Glen’s SF East Bay Area Real Estate Market Update, October 31, 2017


Glen’s SF East Bay Area Real Estate Market Update

October 31, 2017



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


  • Following a dramatic 60% drop at the end of last year, inventory began its usual seasonal trend upward. Typically, we see a steady increase on a month by month basis to occur before finally peaking in September. This year has taken a slightly different course. Inventory has been fairly flat over the summer months fluctuating slightly up and down. We did see a decrease in the available housing inventory since last month. However, we are still well below where we were last year at this time by 22%. That’s concerning considering last year was a very “tight” market. Pendings were somewhat steady with a slight decrease from September. Our monthly supply is now 30 days. Last year, our months’ supply at this time was 39 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 30 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), decreased slightly in comparison to last month, but is still below where we were last year by 15%. The pending active ratio increased to 1.33. This compares to last year at the same time of 1.22. 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.
  • The percentage of homes “sitting” has increased slightly with 42% of the homes listed now remaining active for 30 days or longer, while 22% stayed on the market for 60 days or longer. This is lower than what we saw last year at this time.
  • The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market with only .02% of the active listings and .02% of sales over the past 4 months.



  • The month’s supply for the combined 38 city area is 30 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 normally a repetitive pattern that we’ve seen over the past four years. However, we are well below supplies levels compared to last year at this time, of 39 days. However, this year the inventory level on the graph is shallower.


  • Our inventory for the East Bay (the 38 cities tracked) is now at 2,065 homes actively for sale. This is still above the December 2012 low of 1,086 and well less than last year at this time of 2,653 or (22% lower). 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 decreased slightly to 2,749, but lower than where we were last year at this time of 3,233 or (15% lower).


  • Our Pending/Active Ratio is 1.33. Last year at this time it was 1.22. 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 fall and winter months.


  • Sales have decreased slightly from the last (4 month period) now at 9,203 for the 38 cities tracked. This is slightly higher than what we saw last year at this time (9,029).
  • The one factor that has changed this year is that we had a very late start to the spring season due to the heavy amount of rain received compared to very little in the preceding 3 years. The rains more than likely delayed many sellers from putting their homes up for sale early. They simply got a late start because they couldn’t work on the exterior of their homes during this time. Also, on average, homes are closing in fewer days than before. It seems that inventory is still being gobbled up but at a slightly faster pace than is being replenished. Inventory seemed to flatten out over the summer months and remains at a lower level when compared to last years numbers.
  • Sales over the last 4 months, on average, are 4% over the asking price for this area, greater than what we saw last year’s at this time, 3%.



Recent News


GOP tax proposal would gut affordable housing, state officials say

By KATY MURPHY,  Bay Area News Group, November 3, 2017

SACRAMENTO — Less than two months after California passed hard-fought bills to build more subsidized rental housing for the poor, affordable-housing advocates are reeling from a federal tax-reform proposal that could grind that momentum to a halt and wipe out an existing program that created roughly 20,000 such homes last year.

The GOP tax proposal, if passed in its current form, would take away tax exemptions that generate $2.2 billion annually for affordable housing construction in California. For context: The recession-era elimination of state redevelopment funding in 2011 — a move widely criticized as devastating to affordable housing — amounted to losses of roughly $1 billion per year.

“This is definitely a red alert for California,” said Matt Schwartz, president and CEO of California Housing Partnership, a San Francisco-based nonprofit housing organization. “The time is now for anybody who cares about our continued ability to produce affordable rental homes to engage.”

California had expected to build roughly 90,000 affordable housing units as a result of a $4 billion statewide housing bond — pending voter approval in November 2018 — and money from a bill by Sen. Toni Atkins, D-San Diego, which levies a fee on certain real-estate transactions.

That number would be cut in half under the tax proposal, officials say.

Like other states, California relies heavily on federal tax breaks to finance affordable housing projects. The GOP tax proposal would eliminate tax-exempt private activity bonds — which helped subsidize the construction of 20,000 affordable homes statewide last year — to help offset the cost of a lower corporate tax rate.

The plan could sharply curtail California’s efforts to help those who have been hit hardest by the housing crisis: seniors, and poor and disabled people. As details emerge, affordable housing advocates and developers are scrambling to mobilize opposition to an obscure-sounding tax policy with far-reaching, real-life implications.

