Promising Signs for More Improvement in Housing Market in 2013
Posted on January 6, 2013
Happy New Year!
The housing market, both in the Bay Area and across the country, certainly showed impressive gains in 2012 with sales and median sale prices up in most markets and distressed sales and foreclosures down. In fact, the biggest challenge many of our local markets faced last year was not having enough homes to sell in order to satisfy the growing demand from buyers. How far we've come in just a few short years!
As we kick off 2013, there are a number of positive signs out there that the momentum we saw last year will only accelerate in the new year. Many widely followed industry analysts believe we will see gains in sales, prices and new home construction this year from coast to coast.
National Association of Realtors Chief Economist Lawrence Yun believes the steady housing market recovery will continue over the next several years, barring further tightening of mortgage credit availability.
Yun reports that, "Existing-home sales, new-home sales and housing starts are all recording notable gains this year in contrast with suppressed activity in the previous four years, and all of the major home price measures are showing sustained increases."
While mortgage rates have been at historic lows, Yun expects these rates to rise to an average of about 4.0 percent this year and 4.6 percent in 2014.
With rising demand and shrinking inventory, NAR foresees "meaningfully" higher home prices. The organization estimates that the national median existing-home price rose 6 percent to $176,100 last year, and predicts it will increase another 5.1 percent in 2013 to $185,200 with a similar increase in 2014.
NAR isn't alone in its bullish forecast. According to the UCLA Anderson quarterly forecast released last month, the U.S. housing market should be a major driver for the nation's economy over the next two years – a change from past years when housing trailed other sectors.
UCLA Anderson economists say that the U.S. housing market may have been late to the economic recovery, but it is now taking the lead. "With the recovery more than three years old...housing is gaining strength," said UCLA Senior Economist David Shulman in his report, Beyond the Cliff. "In fact, the late arrival of the traditionally early pickup in the housing market has become the leading source of strength."
So where does all this leave us? While no one can say for certain what the future holds, most signs point to the fact that the housing market will continue to see steady improvement. Interest rates remain near historic lows, and home prices are rising again. The economy is gaining strength, albeit not as predictable and solid as we’d like to see. And the job market continues its gradual acceleration.
Locally, this gives us a very optimistic outlook for 2013's Bay Area housing market. It should be even more robust than 2012's. The market has turned in a big way since the recession and there just aren't enough listings to go around. Sellers are getting good prices for their homes once again – in some cases, multiple offers over their asking price. In San Francisco and the Peninsula, most of 2012 was challenged with 40% to 50% of the previous year’s inventory, even less in some communities; coupled with rising sales activity. Similar situation occurred in Silicon Valley, and Marin. East Bay, Sonoma, Monterey and Santa Cruz counties had drastically low levels of entry level homes for sale all year long. Some areas in these counties had been hit hardest with distressed sales, and the recovery was most notably swift here, as it became very competitive to purchase a short sale or bank-owned property. South County; Morgan Hill, Gilroy, and Hollister, it was all about the lack of inventory all year. (As noted below by our Santa Cruz manager, inventory levels there are lowest they’ve seen since 2005.) Mid-year the higher end of the market in these counties saw improvement, with some substantial sales along the Coast, wine country, and in the East Bay. The Previews market was alive and well in San Francisco, the Peninsula, and Marin; which had some incredibly “record-high” sales in 2012.
The two most widely known axioms associated with real estate; Location, Location, Location – and Supply/Demand, have never been more important. Here in the Greater San Francisco Bay Area, we are extremely fortunate to have both in our favor. If a homeowner is considering selling this year, the best advice may be, to not wait for other homeowners in the area to do the same. Now may be the perfect time list your home while the numbers are in your favor.
Below is a market-by-market report from our local offices. An interesting mix reported; some Holiday slow-down, coupled with a fair amount of last minute Fiscal-Cliff buying frenzy. Never a dull moment for Bay Area Realtors!
North Bay – Lack of inventory continues to generate multiple offers, according to our Petaluma manager. More than normal, agents are seeing sales transacted before they hit the market. Our Sebastopol manager notes that the holiday real estate market felt just like it did in the 90’s: buyers, sellers and agents all appear to have taken a winter vacation. Almost like a fiscal cliff, our Southern Marin manager says, agents were rushing around December 31st getting deals closed and handing over keys to happy buyers and checks to happy sellers. They made it! The rush of year-end activity was big and we closed the year in Marin with a bang. Still many unsatisfied buyers out there. With equity coming back, sellers should be looking at 2013 as a great time to re-enter the market. Will it be enough to satisfy the demand? That’s the big question. We are all gearing up for a big year though.
