Close

East Bay

The U.S. Housing Market: Despite a Demographic Push, Proceed With Caution

 

With California housing markets having decidedly shifted since the summer, the looming question is what comes next. Since 2014, Pacific Union has partnered with John Burns Real Estate Consulting to forecast the market for the upcoming three years. At our November 2017 forecast, we suggested that the John Burns Home Value Index would reach a plateau in 2018 (which we named a “table top”) and maintain that level through about 2020. The major difference between the current peak and the previous peak seen in the mid-2000s is that the current peak resembles a table top, while the last peak was characterized as a “mountain peak” — a peak followed by a large decline.

Source: 2017 Pacific Union Real Estate and Economic Forecast

A lot has happened since our last forecast, but our predictions remain similar.

While our annual forecast event has been postponed to the first quarter of 2019 as a result of the merger with Compass and the wildfires, I recently attended the JBREC annual summit in New York City, and here are the key takeaways.

  • While concerns over the housing market’s strength are rising, the major tailwind is the demographic force. With U.S. millennials numbering 44 million, that generation’s largest age bracket (4.7 million people) will turn 32 years old over the next couple of years, thus creating a huge wave of potential homebuyers.
  • Online buyer behavior suggests that sales will remain solid in markets in the South (such as Charlotte, Houston, Raleigh, and Atlanta) but will decline in West Coast markets and some Northeastern markets, with California home sales expected to post a 2 percent to 7 percent decline over the next six months.
  • Interest-rate hikes following strong price growth over the last year took a large bite out of affordability, making it the biggest concern for California housing markets.
  • While technological advancements have the potential to reduce construction costs, supply constraints outweigh any potential savings in the short term.
  • Affordability constraints are likely to drive builders to pivot down in price to smaller, higher-density, lower-specification homes in slightly less desirable locations. Also, builders are more likely to construct single-family rental properties.
  • Average annual price growth in six California metropolitan areas is projected at 6 percent in 2019 and 3 percent in 2020 before declining by 0.3 percent in 2021.

Long-Term View

Demographic Trends Are Propping Up Long-Term Demand

  • With U.S. millennials numbering 44 million, that generation’s largest age bracket (4.7 million people) will turn 32 years old over the next year, which is the median age of first-time buyers in the U.S. Considering a combined total of about 6 million new and existing homes sold annually in the U.S., millennials have the potential to create a huge wave of first-time homebuyers and account for a much larger share of total housing demand. First-time buyers currently comprise about one-third of all homebuyers.
  • These demographic forces suggest that 1.25 million more households per year over the next 10 years will need housing, which means that 1.375 million new units per year need to be built to meet demand through 2025 (including owner-occupied properties, second homes, and replacement of teardowns).
  • However, after 2025, America’s aging society will reduce the need for housing production since seniors create supply when they pass away or move into assisted-living facilities or their children’s homes. Thus, the net growth of new homes will decline to 230,000 units per year.

But Supply Constraints Make Homes Increasingly More Expensive

  • At the same time, meeting current demand has become increasingly more difficult, as builders take a large risk when buying raw land to entitle in their respective regions.
  • Based on a JBREC survey, buying raw land is perceived by builders as twice as risky as buying a few home-builder stocks, leading to fewer builders willing to make purchases in the current housing cycle.
  • In addition, builders face large labor shortages, which will not abate considering the nation’s aging demographics and immigration restrictions, both of which will lead to much higher construction wages.
  • However, technological advancements in the construction industry — such as building information modeling software, 3D printing, robotics, off-site technologies imported from overseas, and smart homes — have the potential to reduce costs dramatically.
  • Still, many costs will continue to increase:
  1. Lot shortages will keep land prices high.
  2. Labor shortages will keep building costs high.
  3. Inflation and potentially tariffs will keep materials costs high.
  4. Regulation-related costs are high in California.
  5. Significant off-site cost reductions for nicer single-family homes are years away.

Short-Term View

2018 Slowdown

  • Nationally, sales of newly built homes have been slowing all year, with a 13 percent year-over-year decline in October, bringing annualized sales to 553,000 new single-family homes, or 40 percent of the projected 1.3 million needed to meet demand.
  • What led to 2018’s slowdown:
    • Mortgage rates rose by 88 basis points this year, from 3.95 percent in January to 4.83 percent in October, resulting in at least an 11 percent increase in payments without accounting for price appreciation.
    • With price appreciation, Californians’ monthly mortgage payments are up by as much as 25 percent year over year:
      • Silicon Valley, up by 25 percent
      • San Francisco, up by 19 percent
      • The East Bay, up by 17 percent
      • Los Angeles, up by 14 percent
      • Nationwide, up by 13 percent
  • Each 100-basis-point increase in mortgage rates reduces borrowers’ purchasing power by about 7 percent.
  • The impact on affordability is vast, as 44 percent of American households earn less than $50,000 per year and the median U.S. income is $63,000.
  • In the Bay Area, the current minimum annual income required to purchase a median-priced home is more than $202,000, up from $90,000 in 2012. The median household income in the Bay Area averages about $100,000 in the eight local counties excluding Solano.
  • In Los Angeles, the current minimum annual income required to purchase a median-priced home is more than $112,000, up from $54,000 in 2012. The median household income is Los Angeles County is currently about $65,000.
  • Newly constructed homes cater to affluent homebuyers, with 60 percent of public builders across the U.S. now constructing homes with average prices higher than $400,000. In Los Angeles, the median new home price is $682,000, while in the Bay Area, it ranges from about $760,000 in Sonoma County to $1 million in Silicon Valley.
  • Only 24 percent of American renters can afford the median-priced new home today, and just 31 percent can afford a resale home.
  • And while there have been more listings on the market in recent months, inventory is still below average across all price tiers, especially for the most-affordable range, which is almost 50 percent below the average.
  • Lastly, the housing market’s performance and the current slowdown is not a nationwide trend — sales of existing home remain strong in the relatively affordable South.

