Bay Area Home Sales Continue Rising – Prices Highest in Four Years
Posted on July 23, 2012
The Bay Area’s housing market continued to heat up as summer got underway in June, with sales jumping 7.2 percent from a year ago and the median sale price surging to its highest level in nearly four years, according to a report released this week by DataQuick, the La Jolla-based real estate information services firm.
According to DataQuick, the median price for all housing rose 10.4 percent in the nine-county Bay Area last month to $417,000, up from $377,750 last June and $400,000 in May. That was the highest median price for the region since August 2008.
What’s causing the steady increase in the Bay Area median? While it’s pretty clear that all real estate is starting to appreciate once again, DataQuick analysts also suspect that it’s the result of an ongoing shift in the types of homes selling, slightly improved mortgage loan availability, and continued record low interest rates.
My sense is that it’s also a simple matter of supply and demand here in the Bay Area. As I’ve reported for many months now, the inventory of homes for sale is at extremely low levels in many of our cities. Some communities have less than half the homes on the market today than they had just a year ago. That’s prompting multiple offers and bids well over the asking price in many cases. Until the supply increases, look for more of the same in the months ahead.
It has been encouraging, though, to see the steady improvement in our market. More and more of our sales are “normal” transactions compared to distressed property sales, which were the lion’s share of deals a year or two ago. This bodes well for the continuing recovery of the market and a return to normalcy.
“Some of today’s stats are similar to what we saw in the thick of the housing downturn back in 2009, only in reverse: Instead of foreclosure resales soaring they’re waning, and instead of high-end sales slumping they’re posting some of the larger sales gains,” noted John Walsh, DataQuick president.
Last month foreclosure resales and short sales made up 36.1 percent of the resale market, down from 39 percent in May and 44.3 percent from a year ago. Foreclosure resales peaked at 52 percent in February 2009, but have since dropped steadily to just 18.1 percent last month.
A total of 8,577 new and resale homes were sold in the nine-county Bay Area last month, up 7.2 percent from 7,998 for June 2011.
Walsh said we’ve come a long ways on the road to recovery, but sales in the Bay Area were still 14.8 percent below their average for the month of June, which was just over 10,000 transactions.
Sonoma and Napa counties enjoyed the biggest sales gains last month at 25.2 percent and 23.7 percent respectively, but all Bay Area counties except Solano saw improving home sales. Contra Costa County saw the biggest median price increase at 17.7 percent in June, followed by Solano County at 12.7 percent.
Here is the DataQuick sales and median price chart:
Source: DataQuick, www.DQNews.com
Be sure to see my comments from the recent Coldwell Banker Chairman’s Circle event at the conclusion of this report
Below is a market-by-market report from our local offices
North Bay – In Northern Marin, the median list price is still at its plateau at $699,500. The average DOM is still hovering around 100, and 37% of all active listings have had a price reduction. All these stats have remained unchanged in the last 5 weeks. It statistically remains a buyer’s market, despite the lowered inventory. The Previews market is not experiencing the lack of listings that other price points are, and we’re not seeing multiple offers. There are currently 25 active listings, which is actually a slightly higher number than our average inventory runs, and an additional 11 that are contingent or pending. In Petaluma, the frenzy continues with double digit multiple offers in all price ranges. Open houses very well attended. One home listed for $460,000 had 45 groups through on Sunday. In Sebastopol, the local manager says agents still need more inventory in all price ranges. It is not unusual for the agents to report groups of 30-40 through their open houses. Some lower priced properties have received upwards of 16 offers. Appraisals continue to be an issue as an appraiser will only look at closed comps with no consideration of market trends. We are seeing more and more buyers wanting to pay $10, 20 or even $30k above whatever the appraisal comes in at. In Southern Marin, about 45% of its already low inventory is in contract. Demand has still been high for homes this summer and sales are strong. Sales would be stronger if more were available to buyers.
San Francisco – By far, the majority of properties are being sold in multiple offers, according to our Lakeside manager. What makes the winning offer stand out? 1) Careful preparation of the contract 2) Personal interaction from the selling agent and an effort for personal presentation of the offer rather than simply emailing the offer; 3) Attention to detail and complete review and signatures on the entire disclosure packet; 4) Solid preapproval letters with significant down payments; 5) Speedy contingency removal plans. All of these require careful selection of an experienced real estate professional. Our Lombard office reports that it has been a week with less frenzy, but most listings are yielding multiple offers. Some appraisal issues exist, with a couple of way-over winners. Backup offer strategy remains crucial in this market. The usual SF summer slowdown is in full swing, our Market Street manager reports, but the buyers remain eager. There was a $1M+ listing that struggled to get a buyer in the Spring, fell out of escrow and then received 3 offers in less than a week (all for significantly more than the first round offer). And another buyer skipped writing an offer when they thought there was going to be a frenzy – until the offer date passed and it remained available. They acted quickly, and got ratified for less than asking (and were pleased to see the appraisal come in for significantly over asking). Open houses are extremely busy, our Sunset office manager notes. One listing in the Inner Sunset received over 30 offers; many were cash and non-contingent offers. At the moment, it is definitely a Sellers’ Market.
