Glen’s SF East Bay Real Estate Market Update
May 31, 2016
Questions seem to come up this time of year asking whether the market is changing when one of the biggest factors may seasonal. There was an article that I referred to last year written by Kathleen Pender of the San Francisco Chronicle. Quoting her article:
“Although spring is the busiest season in the Bay Area real estate market, a shorter surge of activity starts after Labor Day and lasts through mid-November. In fact, September is traditionally the biggest month for new listings in San Francisco.”
“It’s all part of a seasonal pattern that buyers and sellers can use to their advantage if they are not constrained by school schedules or job transfers.”
“The annual cycle starts in January and February, when buyers return to the market after the near-dead holiday season but find little to choose from and start bidding up prices. By the time new listings catch up a couple months later, “there is so much demand, the competition is ferocious,” said Patrick Carlisle, chief market analyst with Paragon Real Estate Group.Zaque Eyn (below) and Andy Mandel (above) of Gigi Park install a… Inventory, sales and prices tend to peak in March, April and May. It’s also when homes tend to sell at the greatest percentage of list price. The sales-to-list ratio is a good measure of competition, Carlisle said.”
We’ve seen a similar pattern over the last three years. Hot spring through May and into June, a lull during July and August with another pick-up in September. Then it drops off the cliff again as you roll into winter.
Here are some highlights for the 38 East Bay Cities that I track:
- Inventory increased by 5.7% in the last 30 days and has more than doubled, (increased by 112%), since the beginning of the year. Inventory is now at about where we were last year at this time. Our monthly supply is now at 36 days. As a reminder of what we mean by “months supply;” If no more homes come onto the market, and homes continue to sell at the same pace as they have been over the last 12 months, then the “months supply,” (in this case 33 days), tells us that’s how many days it would take to sell the remaining number of homes we currently have available for sale in any given market.
- The number of pendings, (homes that are in contract), increased by 8.7%. That’s less than what we’ve experienced during this time last year. The pending active ratio has increased slightly to 1.43. This supply and demand ratio signals whether we’re in a sellers or buyers market. Typically, a number well above 1, (more inventory with less pending) favors sellers. A number below 1 favors buyers. This is at a lower level than we saw last year at this time, (1.60), and this may be an indication of a slight weakness in the market.
- The percentage of homes “sitting” increased slightly since last month. 35% of the homes listed now remain active for 30 days or longer, while 16% stayed on the market for 60 days or longer.
- The “distressed” market, (foreclosures and short sales) are no longer much of a factor representing only 4% of sales over the past 4 months.
- Median Price recovery on a city by city is beginning to see a slight increase. This is typical as we approach Summer. 16 out of the 32 East Bay cities tracked are now at or above their median price “peak” levels with another 8 cities within 20%. That means that 9 cities are still well below their peaks, falling into the 20% to 40% range.
- The month’s supply for the combined 38 city area increased to 36 days, about the same level we saw last May, in 2015. Historically, a 2 to 3 months supply is considered normal in the San Francisco East Bay Area.
- Our inventory for the East Bay (the 38 cities tracked) increased to 2,525 homes actively for sale. This is still well above the December 2012 low of 1,086 but about the same as we were last year at this time of 2,461. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales have increased to 3,619, lower than where we were last year at this time of 3,987.
- Our Pending/Active Ratio has remained about the same at 1.43. This continues to favor sellers. We anticipate that it is primarily seasonal and will begin to move towards what is considered a more normal and balanced market as we move towards summer, (a ratio of 1 with an equal number of listings and pending sales).
- Sales are increased 15.5% from what we saw in March based on a (4 month period) now at 7,474 for the 38 cities tracked. This is 5.2% less than where we were last year at this time.
- Sales over the last 4 months, on average, are 4.6% over the asking price for this area.
Historical Median Price City by City Recovery
How much has the real estate market in your city recovered from their previous Peaks. The graph shows our recovery from each cities peak. As you can see, the most sought after cities have led the way. However, this is a slow process and as buyers become priced out of some of these markets, their interest spills over to the surrounding cities. They too begin to follow the trend up towards recovering.
by Alex Starace, Redfin, May 27, 2016
A growing number of home buyers are worried about competition, according to a Redfin survey of 975 home buyers conducted this month.
While affordability is the main concern keeping homebuyers up at night, nearly 19 percent cited competition from other buyers as their top worry, up from 16 percent in February and 11 percent in November.
Interestingly, fewer buyers were concerned about home supply this quarter than last, even though the dwindling number of homes for sale is the main driver of competition and affordability woes.
Buyers’ concerns are justified. Sixty percent of Redfin offers have faced competition in May to date and over half of all offers faced competition for much of each of the last four years. With prices up nearly 5 percent, the thought of a bidding war would be particularly worrying for a cost-conscious buyer.
“Though enticed by high rents and low mortgage rates to begin a home search, first-time buyers face a number of obstacles in today’s competitive market,” said Redfin chief economist Nela Richardson. “In many cities, starter homes have seen the largest price increases because the supply of affordable homes on the market is so low and the demand for these homes is so high.”
