Glen’s East Bay Real Estate Market Update for May 31, 2018

East_Bay_Banner

May 31, 2018 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

Zillow_April_2018

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

  • As anticipated, we repeated the dramatic drop off in inventory at year end, following our normal pattern for December, typically our low point. As expected, January through May began the normal trend of adding on new inventory. We increased our available housing inventory by 170% in the first 5 months of the year. We’re now slightly more than where we were last year at this time by 5.4%. We’re now sitting on a 33 day supply of homes. This still makes for a very competitive market for many buyers that have been looking since the beginning of the year.
  • Our monthly supply is now 33 days. Last year, our months’ supply at this time was also 33 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.
  • It’s hard to predict how much tax reform will play into this. That impact may not be felt until when taxes are due next year. We are seeing interest rates starting to go up. Prices continue to rise. More and more, affordability, the high cost of living and our traffic woes are coming into play for those, especially in the “middle class,” who may now be considering leaving the Bay Area.
  • Typically, we see a steady increase in inventory on a month by month basis to occur before finally peaking in September.
  • The number of pendings, (homes that are in contract), increased as inventory levels began to rise. The pending active ratio increased to 1.26. This compares to last year at the same time of 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.
  • The percentage of homes “sitting” has slightly increased to 27% of the homes listed now remaining active for 30 days or longer, while only 12% have stayed on the market for 60 days or longer. This is lower than what we saw last year at this time with 34% of the homes listed remained active for 30 days or longer, while 15% stayed on the market for 60 days or longer.
  • The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market.

Months_Supply

  • The month’s supply for the combined 39 city area is 33 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 over the past four years. We are at about the same supply levels compared to last year at this time, of 33 days.

Actives_and_Pendings

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,348 homes actively for sale. This is slightly higher than last year at this time of 2,226 or (5.4% higher). 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 2,970, similar to what we saw last year at this time of 3,035.

Pending_Active_Ratio

  • Our Pending/Active Ratio is 1.26. Last year at this time it was 1.42.
  • Sales over the last 4 months, on average, are 6.5% over the asking price for this area, greater than what we saw last year at this time, 4.8% indicating a stronger market for sellers.

 

Recent News

 

Frustration spikes in Bay Area house-hunting

By MARISA KENDALL, Bay Area News Group, June 6, 2018

Frustration with the Bay Area’s housing market has surged in 2018, hitting a four-year high, according to new data that reveals just how widespread the struggle to afford lodging really is.

Fifty-three percent of voters said it’s “much harder” to find a place to live compared to a year ago — up from 36 percent of voters in 2017, according to a poll released Wednesday by business-backed public policy advocacy group the Bay Area Council. The data quantifies the unsettling trend residents have been experiencing for months — the housing shortage has expanded to impact nearly everyone in the Bay Area, from fast-food workers to tech employees.

“It’s a classic supply/demand mismatch, and it’s having societal impacts,” said Matt Regan, senior vice president of public policy for the Bay Area Council. “Far too many people are considering leaving the Bay Area, which is tragic, and those who are staying are having to pay higher prices than ever before.”

The data comes on the heels of a Bay Area Council poll released Sunday that showed nearly half the region’s residents said they are likely to move away in the next few years, largely because of the high cost of housing.

In the poll released Wednesday, 76 percent of voters surveyed said it’s gotten “much” or “somewhat” harder to find housing — up from 64 percent last year. The poll, conducted online by Oakland-based EMC Research from March 20 through April 3, surveyed 1,000 registered voters in the nine-county Bay Area.

As housing woes intensify, more residents say they’re willing to do something to fix the problem. Seventy-three percent of voters said they supported policies that would make it easier to build housing near transit hubs and commercial centers, compared to 68 percent in 2016. Meanwhile, 29 percent of homeowners said they would consider adding an in-law unit to their property, up from 25 percent last year.

Regan hopes politicians will see those numbers, realize there is broad support for additional residential development, and craft policies to help make that construction happen. There’s no way to end the region’s dire housing shortage, and the sky-high prices that go with it, without building more housing, he said.

“There’s definitely a willingness … of the Bay Area’s residents to see more homes built,” Regan said. “Unfortunately when it gets to the political arena, it’s generally those 25 percent of opponents who tend to show up at meetings and make their voice heard.”

On the other hand, the share of residents willing to welcome that new development into their own neighborhoods dropped — from 62 percent in 2017 to 59 percent this year.

 

The San Francisco Bay Area’s housing crisis is so out of control, a median-priced home costs $820,000 — here are 5 ways to help fix the problem

By Leanna Garfield, Business Insider, June 6, 2018

The San Francisco Bay Area has become the epicenter of California’s affordability crisis.

Largely drawn by high-paying tech jobs, people have flocked in recent years to the Bay Area at rates that the housing market cannot keep up with. In April, the median price of a home in the Bay Area shattered records at $820,000.

A new report from the Bay Area Council Economic Institute (BACEI) explores a few ways to tackle the region’s affordable housing crisis.

The researchers focus specifically on reducing housing prices in Alameda County, where residents need to make at least $181,130 to afford a median-priced home (at around $875,000), according to the California Association of Realtors. The median rent in the East Bay county, which includes Oakland and Berkeley, is around $3,020— lower than the San Francisco metro median of $3,300, but still expensive compared to other major metro areas.

The report proposes 20 policy solutions. The most promising ones include:

  • Extend the BART subway line to Livermore, a city that’s cheaper than some other parts of the Bay Area.In late May, the Pleasanton Weekly reported that BART voted against expanding subway service to Livermore, but the regional rail authority could still pursue the proposed project.
  • Build a new affordable housing development near Fremont’s second BART station.In 2014, the City of Fremont called for the development of a mixed-use neighborhood in an area surrounding the station that’s largely vacant parcels and industrial buildings. Fremont is a hub for high-tech manufacturing, and building more housing in the area could allow residents to live closer to work. The city’s plan includes up to 4,000 apartment units, and multiple developers have already had their master plans for developments approved.
  • Pass more legislation that encourages housing developments near public transportation.There’s current legislation in the works that could encourage this kind of development in the future.
  • Enforce building targets that require California counties to create enough housing to meet resident needs.In 2017, two bills passed that will make it harder for developers to reduce the density on their housing projects unless the surrounding county has met its targets.
  • Complete Oakland’s four existing housing megaprojects.These include the Brooklyn Basin Development of 3,100 housing units, and a market-rate townhome project at the former Oak Knoll Naval Hospital Site.

These recommendations focus on investing in transit-oriented developments, which the researchers believe would reduce housing prices in the Bay Area. The BACEI reasons that if there were more affordable housing developments near subway and bus stops, it would grow the region’s economy.

The influx of housing would not only create density, but also give residents more income to spend on rent since they wouldn’t need to drive a car every day.

Commuting by car can be expensive. According to a 2017 study from AAA, owning and operating a new vehicle costs drivers an average of $8,469 annually, or $706 each month — which is almost like paying a second rent.

In the same vein, the report encourages local legislators and developers to prioritize high-density housing developments, rather than sprawling neighborhoods with high-cost homes.

Some policies — like strict rent-control measures and occupancy taxes on Airbnb rentals— could make the Bay Area’s housing shortage worse, according to the report. The BACEI argues that enacting strict rent-control policies can deter developers from building more rental properties. (This idea is highly debated among economists and housing experts.) The researchers added that banning or adding taxes on short-term rentals in Oakland would also deprive some homeowners of an income source.

Several other American cities are planning transit-oriented, affordable housing developments.

Over the next two decades, Sound Transit — the transit agency serving the greater Seattle area — will buy land as it builds out its light rail expansion. On the agency’s surplus property, it may build affordable housing developments, Next City reportsThe Los Angeles Metro is also providing $9 million to developers at a low-interest rate to construct affordable housing within a half mile of transit lines.

The Council recommends that the Bay Area moves quickly on at least a few of their proposed solutions.

“Solving the housing affordability crisis is not an Oakland issue, and it is not a Berkeley issue. It is an every city, every neighborhood issue,” the report says.

What does a ‘decent standard of living’ cost in California? 1 in 3 households can’t afford it

By ANNIE SCIACCA, Bay Area News Group, June 5, 2018 

One in three households in California — about 3.3 million families — are struggling to reach a decent standard of living, even though most of those households include full-time workers, according to a report from nonprofit coalition United Ways of California.

In its statewide report released this week, Struggling to Stay Afloat: The Real Cost Measure in California 2018, United Ways used an approach it calls the “real cost measure” to determine the local costs of living that go beyond food and housing.

The real cost measure changes across different cities, areas and even neighborhoods in the state, depending on childcare, healthcare and transportation, in addition to the high cost of food and housing — all of which it takes into effect to determine what the United Ways team calls a “decent standard of living.”

Perhaps unsurprisingly, the cost of housing weighs heavy on Californians, the report found. About 38 percent of households spend more than 30 percent of their income on housing, and families below the federal poverty level spend as much as 79 percent of their income on their homes.

Despite the high cost of living in the Bay Area, the area actually sees a lower percentage of households struggling to meet their Real Cost Measures, according to the report. About 35 percent of households in the Greater Los Angeles and Inland Empire areas fall below the Real Cost Measure, and 37 percent of the Central Valley do.

The Bay Area’s low unemployment and high wages could contribute to the lower percentages of struggling families, but there is a worrying trend: the percentage of households falling below the measure in Alameda and Contra Costa counties have increased since 2015, which is the last time United Ways conducted this study. In Contra Costa County, the percentage jumped from 24 percent in 2015 to 27 percent in this study, while in Alameda County, the percentage increased from 25 percent in 2015 to 28 percent.

Certain communities of people are more impacted by the high cost of living than others, the report suggests.

A high proportion — 72 percent — of single mothers in California fall below the Real Cost Measure. And 45 percent of households led by a person born outside the U.S. live below the Real Cost Measure — 63 percent of households where that leader is not a U.S. citizen.

While being unemployed or underemployed could certainly contribute to affordability issues, researchers found that 90 percent of the households living below the Real Cost Measure for their area included at least one working adult. In Alameda and Santa Clara counties, that number jumped to 98 percent, and in Contra Costa and San Mateo counties, it was 97 percent.

“They are earning less than it takes to meet decent standard of living, and most of those people are working full time,” Pete Manzo, CEO and President of United Ways of California, said in a call with reporters about the report. “The challenge isn’t so much, ‘get a job’ or ‘get employed.’ The challenge is how to earn more — how can we increase income for those families.”

Nearly half of Bay Area residents say they want to leave

By MARISA KENDALL, Bay Area News Group, June 3, 2018 

Despite the Bay Area’s natural beauty and booming job market, nearly half of its residents now want to get out, citing a creeping disillusionment with the high cost of housing.

Forty-six percent of Bay Area residents surveyed said they are likely to move out of the region in the next few years — up from 40 percent last year and 34 percent in 2016, according to a poll released Sunday by business-backed public policy advocacy group the Bay Area Council.

The numbers show a disturbing trend in one of the nation’s most expensive housing markets: Workers desperate for a better quality of life and without housing options will go elsewhere, potentially plunging the region into a financial downturn.