“The newly released House Tax Reform bill would be catastrophic for affordable housing in California,” wrote Tia Boatman Patterson, executive director of the California Housing Finance Agency, in an alert sent Thursday to a handful of colleagues and groups, calling for “all hands on deck.”

Proponents of the tax reform plan say it will simplify a hopelessly complex tax code. And, because it would eliminate state and local deductions — another provision that has Californians howling — such a policy would discourage states like California from hiking taxes in the first place, argues state Sen. Jeff Stone, R-Murrietta.

“While some Californians will be adversely affected by an elimination of the deductions that currently exist for state and local taxes paid,” he said in a statement Friday, “a bigger question arises: Why don’t we just lower the tax burden on California’s hard working families in the State to offset the impact that comes with the removal of federal deduction for state income taxes?”

Stone was not available to address the proposal’s affordable-housing implications on Friday, and his office said staffers were still reviewing it.

The proposal could hurt affordable-housing financing in two ways: first, by eliminating a key tax credit, and second, by making the tax credits preserved under the federal proposal less valuable.

As the corporate tax rate drops, experts say, the tax burden will automatically lighten, giving investors less of a financial incentive to buy the credits, which are used to help pay for the costs of building a subsidized home.

Sen. Jim Beall, the South Bay Democrat who carried Senate Bill 3, which put the affordable-housing bond on next year’s ballot, said the proposal “will hurt thousands of California families, seniors and vets.”

“Giving big tax cuts to wealthy corporations at the expense of middle-income and low-income families who cannot afford to buy a home or rent an apartment is cruel,” Beall said in a statement to this news organization. “I urge Californians to contact their congressional representative about this bill and tell them to leave the Low-Income Housing Tax Credit and New Market Tax Credit programs untouched.’’

Carolina Reid, assistant professor of city and regional planning at UC Berkeley, said the proposal would be “absolutely devastating” for the state.

“California, with the housing package, was taking such a leadership role in addressing the housing crisis, and that can be completely undermined by these federal efforts,” she said. “It’s really troubling.”

California’s high taxes, costly housing mean trouble under GOP tax plan

By Kathleen Pender, SF Chronicle, November 2, 2017 

People who live in high-tax states with high housing prices would fare worst under the tax bill released by House Republicans Thursday.

Analysts are still poring over the details and crunching the numbers, but in general, “the bill is a large cut for businesses and a smaller tax cut for individuals,” said Howard Gleckman, a senior fellow with the Urban-Brookings Tax Policy Center.

The impact on individuals “will be very idiosyncratic. It depends on where you live, the makeup of your family, how you make your money,” Gleckman said.

A large family in a high-tax area with expensive housing would likely pay higher taxes than they do now. A working-class household in Peoria, Ill., depending on the family size, “may do pretty well,” Gleckman said.

The bill would cut the top corporate tax rate to 20 percent from 35 percent, and condense the number of individual tax rates to four — 12, 25, 35, and 39.6 percent. Today there are seven, ranging from 10 to 39.6 percent. However, the top tax rate would apply to taxable income over $1 million for married and $500,000 for single filers. Today it kicks in around $470,000 for married and $418,000 for single filers.

The bill would almost double the standard deduction to $24,000 for married couples and $12,000 for single filers, which means far fewer people would itemize deductions. However, large families could fare worse because it also would eliminate the personal exemption ($4,050) they can deduct for each member of the household, including college kids and adult dependents. Instead, it would increase the child tax credit to $1,600 from $1,000 for each child 16 and younger. It also would create a new “family credit,” equal to $300 for each parent and adult dependent, but this would expire after five years.

People in high-tax states could pay more. Today, if they itemize, they can deduct either state and local income or sales tax. California has the nation’s highest income tax rate at 13.3 percent.

People who itemize their deductions could still deduct their property taxes under the bill, but only up to $10,000 per year. Today there is no limit. If you bought a new California home for roughly $900,000 today, your state and local property taxes would be about $10,000 a year.

However, under current law, people who are subject to Alternative Minimum Tax get no benefit from the state and local income and property tax deductions. The bill would eliminate the AMT, taking the sting out of the loss of those deductions for those people.