What to Expect in the Months Ahead

  • The economy will remain healthy, boosted by low unemployment, continued hiring, and wage increases, but the rate of growth will slow.
  • Mortgage rates will likely reach 5.5 percent by the middle of 2019, leading to fewer home sales.
  • Historically, increases in mortgage rates when the economy was strong have generally had a small impact on activity, leading to a 7 percent to 10 percent decline in sales.
  • Online buyer behavior suggests that sales will remain solid in the markets in South (such as Charlotte, Houston, Raleigh, and Atlanta) but will decline in West Coast markets and some Northeastern markets, with California home sales expected to post a 2 percent to 7 percent decline.

What to Expect Beyond 2019

  • Rising rates will slow move-up homebuyer activity, with an 11 percent decrease in total home sales.
  • Mortgage availability has improved, though credit scores and proof of employment play a critical role (unlike during the early 2000s).
  • Affordability constraints are likely to drive builders to pivot down in price to smaller, higher-density, lower-specification homes in slightly less desirable locations. Also, builders are more likely to construct single-family rental properties.
  • The risk of a recession increases, with a 48 percent probability of a downturn within two years and a 64 percent chance within four years. Fifty-nine percent of economists forecast a recession in 2020.
  • However, housing risks vary by market:
  1. California housing markets generally rank normal to higher risk, with no market nationally categorized as very high risk.
  2. Affordability is the primary risk.
  3. A huge upside in the current housing market is homeowner equity, currently at $190,000 inflation-adjusted per U.S. owned household.
  • Other risks:
  1. A rapid acceleration in interest and mortgage rates shaking consumer and business confidence
  2. A decline in foreign buyer activity due to immigration policy or emerging market factors (such as currency, trade policy, local stock markets, or economic fluctuations)
  3. Immigration restrictions: There has already been a pull-back in H-1B visa approvals, which are critical for the tech sector in California; holders of these visas are also participants in local housing markets
  4. Excessive debt burdens (government, corporate, and consumer); if interest rates spike, they would have trouble repaying debt
  5. A stock market correction that could rattle consumer confidence and result in in job losses
  6. A “black swan,” or an unforeseen geopolitical event that triggers significant volatility in financial markets and the economy

California Outlook

  • The chart below shows the John Burns Home Value Index four-year outlook for median home price appreciation in six California metropolitan areas and/or divisions. The numbers indicate the average annual rate of growth or decline.
  • Because of affordability pressures, all six markets are projected to see notably slower price growth over the next three years.
  • Four of the six markets are forecast to see negative growth in 2021 of no more than 1.3 percent. However, all markets will see at least a 5 percent additional cumulative increase in 2019 and 2020 before the reversal in 2021.

Source: John Burns Real Estate Consulting

Taken together, with input from JBREC and the nation’s largest home builders, our final takeaway is that buyers and investors should proceed with caution but proceed nevertheless.

Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.

(Promotional photo: iStock/RgStudio)

 

_______
Shared with permission from the Pacific Union Blog

Read More

Pacific Union’s November 2017 Real Estate Update

Northern California’s inventory woes continued in November, with the number of homes for sale dropping on an annual basis in all Bay Area regions in which Pacific Union operates. Supply fell to a one-year low in Contra Costa County, Marin County, San Francisco, Silicon Valley, Sonoma County, and Sonoma Valley.

Click on the image accompanying each of our regions below for an expanded look at local real estate activity in November.

CONTRA COSTA COUNTY

The median sales price in Contra Costa County ended November at $1,250,000, tying the high set three times earlier this year. The months’ supply of inventory was 1.0, down on both a monthly and yearly basis.

Homes sold in a brisk 21 days and for 99.1 percent of original prices.

Defining Contra Costa County: Our real estate markets in Contra Costa County include the cities of Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek. Sales data in the adjoining chart includes single-family homes in these communities.

EAST BAY

For the 10th consecutive month, the median sales price in our East Bay region was in the seven-digit range in November, at $1,100,000. With a  0.7-month supply of inventory, the East Bay remained one of the Bay Area’s tightest real estate markets.

As in October, homes took an average of 18 days to find a buyer. Continuing a trend that has persisted for the past few years, homes again sold for substantial premiums, commanding 114.5 percent of asking prices.

Defining the East Bay: Our real estate markets in the East Bay region include Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705; Alameda; Albany; Berkeley; El Cerrito; Kensington; and Piedmont. Sales data in the adjoining chart includes single-family homes in these communities.

MARIN COUNTY

The number of homes for sale in Marin County fell to a one-year low in November, with the months’ supply of inventory at 0.9. The median sales price was $1,227,500, up 15 percent year over year.

Homes left the market in an average of 44 days, selling for 98.1 percent of original prices.

Defining Marin County: Our real estate markets in Marin County include the cities of Belvedere, Corte Madera, Fairfax, Greenbrae, Kentfield, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon. Sales data in the adjoining chart includes single-family homes in these communities.