Fleeing_the_Bay_Area

“They couldn’t be more clear what the big problems are — and it is exclusively about the cost of housing,” said John Grubb, chief operating officer for the Bay Area Council. “They don’t see…enough action coming, and so they’re looking at taking matters into their own hands. And unfortunately, what they’re going to take into their hands is the steering wheel of a U-Haul to go somewhere else where there’s a better combination of salary and lower housing costs.”

Bay Area home prices have been climbing for six years, setting another record in April, when the median sale price hit $850,000 — up 13 percent from a year ago, according to real estate data firm CoreLogic. Rents are soaring too, and workers are forced to move farther away to find affordable housing and commute on already crowded Bay Area roads and freeways to get to their jobs.

Meanwhile, recent efforts by policy makers, affordable housing organizations, developers and others apparently have yet to make a dent in residents’ concerns.

The Bay Area Council has thrown its support behind several housing-focused bills that it says will help, including SB 831, which eliminates some fees for building in-law units; SB 1227, intended to increase the supply of affordable student housing; and SB 828, which would force cities to rezone land to allow more homes to be built.

Researchers have been worrying about the Bay Area exodus for some time. A recent report from Joint Venture Silicon Valley found more people left Silicon Valley in both 2016 and 2017 than in any year since 2006. Still, Silicon Valley is gaining more residents than it’s losing — the region welcomed 44,732 newcomers between July 2015 and July 2017, and lost 44,102. But the ominous new data from the Bay Area Council suggests that could change quickly, as the out-migration shows no sign of slowing down.

When asked to pinpoint the most important problem facing the Bay Area, 42 percent of those surveyed said housing — a dramatic jump from 28 percent last year. Meanwhile, 18 percent said traffic and congestion, 14 percent cited poverty and homelessness, and 12 percent said the cost of living.

Those problems spell serious disillusionment for Bay Area residents. Fifty-five percent of residents polled said they feel the Bay Area has “gotten pretty seriously off on the wrong track,” compared to 42 percent last year.

Of those who are likely to move out in the near future, 24 percent of the 1,000 registered voters surveyed in the nine-county Bay Area said they plan to stay in California, including 5 percent who said they would head to Sacramento. Texas, Oregon and Nevada were the most popular out-of-state destinations, capturing 10 percent, 9 percent and 8 percent of potential movers, respectively.

With such a large gap in prices, it’s no wonder Bay Area residents — particularly young people, who are less likely to have bought a home before prices spiked — want to leave. Fifty-two percent of millennials said they will be attempting to leave the region in the next few years, up from 46 percent in 2017. That’s particularly troubling because it means the young people who should be driving the region’s workforce for decades to come instead are seeking opportunities elsewhere, said Grubb.

“Losing our youth is a very bad economic strategy,” Grubb said, adding that if housing prices continue to soar, the Bay Area could be in for a recession.

Just 16 percent of residents think there will be no downturn, with 35 percent expecting one in the next three years.

Already, the local businesses that back the Bay Area Council are struggling to recruit young people, Grubb said. The region has become a tough sell, and those who do want to work here demand high salaries to compensate for the exorbitant cost of living. As a result, companies increasingly are opening offices outside the Bay Area.

Of course if the economy tanks, housing prices will go down. But that, Grubb said, conjures up images of mass layoffs and families struggling to make ends meet — a sacrifice no one should want to make.

Is the Bay Area rental market cooling off?

By MARISA KENDALL, Bay Area News Group, May 31, 2018 

For Bay Area renters struggling to afford apartments that keep getting more expensive, the latest numbers could seem too good to be true — the region’s runaway rent prices finally may be starting to level off.

San Jose is looking at the slowest start to the summer rental season in years. Rents in San Francisco are flat-lining. And Oakland saw a minuscule increase in rent prices last month.

That’s according to a new study by apartment search website RentCafe, which found the Bay Area is part of a nation-wide trend — while rents continue to increase, they’re doing it at a significantly slower pace. Experts say the slowdown suggests that in the near future, renters may finally find relief from the sky-high prices that are forcing people to flee to the Central Valley and beyond in search of cheaper housing.

John Protopappas, president and CEO of Oakland-based real estate development company Madison Park Financial Corporation, predicts this is the start of a major slowdown in the Bay Area’s rental market. It’s all about supply and demand, he said. In Oakland alone 7,000 housing units are under construction, and as those finished units flood the market, Protopappas expects the city’s rents to drop 20 or 30 percent in the next two or three years.

“It’s going to become a renter’s market instead of a landlord’s market,” he said.

But the broader Bay Area continues to add more jobs than houses, and until that changes, prices won’t drop enough to have a significant impact on residents, said Mathew Reed, policy manager of SV@Home, an organization dedicated to supporting the creation of affordable housing in Silicon Valley.

“I think it’s nice to see us returning to a sane level of increase,” he said, “but we’re so out of whack and so many people are paying such a high proportion of their income already, I don’t see anything in the market right now that says housing is becoming more affordable.”

Nevertheless, the recent numbers are good news, Reed said. A 2 percent annual increase in rent prices is healthy, as it mirrors the rate of inflation, he said.

Meanwhile, flat-lining rents could impact real estate developers with plans for new buildings.  As construction costs continue to rise — some say a whopping 50 percent in the past five years, due largely to a shortage of workers driving up wages for skilled labor — new buildings won’t be erected if rents don’t keep pace with rising costs.

“It will slow down development until we get back to an equilibrium,” Protopappas said. “But it will take years … in the meantime it’s going to be a renter’s market for a long time.”

Bay Area home prices soar to new record

By Kathleen Pender, San Francisco Chronicle, April 24, 2018 

The median Bay Area home price surged to an all-time high of $820,000 in March, up 9.3 percent from February and up 14.7 percent from March of last year, research firm CoreLogic reported Tuesday.

Rising mortgage rates and shrinking tax breaks for mortgages were expected to put a damper on home prices, but so far that has not proved to be true in the Bay Area.

People “are trying to desperately buy something before it becomes completely unaffordable,” said Scott Anderson, chief economist with Bank of the West. “Six months, a year from now, you will see more of the downside from rising rates.”

That increase “is significant, and it stands out statewide and nationally, but there is a mix issue,” he said. The median price is the halfway point between the highest and lowest prices homes sold for in a particular month. In recent months, “there has been a shift toward more mid- to high-price homes selling and less in the lower end,” LePage said. That tends to raise the median price.

The_Surge_Continues

The California Association of Realtors reported this week that the median time a home in the Bay Area sat on the market before an offer was accepted was just 12 days in March, down from 13 in February and 14 a year ago. At the current pace of sales, it would take just 1.9 months to sell every Bay Area home on the market, down from 2.6 months in February and 2.2 last March.

Home prices haven’t been hurt by rising mortgage rates because at 4.5 percent, they are still low by historical standards, said Aaron Terrazas, chief economist with Zillow, a real estate website. He expects mortgage rates will peak at 5.5 to 6 percent in a year or two.

“We think mortgage rates can go up to 5 percent or a little above before we see any headwind on the housing market,” Terrazas said. When that happens, “I don’t think it will cause a decline in prices; it will cause a slowdown (nationwide). The risks are bigger in the Bay Area because home prices are so high.”

On a $650,000 mortgage, going to 5 percent from 4 percent would add $386 to the monthly payment.

Anderson predicts that the new tax law eventually will depress home prices — by about 4 percent nationwide over two years — by raising the after-tax cost of homeownership. “In higher cost areas, the impact would be greater,” he said.

People have been leaving California for other states, but its population has continued to grow thanks to immigration from other countries and the natural increase from births minus deaths. But “we expect more out-migration from the Bay Area and the state as a result of high housing costs,” Anderson said. “I think by the end of this year,” the state’s population will decline for this first time in this economic expansion.

2018 Mid-Year California Housing Market Forecast by Leslie Appleton-Young, C.A.R.

Some key slides from her forecast released in June:

Bay_Area_Peak_v_Current_Price

Not_Building_Enough

Sellers_Not_moving

Revised_Ca_Market_Outlook

 

Glen’s East Bay Real Estate Market Update for April 30, 2018

East_Bay_Banner

 

April 30, 2018 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

Zillow_March_2018

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

  • As anticipated, we repeated the dramatic drop off in inventory at year end, following our normal pattern for December, typically our low point. As expected, January through April began the normal trend of adding on new inventory. We increased our available housing inventory by 132% in the first 4 months of the year. However, as early of a start as this has been and with such a large increase in supply, we’re still lagging slightly behind where we were last year at this time by 9.4%. We’re now sitting on a 30 day supply of homes. This makes for a very competitive market for many buyers that have been looking since the beginning of the year.
  • Our monthly supply is now 30 days. Last year, our months’ supply at this time was 30 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.
  • It’s hard to predict how much tax reform will play into this. That impact may not be felt until taxes are due. We are seeing interest rates starting to go up. Prices continue to rise, but at a slower pace. More and more, affordability, the high cost of living and our traffic woes are coming into play for those, especially in the “middle class,” who may now be considering leaving the Bay Area.
  • Typically, we see a steady increase on a month by month basis to occur before finally peaking in September.
  • The number of pendings, (homes that are in contract), increased as inventory levels began to rise. The pending active ratio increased to 1.39. This compares to last year at the same time of 1.28. 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 slightly decreased to 26% of the homes listed now remaining active for 30 days or longer, while only 13% have stayed on the market for 60 days or longer. This is similar to what what we saw last year at this time with 29% of the homes listed remained active for 30 days or longer, while 14% stayed on the market for 60 days or longer.
  • The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market.

Months_Supply

  • The month’s supply for the combined 39 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 over the past four years. We are at about the same supply levels compared to last year at this time, of 30 days.

Actives_&_Pendings

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,013 homes actively for sale. This is below last year at this time of 2,222 or (9.4% 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 increased to 2,790, similar to what we saw last year at this time of 2,847.

Pending_Active_Ratio

  • Our Pending/Active Ratio is 1.639. Last year at this time it was 1.28.
  • Sales over the last 4 months, on average, are 6.2% over the asking price for this area, greater than what we saw last year at this time, 3.4% indicating a much stronger market for sellers.

Glen's Numbers Pg1

Glen's Numbers Pg 2

 

Recent News

 

5 Reasons California’s Housing Costs Are So High

By Matt Levin, Calmatters, May 4, 2018

Why are California housing costs so high? At its most basic level, it’s a story of supply and demand — lots of people want to live here, and there aren’t enough homes to go around.

But there are lots of uniquely California factors — from the shape of our coastline to Proposition 13 — that have attached a painfully expensive price tag to the California dream.

The median price of a home is now well over half a million dollars. That number is about $240,000 nationally. More than 20 percent of Californians pay more than half their income for housing.

Here are five reasons the state’s housing market got so out of whack.

1. We Haven’t Built Enough Housing

Experts who study California’s housing crisis argue about lots of things. Is rent control good or bad? Will that new shiny high-rise going up in your neighborhood help or hurt housing costs? How much should we blame “not in my backyard” NIMBYs for our problems?

But there is one principle the vast majority of housing experts agree on: Over the past few decades, California hasn’t built enough housing to keep up with the number of people who live here.

The state housing department estimates that we need to build 180,000 new housing units a year to keep prices stable. Over the past 10 years, we’ve averaged less than half of that.

