Glen’s San Francisco Real Estate Market Update, March 31, 2017

March 31, 2017 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

Zillow_Feb_2017

Here are some highlights for the 38 East Bay Cities that I track:

  • Following a dramatic 60% drop at the end of the year, inventory has started its’ seasonal trend upward for the third month in a row gaining 11.2% over the last 30 days and 50.7 since the beginning of the year. Expecting to follow the trends we saw in the previous 3 years, we anticipate a gradual increase on a month by month basis through spring and summer to occur before finally peaking in the fall months. Inventory levels are slightly less than what we experienced last year at this time. Our monthly supply is now 27 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 27 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), has increased 14% over the last 30 days but is less than what we experienced during this time last year by 12.8%. The pending active ratio increased slightly to 1.42. 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, (1.54). This will change in the coming months as we continue to move towards a more “normal” or balanced market for 2017.
  • The percentage of homes “sitting” has begun to increased slightly with 32% of the homes listed now remain active for 30 days or longer, while only 16% stayed on the market for 60 days or longer. This is due more to a clearance of some of the “stale” inventory seen as bargains and new homes beginning to come onto the market. This is about the same level that we saw last year at this time.
  • The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .1% of the market with only .03% of the active listings and .03% of sales over the past 4 months.
  • Median Price recovery on a city by city is beginning to see a slight increase. 17 out of the 33 East Bay cities tracked are now at or above their median price “peak” levels with another 12 cities within 20%. That means that only 4 cities are still well below their peaks, falling into the 20% to 30% range. The Median Price for the East Bay has decreased from $645,000 to $610,000 over the last 6 months, also typical for this time of year.

Months_Supply

  • The month’s supply for the combined 38 city area remains at 27 days. Historically, a 2 to 3 months supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is a repetitive pattern that we’ve seen over the past four years.

Actives_&_Pendings

 

  • Our inventory for the East Bay (the 38 cities tracked) increased to 1,870 homes actively for sale. This is still above the December 2012 low of 1,086 and slightly less than last year at this time of 1,972. 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 increased to 2,648, lower than where we were last year at this time of 3,034.

Pending_Active_Ratio

  • Our Pending/Active Ratio is 1.42. Last year at this time it was 1.54. This will be moving towards a more balanced or “normal.” (a ratio of 1 with an equal number of listings and pending sales) as we continue into the spring and fall.

Sales_3.31.17

 

  • Sales have decreased from the last (4 month period) now at 6,417 for the 38 cities tracked. This is slightly below what we saw last year at this time (6,561).
  • Sales over the last 4 months, on average, are 2.5% over the asking price for this area down slightly from last year’s 2.8%.

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Recent News

 

It’s a seller’s market again as prices surge across Bay Area and supply dwindles

By Riley McDermid, San Francisco Business Times, April 20, 2017

The housing crunch in the Bay Area is intensifying, after new listings for homes plunged 12 percent from the same period last year and the median home price climbed into double digit increases year over year.

The data come from a new report from the California Association of Realtors released this week. It shows home prices climbing across the entire Bay Area, as well as the rest of the state, as more people look for housing in places with limited housing supply.

“Sales of single-family homes rose 6.9 percent year-over-year in California; in the nine-county Bay Area, the increase was 6.4 percent. Statewide, the median price rose 6.8 percent to $517,020, while the Bay Area median rose a whopping 10.1 percent to $837,720,” the Mercury News reports.

“In Contra Costa County, sales grew by 11.2 percent and the median climbed 6.6 percent to $585,000. In Alameda County, sales were up 5.5 percent and the median jumped 10.0 percent to $833,750,” the paper reports. “These are the numbers for San Francisco: Sales up 12.6 percent, but the median price down a smidgen (-0.4 percent) to $1,350,000.”

Market watchers warned that while those numbers are great for sellers and Realtors, they will continue to worsen the region’s housing crisis and pinch buyers. Higher interest rates could also put a squeeze on the area’s long-term growth.

“[Spring is] off to a good start, as the economic and market fundamentals remain solid for the most part,” Leslie Appleton-Young, C.A.R.’s senior vice president and chief economist, told the paper.