NAPA COUNTY

At $637,500, Napa County‘s median sales price ended November in the same general range as it has been all year. The months’ supply of inventory was 2.8, the lowest since the summer.

Homes sold for an average of 94.1 percent of asking prices, nearly identical to last November, and took 85 days to find a buyer.

Defining Napa County: Our real estate markets in Napa County include the cities of American Canyon, Angwin, Calistoga, Napa, Oakville, Rutherford, St. Helena, and Yountville. Sales data in the adjoining chart includes all single-family homes in Napa County.

SAN FRANCISCO – SINGLE-FAMILY HOMES

The median sales price for a single-family home in San Francisco was $1,500,000 in November, nearly matching the one-year high set in October. The number of homes on the market continued to dwindle, with the months’ supply of inventory at 0.9.

Sellers received an average of 110.2 percent of asking prices, nearly identical to premiums recorded in October. Single-family homes in San Francisco sold in an average of 27 days.

SAN FRANCISCO – CONDOMINIUMS

At $1,254,825, the median sales price for a San Francisco condominium climbed to a one-year high in November. Inventory moved in the opposite direction, falling on both a monthly and yearly basis to a 1.3-months’ supply.

Units sold in an average of 38 days and for 102.9 percent of original prices.

SILICON VALLEY

Silicon Valley‘s median sales price was $3,050,000 in November, unchanged from the previous month. The number of homes for sale declined to a one-year low, with the months’ supply of inventory at 1.0.

Homes sold for an average of 101 percent of asking prices, finding a buyer in 26 days.

Defining Silicon Valley: Our real estate markets in Silicon Valley include the cities and towns of Atherton, Los Altos (excluding county area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside. Sales data in the adjoining chart includes all single-family homes in these communities.

Mid-Peninsula Subregion

The median sales price in our Mid-Peninsula subregion reached a yearly peak in November, finishing the month at $1,885,000. Along with the East Bay, the Mid-Peninsula had the region’s most pronounced inventory drought, with a 0.7-month supply of homes for sale.

Sellers received an average of 102.9 percent of asking prices, similar to last November, with homes leaving the market in 19 days.

Defining the Mid-Peninsula: Our real estate markets in the Mid-Peninsula subregion include the cities of Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area). Sales data in the adjoining chart includes all single-family homes in these communities.

SONOMA COUNTY

The number of homes for sale in Sonoma County fell to a one-year low in November, with a 1.1-months’ supply of inventory. As a result, the median sales price increased to $659,000, a yearly high.

The pace of sales was identical to November 2016, with homes leaving the market in an average of 67 days. Buyers paid 96.7 percent of original prices, similar to numbers recorded over the past year.

Defining Sonoma County: Sales data in the adjoining chart includes all single-family homes and farms and ranches in Sonoma County.

SONOMA VALLEY

Inventory levels in Sonoma Valley were more than cut in half from October to November, with a 2.0-months’ supply for sale. Properties lasted on the market an average of 75 days, almost a month longer than in October.

The median sales price was $730,000, and buyers paid an average of 93.9 percent of asking prices.

Defining Sonoma Valley: Our real estate markets in Sonoma Valley include the cities of Glen Ellen, Kenwood, and Sonoma. Sales data in the adjoining chart refers to all residential properties – including single-family homes, condominiums, and farms and ranches – in these communities.

LAKE TAHOE/TRUCKEE – SINGLE-FAMILY HOMES

The median sales price for a single-family home in the Lake Tahoe/Truckee region ended November at $699,000, just a few thousand dollars lower than in October. Homes sold for an average of 92.6 percent of asking prices, nearly identical to the previous two months.

The Lake Tahoe region had a 2.7-months’ supply of single-family homes for sale, with buyers taking an average of 83 days to close a sale.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. Sales data in the adjoining chart includes single-family homes in these communities.

LAKE TAHOE/TRUCKEE – CONDOMINIUMS

The number of condominiums on the market in the Lake Tahoe/Truckee region sunk to a yearly low, with a 2.8-months’ supply of units for sale. The median sales price was $477,500, a 27 percent annual increase.

Condominiums sold in an average of 122 days, nearly identical to October’s pace, and for 96.4 percent of original prices.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. Sales data in the adjoining chart includes condominiums in these communities.

_______
Shared with permission from the Pacific Union Blog

Read More

Pacific Union’s November 2017 Real Estate Update

Northern California’s inventory woes continued in November, with the number of homes for sale dropping on an annual basis in all Bay Area regions in which Pacific Union operates. Supply fell to a one-year low in Contra Costa County, Marin County, San Francisco, Silicon Valley, Sonoma County, and Sonoma Valley.

Click on the image accompanying each of our regions below for an expanded look at local real estate activity in November.

CONTRA COSTA COUNTY

The median sales price in Contra Costa County ended November at $1,250,000, tying the high set three times earlier this year. The months’ supply of inventory was 1.0, down on both a monthly and yearly basis.

Homes sold in a brisk 21 days and for 99.1 percent of original prices.

Defining Contra Costa County: Our real estate markets in Contra Costa County include the cities of Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek. Sales data in the adjoining chart includes single-family homes in these communities.

EAST BAY

For the 10th consecutive month, the median sales price in our East Bay region was in the seven-digit range in November, at $1,100,000. With a  0.7-month supply of inventory, the East Bay remained one of the Bay Area’s tightest real estate markets.

As in October, homes took an average of 18 days to find a buyer. Continuing a trend that has persisted for the past few years, homes again sold for substantial premiums, commanding 114.5 percent of asking prices.