Doesn't_Build_Like_it_Used_To

Even when new construction was booming in the early and mid-2000s, new homes and apartment buildings weren’t being built in coastal cities where the vast majority of Californians work. While places like the Inland Empire and Central Valley saw a building craze, places like San Francisco and Los Angeles basically flatlined.

We’re also not keeping up with other states.

Places like New York and Massachusetts have built a lot more housing per capita than we have in recent years. That hasn’t made those places cheap, but it has helped to alleviate some cost pressures.

California_Trails

2. Demand to Live and Work and Own in Urban California Has Reached a Breaking Point, and Part of That Demand Is Global

Over the last decade, Californians have increasingly tried to cram themselves into major urban centers that are already jammed with residents.

The Bay Area is the poster child here.

Between 2000 and 2007, Bay Area cities accounted for only 4 percent of the state’s total population growth. Between 2010 and 2017, nearly 20 percent of all new Californians were either being born in or moving to the Bay.

Calif_bands_together

While the tech industry certainly bears much of the responsibility for that trend, the increased demand to live in California’s urban cores extends beyond Silicon Valley. The urban parts of L.A. and San Diego have all seen a major increase in people wanting to live and work there, which means increased competition for rental housing.

And we’re not just talking about apartment rentals. Here’s a pretty amazing graph.

Rise_of_Rentals

The number of single-family homes occupied by renters grew by more than 400,000 over the last 10 years, while the number of owner-occupied units dropped during the Great Recession and has yet to recover.

So who owns these houses? The vast majority are “mom and pop” investors and wealthy individuals buying one or two additional properties. Foreign buyers, primarily from China, have also become increasingly enamored with California real estate. Last year, nearly one in four California single-family homes were sold in all-cash transactions, an indication of investor appetite for California real estate.

Overall, investors are a relatively small part of the housing market, especially when viewed from a statewide lens. But in certain local markets, investors compete directly with California families for homes.

3. Proposition 13 Dilutes a City’s Incentive to Build New Housing

Why hasn’t California built enough housing to keep up with its population?

Most housing researchers agree that part of the reason is Proposition 13, the landmark 1978 ballot initiative that capped how much local governments could collect from property taxes. While intended to protect California homeowners from unmanageable property tax bills, Proposition 13 has produced a host of unintended consequences.

Imagine you’re a city, sitting on a huge plot of vacant land. You could zone that land for housing or for commercial use, like a hotel or a Target. Your city obviously needs more housing — prices are sky high.

Easy decision, right? Nope.

Proposition 13 has made development decisions much more complicated. Because property taxes are capped, local governments have become increasingly reliant on other revenue sources. That vacant land is much more valuable to the city’s coffers if a big box retailer gets built on it, as opposed to a multifamily apartment building.

Housing nerds call this the “fiscalization of land use.”

There’s debate about just how much Proposition 13 is to blame for the state’s housing shortage. But talk to local elected officials, and you’ll see the issue isn’t just a hypothetical dilemma.

4. In Most Parts of California, the Process to Get New Housing Approved Is Difficult, Time-Consuming and Expensive

It can be hard to be sympathetic to developers.

From time immemorial, it feels like they’ve complained about rules and regulations they say make it harder to build their projects. The builder who designed Stonehenge probably thought there was too much bureaucracy involved.

While it may be tough to trust developers, that doesn’t necessarily mean that they’re wrong. The process by which a piece of land is approved for new construction can be incredibly cumbersome, time-consuming and risky. While good data on exactly how much this adds to housing costs is hard to come by, typical approval time for projects in San Francisco is over a year, while in L.A. it’s eight months. That doesn’t include when land needs to be “rezoned” for residential development, which can take even longer.

Why the lag? Here’s the laundry list.

  • Multiple Layers of Government Review: A housing project often must go through multiple government agencies, including the planning department, health department, fire department, building department and perhaps most importantly, a city council.
  • Lots of Avenues for “Not In My Backyard” Voices: The review process for new developments gives ample opportunity for local residents to express their opposition. Locals may fear that new housing projects will change the character of their neighborhoods, increase traffic and hurt their property values. If a city councilmember votes for new housing, he or she may have to face dissatisfied voters.
  • An Often Misused Environmental Law: The California Environmental Quality Act, or CEQA, requires that local agencies consider the environmental impact of a new housing development before approving it. That sounds like a worthy goal, but the law has often been abused to prevent new developments — even environmentally friendly ones with high-density housing and bike lanes. According to the nonpartisan Legislative Analyst’s Office, CEQA appeals delay a project by an average of two and a half years.
  • Local Growth Controls: Two-thirds of California coastal cities and counties have adopted policies that explicitly limit the number of new homes that can be built within their borders or policies that limit the density of new developments. Subtler growth controls include not zoning enough land for new development or requiring supermajorities to approve new housing.

5. Land, Labor and Raw Material Costs Are Higher in California Than the Rest of the Country. And Those Costs Are Rising

Unfortunately, California’s coastline topography makes it more expensive to build here than most other places. Also, there’s the ocean. You can’t expand into the ocean.

Limited land plus tons of demand means high land prices. In many markets in California, the bulk of a single-family home or apartment building’s value is in the land it is built on.

But while the land itself is what typically eats up most of a developer’s budget in California’s hottest markets, it’s not the only cost-driver. Construction labor and the cost of the raw materials have been rising over the last five years, and are higher in California than other parts of the country. According to the Legislative Analyst’s Office, construction labor is about 20 percent more expensive in major California cities than in the rest of the country.

On the labor side, a shortage of skilled construction workers bears much of the blame. When the housing market crashed in the late 2000s, construction workers left the industry in droves. And those same workers haven’t come back.

Constructions_Jobs

Construction today just doesn’t seem to have the same appeal to younger workers. Firms are struggling to recruit younger workers to supplement and eventually replace a graying workforce.

Building codes and environmentally friendly design requirements in many California cities require different types of raw building materials to be used, some of which can be pricier than elsewhere in the country. And nationwide, the cost of vital resources like lumber and concrete are on the upswing.

There are plenty of reasons beyond the five we’ve mentioned here that help explain why California housings costs have gotten so out of control. The task of making California affordable again — or at least relatively affordable again — defies a simple silver-bullet solution.

If people are fleeing the Bay Area for cheaper housing, why is it still so costly?

By Kathleen Pender, San Francisco Chronicle, May 4, 2018

So which is it: Are people fleeing California and the Bay Area for cheaper housing, or swarming here for high-paying jobs?

The answer is: both. A flurry of recent population reports have painted a confusing picture.

If you look just at domestic migration — people moving around the country — the Bay Area lost about 46,000 people more than it gained during the year that ended July 1, according to U.S. Census Bureau estimates released March 22. That net loss was nearly twice as big as the previous year and marked a turnaround from earlier years, when more people were coming to the Bay Area than leaving.

The national media pounced on this data — throw in some one-way U-Haul prices and dubious survey results — and declared that the Bay Area is losing its appeal, and fast. “They made it sound like the highways are jammed with people trying to get out of the Bay Area right now,” said Patrick Carlisle, chief market analyst with Paragon Real Estate Group. He summarized the coverage in a report, “Will the Last One Leaving Please Turn Out the Lights?”

So if people are leaving the Bay Area in droves, why are home prices still soaring and why aren’t there more houses for sale?

One thing these stories mostly failed to mention is that net immigration — people coming from and leaving for other countries — is still positive in the Bay Area. About 58,000 more people came here from abroad than left last year, surpassing the nearly 46,000 who decamped for other states. (The census estimates included the nine-county Bay Area and three neighboring counties.)

Another reason is that people moving here tend to have higher incomes than people moving out, and so are better able to absorb the ridiculous cost of housing.

Linda Crowe moved from the Bay Area to Boston for a job three years ago, but moved back in December because she missed her friends and community. “I worked my entire career in technology, and a lot of my professional network was here,” she said. And the weather “is so much nicer here.”

She landed a job with IBM, and bought a home in San Francisco’s Cole Valley. It helped that she sold her home in San Carlos a year and a half ago, after renting it out the first year and a half she was gone.

Crowe said housing is somewhat cheaper in Boston, but “I make more money here. Salaries are significantly higher in the Bay Area, particularly in the technology sector. They have to be.”

Coming_and_Going

California has had net domestic out-migration for a much longer period. Since at least 1991, it has lost more people to other states than it has attracted almost every year, according to the California Department of Finance.

Net immigration over that period has been consistently positive — in the hundreds of thousands per year — but it wasn’t always big enough to outweigh domestic out-migration. In 2005 through 2010, the state lost more people to other states and countries combined than it gained each year. But its total population has still grown each year since at least 1991, thanks to “natural” increase — births minus deaths.

It’s impossible to say definitively why people move out of the area, since there’s no exit poll. A report released last week tried to explain why California, by its calculation, lost nearly 1.1 million more people to other states than it gained from 2006 to 2016.

The report, prepared by Beacon Economics for San Francisco think tank Next 10, looked at housing, migration and employment trends.

It concluded that “the main driver for net out-migration appears to be high housing costs,” not high state income taxes. That’s because the “vast majority of people who moved out of California were concentrated in lower-skilled, lower-paying fields, namely sales, transportation and food preparation.” People moving out probably paid little or no state income tax because California’s tax structure is highly progressive.

People moving into the state are higher-income and better educated. They’re much more likely to pay state income tax and better able to afford a home in California, which had the nation’s highest median price in 2016.

“California has seen a net inflow of residents who earn more than $50,000 annually, have bachelor’s or advanced degrees, and work in high-skilled occupations. This is especially true for the Bay Area, where high salaries and abundant job opportunities outweigh the high cost of living,” the report said.

Most places want their working-age population to expand, because economic growth is the sum of growth in the labor force plus productivity growth, said economist Mike Englund of Action Economics.

California benefits from an inflow of younger people (thanks largely to immigration) because they have a future in the labor force. But if a region’s infrastructure does not match the population, problems ensue.

In the Bay Area, housing creation has lagged far behind population growth, which is why home prices and rents are skyrocketing and people are commuting longer distances to work.

But it can also go the other way. “If you build an infrastructure for 1 million and the population drops by half, you still have all the infrastructure to maintain but fewer people to pay for it,” Englund said.

Detroit, he said, “was a classic example of a city designed for one population and ending up with another.” During the recession you could pick up homes in Detroit for $1.

It’s enjoying something of a resurgence now. LinkedIn, based in Mountain View, said last week that it has leased a historic 74,500-square-foot building in Detroit and will expand its workforce there from about 40 to 120 over the next two years.

Although California and the Bay Area still have growing populations, the recent spike in domestic out-migration is raising concerns. The federal tax law passed in December could encourage people to move from California and other higher-tax states to lower-tax states, because the new law severely limits the federal deduction for state and local income and property tax.

In addition, “changes to (federal) immigration policy would likely reduce the growth we get from international migration,” said Jed Kolko, chief economist with job site Indeed. A big drop in immigration, however, “might be offset by less domestic out-migration” because fewer people would be competing for housing, and home prices and rents might drop.

The top five states for outbound Californians in 2016 were Texas, Arizona, Nevada, Oregon and Washington, according to Next 10. These states created an average of 231 new housing units for every 1,000 new residents from 2011 to 2016. California added just 209.