Rent is Still Too D@mn High
Those looking to buy are often fleeing an expensive rental market. Consistent with February’s survey, about one in four homebuyers surveyed this month cited high rent as their reason for house hunting, a significant jump since last August.
The change is attributable to first-time buyers. In the most recent survey, over fifty percent said high rent led them to the market, as compared to only 25 percent of first-timers in August.
Fewer Homebuyers Worried about Stock Market Fluctuations
Eighteen percent of homebuyers said that the recent turmoil in the stock market was a worrying economic sign that might signal a housing downturn, down 5 percentage points from February. Only 7 percent said stock market losses cost them money they had planned to use to buy a house, down from 12 percent. Seventy-two percent said the stock market had no effect on their decision to buy.
School Quality and Green Space are Very Important to Homebuyers
Buyers were asked to cite up to three of the most important factors in their choice of home, beyond square footage and price. Three choices rose to the top: the layout, finishes and design were most important (46%), followed by school quality (41%) and a yard or green space (39%). Ease of commute came in fourth, checked off by 32 percent of respondents.
Of buyers surveyed, 34 percent said they are more inclined to buy now than they were a year ago, up one percentage point from the previous survey and up five percentage points from the August report.
Only 27 percent of buyers felt an increased urgency to buy before prices or mortgage rates rose, down four percentage points compared to last quarter.
About the Survey
Redfin’s survey was conducted between May 17 and May 23, and includes responses from 975 homebuyers in 36 states and Washington, D.C.
While spring is traditionally the busiest time for real estate sales, this summer could prove to be the hottest time for buying or selling a home, according to a real estate economist at Florida Atlantic University.
“From a buyer’s perspective you have more choice, but you’re also competing against far more buyers,” says Ken Johnson, Ph.D., a professor of finance and associate dean at FAU’s College of Business, who also has sold hundreds of homes as a real estate broker. “Sellers are also looking to sell over the summer, particularly if they have children and want to get a deal done before school starts again.”
By Mark Calvey SF Business Times, June 6, 2016
Venture capitalists tightening their purse strings, startups shedding jobs and the continuing dearth of IPOs could be taking their toll on the Bay Area’s housing market.
By almost any measure, the Bay Area’s roaring economy is cooling. The region’s housing market is fueled by wealth creation and the new jobs that has been a hallmark of the regional economy.
The hardest hit segment of the Bay Area’s housing market is the luxury sector, according to research released Monday by San Francisco-based Paragon Real Estate Group.
“It appears the luxury segment has softened to a greater degree than more affordable segments, some of which remain very competitive,” Paragon said. “The number of high-end listings in MLS has jumped while sales have plateaued or declined.
When economic uncertainty swells, this is a market segment often affected first,” Paragon said.
Paragon cites the supply of high-end condo projects to market as well as the fact that expensive homes are usually a buyer’s second or third home, not a primary residence.
Apartment rentals also reflect job losses more quickly, with Paragon saying asking-rent appreciation has plateaued and that “it is quite possible that actual lease rents have already started to decline.”
C.A.R. Market Snapshot, May 2016
Since the Great Recession ended roughly 7 years ago, home prices in California have posted some significant gains. After dipping by more than 58% during the downturn, the median home price has more than doubled to broach the $500,000 mark for the first time since 2007. This has eroded affordability as incomes have failed to keep pace. Perhaps the one saving grace in today’s market, at least from an affordability standpoint, is that interest rates remain near historic lows, which has helped to keep mortgage payments manageable even as prices rise.
However, low rates do little to offset the effects of higher home prices on the ability of prospective buyers to come up with a down payment. C.A.R. is currently forecasting that price growth will taper down towards something that is more consistent with income growth as the cycle progresses, but even if prices remained flat, there will be a significant down payment burden facing new home buyers in California for the foreseeable future.
As prices continue to rise, obtaining a down payment will be an even greater obstacle to home ownership. Low rates have kept mortgage payments more affordable than they otherwise would be for existing homeowners, but it is getting harder and harder for new buyers to get into the market in the first place.
By Kathleen Pender, San Francisco Chronicle, May 13, 2016
On Monday, the California Senate is set to vote on a bill aimed at easing the dire housing shortage by making it easier for homeowners to add a legal in-law unit within their building’s existing footprint.
SB1069 is one of several bills that would prevent cities and other jurisdictions from imposing certain requirements on property owners wanting to add a second unit. It comes at a time when many California cities are relaxing their rules in an effort to promote affordable housing in established neighborhoods near transit and job centers.
San Francisco, Oakland, Berkeley and Redwood City are among the Bay Area cities that have recently passed ordinances easing restrictions on “accessory dwelling units,” commonly called in-laws, granny flats or backyard cottages.
“This is a really easy and visible way to add places for people to live, because some people have more house than they need,” said Denise Pinkston, co-chairwoman of the Bay Area Council housing committee.
Glen Bell – (510) 333-4460 firstname.lastname@example.org