San Francisco – The Lombard manager reports that the fiscal cliff drama helped create a lot of year-end closing frenzy. More deals closed but more gray hairs for agents. Sellers were “snug in their beds” making the market seem “all quiet on the western front,” our Market Street manager says. However, buyers squeezed house hunting in with their holiday preparations, and those few homes that were accepting offers were inundated (one modest home in the Excelsior district had given out 42 disclosures at the time of this update, and had 3 offers in hand days before the official offer date). Our Sunset office manager noted that sales are down but it is not due to lack of buyer demand. It is due to lack of inventory. The very few listings that had open houses were extremely busy. Although sales are down, the majority of the sales still had plenty of multiple offers.
SF Peninsula — Peninsula wide the inventory is extremely low: 10 active in Burlingame, 25 in San Mateo, two in Millbrae and three in Foster City. The buyers are waiting, agents are seeking news of any “off market” listing and everyone is praying for something to show to their waiting buyers. There are 35 active and 12 pending sales currently in Hillsborough. This reflects a lower inventory from a typical market of 65 listings through most of 2012. There were a lot of last minute end of year sales. Many were rushed due to uncertainty about taxes in 2013. There are certainly high-end buyers waiting for the expected new listings to come forth. It seems that the spring market will definitely kick off earlier than in most years. In Menlo Park, the local office was amazingly busy until Christmas day. Lots of closings before year ‘tax hike” end. Everyone has more buyers than sellers. The Redwood City-San Carlos market has been very quiet over the holidays. Woodside and Portola Valley got pretty sleepy at the end of the year. Agents have more buyers than sellers in general – properties available over $6 million are numerous however. Some deals to be made in that over $6 million market.
East Bay – The Berkeley office reports steady showings throughout December and even during the holidays. Agents are still writing offers and securing listings for early 2013. In the Lamorinda area, sales have declined slightly as inventory is extremely low. Sellers seemed to have been waiting until after the holidays to list their homes. According to our Walnut Creek manager, inventory is still low. Some sellers are waiting on the new year to list their homes. Buyers are still doing non-contingent deals and cash is still prevalent in winning offers. The Previews high-end market is consistent right now within the listings and sales sides. Buyers are definitely showing interest in this market more so than in the past few months.
Silicon Valley – In Cupertino, it has been very quiet, our local manager says. Agents are just now starting to show up again and get underway for the new year. The Los Gatos office said sales continued to pour in over the holidays and the upper end of the market gained strength. Our San Jose Willow Glen manager says the last two weeks of the year were fairly quiet with new listings. Many sellers seem to be waiting until the new year to put their homes on the market, many of our agents continue to have listing appointments and meeting with sellers to consult about timing as to when in 2013 to put their homes on the market. We have several new listings going “live’ on the MLS the first two weeks of Jan. The overall consensus is that the winter selling season will start well before the traditional “Super Bowl” weekend. The race was on to get all deals closed by the end of the year for those chasing the New Year deadline. Many agents also have a full pipeline of buyer’s ready, willing and able to buy so the hunt will be on right out of the gate of 2013. The inventory is incredibly low going into 2013 in the Saratoga area. Sales for December were on pace with the normal level.
South County – Our Morgan Hill manager says the dual holiday season certainly slowed down real estate activity in the South Bay. Most buyers and sellers (and agents) took a well-deserved break from the frenzied pace of the current market. As 2013 begins, optimism remains strong and buyer demand continues to be strong for homes in all price ranges. Morgan Hill agents are working hard to acquire listings—as most are selling for over asking price with multiple offers.
Santa Cruz County – The December numbers reflect continued low inventory, hovering around 600 total homes on the market, down 26% from a year ago. Closed sales were up overall for 2012, over 20% and sales have exceeded the same months, one year earlier for well over a year. The unsold inventory index is the lowest since 2005, with only about 3 months supply of inventory currently available. The year ended with the median price around $500K and those sales under that price representing half the sales. It appears that we are digging ourselves out; there are definitely a lot more buyers than homes available, and we are expecting much of the same going forward this year. Agents are optimistic about the upcoming year.
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