“California is permitting roughly the same number of housing units as Florida, despite having approximately 18 million more residents,” the report said. It added that “the housing shortage would be even worse” if there were no domestic out-migration.

After retiring from a career in technology, Jim DeStefano, 71, sold his San Jose home in December and moved to Fort Myers, Fla. He said he wanted a “better quality of life” and a “less liberal environment.”

Property taxes are higher in Florida, he said, but housing costs about one-third what it does in the Bay Area.

Moving was stressful, and expensive, but worth it, he said. “I haven’t seen one iota of graffiti, no litter on the streets. I haven’t seen a homeless person.”

 

Why the Bay Area is the epicenter of California’s housing crisis

By KATY MURPHY, Bay Area News Group, May 4, 2018 

The same story is playing out, over and over: People are flocking to the Bay Area for high-skilled, highly paid jobs, while cashiers, teachers and construction workers are, increasingly, saying goodbye to a place they no longer can afford.

A new study released Thursday points to why the California housing crisis is so acute, particularly in the Bay Area — where a home destroyed by fire sold for more than $900,000 and it would take four minimum wage jobs to afford an apartment: More people are moving in from other states than moving out. No other region in California has experienced such explosive growth of high-paying jobs. Statewide, between 2011 and 2016, California added just 171 homes for every 1,000 people.

Coming_and_Going_Bay_Area

“The boom is so ferocious that it exaggerates the driving up of the rents and the cost of living,” said Richard Walker, a geography professor emeritus at UC Berkeley and author of a new book, “Pictures of a Gone City: Tech and the Dark Side of Prosperity in the San Francisco Bay Area.”

The study, commissioned by the San Francisco public policy group Next 10, documented a growing economic divide. While pay for California’s low-wage earners grew by just 17 percent over the past decade, wages rose by 29 percent for middle-income workers and nearly 43 percent for high-wage earners.

The key question for California is, “How do you manage the effects of success?” said Michael Storper, an economic geographer at UCLA’s Luskin School of Public Affairs. “At the moment we are a winner economy. California is amazing in how much it attracts high-wage, high-skill industries. Who wouldn’t want to be like that?”

At the same time, he said, how do you preserve housing for the majority of residents who don’t command high salaries? Or find a way to pay them more?

Carmelita Reyes, principal of Oakland’s International High School, said that when she started teaching in the city in 2001, many of the young teachers rented apartments by Lake Merritt.

“No one was getting rich being a teacher, but you could afford to live in Oakland,” she said. The narrative back then, she said, was “teachers are never going to buy a house. And now it’s `teachers can’t afford an apartment.’ ”

One of her teachers commutes from Napa County, where she found a cheap place to rent. A fellow Oakland principal has decided to open her home to travelers, renting out a bedroom on Airbnb.

Fed up with housing costs, some Californians are leaving the state altogether. The study found that between 2006 and 2016, more than 1 million more people left California for other states than moved in from the rest of the U.S.

“These high home prices and high rents are forcing more low and middle-income Californians to leave the state for more affordable housing in states like Texas and Washington and Arizona,” said Noel Perry, Next 10’s Founder.

Researchers found similar patterns for international migration: Higher-skilled migrants from other countries are replacing lower-skilled migrants in California.

And though the Bay Area has grown in recent years, that pattern may be shifting. The new study, along with a recent report from the Joint Venture Silicon Valley think tank, found that nearly as many people are leaving Silicon Valley as are coming in. The think tank found the biggest drops were for residents between the ages of 18 and 24, and between 45 and 64.

The Bay Area always has been a high-wage economy, Walker notes, but the latest boom has attracted such an enormous level of investment in tech and other lucrative sectors that “the whole thing has gotten out of hand.”

“You can’t keep that economy going — you can’t feed people, you can’t get them the things they want, you can’t deal with the tourists, you can’t drive buses — without lower and middle-income workers to do those kinds of jobs,” he said.

The Next 10 report did not include recommendations. Perry, its founder, said the study was intended to help state and local policymakers try to solve some of these challenges.

“In order to support long-term, sustainable economic growth in California, our state needs to support a diverse economy — that means jobs and housing for people at all income levels,” he said.

The insatiable demand for housing that has uprooted so many Californians is forcing an 80-year-old Pleasanton resident to leave the house he has rented for 46 years, his daughter said. Tricia Davis said her father and stepmother got a letter in April saying that they could stay in the home — if they agreed to a $1,000 rent hike. They considered moving to Montana, where Davis lives, and then to Fresno, near another relative, before discovering an apartment for people over 62, in town, that they could afford.

“For them to have to try to just move, it’s been pretty traumatic,” Davis said.

Davis, an agent for Delta Air Lines, said she long ago gave up on living in the East Bay city where she grew up. “Pleasanton, as great of a town as it is, even with a college degree I couldn’t afford to live there.”

As Bay Area rents soar, many can’t keep up

By KATY MURPHY, Bay Area News Group, May 1, 2018 

A new report highlights the grim reality of renters struggling to keep a roof over their heads in the midst of a tech-fueled economic boom: Many are losing the battle with the housing crisis.

Sobering, county-level figures compiled by the nonprofit California Housing Partnership and released Tuesday show startling increases in homelessness and a widening chasm between wages and housing costs throughout the Bay Area and elsewhere in the state.

 

As lawmakers wrangle with one other and the governor over the best use for California’s $6 billion budget surplus, the group behind the report — a nonprofit the state created 30 years ago to advocate for affordable housing — recommends that $2 billion be used to build apartments for low-income Californians.

“This is a housing emergency,” said Matt Schwartz, the partnership’s president and CEO. “The state should declare this a housing emergency, and some of the budget surplus needs to be made immediately available to get the homeless off the streets and into affordable housing.”

The report found that workers in core Bay Area counties would need to earn four or more times the minimum wage to afford a Bay Area apartment — and that the lowest-income renters in Alameda, Santa Clara and Contra Costa counties spend well over half their income on rent, leaving little for other needs.

“We’re seeing rents and housing prices go up to a level where people who never thought they would have to worry about housing stability are having to worry,” said Gloria Bruce, executive director of East Bay Housing Organizations, a coalition of affordable housing advocates. “I think sometimes people think of homelessness and housing affordability as two separate issues, but they are really one and the same.”

Counties are doing more than ever to coordinate services for people who have lost their homes, Bruce said, but they are struggling to keep up with the need. When it comes to finding permanent housing, she said, “there is literally no place for them to go that they can afford. We see a market that is just not serving people at the bottom.”

The California Housing Partnership is recommending the state spend $2 billion of its surplus on affordable housing funding to cities and counties, similar to two pending legislative proposals. Senate Bill 912 from Sens. Jim Beall, D-San Jose, and Nancy Skinner, D-Oakland, would direct $2 billion in affordable housing funding to cities and counties. Assembly Bill 3171, a bipartisan bill from Assemblyman Phil Ting, D-San Francisco — who heads the Assembly budget committee — and backed by Republican Assemblyman Brian Maienschein of San Diego, calls for a one-time infusion of $1.5 billion in matching funds for cities.

 

The Legislature has until June 15 to approve the state budget. Gov. Jerry Brown, who has the authority to veto individual expenditures in the budget plan, has proposed saving most of the surplus to guard against the next economic downturn. He comes back with an updated proposal later this month.

The housing partnership also calls for changing the law to allow local affordable housing measures to pass with just 55 percent support, rather than 67 percent; bringing back redevelopment agencies for low-income housing; and an aggressive campaign for a $4 billion affordable housing and veterans’ housing bond that will appear on the November statewide ballot.

 

“Until the voters pass it, it’s not real,” Schwartz said of the bond measure. “And we can’t afford for that bond to not become a reality, because it will be a crushing blow for us to get veterans and homeless people off the streets of California.”

 

Are Bay Area residential towers too costly to build?

San Jose study session reveals troubling new trend in housing development

By GEORGE AVALOS, Bay Area News Group, April 27, 2018

Soaring construction costs could hobble efforts in San Jose and other Bay Area cities to speed development of high-density housing such as apartment towers, according to a foreboding assessment being circulated in the South Bay.

Even worse, while ordinary individuals already face dire financial obstacles when they buy or lease housing, residential rents likely would have to spiral even higher to render the vast majority of Bay Area apartment towers economically viable for developers, experts warned the San Jose City Council at a study session last week.

“This is a housing crisis and a housing catastrophe, but if I’m going to kick off a new project, rents have to go higher,” Drew Hudacek, chief investment officer for development firm Sares Regis, told the San Jose council’s study session last week.

Luxury apartment rents in San Jose now range from $3.25 to $3.75 a square foot, Hudacek estimated during his presentation to the council. However, he added, to justify new luxury apartment development based on current construction costs, rents would have to rise to $4.25 to $4.75 a square foot. That means renters would be forced to endure an eye-popping 25 percent increase in rents before most new residential towers could be built.

“We have more than 6,000 units that are fully entitled and ready to be built,” San Jose Mayor Sam Liccardo told this news organization following the study session. “But developers can’t get shovels in the ground because the development costs are scaring away the financing.”

The mayor indicated that he might seek City Council approval to slash the fees that San Jose charges developers for their projects.

“I don’t know that City Hall can do that much to change market forces, but at the very least,” Liccardo said, “we need to take a hard look at reducing our fees and reducing our red tape.”

Sharply rising costs for construction and labor have added a fresh complication in the market, developers and experts told the City Council study session.

“Construction costs have increased dramatically, especially in the last 18 months,” Don Peterson, senior managing director Northern California for Mill Creek Residential Trust, said during a presentation to the council.

Developers and industry experts say commercial construction costs are rising primarily due to more expensive materials such as lumber and rising labor costs.

According to Hudacek, construction costs are rising about 1 percent to 1.5 percent each month — which is far above the general rate of inflation, as measured by the consumer price index. Construction expenditures represent 60 percent to 75 percent of the total cost of developing a high-density residential project, Hudacek estimated.

These difficulties and obstacles in financing and project profitability have occurred at a time when the Bay Area economy overall — and Silicon Valley in particular — is booming. It’s unclear if, or when, the economy in the Bay Area might cool off.

“We never know when the perfect time is” to develop a project, Elizabeth Seifel, a principal executive with Seifel Consulting, told the study session.

San Jose officials should still support housing development as a priority, even in the face of uncertainty, Erik Schoennauer, a San Jose-based land-use and planning consultant, said Friday.

“The council should be bullish about housing,” he said. “Yes, the city has a jobs-first general plan. But you cannot achieve job growth without new housing. Employers want to be where there is an adequate supply of housing. And if you want expanded retail services, you need more customers going into that area.”

The Hottest Markets for U.S. Real Estate: Is California’s Reign Over?

By Cicely Wedgeworth, Realtor.com, Apr 26, 2018

How the mighty have fallen! For the first time in years, California markets aren’t fully dominating our monthly list of the hottest markets on realtor.com®.  In fact, the Golden State has even ceded its long-held No. 1 spot!

Each month at realtor.com®, we rank the top metro areas where homes sell the fastest, and where eager house hunters are clicking up a storm on our listings. And each month, California reliably hogs the greatest share of the top 20 spots of any state. But while 11 of the top 20 markets in March could be found in the Golden State, in April, that tally had fallen to only six.