The proposal would cap the mortgage interest deduction on new home loans. Today, homeowners can deduct interest on up to $1 million in mortgage debt used to buy, build or improve a first and second home, plus up to $100,000 in other mortgage debt (such as a home-equity loan used to buy a car). For existing mortgages, those rules would not change. But starting Nov. 2, if you took out a new loan, you could only deduct interest on up to $500,000 in mortgage debt on a principal residence and no interest on new home-equity debt.

The bill also would make it a little harder to shield capital gains tax on a home. Today, you can exclude up to $250,000 in capital gains ($500,000 if married) when you sell your house, as long as you have owned and used it as your primary residence for at least two of the past five years. The bill would change this to five of the past eight years.

The bill kills most tax benefits for higher education, including deductions for student loan interest and tuition and fees and the Lifetime Learning and Hope Scholarship credits. It retains the American Opportunity Tax Credit and extends it, albeit by half, for students taking a fifth year of college.

In a major change, profits from partnerships, sole proprietorships and other “pass-through” entities would be treated like business income and taxed at the top rate of 25 percent. Today it’s taxed like ordinary income at rates up to 39.6 percent. The bill includes complex “anti-abuse” provisions designed to prevent employees from becoming self-employed just to reduce their taxes.

The 429-page “Tax Cuts and Jobs Act’’ would almost double the estate-tax exemption to $10 million per person and kill the estate tax altogether after 2023.

It retains the Medicare surcharge on investment income and ordinary income above certain limits and the deduction for contributions to 401(k) plans. Cutting the latter has been suggested as a way to offset the cost of the plan, which is estimated at $1.5 trillion over 10 years.

Some surprises buried in the fine print: You would be able to make contributions to a 529 college savings plan for an unborn fetus, the tax credit for adoptions would be eliminated, and churches could make political statements, said William Gale of the Tax Policy Center.

The taxation of alimony would change for people getting divorced in the future. Today, the person getting the alimony claims it as income and the payer gets to deduct it. In the future, alimony would not be taxable or tax-deductible, putting it on the same footing as child support payments, Gale said.

Nicole Kaeding, an economist with the Tax Foundation, said the “vast majority” of Americans would get a tax cut under the plan. People who now claim large deductions for state and local income and property taxes and mortgage interest might not.

The bill’s author, Kevin Brady, R-Texas, said that a family of four making $59,000 a year would save almost $1,200.

Gene Sperling, who served as the principal economic policy adviser for Presidents Bill Clinton and Barack Obama, said in a new conference that the plan fails the test of “fiscal sanity, fairness and moral authority.” He criticized it for permanently cutting taxes for businesses and wealthy individuals, but providing smaller tax cuts for low- and middle-income families and making some of them temporary.

President Trump endorsed the tax plan and said he wants it passed by Thanksgiving.

Zillow tells first-time homebuyers: Buy now before prices jump even higher

By Svenja Gudell, SF Business Times, Novemeber 9, 2017

With home prices still expected to rise in the next year, real estate information company Zillow is advising prospective first-timers: Buy now.

For many first-time homebuyers, the biggest factor in being able to buy a home is amassing the down payment. Some people save for years to patch together enough money to put down for a home in the Bay Area, one of the most expensive home markets in the country.

But waiting too long can be more expensive than taking the plunge now, Zillow found in a recent analysis.

“Sky-high rents and rising home prices are putting first-time buyers in a bit of a catch-22,” said Svenja Gudell, Zillow chief economist, in a statement. “A renter who saves for another year to reach a larger down payment may find that the home they love today is outside their budget a year from now.”

Borrowers are generally encouraged to make a down payment of 20 percent of a home’s purchase price. Those who put down less usually have to buy private mortgage insurance and may face higher loan rates as well.

At the same time, prospective buyers aiming for the 20 percent benchmark might not ever make that goal if prices rise faster than savings rates. The majority of first-time buyers — 59 percent — put down less than 20 percent for their down payments, according to Zillow research.

That is especially true in the Bay Area, where prices are already high that annual increase of a few percentage points can translate into home prices ballooning by tens of thousands of dollars.