“However, higher interest rates, a dearth of housing inventory, and slow wage growth will continue to have an adverse effect on housing affordability that is putting upward pressure on home prices, and is sure to hamper the market throughout the year.”

You can read C.A.R.’s full report here, with a county by county breakdown.

Blueprint for Bay Area aims to ‘change the dynamics’ of housing crisis

By John King, San Francisco Chronicle, April 15, 2017 

The only way for the Bay Area to become a relatively affordable place to live again is for cities and counties to be more tolerant of different types of housing, according to the draft of a new regional plan.

This could include a requirement that at least 10 percent of new units across the region be affordable and requiring fewer parking spaces in new housing complexes. Some cities might need to increase the amount of housing allowed in areas with ample transit.

“We’re looking at what it would take the region to change the dynamics” that in recent decades have seen the creation of housing lag far behind job and population growth, said Matt Maloney, a planner with the Metropolitan Transportation Commission, which is working with the Association of Bay Area Governments on the document. “The housing crisis right now is what comes at you front and center.”

Known as Plan Bay Area 2040, the draft released this month also spells out spending priorities for what is estimated to be $303 billion in transportation funding during the life of the plan.

Much of the investment would go to projects that have been in the works for years, such as new ferry service and an expansion of “express lanes,” where single drivers pay for the privilege of using carpool lanes. The improvements listed include wider highways in Solano County and a new BART station in the Irvington district of Fremont.

The draft calls this glimpse into the future “particularly disconcerting” and “far off-trajectory.” It also argues that “to truly address affordability and equity challenges, an engaged public and government at all levels will need to act.”

This is where ideas like including affordable units in all new housing developments comes in, or the density boost in areas where the 2013 plan calls for increased growth.

“Our scenario is to try and motivate more growth in areas that local governments already have identified,” Maloney said. At the same time, he acknowledged that the regional agencies can only cajole, not compel. There can’t be a decree to do away with parking minimums across the Bay Area, for instance.

Oakland approves 634-unit tower, city’s largest residential building ever

By Roland Li, San Francisco Business Times, April 20, 2017

Oakland’s Planning Commission approved on Wednesday a 400-foot tower with 634 apartments, a sign that the city’s housing boom is continuing.

The project will transform a downtown two-story parking lot at 1314 Franklin St., a block from the 12th Street BART station, into a 40-story skyscraper.

Robert Merkamp, an Oakland city planner, said the project was the largest single residential building ever approved in Oakland. Other master-planned projects like Brooklyn Basin have thousands of units approved, but among multiple buildings. Approved at 400 feet, 1314 Franklin would be among the tallest buildings in the city.

NEW POLL FINDS THAT 25% OF HOMEOWNERS WOULD ADD AN IN-­LAW UNIT, CREATING 400,000 NEW AND AFFORDABLE HOUSING UNITS

By Bay Area Council – April 12, 2017

SAN FRANCISCO—Amid the Bay Area’s crippling housing crisis, important legislation that took effect in January makes it faster, easier and less expensive for homeowners to build in-law or accessory dwelling units (ADU). SB 1069 authored by Senator Bob Wieckowski and sponsored by the Bay Area Council reduces parking requirements, discretionary permitting, and onerous utility connection fees that previously made in-law units infeasible for many residents.

In the recently released 2017 Bay Area Council Poll, a total of 25 percent of homeowners said they would consider adding an ADU. The Bay Area Council estimates that this could create an additional 400,000 new units—an even greater number than was previously projected when the legislation was signed into law by Governor Jerry Brown.

The poll also found that 76 percent think the region’s housing shortage is threatening the Bay Area’s economy, with 40 percent of respondents considering leaving the Bay Area in the next few years. The Bay Area’s future workforce and talent pipeline of millennials led the way at 46 percent.  Encouragingly, the poll found 62 percent of respondents are in favor of building new housing in their neighborhood, up from 56 percent in 2014.

With the ability to build in-law units quickly and cheaply, the potential for new affordable rental housing in the Bay Area is massive and crucial to reducing the number of students, teachers, nurses, family members, senior citizens, and others being priced out. The expansion of ADUs has been tremendously successful in alleviating housing woes in other cities like Vancouver, which after passing similar legislation over a decade ago, has seen 35 percent of single family homes add a second unit.In Portland, recent efforts by proponents have resulted in an increased pipeline from one per month to one a day.