Defining the East Bay: Our real estate markets in the East Bay region include Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705; Alameda; Albany; Berkeley; El Cerrito; Kensington; and Piedmont. Sales data in the adjoining chart includes single-family homes in these communities.

MARIN COUNTY

The number of homes for sale in Marin County fell to a one-year low in November, with the months’ supply of inventory at 0.9. The median sales price was $1,227,500, up 15 percent year over year.

Homes left the market in an average of 44 days, selling for 98.1 percent of original prices.

Defining Marin County: Our real estate markets in Marin County include the cities of Belvedere, Corte Madera, Fairfax, Greenbrae, Kentfield, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon. Sales data in the adjoining chart includes single-family homes in these communities.

NAPA COUNTY

At $637,500, Napa County‘s median sales price ended November in the same general range as it has been all year. The months’ supply of inventory was 2.8, the lowest since the summer.

Homes sold for an average of 94.1 percent of asking prices, nearly identical to last November, and took 85 days to find a buyer.

Defining Napa County: Our real estate markets in Napa County include the cities of American Canyon, Angwin, Calistoga, Napa, Oakville, Rutherford, St. Helena, and Yountville. Sales data in the adjoining chart includes all single-family homes in Napa County.

SAN FRANCISCO – SINGLE-FAMILY HOMES

The median sales price for a single-family home in San Francisco was $1,500,000 in November, nearly matching the one-year high set in October. The number of homes on the market continued to dwindle, with the months’ supply of inventory at 0.9.

Sellers received an average of 110.2 percent of asking prices, nearly identical to premiums recorded in October. Single-family homes in San Francisco sold in an average of 27 days.

SAN FRANCISCO – CONDOMINIUMS

At $1,254,825, the median sales price for a San Francisco condominium climbed to a one-year high in November. Inventory moved in the opposite direction, falling on both a monthly and yearly basis to a 1.3-months’ supply.

Units sold in an average of 38 days and for 102.9 percent of original prices.

SILICON VALLEY

Silicon Valley‘s median sales price was $3,050,000 in November, unchanged from the previous month. The number of homes for sale declined to a one-year low, with the months’ supply of inventory at 1.0.

Homes sold for an average of 101 percent of asking prices, finding a buyer in 26 days.

Defining Silicon Valley: Our real estate markets in Silicon Valley include the cities and towns of Atherton, Los Altos (excluding county area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside. Sales data in the adjoining chart includes all single-family homes in these communities.

Mid-Peninsula Subregion

The median sales price in our Mid-Peninsula subregion reached a yearly peak in November, finishing the month at $1,885,000. Along with the East Bay, the Mid-Peninsula had the region’s most pronounced inventory drought, with a 0.7-month supply of homes for sale.

Sellers received an average of 102.9 percent of asking prices, similar to last November, with homes leaving the market in 19 days.

Defining the Mid-Peninsula: Our real estate markets in the Mid-Peninsula subregion include the cities of Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area). Sales data in the adjoining chart includes all single-family homes in these communities.

SONOMA COUNTY

The number of homes for sale in Sonoma County fell to a one-year low in November, with a 1.1-months’ supply of inventory. As a result, the median sales price increased to $659,000, a yearly high.

The pace of sales was identical to November 2016, with homes leaving the market in an average of 67 days. Buyers paid 96.7 percent of original prices, similar to numbers recorded over the past year.

Defining Sonoma County: Sales data in the adjoining chart includes all single-family homes and farms and ranches in Sonoma County.

SONOMA VALLEY

Inventory levels in Sonoma Valley were more than cut in half from October to November, with a 2.0-months’ supply for sale. Properties lasted on the market an average of 75 days, almost a month longer than in October.

The median sales price was $730,000, and buyers paid an average of 93.9 percent of asking prices.

Defining Sonoma Valley: Our real estate markets in Sonoma Valley include the cities of Glen Ellen, Kenwood, and Sonoma. Sales data in the adjoining chart refers to all residential properties – including single-family homes, condominiums, and farms and ranches – in these communities.

LAKE TAHOE/TRUCKEE – SINGLE-FAMILY HOMES

The median sales price for a single-family home in the Lake Tahoe/Truckee region ended November at $699,000, just a few thousand dollars lower than in October. Homes sold for an average of 92.6 percent of asking prices, nearly identical to the previous two months.

The Lake Tahoe region had a 2.7-months’ supply of single-family homes for sale, with buyers taking an average of 83 days to close a sale.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. Sales data in the adjoining chart includes single-family homes in these communities.

LAKE TAHOE/TRUCKEE – CONDOMINIUMS

The number of condominiums on the market in the Lake Tahoe/Truckee region sunk to a yearly low, with a 2.8-months’ supply of units for sale. The median sales price was $477,500, a 27 percent annual increase.

Condominiums sold in an average of 122 days, nearly identical to October’s pace, and for 96.4 percent of original prices.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. Sales data in the adjoining chart includes condominiums in these communities.

_______
Shared with permission from the Pacific Union Blog

Read More

Pacific Union’s October 2017 Real Estate Update

The median sales price rose year over year in October in all Bay Area regions in which Pacific Union operates, the result of continued buyer demand amid tight supply conditions. Prices reached one-year highs for single-family homes and condominiums in San Francisco, as well as for properties in Sonoma County.

Click on the image accompanying each of our regions below for an expanded look at local real estate activity in October.