Here are some examples:

For San Francisco, Zillow projects a rise of 1.3 percent, or about $11,538 to an average of $876,938 in September of 2018. A 20 percent down payment would be $175,388 — or $2,304 more than you would have put down the year before. That means $192 more in savings each month.

Nationwide, prices are expected to go up by $6,275 to an average price of $208,975 in September of 2018 that would require a $105 bump in savings per month for prospective homebuyers gearing for a 20 percent down payment.

Overall, home-ownership rates are inching downward, especially for the younger generations who tend to stock the nation’s pool of first-time buyers.

The main barrier for many would-be buyers is the high pricetag of a home, which in turn requires a higher down payment, according to a study published in May by Apartment List, a San Francisco-based rental listings site.

“Millennials in many of the nation’s large metros will need at least a decade to save enough money for a 20 percent down payment on a condo. Millennials in San Francisco, San Diego, Los Angeles, Austin and San Jose each face a wait of at least 19 years,” the study found.

Would-be buyers need not lose all hope — it is still possible to buy a home with less than a 20 percent down payment, Zillow states in its 2017 Consumer Housing Trends Report.

“Today’s low mortgage rates make it so a monthly mortgage payment is still likely to be lower than a monthly rental payment in many markets,” the report states. “Buying may not be as far out of reach as many think.”

After long wait, massive Oak Knoll housing project approved

By DAVID DEBOLT, East Bay Times, November 8, 2017

OAKLAND — After so many years of starts and stops, some would be forgiven for thinking the former Oak Knoll Naval Hospital would remain a ghost of its past, nothing more.

But the Oakland City Council on Tuesday evening ended the long wait over the site’s fate by voting to approve the construction of 918 townhomes and houses at the former military hospital above Interstate 580. The project will represent one of the largest developments in the city recent years, in terms of acreage.

Spread over 187 acres, the proposed development includes 72,000 square feet of retail property, 67 acres of open space, biking and walking trails, a restored creek and art installations.

Bay Area rents still a struggle for residents

By LOUIS HANSEN, East Bay Times, November 9, 2017

Nearly half the renters in the Bay Area struggle to meet high housing costs, despite an influx of wealthier workers into the market, a new survey found.

A study by Apartment List, a rental website, found nearly 1 in 4 renters in San Jose, San Francisco, Oakland and surrounding areas were severely cost burdened, spending more than half of their income on rent. About half of Bay Area renters are considered economically burdened, spending over 30 percent of their paychecks on shelter.

But the region’s record-setting housing prices are forcing high wage earners into the rental market, too. Real estate agents and researchers say wealthier clients in the Bay Area are choosing to rent because they can’t afford to buy. Even well-paid young tech workers are finding it hard to break into a housing market where the median single family home price is $775,000.

“Rents are out of control. Everybody knows that,” said David Hunt, operations manager for property management company WA Krauss. But few prospective renters have trouble meeting income qualifications for their 450 rental properties around the Bay Area, Hunt said.

“There’s a lot of money here,” he said.

Average rents have continued to surge, growing up to five percent over the past year in some cities. In San Jose, a one-bedroom goes for $2,050 and two bedroom for $2,570. In Oakland, the typical one bedroom costs $1,780 and a two-bedroom costs $2,240. And in San Francisco, the average rents are $2,450 for a one-bedroom and $3,080 for a two-bedroom, according to Apartment List.

The survey is the latest to spotlight the housing pinch on renters in Silicon Valley. Researchers at UCLA found that nearly 80 percent of residents in the San Francisco metro area earning under $50,000 are spending more than 30 percent of their income on rent.

The Apartment List study considered income and rental costs when calculating an index of affordability. Among the top 100 metro areas in the country, San Jose was ranked at 51 and San Francisco at 30 for affordability, reflecting the Bay Area’s strong economy and higher salaries.

But that doesn’t tell the whole story, Bennet said. Lower income renters have been forced to leave the region for cheaper cities and states, she said. Others are leaving apartments to return to family homes.

California and Florida have the highest percentage of renters paying more than 30 percent of their paychecks for shelter. Los Angeles and Miami ranked near the bottom of the index for affordability.

The study also found the share of cost-burdened renters has soared over generations. Just one-quarter of U.S. residents paid more than one-third of their income to rent in 1960; that percentage is now nearly 50 percent.