That’s the lowest number since we started doing this ranking, in 2013.

Nine other states were represented on the top 20 list: Texas (2), Massachusetts (2), New York (2), Michigan (2), Colorado, Washington, Ohio, Idaho, and Wisconsin.

Longtime top dog San Francisco fell to No. 3 in April, ceding the throne to … Midland, TX, which had previously been at No. 5. Second place went to Boston, which just hosted its famous marathon.

(The definition of big-city markets often include neighboring towns. For example, the San Francisco market includes nearby Oakland and Hayward, and the Boston market includes Cambridge, Newton, and a tiny slice of New Hampshire.)

The top movers for the month are Racine, WI (up 28 spots from March); Rochester, NY (up 14); and Detroit (up 13). Columbus, OH, moved up five spots to reach No. 4, the highest it’s ever reached in our ranking.

Realtor.com’s hottest markets receive 1.6 to 2.7 times the number of views per listing compared to the national average. These markets are seeing homes move off the market 17 to 40 days more quickly than the rest of the United States.

The_Hot_List

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

Glen’s SF East Bay Area Real Estate Market Update, March 31, 2018

East_Bay_Banner

March 31, 2018 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

Zillow_2.18

 

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

  • As anticipated, we repeated the dramatic drop off in inventory at year end, following our normal pattern for December, typically our low point. As expected, January through March began the normal trend of adding on new inventory. We increased our available housing inventory by 87% in three months. However, as early of a start as this has been and with such a large increase in supply, we’re still lagging behind where we were last year by 13.2%. We’re now sitting on an 24 day supply of homes. This makes for a very competitive market for many buyers that have started to come back into the market.
  • Our monthly supply is now 24 days. Last year, our months’ supply at this time was 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 24 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.
  • It’s hard to predict how much tax reform will play into this. That impact may not be felt until taxes are due. We are seeing interest rates starting to go up. Prices continue to rise, but at a slower pace. More and more, affordability, the high cost of living and our traffic woes are coming into play for those, especially in the “middle class,” who may now be considering leaving the Bay Area.
  • Typically, we see a steady increase on a month by month basis to occur before finally peaking in September.
  • The number of pendings, (homes that are in contract), increased as inventory levels began to rise. The pending active ratio increased to 1.62. This compares to last year at the same time of 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.
  • The percentage of homes “sitting” has slightly increased to 31% of the homes listed now remaining active for 30 days or longer, while only 14% have stayed on the market for 60 days or longer. This is similar to what what we saw last year at this time with 31% of the homes listed remained 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 a factor representing less than .05% of the market with only.

Months_Supply

 

  • The month’s supply for the combined 38 city area is 24 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 over the past four years. However, we are below supply levels compared to last year at this time, of 27 days.

Active_&_Pendings

 

  • Our inventory for the East Bay (the 39 cities tracked) is now at 1,623 homes actively for sale. This is below last year at this time of 1,870 or (13.2% 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 increased to 2,634, similar to what we saw last year at this time of 2,648.

Pending_Active_Ratio

 

  • Our Pending/Active Ratio is 1.62. Last year at this time it was 1.42.
  • Sales over the last 4 months, on average, are 5.3% over the asking price for this area, greater than what we saw last year at this time, 2.5% indicating a much stronger market for sellers.

 

Glen's Numbers Pg 1

Glen's Numbers Pg 2

 

Recent News

 

Bill pushing apartments and condos near public transit loses crucial vote

By Melody Gutierrez, San Francisco Chronicle, April 17, 2018

A San Francisco state senator’s bill to limit cities’ ability to block large apartment and condominium construction in residential neighborhoods near public transit lost a key legislative vote Tuesday, killing it for this year.

State Sen. Scott Wiener’s SB827 became one of the most hotly debated housing bills in the country, even before its first committee hearing. That hearing was Tuesday, and the Senate Transportation and Housing Committee— of which Wiener is a member — voted 5-4 to prevent the bill from moving forward.

“There will be a path in the future,” Wiener said when the vote appeared to be going against him. He promised to make changes in the measure and bring it back before the Legislature in 2019.

Wiener spent weeks lobbying to get the bill through its first committee, but conceded last week that it probably needed another year of work to build a coalition to support it.

The bill would have prevented cities from applying density and height limits to block apartments and condo buildings of up to five stories if they were within a half-mile of major transit hubs, such as a BART or Caltrain station. It would also have removed density restrictions on such buildings within a quarter-mile of highly used bus and light-rail stops.

Wiener’s measure achieved a kind of ideological symbolism as California struggles with soaring rents and home prices, caused in part by a shortage of available housing. Supporters, who included Democrats and Republicans, said it would counteract NIMBYs who refuse to entertain any development near where they live. Opponents, who also included partisans on both the left and right, called it a massive overreach by Sacramento that could destroy local neighborhoods.

Who caused the Bay Area’s housing shortage?

Hint: It’s not just tech

By Marisa Kendall, East Bay Times, April 8, 2018

EVERYONE HAS A THEORY about who’s to blame for the housing shortage that’s driving up prices and chasing Bay Area families out of the region.

A new poll offers surprising insights into where most of us point the finger: not at the government officials who control what homes are built where, but at the tech companies that have flooded this region with jobs and the real estate developers trying to maximize profits.

Experts say finding someone to blame is not that simple. The real answer, they say, lies entangled in a complicated web that implicates everyone involved, from businesses to local elected officials to your next door neighbor. And the stakes are high for policy makers trying to untangle that web as the housing crisis intensifies. To solve the problem, it’s crucial to understand the factors that turned the Bay Area’s real estate market into one of the country’s most dysfunctional.

“There isn’t one single sector to blame for the housing crisis,” said Pilar Lorenzana, deputy director of pro-affordable housing organization SV@Home, “and consequently there isn’t one single sector that’s responsible for fixing it.”

In a five-county poll conducted for the Silicon Valley Leadership Group and this news organization, 48 percent of those surveyed pointed to tech companies as a major contributor to the region’s housing shortage. Only developers ranked higher, with 57 percent of residents saying they were a major factor.

Who is to Blame

“Before ‘Silicon Valley’ got here, it was more affordable,” said 46-year-old microbiologist Megan Moore, who has lived in La Honda her whole life. “It’s great that there are so many jobs available… but the lack of housing kind of unbalances it all.”

But some experts say city and state officials have far more control over the region’s supply of homes.

“People are not focused on the source of the problem when it comes to our housing shortage — if they’re blaming tech companies and developers, then they’re not showing up at our city council meetings,” said Ethan Elkind, director of UC Berkeley law school’s climate program and an expert in land use and infrastructure policy. “That’s where their attention should be focused.”

Just 38 percent of survey respondents said local governments opposing new construction played a major role in the problem, while 28 percent pointed to the state government adding burdensome taxes and regulations to residential projects, and 19 percent blamed environmental groups attempting to block development.

It’s city officials who permit and approve, or reject and delay, new housing projects — and new housing is what the Bay Area needs to pull itself out of this crisis, most observers agree. Santa Clara and San Mateo counties together added about 47,000 jobs in 2017, while permitting just 12,000 new residential units, according to the Silicon Valley Index, an annual report released by Joint Venture Silicon Valley’s Institute for Regional Studies.

But while tech leaders might disagree, it’s hard to argue that their industry — which accounted for 29 percent of new jobs from the second quarter of 2016 to the second quarter of 2017, according to the Silicon Valley Index — hasn’t also played a major role in the housing crisis.

Part of the problem, said 58-year-old Mark Himelstein, is that the tech industry for years grew unchecked in Silicon Valley.

“We didn’t have balance,” said Himelstein, a management consultant who owns a home in unincorporated San Mateo County and responded to the housing poll. “There was no relationship between the tech companies’ hiring practices and hiring goals and funding lower-income housing opportunities.”

Himelstein would like to see companies work more closely with local cities and counties to fix the problem. For starters, he said, large companies should release data on their hiring plans — including how many people they are hiring, and their pay ranges — and then work with officials to plan housing for the new employees.

Even the techies themselves are quick to blame their employers for the housing shortage: Of the tech workers polled, 47 percent said technology companies are a major reason for the shortage, compared to 49 percent of nontech workers.

More tech companies are stepping up as they realize the problem is impacting their bottom line, Lorenzana said. With the prohibitive cost of housing making it harder to recruit and retain workers, companies including Google, Facebook, LinkedIn and Cisco are contributing money and clout to building more housing. Another 100 tech leaders recently signed a letter supporting SB 827, which would lead to more housing development near transit hubs.

There’s plenty more that tech companies can do, Lorenzana said, from donating money, to spearheading residential construction projects, to simply speaking out in favor of housing development.

“I think what you’re seeing right now is tech and the private sector are finally understanding that this is an issue that is affecting their consumer base, and it’s affecting their employees,” Lorenzana said. “And whether it’s their job or not, there is a role for them to play.”

But tech companies can’t conjure up more housing without city officials, who experts say can be reluctant to approve large-scale residential development projects, or can otherwise limit construction with rules that govern where projects can be built, how tall they can be and how much parking they must provide.

Brisbane city officials, for example, for years have resisted plans by Universal Paragon Corp. to build nearly 4,500 housing units on the Baylands former industrial site, only recently agreeing to consider allowing a fraction of that. In Cupertino, which approved Apple’s massive new campus for 12,000 employees without any additional homes, housing advocates recently criticized Mayor Darcy Paul for saying the region’s housing shortage was “not dire.” Fed up with Cupertino’s approval process, Sand Hill Property Company recently used a new law, Senate Bill 35, to go over city officials’ heads and propose a redevelopment plan for Vallco Mall that includes six times the number of housing units the city originally intended.

“They’ve been green-lighting office projects like crazy,” Elkind said of Bay Area cities, “but they don’t care about where those workers are supposed to live.”

Some cities are making an effort to build more housing. Mountain View recently approved a Google-backed plan to build 10,000 new homes in North Bayshore, and San Jose Mayor Sam Liccardo has proposed a plan to build 25,000 homes over the next five years.

Cupertino Vice Mayor Rod Sinks says city officials shouldn’t shoulder all the blame for the Bay Area’s housing shortage.

“I recognize that the cities have a major responsibility for this, and we haven’t generated enough housing,” he said. “On the other hand … it takes two to tango.”

Once the city approves housing, it’s up to a developer to build it, Sinks said. And it can be challenging to find developers willing or able to step up. Housing projects are getting more expensive to build as construction costs rise, Sinks said, and it’s more lucrative for developers to build office space or market-rate housing instead of affordable housing.

It’s also important to remember that cities’ housing policies are largely a reflection of their constituents, including long-term residents with a “not in my backyard,” or NIMBY, attitude toward development, said Gary Painter, an economics professor at the University of Southern California who studies housing markets.

“Current residents are probably the source of a lot (of) blame,” Painter said. “They don’t want newcomers to come in and change their quality of life, because they’ve already been here and established that.”

In the poll, just 25 percent of respondents said NIMBY groups play a major role in the Bay Area’s housing shortage.

State regulations have a hand in the problem too, experts say, by creating incentives for cities to favor commercial development over residential.

Many developers also blame the California Environmental Quality Act, a statute that imposes strict requirements on real estate projects to limit their environmental impact. Developers say residents also use CEQA to file lawsuits purely to delay projects and jack up construction costs. In the poll, 19 percent of people said environmental groups play a major role in the Bay Area’s housing issues.