“Despite overall growing support for building new housing and the enormous potential of ADUs, challenges remain,” said Bay Area Council Housing Committee Co-Chair and Partner at TMG Partners Denise Pinkston. “We are working to overcome resistance in implementing the new law as well as raising public awareness among homeowners about this now more accessible opportunity.” The Bay Area Council is also working with local and national banks to develop a financing tool that ensures loan opportunities are available to construct ADUs for households of all incomes.

“While an important first-step in addressing the monolithic regulatory system that’s fueling the housing shortage, ADUs will not be able to single-handedly meet the monumental demand our region is experiencing. Nor were they intended to,” said Bay Area Council President and CEO Jim Wunderman. “Much bigger and significant statewide reform is needed to reduce regulatory barriers for all housing and build long-term relief.”

The 2017 Bay Area Council Poll, which was conducted online by Oakland-based public opinion research firm EMC Research from Jan. 24 through Feb. 1, surveyed 1,000 registered voters from around the nine-county Bay Area about a range of issues related to economic growth, housing and transportation, drought, education and workforce.

PropertyRadar: No, California is not in a housing bubble

Home sales fall to lowest level since 2008

BY Brena Swanson, HousingWire, April 6, 2017

San Francisco Bay Area home sales plummeted to the lowest of any month since February 2008 as average home prices soared into the millions.

The extreme rise in home prices, however, is not a sign that the housing market is in a bubble and about to pop, Madeline Schnapp, director of economic research for PropertyRadar, explained in a recent report.

Looking at the latest facts for February, San Francisco Bay Area home sales, including condominiums, fell 2.8% from January 2017 and were down 4.1% from February 2016, marking the lowest of any month since February 2008.

And at the county level, sales were down double digits from last year in four of the region’s eight counties, with Marin and San Mateo counties posting the largest year-over-year declines of 13.7% and 12.4%, respectively.

“Double-digit home sale declines in Marin and San Mateo counties reflect their median prices topping $1 million,” noted Schnapp. “It’s no wonder headlines are dominated by stories of Millennial homebuyers wanting out.”

The San Francisco Bay Area February median home price (single-family residence) jumped 7.9% to $750,000, up from $695,000 in January 2017 and up 12.8% from $665,000 a year earlier.

Home prices have increased so much that Schnapp noted, “When we examine heatmaps of home values in the San Francisco Bay Area counties, large swaths are color-coded red, indicating values north of $2 million.”

But all of the surging home prices do not add up to a housing bubble, Schnapp stated.

“It’s a market dislocation caused largely by government policy,” said Schnapp. “A housing bubble requires both an unwarranted surge in prices followed by a massive selloff.”

“A massive selloff — a bubble bursting — is unlikely because a regulatory change in 2009 means that even if consumers default on their loans, banks will now sit on inventory rather than foreclose and sell like they did in 2008,” she continued.

Instead, Schnapp attributed the higher prices to a combination of factors, including plentiful jobs and below-market rate loans that require little down.

The real problem comes down to bad government policy, she said.

“Local, state and federal housing regulations have made it all but impossible for builders to meet housing demand in California’s growing economy,” said Schnapp. “Conceptually, the solutions to California’s affordability crisis are simple, but politically we should expect the current situation to continue for the foreseeable future.”

Housing, traffic woes stoke urge to flee Bay Area, new poll shows

By GEORGE AVALOS, SF Chronicle, March 31, 2017

Choked by traffic and overwhelmed by skyrocketing housing costs, a greater percentage of Bay Area residents than a year ago now say they yearn to flee the region.

In a new Bay Area Council poll released Thursday, 40 percent of the region’s residents said they want to move away in the next few years, a marked increase from the 33 percent who said in 2016 they wanted to leave.

Even worse, the new survey found that young adults are more inclined to leave: 46 percent of millennials want to lead the charge out of the Bay Area in the next few years.