CONTRA COSTA COUNTY

Contra Costa County‘s median sales price ended October at $1.2 million, in the same general range as it has been since the spring.  Homes sold for an average of 99.1 percent of original price, also consistent with numbers recorded over the preceding four months.

The months’ supply of inventory was 1.4, down on both a monthly and yearly basis, with homes finding a buyer in an average of 29 days.

Defining Contra Costa County: Our real estate markets in Contra Costa County include the cities of Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek. Sales data in the adjoining chart includes single-family homes in these communities.

EAST BAY

For the ninth consecutive month, the median sales price in our East Bay region was in the seven-digit range in October, finishing at $1,152,000. Homes continue to command the largest premiums in the Bay Area, an average of 115.5 percent of original price.

Homes left the market in a brisk 18 days, one day faster than in the previous two months. With a 1.1-month supply of homes for sale, inventory was down from September and October of last year.

Defining the East Bay: Our real estate markets in the East Bay region include Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705; Alameda; Albany; Berkeley; El Cerrito; Kensington; and Piedmont. Sales data in the adjoining chart includes single-family homes in these communities.

MARIN COUNTY

The median sales price in Marin County was $1,255,000 in October, just a few thousand dollars higher than in September. Homes sold in an average of 39 days, as the market returned to the pace of sales observed in the late spring and early summer.

The months’ supply of inventory was 1.6, with homes selling for an average of 98.9 percent of asking price.

Defining Marin County: Our real estate markets in Marin County include the cities of Belvedere, Corte Madera, Fairfax, Greenbrae, Kentfield, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon. Sales data in the adjoining chart includes single-family homes in these communities.

NAPA COUNTY

The number of homes for sale improved in Napa County on both a monthly and annual basis in October, with the months’ supply of inventory rising to 3.6. Buyers took an average of 79 days to close a deal, 11 days longer than they did in September.

The median sales price ended the month at $653,500, with homes selling for an average of 92.9 percent of original price.

Defining Napa County: Our real estate markets in Napa County include the cities of American Canyon, Angwin, Calistoga, Napa, Oakville, Rutherford, St. Helena, and Yountville. Sales data in the adjoining chart includes all single-family homes in Napa County.

SAN FRANCISCO – SINGLE-FAMILY HOMES

The median sales price for a single-family home in San Francisco climbed to $1,588,000 in October, a one-year high and up 20 percent from September. The months’ supply of inventory fell to 1.1, the lowest level since last December.

Sellers received an average of 110 percent of original price, consistent with premiums recorded for most of this year. Single-family homes sold in an average of 24 days, almost a week faster than in the preceding month. 

SAN FRANCISCO – CONDOMINIUMS

San Francisco condominium prices also reached a yearly high in October, ending the month at $1.23 million. The months’ supply of inventory was 1.5, less than half of what it was in September.

Units sold in an average of 30 days, the quickest pace of sales recorded over the past year. For the ninth consecutive month, San Francisco condominium buyers paid premiums — an average of 104.9 percent of original price.

SILICON VALLEY

The median sales price for a home in our Silicon Valley region was above $3 million for the second consecutive month in October: $3,056,000. Sellers received an average of 106.1 percent of original price, the largest premiums seen over the past year.

The months’ supply of inventory was 1.4, down on both a monthly and yearly basis, with homes selling in an average of 21 days.

Defining Silicon Valley: Our real estate markets in Silicon Valley include the cities and towns of Atherton, Los Altos (excluding county area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside. Sales data in the adjoining chart includes all single-family homes in these communities.

Mid-Peninsula Subregion

With a 0.9-month supply of homes for sale in October, the Mid-Peninsula was the Bay Area’s most inventory-constrained region. It was also the fastest paced, with homes finding a buyer in an average of 16 days.

The median sales price was $1.65 million, down from September but nearly identical to last October. Homes sold for an average of 107.4 percent of original price, 10 percent more than they did the previous month.

Defining the Mid-Peninsula: Our real estate markets in the Mid-Peninsula subregion include the cities of Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area). Sales data in the adjoining chart includes all single-family homes in these communities.

SONOMA COUNTY

Sonoma County‘s median sales price ended October at $650,000, reaching a one-year high. Buyers paid 97.6 percent of asking prices, nearly identical to September’s number.

The months’ supply of inventory was 1.7, and properties sold in an average of 57 days.

Defining Sonoma County: Sales data in the adjoining chart includes all single-family homes and farms and ranches in Sonoma County.

SONOMA VALLEY

With a 4.1-month supply of properties for sale in October, Sonoma Valley had the Bay Area’s best balance between buyers and sellers. The median sales price was $775,000, up month over month and year over year.

Properties left the market in an average of 49 days, more than three weeks faster than they did in September, selling for an average of 97.5 percent of original price.

Defining Sonoma Valley: Our real estate markets in Sonoma Valley include the cities of Glen Ellen, Kenwood, and Sonoma. Sales data in the adjoining chart refers to all residential properties – including single-family homes, condominiums, and farms and ranches – in these communities.

LAKE TAHOE/TRUCKEE – SINGLE-FAMILY HOMES

With a 2.3-month supply of single-family homes in October, the Lake Tahoe/Truckee region had the fewest number of homes for sale all year. The median sales price was $710,000, down $20,000 from September but up 11 percent from last October.

Single-family homes sold in an average of 72 days, identical to the pace of sales one year earlier, and for 92.2 percent of original prices.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. Sales data in the adjoining chart includes single-family homes in these communities.