“CEQA has become an evil, five-headed, fire-breathing dragon with respect to housing production,” said Mark Rhoades, president and CEO of Bay Area real estate developer Rhoades Planning Group.

Environmentalists disagree. Lawsuits are filed in fewer than one out of every 100 projects covered by CEQA, with an average of 195 suits filed per year since 2002, according to a study commissioned by the Rose Foundation for Communities and the Environment.

As for the other major scapegoat — tech companies — Matt Regan, senior vice president of public policy for the business-backed Bay Area Council, points out that blaming them doesn’t solve the problem.

“Tech companies are not developers,” he said. “They build and design algorithms and technology and code and phones and computers.”

Homebuyers face ‘most competitive market in recorded history’

Low inventory, demographic shifts, and rising prices will cause frustration this spring and summer

By Patrick Sisson, Curbed, Apr 16, 2018

Rising real estate costs, demographics shifts, and low inventory have hamstrung homebuyers for years. But according to Danielle Hale, chief economist for Realtor.com, this spring buying season may bring buyer frustration to a boil.

“I think it’s fair to say this is the most competitive housing market we’ve seen in recorded history,” says Hale. “There’s record low inventory and strong interest from buyers in getting into the housing market. There are a lot of buyers, and not a lot of sellers.”

According to Hale and other economists and real estate industry observers, many factors have created this “imperfect storm” of high demand and low supply. Underbuilding had been a key factor, due to cost, labor shortages, and zoning and regulatory barriers to new construction.

“We’ve been paying the bill for underbuilding for some time, and every year, it gets worse,” she says. “We’re not only not keeping up, we’re falling further behind.”

This shortage—inventory has decreased for 42 consecutive months and is down 8.5 percent from last year, according to Realtor.com data—comes as demographic trends conspire to create even more competition.

Millennials are reaching prime homebuying age—in 2020, the greatest proportion of that generation will be turn 30—just as baby boomers are looking to downsize. This has created especially fierce competition for smaller homes, the type of starter homes that most first-time buyers desire.

This dynamic can be especially frustrating for young adults because they may be bidding for the same smaller home as someone from an older generation who can lean on the accumulated wealth of decades of homeownership.

Things are better further up the housing market. Hale says the high end of the housing market, above $450,000, has seen a 1 to 2 percent increase in inventory over the past year.

Realtors are seeing listings move off the market as “quickly as they’ve ever seen them,” Hale says. In March, homes stayed on the market an average of 63 days, a 7 percent drop year-over-year from 2017. Inventory is predicted to move even faster in the summer, as it usually does, and Hale expects many markets to set records.

She also expects aggressive tactics from buyers. A Realtor.com survey of potential buyers found that 40 percent plan to put more than 20 percent down, and 26 percent are willing to pay above asking price. A survey in early March by Toluna Research found that 40 percent of current buyers have been searching for more than seven months.

“Buyers right now are staying informed and signaling they’re serious, that’s how they’re staying competitive,” she says.

Recent mortgage data reinforces the difficulty in achieving affordable homeownership.

More borrowers with conventional home loans are spending a greater percentage of their income servicing these loans, according to data from CoreLogic. This December, more than 20 percent of borrowers were spending more than 45 percent of their income on mortgage payments each month, a percentage not seen since the buildup to the Great Recession.

Analysis from Arch Mortgage Insurance Company found that the size of a monthly mortgage payment needed to afford a home rose 5 percent in just the last three months, and may rise an additional 10 to 15 percent by year’s end. Mortgage rates hit 4.42 percent last week, according to Freddie Mac. That’s low compared to traditional rates, but an increase from the recent run or rock-bottom rates.

California Could Have Avoided a Housing Crisis—if It Had Built 3.4 Million More Homes

By Sissi Cao, Observer, 04/16/18

California’s housing shortage, primarily in the tech-centric San Francisco Bay Area, is believed to have contributed to the area’s skyrocketing home prices and an exodus of its top talent.

A new study by an urban planning industry coalition quantified the shortage for the first time: The Golden State has built 3.4 million too few homes between 2000 and 2015 to keep up with the area’s economic growth.

That’s nearly equal to the total housing shortage in the rest of the country combined, according to the study conducted by Up for Growth National Coalition, a cross-industry advocate group aiming to address urban planning issues. The study was first reported by The Wall Street Journal.

Over the 15-year period, the country should have built 7.3 million homes, or 5 percent of the current total housing inventory, to keep up with the growth in population and jobs over the time period, the study found. A majority of the shortage is concentrated in coastal areas and sunbelt states.

In particular, the alarming shortage in California is a result of the state’s complex environmental and land-use regulations, which date back to the 1970s, and a lack of political incentives to rewrite outdated rules to boost new home construction.

“There is no coordinated regional policy to push housing production to match job growth,” said Kim-Mai Cutler, a partner at Initialized Capital, a San Francisco-based venture capital fund, and a columnist for TechCrunch.

“There are a number of reasons behind California’s significant housing challenges, but the primary drivers are the uncertain approval processes and zoning restrictions that favor single-family homes over more dense, transit-oriented communities,” Mike Kingsella, executive director of Up for Growth National Coalition, told Observer. “Such requirements make it nearly impossible to build the type of walkable and vibrant communities required—and frankly, desired—in rapidly growing job centers in California.”

San Francisco, for example, has zoning laws that limit residential buildings to no taller than 40 feet, or four stories. (In some “sunset zones,” buildings are subject to stricter rules that require their height not to cast a shadow on any city parks or public squares for more than an hour after sunrise or an hour before sunset.)

“It’s in the interest of individual municipal governments, which are all facing long-term structural liabilities like unfunded pension obligations and retirement health benefits, to continue to approve office spaces over housing, because it’s a net tax revenue generator,” Cutler told Observer.

“As an elected leader, you get to bump your tax collection upward [by favoring office spaces over residential housing] but don’t have to convince your constituents to pay for schools or services for additional residents,” she explained. “The existing voting constituents, many of whom are homeowners in the suburban jurisdictions, also like to see their property values—often the most significant part of their net worth—protected or enhanced.”

On top of that, California’s tax law encourage homeowners to hold on to their properties rather than putting them on the market, which exacerbate the housing shortage.

Unlike most states in the U.S., homeowners in California pay property taxes based on what they originally paid for their homes rather than a home’s current market value. As a result, due to the dramatic increase in property values in recent years, selling off a current home and moving to a new one means a significant rise in property tax for homeowners.

“A tax assessment can also be passed down to children, so one could pass a home valued at $2 million to $3 million in present value but only pays 1981-era tax rates to their kids,” Cutler said. “So basically, very few people sell their homes in California and the state only builds a fraction of what it needs to match existing population growth,”

 

Work in tech? Want to own a home? Here’s an idea

A playful billboard off Highway 101 has a message that hits close to home

By MARISA KENDALL, Bay Area News Group, March 30, 2018

For commuters sitting in traffic on Highway 101, heading home to tiny apartments that eat up most of their paychecks, a new bright-green billboard offers yet another reason to pack up and leave the Bay Area.

“Own a home. Work in tech. Move to Pittsburgh,” the ad teases.

The billboard was erected last week by Pittsburgh, Pennsylvania-based startup Duolingo — the maker of a popular online language-learning platform and mobile app — to lure tech talent away from Silicon Valley and into the Steel City. It’s a unique campaign that capitalizes both on the Bay Area’s notorious housing shortage, and the ongoing exodus of local residents searching for cheaper homes and a better quality of life.

And it appears to be working.

“There’s just significantly less traffic here,” Duolingo CEO Luis von Ahn said. “Being able to buy a home and actually walk to work, which is unheard of in Silicon Valley, is actually pretty common here.”

Half of Duolingo’s 110 employees walk or bike to work, von Ahn said, and about the same number own a home.

The median home value in Pittsburgh is $132,400 — compared to $1.3 million in San Francisco, $1.1 million in San Jose and $755,600 in Oakland, according to Zillow.

Those out-of-sight prices, unaffordable even for many Bay Area workers with high-paying jobs, seem to be playing a role in encouraging residents to leave in numbers higher than the region has seen in 10 years. Last year, for the second year in a row, the droves of people leaving the valley nearly equaled those moving in — 44,102 people left between July 2015 and July 2017, and 44,732 moved in, according to the 2018 Silicon Valley Index report published by Joint Venture Silicon Valley.

That’s because no one can afford to live here anymore — not even Google employees or doctors at Stanford, said Joint Venture president and CEO Russell Hancock.

“It used to be the California dream,” he said, “and now it’s turning into this Silicon Valley nightmare.”

Development without gentrification? Oakland’s Fruitvale is the model, report says

By ERIN BALDASSARI , Bay Area News Group, March 29, 2018

The cluster of shops, community service organizations and apartments at the Fruitvale BART station may not seem all that different from other commercial plazas, but to some economists and urban planners, it’s the grand prize of development — at least, for now.

Researchers from UCLA’s Latino Policy and Politics Initiative say the transit village has been a boon to the surrounding neighborhood without resulting in gentrification. As many low-income and working class residents across the state are forced to leave urban areas due to rising rents and home prices, the UCLA researchers said Oakland’s Fruitvale neighborhood has held onto its existing residents, along with its signature Mexican-American culture.

“It’s the holy grail of urban planning,” said Alexander Quinn, an economist with Hatch, who reviewed the study’s findings, “to say we improved the place and the people who live there are better off.”

But long-time residents, academics and elected officials question whether Oakland’s Mexican-American mecca can continue to withstand the pressure of the region’s booming economy.  And, to them, the tide may already be turning.

It’s often considered one of the country’s first “transit-oriented developments” — a catch phrase that’s become the gold standard for building in dense urban areas and is the subject of a new state bill to encourage these types of projects  across the state.

Today, the village is home to a charter high school, senior center, public library, pediatric clinic, union office and Clinica de la Raza, along with a number of restaurants and retailers. There’s also a weekly farmers market, vendors pushing carts who set up in and around the village daily and the annual Dia de los Muertos festival, which draws 70,000 visitors. By all accounts, the village is a success, luring urban planners and economists from across the globe to study and replicate it elsewhere, said Chris Iglesias, Unity Council’s CEO.

But, the researchers wanted to know if it was also a success for residents in the surrounding community.

To do that, they identified 12 other census tracts in the Bay Area and 12 elsewhere in California that had a similar demographic composition, household income and average rent in 2000, before the transit village was constructed. Then, using census data, they looked at how those neighborhoods changed in the subsequent 15 years.

Fruitvale saw higher growth in household incomes compared to similar neighborhoods in both the Bay Area and California, along with more residents graduating high school and going on to earn a bachelor’s degree. Across the state and the Bay Area, the proportion of residents buying their homes fell, while in Fruitvale, the number of home buyers actually increased.

At the same time, Fruitvale lost only 1 percent of its Latino population, 4 percent of its black residents, less than one percent of its white residents and gained 6 percent of new Asian residents. Similar Bay Area and California neighborhoods actually saw an increased concentration of its Latino populations, which grew 5 percent and 6 percent, respectively, while they lost less than one percent and 4 percent of their white residents.