“It turns out that we were wrong about millennial preferences, the stories were wrong that millennials wanted to live in a hyper-urban environment and that it would be OK to raise families in a condo,” said Micah Weinberg, president of the Bay Area Council’s Economic Institute. “Millennials are putting off family formation, but when they have a family, they want what their parents had: a house on a nice lot pretty close to work.”

The departure of millennial professionals to other regions of the country could harm the Bay Area’s economy, the council warned.

“Losing our youth is a very bad economic and social strategy,” said Jim Wunderman, president of the Bay Area Council, a business-sponsored, public policy advocacy organization.

The council polled 1,000 residents across nine Bay Area counties in late January for its annual survey. Those counties included Alameda, Contra Costa, Santa Clara, San Mateo, San Francisco, Marin, Sonoma, Napa and Solano.

Of the residents surveyed, 55 percent said they worried about the general cost of living in the Bay Area while 41 percent picked traffic as a big concern and 39 percent chose housing.

When asked to pick the single biggest problem, 16 percent chose the cost of housing and rent as the No. 1 problem facing the Bay Area, down from 22 percent last year. Thirteen percent picked traffic, also down from 17 percent in the prior poll.

Five percent chose the administration of President Donald Trump as the worst problem facing the Bay Area. The Bay Area Council included that category on its list of potential top problems. Last year, however, the administration of then-President Barack Obama was not included on the council poll’s list of potential top concerns.

With higher-paying technology jobs propping up housing costs, some community leaders worry the region won’t be able to attract a diverse workforce.

“The Bay Area is becoming like New York,” said Russell Hancock, president of Joint Venture Silicon Valley. “People won’t bother moving here unless they are really high earners.”

While many millennials seem particularly displeased by life in the Bay Area, economists with the Bay Area Council see anecdotal evidence that young people want to do something about the region’s woes.

The result could be a kind of “Yes In My Backyard” movement that could ward off the influence of the “Not In My Backyard” anti-growth mentality that has dominated the Bay Area’s political scene for decades, Weinberg said.

Fixing the housing and traffic problems could be essential to retaining young, talented tech workers or millennial employees in any industry, economists said.

“If you can’t attract millennials, you can’t compete as a region,” Hancock said. “But the market is sending powerful signals about the Bay Area. We are creating an affluent community with all kinds of wonderful amenities. This will be an ideal setting for some, but not all.”

Still, some cities have taken big steps forward in addressing their housing shortages. Chief among those, Hancock said, are San Jose, Oakland, Redwood City and Mountain View.

“We’ve got to do something, because more and more, you hear that it’s too expensive, too tough to live here,” Hancock said, “and that the most compassionate thing we can do for a young person is buy them a one-way bus ticket out of town to a place that is less expensive.”

BAC_Poll

Bay Area population growth slows, some counties losing people

By Kurtis Alexander, SF Chronicle, March 22, 2017

The Bay Area may be losing a bit of its luster.

After years of being overrun by new residents drawn by a red-hot economy, the number of people moving out has begun to catch up with the number moving in, new census data show.

In fact, in some parts of the Bay Area — including Santa Clara, San Mateo and Marin counties — already more people are leaving than arriving, according to the estimates released Thursday, which cover the period from July 1, 2015, to June 30, 2016. The same would be true in San Francisco if it weren’t for the high number moving in from abroad.

Such a trend has not been seen since last decade’s recession.

“Job growth has slowed, and that leads to a lessening in demand to live in the Bay Area,” said Hans Johnson, a senior fellow at the Public Policy Institute of California who had not seen the new census figures. “But it’s not like we’re having outright job losses or increasing unemployment. That’s not happening.”

The region’s economy, by all measures, is still robust. What’s happening, say Johnson and other demography experts, is that the extraordinary upswing that led California out of hard times last decade, with the tech sector propelling the boom, has become slightly less alluring. At the same time, housing prices have continued to grow, compounding the crunch.

“The key here is being able to afford to live in the Bay Area,” said Johnson. “Jobs and housing are really the primary criteria driving people’s decisions. It’s kind of a balancing act between the two. If jobs predominate, people are moving in. If housing predominates, you have less people moving in.”