LAKE TAHOE/TRUCKEE – CONDOMINIUMS

The median sales price for a condominium in the Lake Tahoe/Truckee region was $390,000 in October, down slightly on both a monthly and annual basis. As with single-family homes in the region, condominium inventory fell to a one-year low, with a 3.3-month supply.

Units sold in an average of 122 days, marking the slowest pace of sales since the spring. Buyers paid 93.8 percent of asking prices, nearly identical to what they did last October.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. Sales data in the adjoining chart includes condominiums in these communities.

_______
Shared with permission from the Pacific Union Blog

Read More

Pacific Union Quarterly Report: Q3 2017

For the most part, home prices rose and inventory declined in the third quarter from one year earlier throughout the Bay Area and in the Lake Tahoe/Truckee region. Only our Sonoma County and Sonoma Valley regions saw supply conditions improve from the third quarter of 2016. San Francisco and the Mid-Peninsula experienced the region’s biggest annual inventory declines, with the number of homes for sale down by double-digit percentage points.

Below, Pacific Union Chief Economist Selma Hepp offers a brief synopsis of third-quarter real estate activity in each of Pacific Union’s regions. The accompanying links lead to the full report for each area, where you can access the latest regional and community-specific market data and statistics to help you make a better, more informed homebuying or selling decision.

Contra Costa County

Third-quarter housing market activity in Contra Costa County continued the strong pace that began earlier in the summer. Despite fewer homes on the market than during the same period last year, the number of transactions remained steady. As a result, buyers again faced more competition, and the median home price increased from the third quarter of last year. Nevertheless, strong median price growth also reflects a healthy rebound in luxury sales this summer. Still, competition for available homes remains among all price ranges, and an increasing number of homes sold for more than the asking price.

Homes continue to sell rather quickly, with competitively priced properties finding a buyer in less than two weeks. The rapidly declining inventory of affordable homes remains a concern, since Contra Costa County’s relative affordability was a big draw for first-time buyers, especially in Pleasant Hill and Concord. Walnut Creek buyers are enthusiastic about the revitalized downtown center and competed for several new condominium complexes with not-so-affordable starting prices — one-bedroom units listing for about $1 million.

Looking Forward: Renewed enthusiasm among buyers suggests that the fourth quarter will continue to see strong activity and heightened competition among buyers. Declining inventory may be the biggest challenge for buyers entering the market.

Click here to read the full Q3 2017 Contra Costa County real estate report.

East Bay

The East Bay‘s housing market continued its strong streak in the third quarter, with the largest sales increase from last year among Bay Area regions. Higher-priced homes experienced renewed demand, which was fueled by an increase in inventory. On the other hand, a lack of relatively affordable homes is holding back sales at lower price points.

Despite the continual decline of homes for sale, lower-priced properties were in high demand, and buyer competition intensified. An increasing share of homes sold for premiums, especially for more affordable properties, for which buyers typically paid about 14 percent more than the asking price. The pace of sales in the East Bay was brisk, with most homes selling in less than two weeks.

Tight inventory combined with strong buyer demand ensured that the median price increased by double-digit percentage points — especially in the region’s most popular neighborhoods.

Looking Forward: Strong summer activity suggests that there will be no shortage of buyers the rest of the year. Low inventory will remain a challenge, particularly for budget-constrained buyers, putting further upward pressure on prices. Homes in close proximity to restaurants and BART stations still appeal most to East Bay buyers.

Click here to read the full Q3 2017 East Bay real estate report.

Marin County

Marin County homebuyers remained enthusiastic in the third quarter, continuing the streak of healthy home sales activity that began earlier in the year. Marin County saw the second-strongest increase in home sales in the Bay Area this year, driven by strong demand for homes priced between $2 million and $3 million.

At the same time, third-quarter inventory was lower than during the same period a last year, leading to heightened competition among buyers. Bidding wars remained common, and almost half of homes sold over the asking price, a notable increase from the same period last year.

Strong sales amid a declining number of homes for sale led the months’ supply of inventory to fall to almost half of what it was during the third quarter of 2016. Fewer homes for sale combined with robust demand kept pressure on prices, which continued to grow at a solid pace, especially for more affordable properties. Homes sold a few days faster than they did at the same time last year.

Looking Forward: Heightened enthusiasm among buyers suggests that activity in the fourth quarter will remain strong. Fall is already showing strong activity, boosted by new listings coming to market, which buyers have been eagerly anticipating.

Click here to read the full Q3 2017 Marin County real estate report.

Mid-Peninsula

Following a strong spring homebuying season, the third quarter in our Mid-Peninsula region showed the usual summer lull, with activity comparable to the same period last year. The strongest demand was for homes priced between $2 million and $3 million, for which sales increased notably but inventory diminished rapidly. Generally, the trend of falling inventory levels over the last year has kept sales activity muted.

At the same time, continued competition among buyers caused homes to go into contract in less than two weeks. An increased number of properties sold for more than asking price, and sellers enjoyed higher premiums than they did in the third quarter of last year. As the result of these market forces, the median sales price grew by double-digit percentage points. The largest price increases were recorded in relatively more affordable communities such as Redwood City, San Carlos, and Belmont, which have become the Mid-Peninsula’s new hot spots, as these cities revitalize their downtown areas in response to their growing popularity.

Looking Forward: A strong end to the third quarter suggests that buyers remain very active and eager. Fewer homes for sale will keep buyer competition stiff, leading to further price appreciation.