“We were interested in whether or not residents of certain ethnic groups were able to stay,” said UCLA researcher Sonja Diaz. “It’s surprising … the community stayed Latino, even with all these benefits.”

But, the data also revealed higher rising rents in Fruitvale than in the Bay Area or across the state. Rents in Fruitvale rose a whopping 83 percent, compared to 71 percent in similar Bay Area neighborhoods and 66 percent in similar California neighborhoods outside the area. Carolina Reid, a faculty research adviser at UC Berkeley’s Terner Center for Housing Innovation, cautioned that the data, which goes up to 2015, misses some of the recent years of growth, when the pressures on rents and home values only increased.

“Fruitvale is not immune to the larger forces impacting the Bay Area, and some of the results they are finding in this study might be partly a timing problem,” she said.

Nor is it clear the existing residents are the ones benefiting from higher incomes and better educational attainment, and not new, wealthier residents with a similar demographic profile, who are displacing their low-income counterparts, said Robert Cervero, professor emeritus of city and regional planning at UC Berkeley.

And, to many long-time Fruitvale residents, it does feel like their community is changing. Noel Gallo, an Oakland city councilmember whose district includes Fruitvale, sees affluent white and Asian families buying homes on his block.

A lot of us in the Fruitvale area … have left Oakland altogether” for cheaper rents in the Central Valley, he said. “Within the last 10 to 15 years, it’s changed a lot, and it’s quite evident and visible.”

That’s why affordable housing and tenant protections are all the more critical, Reid said. The Unity Council recently broke ground on a 94-unit affordable housing tower at the Fruitvale transit village with plans to construct another 181 market rate units and retail businesses in the near future, Iglesias said.

“Even though we’re making strides, we’re still playing catch-up” from decades of disinvestment in the neighborhood, he said. “Investments are starting to come in and stuff is starting to happen, but we’re still making up for lost time, and it’ll take time to see the fruits of some of this work.”

Bay Area’s air quality near nation’s worst, climate change to blame: Report

By Sophie Haigney, San FranciscoChronicle, April 17, 2018

California has some of the worst air quality in the nation, both in terms of ozone and particle pollution, and perhaps the biggest factor appears to be climate change, according to a new report.

The Bay Area ranked sixth worst in the nation from 2014 to 2016 in terms of short-term particle pollution in a new “State of the Air 2018” report, which the American Lung Association released Tuesday. The region ranked 13th worst in the country for ozone pollution, which scientists say is due to climate change and warming temperatures across the globe, and several Bay Area counties experienced more unhealthy ozone days than previous years.

“We are improving air quality, but the impacts of climate change are interfering with progress,” said Bonnie Holmes-Gen, senior director of air quality and climate change at the American Lung Association in California.

Poor air quality has been associated with numerous health risks, including asthma, lung cancer, and heart disease.

 

Though ozone pollution has generally been falling since 2000, it worsened in cities across the nation compared with the previous report.

“California retains its historic distinction with 11 of the 25 most polluted cites in that state,” the report said.

The metropolitan areas of San Jose-San Francisco, San Diego, Sacramento, Redding-Red Bluff, Chico and Los Angeles all saw more unhealthy air days on average in this report than last year’s report. In addition to the nine counties traditionally considered to make up the Bay Area, the report also included San Joaquin, Santa Cruz and San Benito counties.

The report specifically attributed increasing ozone pollution to climate change, noting that in 2016 scientists measured “the second warmest temperatures on record in the United States.”

“Ozone doesn’t come out of tailpipes or smokestacks. The more heat, the more likely ozone is to form,” said Janice Nolen, assistant vice president of national policy for the American Lung Association.

Particle pollution, meanwhile, improved in most places nationally, including San Francisco. This reflects a long-term trend: California has seen an 80 percent drop in unhealthy particle pollution days since 2004.

“Particle pollution dropped, especially for year-round averages,” Nolen said. “There were lower averages during 2014 to 2016, fewer days when it spiked, and that has to do with cleaning up major sources of pollution, replacing old dirty diesel engines, and transitioning to zero-emission vehicles.”

This drop didn’t affect every location equally, though.

San Joaquin and Santa Cruz counties both got F grades for short-term particle pollution, while San Francisco, San Mateo, Sonoma and San Benito counties all received A grades.

“The coastal parts of the San Francisco Bay Area benefit from coastal breezes, but all the pollution created by freight traffic, daily gridlock and ports is reflected inland in Alameda, Contra Costa County, near Sacramento and in San Joaquin Valley,” said Holmes-Gen.

Natural disasters such as wildfires were noted as contributing factors to poor air quality, but the report released Tuesday did not include data from 2017, when wildfires in the North Bay resulted in “extremely high levels of particulate matter, levels that were comparable to those you might experience in Beijing,” said Jack Broadbent, chief executive officer of the Bay Area Air Quality Management District.

“The fires and the resulting pollution point to an ongoing theme in our national and California state of the year report,” Holmes-Gen said. “Climate change represents a significant challenge to air quality, and the public needs to understand climate impacts are happening now.”

 

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

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

East_Bay_Banner

December 31, 2017 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

Zillow_11.30.17

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

  • As anticipated, we repeated the dramatic drop off in inventory at year end, following our normal pattern for December, typically our low point. However, our current inventory is even lower than last year’s. I’ve been tracking SF East Bay real estate markets since 2006. This market is the tightest I’ve ever seen it. I’ve haven’t seen our market dip below a two week supply. We’re now sitting on a 12 day supply of homes. Furthermore, considering that 63% of the active homes are sitting for 30 days or longer, fresh new inventory is hard to come by. This makes for a very competitive market for many buyers that are starting to come back into the market.
  • Our monthly supply is now 12 days. Last year, our months’ supply at this time was 15 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 12 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.
  • It’s hard to predict how much tax reform will play into this. We are seeing interest rates starting to go up. Prices continue to rise, but at a slower pace. More and more, affordability, the high cost of living and our traffic woes are coming into play for those, especially in the “middle class,” who may now be considering leaving the Bay Area.
  • Typically, we see a steady increase on a month by month basis to occur before finally peaking in September.
  • The number of pendings, (homes that are in contract), decreased as well, also reaching a low level that I have not seen before. The pending active ratio increased to 2.11. This compares to last year at the same time of 1.73. 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 to 63% of the homes listed now remaining active for 30 days or longer, while 37% stayed on the market for 60 days or longer. This is roughly 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.

Months_Supply

  • The month’s supply for the combined 38 city area is 12 days. This is the lowest level that I’ve seen since I started following SF East Bay real estate markets, (going back to 2005). 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 over the past four years. However, we are below supply levels compared to last year at this time, of 15 days.

Actives_&_Pendings

  • Our inventory for the East Bay (the 38 cities tracked) is now at 868 homes actively for sale. This is below last year at this time of 1,241 or (30% 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 to 1,830, lower than where we were last year at this time of 2,147 or (14.8% lower).

Pending_active_ratio

  • Our Pending/Active Ratio is 2.11. Last year at this time it was 1.73.

Sales

  • Sales have decreased from the last (4 month period) now at 8,295 for the 38 cities tracked. This is slightly lower than what we saw last year at this time (8,319).

 

  • Sales over the last 4 months, on average, are 3.8% over the asking price for this area, greater than what we saw last year at this time, 2.3%.

Glen's Numbers Pg 1

Glen's Numbers Pg 2

 

Recent News

 

The 3 Best Reasons to Buy a Home in 2018 (but You’d Better Hurry)

By Holly Amaya, Realtor.com, Jan 4, 2018

Figuring out when to plunge into the real estate market can be quite intimidating—especially when prices are high, choices are limited, and history urges restraint.

“We’ve seen two or three years of what could be considered unsustainable levels of price appreciation, as well as an inventory shortage that resulted in a record-low number of homes for sale across the country,” says Javier Vivas, director of economic research for realtor.com®. “When you factor those together, you have a market that has to either explode or see some relief.”

Comforting, right? Well, take heart: Experts agree that relief is indeed on the horizon.

New predictions for 2018 forecast more moderate gains in home prices and rising inventory levels, while low unemployment and record levels of consumer confidence mean more buyers are feeling good about their finances.

A lot depends on where you live (and how much you plan to finance), but these factors combined could mean 2018 will be your year to take the buying plunge.

1. Rates are going up

After years of record-low interest rates (hello, 3%!), the Fed is finally making some noticeable increases: The rate for a 30-year fixed mortgage broke the 4% mark last year. And with economic growth continuing to carry momentum, Vivas predicts we’ll see at least two to four more rate increases throughout 2018. Rates are anticipated to hit 5% by the end of the year.

“The big story there is that those increases will further constrict affordability,” Vivas says. “The more buyers wait, the more expensive it will get to buy—not just because of home prices, but because of inflationary pressure.”

In other words, if you want in on the American dream, now might be the time.

2. Prices are climbing, but not crazily fast

Home prices have soared over the past few years, pricing otherwise well-positioned buyers out of high-cost areas and leading some experts to cry “bubble”. But in 2018, price increases are expected to moderate.

Vivas forecasts a home price increase of 3.2% year over year, after finishing 2017 with a 5.5% year-over-year increase. Existing-home sale prices are predicted to increase 2.5% year over year.

Of course, it all depends on where you live. While red-hot markets such as San Francisco are predicted to finally lose some steam, sales numbers and home prices are poised to climb in Southern states such as Texas and Florida, where economic momentum continues chugging along and new construction is happening in the right price points.

So what does that mean? Basically, home prices will still increase, but not at the same pace as they have over the past few years.

3. Inventory levels will begin to increase

An inventory shortage has plagued the U.S. housing market since 2015, forcing some buyers to settle (a tiny house with linoleum floors for $1 million, anyone?) and keeping others out of the buying game entirely. But by fall 2018, the tides will begin to turn, with markets such as Boston; Detroit; and Nashville, TN, recovering first.

The majority of inventory growth will happen in the middle- to upper-tier price point, in the ranges of $350,000 and $750,000 and above $750,000, Vivas predicts.

New home construction is also expected to expand. But that will happen slowly, thanks to a constricted labor market, limitations on the amount of lots and land that’s available, tight bank financing for building loans, and a run-up in building material prices, says National Association of Home Builders chief economist Robert Dietz.

“It’s been a slow climb back from the recession, and now we’re confronting all of these limiting factors and supply-side constraints,” Dietz says.

It’s particularly tough, he says, for builders to break ground at the entry level for first-time buyers, particularity in high-cost coastal markets such as California. That means it will take longer for those inventory levels to recover.

But there’s a bright spot: Builder confidence is at its highest level since 1999, according to the NAHB. And that means hope is on the horizon.

“As we head into 2019 and beyond, we expect to see the inventory increases take hold and provide relief for first-timers and drive sales growth,” Vivas says.

The wildcard: Taxes and politics

When the Republican tax plan was introduced, the proposed elimination of the mortgage interest deduction was all anyone could talk about: While the new limitations on the deduction will affect only 2.5% of all existing mortgages in the U.S., it will have a disproportionate effect on Western markets, where 20% to 30% of mortgages are above the new threshold, according to Vivas.

