This market has seen some dramatic swings over the past 3 years.
To put this in perspective, I’ve attached some slides borrowed from a presentation by Leslie Appleton-Young, Vice-President & Chief Economist for C.A.R. (California Association of Realtors).
Included are the following (3) slides:
- Median Price of Existing Detached Homes
- Peak vs. Trough Price
- Trough vs. Current Price – May 2010.
The first slide takes us on a wild ride from the Median Price Peak for the San Francisco Bay Area of $852,713 in May of 2007, down to the Trough we saw in February 2009 at $399,040, followed by some recovery at $592,930 as of May 31, 2010.
The other two slides demonstrate how our region, the San Francisco Bay Area has stacked up to others in the state.
Does this mean we’re seeing recovery for the Bay Area Real estate markets?
According to C.A.R.’s 2010 Market Outlook (as of 6/18/2010), California will see a small decrease in sales during 2010, down 4.7% from last year, but a 9.1% increase in median price.
Let’s take a closer look at what’s happened since December of 2009 to today.
I try to look for trends in the 38 cities that I follow, (in Alameda and Contra Costa Counties). December’s numbers showed inventories at their lowest levels since I started tracking these numbers back in 2005.
(Click on images to view the larger versions)
Here are the East Bay housing highlights since December:
- 94.4% increase in inventory, (Active Listings) – From 3,690 to 7,164
- 6.2% increase in pendings, (listings that have gone into contract) – From 6,133 to 6,517
- 45.2% drop in the Pending/Active ratio – from 1.66 to .91
- Month’s supply has doubled – From a 1.7 Month supply to a 3.4 month supply.
So, as a summary, we normally see an increase from December into early summer for both the number of homes that come onto the market and the number that go into contract. This year had an unusually high amount come onto the market. Distressed sales contributed 46% of this market, (REO/Foreclosures and Short sales). This has become slightly less of a factor since the end of last year where 54% were distressed properties.
Pending sales increased as well through April, but since have dropped off. We have seen a 12.8% drop in pendings since April 30, 2010, perhaps indicating the influence of the federal and state incentive programs.
The Month’s supply of homes that are for sale has increased from a low of 1.7 months at the beginning of the year to a 3.4 month supply now. The long range average for California is 7.2 months as stated by C.A.R. (California Association of Realtors). However, the San Francisco Bay Area tends to fair better than the rest of the state with a long range average considered to be closer to a range of between a 5 to 6 month supply of homes for sale.
This is in line with what we are seeing in the ratio between active listings and pending sales. The ratio at the beginning of the year was at a high of 1.66, (low inventories with a high number of buyers going into contract indicating a stronger seller’s market). We are now looking at a ratio of 0.91.
So what’s in store for the East Bay housing market?
It’s difficult to make a blanket prediction for the entire Bay Area due the many differences in local markets. Lower price ranges vs. med to high end markets are behaving differently. Demand is also determined on a city by city, even neighborhood by neighborhood basis. We’re seeing more properties come onto the market, sitting longer and experiencing more price reductions in the mid to high end ranges. Even with that, there’s still not enough inventory for investor and home owner demand in the lower price range areas.
A few months from now, I think we’ll be talking about a modest decline in sales numbers along with a continued increase in inventory, with the pendulum continuing to swing from the brief seller’s market we experienced in early spring back into a buyer’s market with opportunities, as long as the rates stay low. If rates start to rise however, I think the market will suffer and we’ll see the additional 2-8% decline in home values by next July that Moody’s recently forecasted.
I’m always available if you want to talk about the market, or explore your options for buying, selling or investing in East Bay real estate. You can reach me directly at 510.333.4460.
You can also download the entire copy of my numbers through July 31st here.
–Glen Bell
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