Click here to read the full Q3 2017 Mid-Peninsula real estate report.

Napa County

Following an outstanding second quarter, Napa County‘s housing market activity slowed some in the third quarter, especially in September. Buyers were hampered by a lack of homes for sales, with inventory down about 7 percent from the same period last year. Buyer demand outstripped supply, particularly for more affordable homes.

Despite the slower summer months, the median price continued to inch higher. Again, affordable homes remain in strong demand, and prices for these properties rose at a relatively stronger pace. Among Bay Area communities, Napa’s median price for affordable homes has gained the most momentum so far this year.

Looking Forward: While early fall market dynamics suggested a strong pickup in activity in the fourth quarter, the recent Wine Country fires will undoubtedly have a powerful impact on the area’s housing markets in months to come. In the short term, housing will be needed for those unfortunate families who lost their homes, and all available properties will be in demand, whether they are seasonally occupied second homes, rentals, or available accessory units. The full impact of the disaster is still hard to estimate, however, in light of already constrained inventory, further pressures on the market are a near certainty.

Click here to read the full Q3 2017 Napa County real estate report.

San Francisco

Stronger 2017 housing market activity in San Francisco continued into the third quarter. Still, buyers remained constrained by very limited inventory. The quarter ended with fewer overall sales than during the same period last year, and inventory for both single-family homes and condominiums fell by double-digit percentage points.

At the same time, strengthened activity and competition among buyers caused properties to sell faster than they did in the third quarter of 2016 across all price ranges except for $3 million-plus. Bidding wars were common, and seven in 10 homes sold above the asking price, with premiums for single-family homes reaching 16 percent. Buyers of homes priced between $1 million and $2 million are facing more intense competition, and most paid 20 percent more than the asking price.

As a result, the median sales price showed moderate growth. Nevertheless, prices of newly constructed condominiums continued to trend lower, while prices of existing units maintained their solid upward momentum.

Looking Forward: The Bay Area’s strong economic drivers should continue to fuel demand for San Francisco real estate. Despite newly constructed condominiums, inventory levels remain severely undersupplied, which will hold back future home sales activity.

Click here to read the full Q3 2017 San Francisco single-family homes real estate report.

Click here to read the full Q3 2017 San Francisco condominiums real estate report.

Silicon Valley

Following a strong end to the spring homebuying season in Silicon Valley, the summer months brought continued momentum to the housing market, with sales exceeding last year’s third quarter. However, while sales of higher-priced homes flourished, lower price points were constrained by rapidly declining inventory, which was almost half of levels recorded during the same period last year.

Amid such supply conditions, buyers faced stiff competition, and a significant number of homes sold for premiums. The share of homes that sold for more than list price has increased over the last year, with a 17 percent gain from the third quarter of 2016.

Relatively more affordable Sunnyvale has become the area’s newest hot spot, and the median sales price has increased by about 50 percent from three years ago. In response to its new popularity, Sunnyvale has revitalized its downtown area.

Looking Forward: Buyer enthusiasm suggests continued demand and strong activity in the fourth quarter. However, major sales increases will be hampered by a lack of inventory. Buyer competition may further intensify, especially at the lower end of the market, while the higher end could see slowing activity.

Click here to read the full Q3 2017 Silicon Valley real estate report.

Sonoma County

Third-quarter housing market activity in Sonoma County continued to see buyers searching for affordable homes, which are in high demand. Buyers in the lower-priced segment saw increasingly more offers being made on attractive properties, and a larger share of homes sold over the asking price than during the same period last year.

More inventory of higher-priced homes boosted that segment of the market, while inventory shortages of lower-priced homes were intensified by sellers’ concerns of being unable to find a move-up home if their current property sold. Because of heighted buyer competition, median prices increased notably throughout 2017 but remained steady from the second quarter.

Looking Forward: While early fall market dynamics suggested a strong pickup in activity in the fourth quarter, the recent Wine Country fires will undoubtedly have a powerful impact on the area’s housing markets in months to come. In the short term, housing will be needed for those unfortunate families who lost their homes, and all available properties will be in demand, whether they are seasonally occupied second homes, rentals, or available accessory units. The full impact of the disaster is still hard to estimate, however, in light of already constrained inventory, further pressures on the market are a near certainty.

Click here to read the full Q3 2017 Sonoma County real estate report.

Sonoma Valley

Third-quarter sales activity in Sonoma Valley ended on par with last year, when the quarter started busy and slowed in September. However, unlike many other Bay Area communities, Sonoma Valley buyers are not grappling with continually declining inventory conditions. On the contrary, inventory in Sonoma Valley has improved over the last two quarters, especially for homes priced between $1 million and $2 million. However, the number of affordable homes for sale has declined, and buyers in that price range faced stiffer competition and saw more homes selling for premiums. Also, affordable homes are selling at a brisker pace — almost three weeks faster than during the same period last year.

The inventory of higher-priced homes increased at a solid pace, though those are generally second homes or vacation homes and generally out of first-time buyers’ budgets. Despite competitive market conditions, the year-over-year median price increase was moderate in the third quarter.

Looking Forward: While early fall market dynamics suggested a strong pickup in activity in the fourth quarter, the recent Wine Country fires will undoubtedly have a powerful impact on the area’s housing markets in months to come. In the short term, housing will be needed for those unfortunate families who lost their homes, and all available properties will be in demand, whether they are seasonally occupied second homes, rentals, or available accessory units. The full impact of the disaster is still hard to estimate, however, in light of already constrained inventory, further pressures on the market are a near certainty.

