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Real Estate Roundup: California Claims One-Third of the 20 Fastest-Growing U.S. Luxury Housing Markets

San Mateo and San Francisco counties have the most-expensive luxury home prices in America, while Alameda County’s Fremont has once again earned accolades for its family-friendliness. Get the skinny on what’s going down in the world of California real estate in Pacific Union’s latest Real Estate Roundup.

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San Francisco Has the Nation’s Fewest Delinquent Mortgage Holders

  • The U.S. mortgage-delinquency rate dipped to 4.3 percent in March, the lowest since March 2007.
  • In the San Francisco metropolitan area, 1.5 percent of homeowners are delinquent on their mortgages, the fewest of any large U.S. housing market.
  • Mortgage delinquencies rose in the Santa Rosa and Napa metro areas from one year earlier, likely a result of October’s wildfires.

Contemporary homes in San FranciscoA thriving economy and rising home equity have helped pushed mortgage delinquencies to the lowest point since before the Great Recession, with San Francisco claiming the best late-payment rate of any large U.S. city.

That’s according to CoreLogic’s latest Loan Performance Insights report, which says that 4.3 percent of Americans with a mortgage were delinquent on their payments by more than 30 days as of March, the lowest number in 11 years. Mortgage delinquencies decreased in 47 states from one year earlier — including in California, where they dropped to 2.5 percent.

In a statement accompanying the report, CoreLogic Chief Economist Frank Nothaft pointed to the U.S. unemployment rate, which fell to an 18-year low of 3.8 percent in May, as helping most Americans avoid mortgage delinquency. He also said that rising home equity plays a factor in the trend, with the average mortgage holder gaining $16,300 in equity between March 2017 and March 2018.

Of the 10 largest core-based statistical areas in the country, San Francisco — which includes Marin, San Mateo, Alameda, and Contra Costa counties — boasts the nation’s lowest mortgage-delinquency rate, at 1.5 percent. Mortgage delinquencies are even more scarce in San Jose-Sunnyvale-Santa Clara, where just 1.1 percent of homeowners are more than 30 days late on their payments. The number of delinquent mortgages declined year over year in both areas.

By contrast, mortgage delinquencies rose from March 2017 in the Santa Rosa and Napa metro areas, to a respective 2.1 percent and 2.2 percent. This is likely due to the devastating October wildfires, with CoreLogic CEO and President Frank Martell referencing last year’s natural disasters as a factors affecting current mortgage-default rates.

California and the Bay Area serve as prime examples of the two trends that Nothaft referenced as helping fewer Americans to be tardy on their mortgage payments. The state’s unemployment rate fell to a record-low 4.2 percent in April, with jobless claims in San Francisco and San Mateo counties dropping to 2.1 percent. And according to a separate recently released CoreLogic report, Golden State homeowners gained an average of $51,000 in equity between the first quarter of 2017 and the first quarter of 2018, the most in the country.

(Photo: iStock/canbalci)

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Shared with permission from the Pacific Union Blog

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Pacific Union’s California Regional Real Estate Forecasts to 2020

On Nov. 15, Pacific Union held its fourth annual Bay Area Real Estate and Economic Forecast in partnership with John Burns Real Estate Consulting at the SFJAZZ Center in San Francisco. Two weeks later, we presented our first-ever forecast for Los Angeles at the Skirball Cultural Center.

The downloadable whitepapers below summarize our overall and California metropolitan statistical area (MSA) outlooks for the real estate market and the economy over the next three years. The analyses feature commentary from Pacific Union CEO Mark A. McLaughlin, Pacific Union Chief Economist Selma Hepp, and John Burns Real Estate Consulting CEO John Burns. To watch a video of the full, one-hour Bay Area forecast, click here. To view the Los Angeles area forecast, click here

East Bay (Alameda and Contra Costa counties)

  • The East Bay MSA is currently at 7.6 on the Burns Affordability Index (10 indicates lack of affordability and 5.0 the historical mean) but is projected to further worsen, with continued price appreciation and increased mortgage rates. FHA loan limits will increase in 2018 to $683,000, easing the affordability issue to some extent, though this limit is still below the median resale price in the MSA.
  • Employment growth remains solid. Currently, job growth is at 2 percent for 2017, slightly lower than the 3 percent-plus experienced in 2015 and 2016.
  • The East Bay MSA pulled over 10,700 permits over the last year, 61 percent of which were multifamily homes. Some submarkets within the East Bay have traditionally been known for family-oriented product (single-family homes), though as affordability worsens, we have seen a rise in for-sale attached and apartment construction. Multifamily permits are anticipated to outpace single family permits through 2020.

Click here to read the East Bay forecast to 2020 whitepaper.

Los Angeles (Los Angeles County)

  • Los Angeles currently ranks at 8.5 on the Burns Affordability Index (10 indicates a lack of affordability and 5.0 the historical mean). While incomes have grown, home prices have consistently increased by 7 percent or more per year since 2012.
  • Despite the current lack of affordability, the MSA is projected to add nearly another 13 percent in appreciation by 2020.
  • Employment growth in 2017 has slowed from 2016 (up 109,000 jobs), but the local economy has still added over 50,000 jobs in the last year (or about 1 percent employment growth).

Click here to read the Los Angeles forecast to 2020 whitepaper.

Napa (Napa County)

  • The Napa MSA has solid employment growth, with 2,800 new jobs over the last year.
  • Similar to Sonoma County, Napa has a generally middle-class to upper-middle-class income profile, with a median income of about $80,000. Further, most of the jobs gained are at lower- and middle-income salary positions ($20,0000 to $80,000), and higher-income jobs ($100,000-plus) are actually decreasing.
  • New construction is extremely limited, with less than 100 new home sales in 2017. This is not expected to change markedly in the immediate future. New construction in Napa is typically aimed at the higher-end, second-home market or higher-density product attainable with local incomes.

