lake St. last year sold just over $3 million. Last week, the property came on the market at just under $8 million after a reported $2 million upgrade. It was under contract in one week. Our Lombard manager says inventory shortage definitely is affecting sales. Some buyers are dropping out, discouraged by competition. Aggressive pre-emptive offers are more common. A few new listings trickling onto the market have raised the number of ratified deals, our Market Street manager reports. With buyer demand still at a fever pitch, nearly every sale received multiple offers (between 2 and 13). The ratified deals with single offers were sold prior to being introduced to the market, or were in the luxury price range. Our Sunset manager says some homeowners who were planning to sell are holding off for an expected appreciation in value as the market continues to tighten.
SF Peninsula — The heavy buyer demand in the northern Peninsula area shows no sign of letting up with buyers and their agents getting ever more creative in finding off-market listings and constructing offers designed to win, our Burlingame manager says. Every offer is a multiple, sometimes as many as 20-50 on a property. One San Mateo property went for $200,000+ over asking for a fixer upper, all cash, five-day close. Millbrae is particularly tight with inventory – only five at this time. There are 50 active and 12 pending listings in Hillsborough at this time, up slightly over the last few weeks. The over $3 million segment is still a bit slow while the $8 million is quite active. About half of the homes that closed escrow in January sold for the asking price or more, according to our Burlingame North manager. The multiple offer activity in January was off the charts. Maybe those numbers will be reflected in the February closed sales. In Half Moon Bay, listing inventory was up this week – the coast-side’s market is strong, not as competitive as the Peninsula. Agents are seeing many buyers coming over the hills as they’re tired of getting beat out of offers with the aggressive competition on the mid-Peninsula. The $900k to $1.3 million market up and down the El Camino corridor from San Carlos to Cupertino is almost out of control, our Menlo Park manager reports. Open houses are mobbed and 5 to 10 offers are common. Between the ‘healthy’ stock market and low rates (that are going up at some point) buyers are almost in a land rush mentality. The entry level of each city is seeing exponentially increasing prices. Inventory is lower than it has ever been in Palo Alto. All price ranges under $1.4 million are active in Redwood City-San Carlos area. The townhouse/condo market has picked up. The Woodside and Portola Valley market are doing well, including the high-end market.
East Bay – Still not enough listings to satisfy the growing buyer demand, our Berkeley manager reports. Last week there were a total of 16 listings in Berkeley, with four over $1 million. Only seven Berkeley properties on last week’s Brokers’ tour and 28 listings on tour for a huge area from El Sobrante through Oakland. Buyers are beginning to understand that they will face tough competition of every home and their first offer has to be their best. Offers are being written 10-30% over asking for the most part. Inventory is slowly inching upwards with 16 homes on the Lamorinda tour this week. Agents continue to work overtime trying to find homes for their buyers. Many agents are broadening their search radius to increase their client’s opportunities. Walnut Creek agents are starting to see a very slight increase in listings but they are sold almost immediately. They are still seeing homes being sold for above asking with few contingencies. Cash is still king.
Silicon Valley – Our Cupertino manager says that lots of people would like to list their homes, but are afraid that they can’t find anything to buy. The number of multiple offers per property is amazing, she notes. Pre-emptive offers are a hot topic in the Los Gatos market. Sellers are torn between accepting an early offer that is written well above list price or waiting until the offer date to be fair to all buyers. Each situation is being handled on a case-by-case basis. An agent in our office showed a property that just came on the market in a very popular neighborhood close to town. The listing agent informed her the seller was waiting until after the weekend to review offers. The buyer’s agent encouraged her client to write a strong “pre-emptive” offer over asking price to show the seller the seriousness of the motivated buyer. The seller signed the offer and the buyer is in contract. In this case, the perseverance of the buyer and the buyer’s agent paid off! Inventory in the San Jose Almaden market is increasing albeit at a snail’s pace. Just about every offer written or received on a property is a multiple offer. That’s echoed by the San Jose Main office, where the local manager reports two properties listed last week ($629,000 list and $689,000 list) received 25 offers and 31 offers apiece. And our Willow Glen manager notes that some frustrated buyers are bidding up regardless of recent comps, and they are not concerned about appraisal issues. Lots of foreign money “all cash” offers seems to be the norm.
South County – The South County market is all about multiple offers and positioning a buyer for success, according to our Gilroy manager. Entry-price homes are receiving 15+ offers. Bank owned properties are drying up quickly. Short sales are coming out as people run out of options for loan modifications. But move-up buyers are back as they now have equity to leverage. All cash and the removal of an appraisal contingency are commonplace. Most open houses need to be staffed with two agents as we are seeing a flood of buyers coming down to South County. On Tuesday of this week there were only 40 properties listed for sale in all of Morgan Hill, our local manager reports. They ranged in price from $2 million+ to under $400,000. In addition, there is only one condo for sale in all of Morgan Hill. Inventory remains a challenge to buyers and to agents. There are several new home developments in Morgan Hill. Last Saturday a local new homebuilder released three single-family homes for sale from $799,000 to $890,000. Prospective buyers actually camped out in front of the sales office for two days prior to the release. The three homes were sold on Saturday morning in a matter of minutes—with several “back-up” contracts accepted on each as well.
Santa Cruz County – The agents are generally optimistic about the Santa Cruz market and all are busy. We are starting to see a slight increase in inventory. Open houses have been well attended and there are Silicon Valley types who are perusing the beach properties and have cash to spend. Some properties that were formerly on the market and did not sell are now selling. Buyers have a bit of anxiety about having to compete for homes, however, the Santa Cruz area is a microcosm of the market “over the hill” – multiple offers here can mean 2 – 10 offers. Properties are going over asking in some cases, and appraisals are all over the map. In some instances the property appraises, then a second look by the lender at the last minute causes some issues. Lending continues to be a huge challenge for the Buyers, even those qualified with sufficient down payment.
Monterey County – Sales activity on the Monterey Peninsula continues on its steady pace, with sales of the higher end properties becoming more frequent, after only a slight lull over the holidays. Our local manager said agents would likely see more sales except they are becoming shorter on inventory. The area was full for the AT&T Pro-Am last week. While there were some showings to those attending, most were concentrating only on golf, as is usual.