Click here to read the full Q3 2017 Sonoma Valley real estate report.

Lake Tahoe/Truckee

Following strong second-quarter housing market activity in the Lake Tahoe/Truckee region, the third quarter saw similar buyer enthusiasm. Home sales reached the highest levels in two years, with August and September showing particularly robust activity.  Intense buyer demand outpaced the supply of new homes on the market, with inventory levels dropping for both single-family homes and condominiums on an annual basis.

Buyers continued to feel a greater sense of urgency, and homes sold more rapidly than in the past couple of years. Sellers were also more realistic than in previous years, which led to fewer price reductions. But more realistic pricing of homes caused increased competition among buyers, and more homes sold over the asking price.

Median prices also showed some strengthening as a result of heightened buyer demand and increased almost 10 percent year to date.

Looking Forward: A strong finish to the third quarter and increased levels of homes under contract suggest that the fourth quarter will see the solid pace of sales continue.

Click here to read the full Q3 2017 Lake Tahoe/Truckee single-family homes real estate report.

Click here to read the full Q3 2017 Lake Tahoe/Truckee condominiums real estate report.

_______
Shared with permission from the Pacific Union Blog

Read More

Moderate California, Bay Area Home Price Gains Forecast for 2018

  • The California Association of Realtors’ 2018 forecast calls for 4.2 percent single-family home price appreciation next year.
  • Affordability is expected to further diminish, with only about one-quarter of California households able to afford the median-priced home by the end of 2018.
  • The state’s unemployment rate will fall to 4.6 percent, while mortgage rates will rise to 4.3 percent.

California home price appreciation should slow next year, although there appears to be no end in sight for the state’s severe and prolonged inventory shortage.

That’s according to the California Association of Realtors’ 2018 housing market forecast, which says that the median sales price for an existing single-family home in the state should close out 2017 at $538,500, up 7.2 percent year over year. CAR predicts that appreciation will slow to 4.2 percent in 2018, putting the median price at $561,000 by the end of next year.

Here in the Bay Area, price growth is also expected to cool next year, according to the latest forecast from John Burns Real Estate Consulting. The company expects new home prices to increase by 1.3 percent in the San Francisco metro area and by about 4.5 percent in the East Bay, San Jose, and Santa Rosa metro areas, all lower than this year’s predicted appreciation rates.

In a statement accompanying CAR’s report, Senior Vice President and Chief Economist Leslie Appleton-Young said that California’s housing inventory has been particularly tight at lower price points this year, while the higher end has had more favorable supply conditions. She expects that trend to persist in 2018, as buyer demand is projected to remain strong.

“With tight inventory being the new ‘norm’ for the past few years and at least the upcoming year, we’ll continue to see fierce competition driving up prices, leading to lower affordability and weaker sales growth,” she said.

By the end of 2018, CAR forecasts that just 26 percent of households will be able to afford the median-priced home, down from 29 percent this year. Home sales should grow by 1.0 percent year over year in 2018 to 426,200 units.

Healthy economic conditions and historically low mortgage rates are expected to drive continued demand for California real estate in the coming year. CAR predicts that the state’s unemployment rate will dip to 4.6 percent in 2018, while mortgage rates will finish the year at 4.3 percent.

_______
Shared with permission from the Pacific Union Blog

Read More

Moderate California, Bay Area Home Price Gains Forecast for 2018

  • The California Association of Realtors’ 2018 forecast calls for 4.2 percent single-family home price appreciation next year.
  • Affordability is expected to further diminish, with only about one-quarter of California households able to afford the median-priced home by the end of 2018.
  • The state’s unemployment rate will fall to 4.6 percent, while mortgage rates will rise to 4.3 percent.

California home price appreciation should slow next year, although there appears to be no end in sight for the state’s severe and prolonged inventory shortage.

That’s according to the California Association of Realtors’ 2018 housing market forecast, which says that the median sales price for an existing single-family home in the state should close out 2017 at $538,500, up 7.2 percent year over year. CAR predicts that appreciation will slow to 4.2 percent in 2018, putting the median price at $561,000 by the end of next year.

Here in the Bay Area, price growth is also expected to cool next year, according to the latest forecast from John Burns Real Estate Consulting. The company expects new home prices to increase by 1.3 percent in the San Francisco metro area and by about 4.5 percent in the East Bay, San Jose, and Santa Rosa metro areas, all lower than this year’s predicted appreciation rates.

In a statement accompanying CAR’s report, Senior Vice President and Chief Economist Leslie Appleton-Young said that California’s housing inventory has been particularly tight at lower price points this year, while the higher end has had more favorable supply conditions. She expects that trend to persist in 2018, as buyer demand is projected to remain strong.

“With tight inventory being the new ‘norm’ for the past few years and at least the upcoming year, we’ll continue to see fierce competition driving up prices, leading to lower affordability and weaker sales growth,” she said.

By the end of 2018, CAR forecasts that just 26 percent of households will be able to afford the median-priced home, down from 29 percent this year. Home sales should grow by 1.0 percent year over year in 2018 to 426,200 units.

Healthy economic conditions and historically low mortgage rates are expected to drive continued demand for California real estate in the coming year. CAR predicts that the state’s unemployment rate will dip to 4.6 percent in 2018, while mortgage rates will finish the year at 4.3 percent.

_______
Shared with permission from the Pacific Union Blog

Read More