Click here to read the Napa forecast to 2020 whitepaper.

San Francisco (Marin, San Francisco, and San Mateo counties)

  • Existing home sales are being held back by a lack of supply and more importantly, a lack of affordability.
  • San Francisco currently ranks at 7.9 on the Burns Affordability Index (10 indicates a lack of affordability and 5.0 the historical mean). Though pricing is at an all-time high, the BAI also takes into consideration strong incomes in San Francisco, as well as low mortgage rates.
  • Employment growth has slowed, but the MSA still added over 21,000 jobs over the last 12 months (or about 2 percent employment growth).

Click here to read the San Francisco forecast to 2020 whitepaper.

San Jose (Santa Clara and San Benito counties)

  • The San Jose MSA ranks at 8.5 on the Burns Affordability Index (10 indicates a lack of affordability and 5.0 the historical norm). Even with regards to the higher price standards of Silicon Valley, San Jose is in a historically unaffordable period. Prices continue to increase to new highs, and more residents are being priced out of the market and pushed to more outlying locales.
  • Employment growth has slowed from 3 percent-plus in 2012 – 2016 to 1 percent in 2017. This is the lowest rate of employment growth since 2010, but job gains remain positive.
  • The San Jose MSA had just over 8,200 permits over the last 12 months. With the recent lower levels of employment growth, this equates to an employment-to-permit ratio of about 1.3, or roughly at equilibrium. This is down significantly from recent years when the employment-to-permit ratio was 4.0-plus. San Jose has historically been a demand exporter, meaning those employed in San Jose often live outside of the MSA (for example, Alameda or Contra Costa counties) due to affordability issues.

Click here to read the San Jose forecast to 2020 whitepaper.

Santa Rosa (Sonoma County)

  • The Santa Rosa MSA has begun to experience job losses for the first time since 2010 and is currently down 1,300 jobs over the last year.
  • Employment in Santa Rosa caters more towards middle-income jobs than most people expect, with a median salary of $71,000. With a large proportion of its workforce in the tourism and service industries, the bulk of jobs in Sonoma County earn $20,000 to $60,000. Further worsening the problem, jobs being lost in Sonoma County are at the higher-income tiers. For example, jobs earning $120,000 to $140,000 have fallen by 7 percent over the past year, while lower-income jobs are stagnant or have experienced minimal growth.
  • New construction is extremely limited, with only 300 new home sales in 2017. While construction activity is expected to increase going forward given the decrease in housing inventory caused by wildfires near the end of 2017, the Santa Rosa MSA will remain a comparatively slow-growth market.

Click here to read the Santa Rosa forecast to 2020 whitepaper.

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Shared with permission from the Pacific Union Blog

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Bay Area Housing Inventory Further Tightens in November

  • The median sales price for a single-family home in the nine-county Bay Area increased by 12.5 percent year over year in November to $910,350.
  • Home prices rose from November of last year in all nine Bay Area counties, with six seeing double-digit percentage point appreciation.
  • Seven Bay Area counties have the state’s most severe inventory shortages, with less than two months of supply.

Stubbornly low supply conditions did not improve in California or the Bay Area on an annual basis in November, pushing prices up by double-digit percentage points in six local counties.

The latest home sales report from the California Association of Realtors says that the state median sales price for a single-family home was $546,820, up 8.8 percent from November 2016 for the largest annual gain in nearly two years. Home prices increased in 45 of 51 counties for which CAR tracks data, with double-digit percent gains recorded in 23 counties.

The nine-county Bay Area led the state’s major regions for annual appreciation, with the median sales price climbing by 12.5 percent from November 2016 to reach $910,350. Home prices appreciated year over year in every local county, with six recording double-digit percent gains: Santa Clara (27.0 percent), San Mateo (22.1 percent), Marin (17.1 percent), Sonoma (13.3 percent), San Francisco (10.3 percent), and Alameda (10.0 percent).

Like last November, four of those counties were California’s only seven-digit housing markets. San Francisco was the state’s most expensive county, with a median sales price of $1,500,000, followed by San Mateo ($1,486,000), Santa Clara ($1,282,500), and Marin ($1,230,000) counties.

In what has become an all-too-familiar refrain, a pronounced lack of homes on the market fueled the price growth statewide and locally. California’s months’ supply of inventory dropped to 2.9 in November, down on both a monthly and yearly basis. The nine county Bay Area’s MSI ended the month at 1.5, also down from October and November 2016.

Supply declined year over year in eight of nine counties, with conditions in Solano County unchanged. San Francisco has the state’s most severe inventory shortage, with a 1.1-month supply, while Santa Clara, San Mateo, Alameda, Marin, Contra Costa, and Sonoma counties all have less than two months of supply. Overall, there were 17 percent fewer Bay Area listings than at the same time last year, with Santa Clara County seeing a substantial 36 percent drop.

CAR President Steve White expressed concern about the state’s deteriorating affordability conditions, pointing to particularly slim supply levels at lower price points. Senior Vice President and Chief Economist Leslie Appleton-Young echoed his sentiments, referencing the Federal Reserve’s decision to raise interest rates last week and more expected hikes in 2018.

“As rates rise, the cost of homeownership will go up, and housing affordability will further deteriorate if the trend continues,” she said.

(Photo: iStock/ChuckSchugPhotography)

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Shared with permission from the Pacific Union Blog

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