SF Peninsula — Our Burlingame manager reports that there are many frustrated agents who have submitted many offer for the same clients, only to lose out to the all-cash buyer and/or final sales prices that far exceed the list price. The precious and thin inventory continues to be snapped up quickly from entry level and beyond. We have had very few appraisal issues but the concern over this is in the minds of buyers and agents alike, which makes those “all cash” offers so attractive. There are currently 65 active and 25 pending sales in Hillsborough. The first 2 weeks of July brought 10 closed sales – two over $4 million and one over $5 million. The upper end market is gaining strength with more sales and reaching higher end price points. Our Burlingame north managers say there has been a slowing of activity – typical of the summer months. Homes that are clean and staged still have good activity. Overpriced homes where little marketing effort is made are sitting. Great activity on the coast – many Peninsula buyers are attending the open houses looking for a better value in home prices, the Half Moon Bay manager says. Well-priced listings are selling within 10 days. Menlo Park agents have been pretty busy for the middle of July. Multiple offers on a $9.5 mil property. If it’s the right price in any category, the buyers come out of the woodwork. Our Palo Alto manager says the local market is like a bubble bath – little bubbles rising and falling every day as inventory rises and falls depending on multiple offers. In Portola Valley, activity levels are very good for the middle of July. Our Redwood City manager reports that open houses are extremely busy. One house in San Carlos had over 50 people through on Saturday and over 100 on Sunday. There has been lots of frustration for the buyers who are not getting their offer accepted, but they continue to look. In San Mateo, there is a slight slowing yet the demand by buyers is certainly there. The drop in the number of offers has been noticeable in multiple offer presentations. The listing inventory has decreased dramatically with SFH inventory down 46% from last year. Sales fell off substantially the last week of June and first week of July. There seems to be a slight increase in sales activity since then, but not quite to the levels of the previous months.
East Bay – The market has been fairly steady in Berkeley, but our local manager says buyers and sellers seem especially edgy. Once in contract, some buyers are waffling or demanding a lot and sellers are nervous as well. In the Oakland-Piedmont area, inventory has dipped again most likely to mid-summer vacations. 70% of the offers ratified in the office are in a multiple offer situation. Realistically, several offers were not written due to number of disclosure packets out and the fear of competing. First time home buyers are still out in large numbers at the open houses with a bit of an uptick in people saying they are just starting their search. Inventory is slowly increasing in the Lamorinda area as sellers are realizing now is the time to market their home. Buyers continue to make offers with the low interest rates being the buzz. Multiple offers continue. Open homes are well attended, even with the holiday. Floor duty remains active. Walnut Creek agents are experiencing multiple offers on most listings, with prices are increasing slightly. Buyers seem to be willing to pay more than appraised value if necessary. Inventory is still at an all-time low. The REO market is almost nonexistent.
Silicon Valley – In Cupertino, things have definitely slowed down since the holiday. However, certain properties still get an unbelievable amount of attention. A Sunnyvale townhouse listed in the mid $600s got 35 offers and was bid up about $100K. Steady as she goes in the Los Gatos market. Low inventory continues and multiple offers are increasing. Our San Jose Almaden manager says that multiple offers still continue. Inventory has actually gone down over the last two weeks. After an incredible June it seems like July is more on pace with our previous expectations in Saratoga. Properties priced right are still selling very quickly.
South County – Gilroy is having a severe shortage of listings and has only 61 homes in active status. Of that 39% are in the high end. All properties have multiple offers and over-bidding. Waiving of appraisals is common, and many offers are all cash. We have seen a 10% appreciation in the market since January. Only 22% of the active inventory are short sales or REO properties; a year ago, 40% of inventory was distressed. The San Benito County market is very similar – only 8 REO’s listed for sale in ALL of San Benito County. There are many properties that are selling in-house prior to going on the MLS. So it pays for a buyer to have a local agent if they want to win in a multiple offer situation. Morgan Hill agents are working hard to obtain listings—as listings are now the “life-blood” of our local real estate market. Once a home hits the market (and is perceived to be priced competitively) the multiple-offer frenzy begins. This seems to be the case in all price categories but is especially true for homes priced between $500,000 and $600,000. Morgan Hill is also experiencing a sudden increase in the number of new home developments that seem to be springing up throughout the area. Developers are reporting that most “phases” sell out in just several days thus requiring potential buyers to be put on waiting lists for future offerings. In addition, it is not uncommon for buyers to camp out over night to be the first buyers for a certain model in the more desirable new home tracts. This tug between supply and demand has resulted in significant price increases here in the South Valley. We are now in a full-blown “sellers” market.
I just returned this morning from a Chairman’s Circle conference of the top Coldwell Banker companies in North America. Needless to say I am very proud that our San Francisco Bay Company ranked among the top four CB companies worldwide. Congratulations to all of you! There was a lot of discussion about the housing recovery, and it seems no matter where in the US you are, it’s a far better real estate market than a year ago. As we were discussing Washington DC, housing policies, and lending regulations, an interesting observation was made by one panel member. For the past 6 months, and going forward until the election, nothing is getting done as far as policy or restrictions, obviously no changes to GSE’s and Fannie/Freddie, QRM, and the other hot topics. It’s too risky for politicians to take a substantive stand on a major housing issue until the election is over. And what has been happening around the country regarding housing the past six months? Steady improvement. Perhaps we give one point to those who favor very little intervention as things begin to work out?
That said, far too many people have lost their homes through foreclosure, and more will continue to do so. And keep in mind that FHA has been a huge friend to this recovery. Low down payment loans for qualified buyers were at the forefront of the recovery. Perhaps we are striking a balance between existing government programs and a free market’s natural course, because it feels like we are working through a process of correction that can take us to a sustainable healthy real estate market. I for one am looking forward to a very strong back half of 2012. My counterparts from all over North America are envious of us in Northern California. Not only is our recovery being noted as one of the strongest in the country, we also have one of the most beautiful places on earth to live and work!
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