S.F. home sales hit 5-year low, and prices are falling

Riley McDermid, SF Business Times, Mar 27, 2017

The sale of single-family homes in San Francisco fell to a five-year low in February, down 4 percent from just the month prior, new data from the Multiple Listing Service for sales in the city shows.

Socketsite reports that the latest sales figures for San Francisco shows only 308 single-family homes and condos were sold in February, a number that is 27 percent lower than sales in the city last February.

“As we noted five months ago, the recorded sales volume in San Francisco was being goosed by contracts for condos in new developments that were signed (‘sold’) many months prior but were closing escrow in bulk as the buildings came online in the middle of 2016. At the same time, signatures on new contracts were down 25 percent in 2016 despite an average of nearly 50 percent more inventory throughout the year and new condo sales dropped to a multi-year low in January,” the housing blog reports.

“And while many continue to finger a ‘lack of inventory’ for the anemic sales trend, listed inventory in San Francisco is running at a five-year high.”

Sales figures for February also showed that the median price paid for homes sold in February was 13.8 percent lower than the record high recorded for the city in April of last year, resting now at $1,120,000, as opposed to the $1.3 million it brought in then.

“Overall, Bay Area home sales dropped 3.3 percent on a year-over-year basis to 4,767 – the lowest February tally in nine years – with a median price of $649,000, which is 4.6 percent higher versus the same time last year,” Socketsite reports.

“Keep in mind that while movements in the median sale price are a great measure of what’s selling, they’re not necessarily a great measure of appreciation or changes in value and are susceptible to changes in mix, as opposed to movements in the Case-Shiller Index.”

California pending home sales dial back, marking weakest February in three years

C.A.R. LOS ANGELES (March 22) – After a solid start to the year in closed escrow sales, low housing inventory, eroding affordability, and rising interest rates mildly pulled back pending sales on a year-over-year basis in February, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

  • Based on signed contracts, statewide pending home sales decreased in February on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* declining 2.6 percent from 113.5 in February 2016 to 110.6 in February 2017, marking the weakest February in three years.
  • For the San Francisco Bay Area as a whole – which has been plagued by a shortage of homes on the market and poor affordability – non-seasonally adjusted pending sales were down year-to-year for the fifth straight month, with every tracked county in the region experiencing a drop in pending sales activity. The Bay Area pending sales index fell 10 percent from 145.2 in February 2016 to 130.6 in February 2017. Santa Cruz and San Francisco counties experienced the largest year-to-year reductions in pending sales of 40.6 percent and 23 percent, respectively. Pending home sales fell 9.2 percent from the previous year in San Mateo County, 7.5 percent in Santa Cruz, and 5.6 percent in Monterey.

 

Confidence in Bay Area economy sinks to lowest level in years, as cost of living pinches and millennials rebel

By Riley McDermid, SF Business Times, Apr 1, 2017

Almost 70 percent of Bay Area residents polled in a recent study said they don’t believe the Bay Area is doing better now than six months ago – and close to half of them say they expect a significant downturn in the area in the next three years.

The data come from a 2017 Bay Area Council Poll, which surveyed 1,000 registered voters from around the nine-county Bay Area from Jan. 24 through Feb. 1. It was conducted online by Oakland-based public opinion research firm EMC Research and asked respondents questions that touched on the region’s hot-button issues of housing, economy, transportation, growth, education and workforce.

“The growing intensity of concern about the Bay Area economy is particularly troubling. Confidence is an important indicator of the direction of our economy, and residents are feeling increasingly uneasy,” Jim Wunderman, CEO of the Bay Area Council, told the Business Time.

“The Bay Area economy is still very strong, but we’ve just come off of two soft months in employment growth and we’re hearing more frequently from employers about how housing and traffic are making it difficult to grow here and attract talent,” he told the Business Times. “We’ve got to get more serious about adding housing and improving the commute.”

This year, housing and traffic topped the list of things respondents said they were most worried about, with 33 percent of millennials citing cost of living as the Bay’s biggest issue, and 65 percent of them saying it ranked in the region’s top three problems. But across all metrics, every group generally felt less economic confidence in the Bay Area than they have in the last four years of surveys.

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net