Among the most affordable places to live include Ogden, Utah; Pittsburgh and Kansas City, according to the survey. Several California cities were deemed the least affordable for renters, including struggling metro areas of Oxnard and Fresno.

Jeff Barnett, vice president of Alain Pinel Realtors, said the Bay Area rental market has flattened out recently, but still stretches the budgets of many new residents. Rental prices are so high, he said, that some families may be better off reaching a bit to buy a starter home or condo.

“You have to be a little more creative, and save a little more money,” Barnett said. “It’s one of the most beautiful places in the world, but we pay for it.”


Home prices expected to soar in North Bay fire zone as Bay Area costs grow

By Kathleen Pender, SF Chronicle, October 27, 2017 

A shortage of homes for sale combined with strong demand continued to push up Bay Area home prices last month, and the situation is only going to get worse in the North Bay when those displaced by the wildfires seek new housing.

The inventory shortage is statewide but “particularly acute in the Bay Area,” the California Association of Realtors said in a news release.

On Friday, CoreLogic reported that the median price of new and existing single-family homes and condos in Bay Area hit $739,000 in September. That was up 13.7 percent from September 2016, the largest yearly gain for any month since January 2014. It was down 0.1 percent from August, reflecting a normal seasonal slowdown.


It’s too early to know what impact the Wine Country fires, which started Oct. 8 and destroyed an estimated 8,800 structures, are having on home prices and sales in the North Bay. The CoreLogic report reflects transactions that were recorded in September.

Bay Area hammered by loss of 4,700 jobs

Lack of affordable housing strangles hiring efforts

By GEORGE AVALOS, Bay Area News Group, October 20, 2017

For the second straight month, the Bay Area lost thousands of jobs in September, making it the worst month for employment locally since February 2010.

The setback for the local economy comes as the crucial holiday shopping and hiring season draws near, and contrasts with a strong hiring picture statewide.

The Bay Area’s job losses stem from two distinct phenomena: Some employers are slashing positions, and others are unable to hire. Some economists attribute this second problem to structural barriers posed by skyrocketing housing costs. The lack of affordable places for workers to live appears to have hobbled the region’s ability to fill jobs as briskly as in prior years.

“Housing is the chain on the dog that is chasing a squirrel,” said Christopher Thornberg, principal economist and founding partner with Beacon Economics. “Once that chain runs out, it yanks the dog back.”

Overall, the Bay Area lost 4,700 jobs last month. While some smaller metropolitan areas in the region had job gains, employers shed 1,300 jobs in Santa Clara County, 1,700 in the San Francisco-San Mateo region and 2,600 in the East Bay, seasonally adjusted figures from the state’s Employment Development Department show.

The September losses, combined with 2,400 job losses reported by the EDD for August, paint an unsettling picture and lend credence to the assessment from a growing number of experts that the Bay Area’s job growth has begun to slow dramatically.

“The slowdown is real,” said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. “There were times this year we thought that job losses here and there were just temporary. But the slowdown is a fact. It’s happening.”

The lack of housing also makes it tough for employees to live near their workplaces, forcing many into lengthy commutes on roads choked with traffic. Some prospective employees decide they’d rather not bother.

“The economy in the Bay Area has pushed up against the physical limits of a lack of housing and a lack of places for workers to live,” said Jeffrey Michael, director of the Stockton-based Center for Business and Policy Research at University of the Pacific.

Over the 12 months that ended in September, the Bay Area added 50,400 jobs, a 1.3 percent increase in total payroll jobs during the one-year period.

By comparison, that’s less than half the growth of 2016. Bay Area job growth was 2.9 percent in 2016, 3.7 percent in 2015, 3.4 percent in 2014 and 3.5 percent in 2013, this news organization’s analysis of the EDD figures shows.

The Bay Area’s employment struggles contrasted sharply with statewide job trends.

California added 52,200 jobs in September, and the statewide unemployment rate remained unchanged at 5.1 percent, the EDD reported.

Despite the Bay Area’s increasingly sluggish picture, experts said Friday that the region doesn’t seem to be headed into a protracted downturn or outright contraction.


Glen Bell – (510) 333-4460