Across the board, experts agree that the new tax plan decreases incentives for homeownership and reduces the tax benefits of owning a home—particularly in highly taxed, expensive markets such as California, Illinois, New York, and New Jersey. But on the flip side, that means that if fewer folks are motivated to buy, then there’s less competition for those who want in the game. Plus, some taxpayers—including renters—will see a tax cut. That increase in buyers’ disposable income could spur demand from folks who are looking to build equity as a homeowner, rather than flushing away their savings in rent.

“Buying remains the more attractive option in the long term—that remains the American dream, and it’s true in many markets where renting has become really the shortsighted option,” Vivas says. “As people get more savings in their pocket, buying becomes the better option.”

2018 house prices and rents will keep growing with no end in sight, economists say

By Jeff Collins, Orange County Register, January 5, 2018

After nearly six years of rising home prices, what’s next?

Will 2018 be the seventh year home prices go up? Or the year the market stalls? Will this be the year that tenants get the upper hand over landlords? Or will rent hikes just keep coming?

In other words, will the seller’s market of the past 69 months continue in 2018?

We interviewed 10 economists and reviewed nine forecasts to find an answer to that question. It can be summed up in one word.

Yes.

Yes, home prices and home sales are projected to keep rising in the year ahead, although the gains will be smaller.

Yes, the supply of homes for sale will fail to keep pace with demand, fueling more cutthroat bidding wars.

And yes, rents will keep rising while apartment vacancies stay near all-time lows.

The economists all cite the same reason: “As long as the economy keeps growing, that’s going to give a push to the housing market,” said Anil Puri, director of the Woods Center for Economic Analysis and Forecasting at Cal State Fullerton.

Jerry Nickelsburg, director of the UCLA Anderson Forecast, put it this way: “When you have increases in employment, you have increases in household formation, and that increases demand for housing. That’s what we’ve been seeing.”

To get a grip on the year ahead, we highlighted five topics: Prices, sales, mortgage rates, number of homes for sale and rent.

The picture that emerges shows a market that still has more room to grow.

Ultimately, we ask the question on the minds of those still seeking to buy a home but are worried they missed their chance: How long will this crazy, runaway train of a market last? Is it too late to buy a home?

Here’s what we learned.

Home prices still rising

Synopsis:

  • Southern California home prices are expected to rise at about the same pace as California: 4.2 percent, according to the California Association of Realtors. That would put next November’s median price of an existing house at about $525,000.
  • Orange County home prices are projected to rise 5 percent to 6 percent, according to forecasts by Chapman University and Cal State Fullerton. Metrostudy, a market intelligence and research firm, foresees a 3.2 percent gain in Orange County home prices. By comparison, Orange County house prices were up 6.9 percent in the year ending in November, according to CAR.
  • Los Angeles County home prices will rise 3.1 percent, according to Metrostudy. UC Riverside’s Center for Economic Forecasting and Development has a more optimistic forecast, predicting gains of 5 percent to 10 percent. CAR reported L.A. County house prices up 9 percent in the year ending in November.
  • Inland Empire home prices will rise 3.9 percent, Metrostudy predicted. UC Riverside forecast a price gain of 8.9 percent in Riverside County and 7.3 percent in San Bernardino County, with prices possibly getting back to record levels set before the 2007 housing crash. By comparison, Riverside County prices rose 8.7 percent in the year ending in November, and San Bernardino County prices rose 12 percent.

Home price gains will continue in the year ahead, just not as fast as in 2017, economists said.

On the one hand, rising demand and a shortage of homes for sale create upward price pressure. On the other, those are offset by an expected increase in mortgage rates and fewer buyers who can afford today’s home prices (called “low affordability” by economists).

“It’s slowing down,” economist and former Chapman University President Jim Doti said of price appreciation. “The main reason is (low) affordability.”

Some also worry the new tax overhaul will slow home sales and sap prices.

A county-by-county analysis by Moody’s Analytics shows home prices in Orange, Riverside and San Bernardino counties will be at least 3.6 percent lower than where they would have been in 2019 without the tax law. In Los Angeles County, prices will be nearly 5 percent lower than previously expected growth rates. The National Association of Realtors projected the tax law will curtail California home price growth by nearly 1 percent.

Sales flattening out

Synopsis:

  • Southern California home sales rose 2 percent to 208,250 transactions through October 2017, according to CoreLogic. But 2018 sales likely will only rise about 1 percent in California and the region, Realtor forecasters said.
  • Orange County sales are projected to increase 2.7 percent this year, according to Chapman.
  • Sales forecasts were unavailable for Los Angeles, Riverside and San Bernardino counties.

Sales have plateaued across the state and region, said California Association of Realtors Chief Economist Leslie Appleton-Young.

Which is a bit of a mystery, given the state’s robust job growth and still-low mortgage rates in 2017.

“You have to wonder why aren’t we seeing more sales activity,” said Robert Kleinhenz, executive director of research at the UC Riverside Center for Economic Forecasting and Development. “The population is much bigger, and all else being equal, you would expect to see a larger number of sales.”

The answer to that riddle, said CAR’s Appleton-Young, is a lack of inventory and prices starting to get out of reach for some.

“The lack of inventory and affordability are really … keeping a lid on the California housing market,” Appleton-Young said. “We have fewer transactions … today than when we had 10 million fewer people living in California.”

The nation also has become less mobile, said Richard Green, director of USC’s Lusk Center for Real Estate.

“That’s depressing sales,” he said. “I don’t expect sales to go down. I don’t expect them to go up either.”

Headwinds from rising mortgage rates

Synopsis:

  • Interest for the benchmark, 30-year fixed-rate mortgage will average between 4.3 percent to 4.6 percent in the year ahead, according to CAR, Chapman and CoreLogic.

Mortgage rates have averaged 3.8 percent over the past three years, with just two brief periods when rates got above 4 percent.

Now, economists say, rates are heading up again, and likely will stay above 4 percent for the coming year.

Federal Reserve hikes in short-term interest rates will directly impact adjustable-rate mortgages and home equity lines of credit, CoreLogic said. They also will drive up long-term rates, to which fixed mortgages are tied.

Combined with higher prices, that translates to a 15 percent increase in monthly principal and interest payments for first-time homebuyers, said CoreLogic Chief Economist Frank Nothaft.

Buyers will have too few homes to choose from

Synopsis:

  • With just 27,550 Southern California homes for sale, 2018 started with the lowest for-sale inventory in five years.

The lack of homes for sale that has plagued the region and the nation for the past five years will continue in the year ahead. Southern California’s for-sale listings fell to 27,550 in December, the lowest number since the spring of 2013, according to ReportsOnHousing.com.

Why are there so few homes?

People are staying put longer between sales — 11 years, twice the 2009 average, according to CAR. Homeowners also are reluctant to sell because they can’t find another home in which to move.

Homeowners also stay put to avoid capital gains taxes or higher property taxes on a new home. Those who got mortgages when 30-year rates averaged 3.5 percent also are “locked in” because they don’t want to give up their lower house payments.

Because of the newly passed tax legislation, homeowners with home loans greater than $750,000 will stay put to keep their mortgage interest tax deductions.

“For-sale inventory will stay lean because homeowners are not going to move, (and) that’s going to limit the inventory that’s for sale,” CoreLogic’s Nothaft said.

Renters to pay more, too

Synopsis:

  • Orange County rents are projected to rise 3 percent to 3.6 percent in 2018, according to apartment data firm RealPage and the USC Casden Multifamily Forecast.
  • Los Angeles County apartment rent will rise 3 percent, both forecasts show.
  • Inland Empire apartment rents will rise faster: Up 4.1 percent to 4.4 percent, according to the two forecasts.
  • Most Southern California apartments will be full. Vacancy rates in the region will be around 3.5 to 3.6 percent, according to RealPage.

Low vacancy rates will keep apartment rents high, economists said.

“As long as the buildings are full and the new development fills up, that’s going to allow rent growth to continue,” said Greg Willett, RealPage chief economist.

Rent hikes will continue so long as vacancy rates stay at 4 percent or lower, added USC’s Green.

“Most places, usually at 5 percent is when rent flattens out,” he said.

When will rent go down?

“We don’t have that in the near-term forecast in the Southern California market,” Willett said. “Usually, you’re talking about a recession and big job cuts for rents to go down.”

Should you buy a home?

Synopsis:

  • Yes, but only if you plan to live there awhile to ride out any potential downturns.

After almost six years of home-price gains, people are asking how much longer will this trend last? Is it too late to buy a home?

Southern California single-family home prices have risen $239,000 or 91 percent over the past 69 months, according to CAR.

How much longer can this go on? How soon will prices start falling? Is it safe to buy a home today?

Most economists say this bull market still has some legs, lasting a year or two more at least, if not five.

“It’s debatable whether we’re in a bubble,” said Chapman economist Doti. “(But) is it a bubble that’s about to burst? No.”

First, economists note the last crash was preceded by a buildup of homes sitting on the market without selling. Currently, few homes stay on the market long, and as mentioned earlier, Southern California listings are at a five-year low.

Demographics also could keep the housing market afloat since millennials are expected start reaching first-time homebuying ages over the next five years, CoreLogic’s Nothaft said.

“We have a demographic tailwind going forward,” he said.

So, is it a good time to buy a home?

“Yeah,” Doti said. “The sooner the better. Get it while interest rates are low. If you can afford a home, now is a good time to buy.”

But there are some precautions you should take first, added USC’s Green.

“If you like the house, if you could afford it, and would live there five years, yes. Otherwise, no,” he said. “In the long run, you’re fine. But if you have to sell (in the short term), you could be in trouble.”

Bay Area home prices hit record

Real estate brokers waiting to see whether new tax law alters trend

KATHLEEN PENDER, San Francisco Chronicle, December 29, 2017

The median price paid for a new or existing Bay Area home or condo hit a record $787,000 in November, up 1.5 percent from a revised $775,000 in October and up 12.6 percent year over year, according to a CoreLogic report issued Thursday.

Some say that could turn out to be a high-water mark until buyers and sellers sort out the impact of the federal tax overhaul, which eliminates some tax benefits of homeownership. Others say the bill won’t put enough downward pressure on the seemingly insatiable demand for Bay Area homes to cause prices to fall.

“I think it’s going to be wait and see in January and February,” said Michael Barnacle, managing broker of the Zephyr Real Estate office in Pacific Heights. “We have had some evidence in recent weeks of people deciding they weren’t going to sell as a consequence of the new taxes.” They might be worried that they will have to pay higher property taxes on a new home, yet be able to deduct less of them, if any.

Buyers, especially first-timers, “are probably going to hold off until they can entirely figure out the whole rent-versus-own situation as a consequence of the tax changes,” Barnacle said.

Ultimately, most people he talks to expect “lower but steady appreciation,” but in the short term, prices may plateau “until people figure this out,” he said.

President Trump signed the tax bill only a week ago and almost all of the changes don’t take effect until 2018.

The new law generally lowers tax rates, but some people could still pay higher taxes if the loss of deductions and exemptions pushes their taxable income higher.

There are two big changes directly affecting homeownership. Under the new bill, homeowners can deduct interest on up to $750,000 in mortgage debt used to buy or improve one or two homes. That’s down from $1 million under the old law. The new rule applies to mortgages taken out after Dec. 14, 2017. Older loans are grandfathered in under the old limits. (Homeowners can refinance these older loans up to $1 million and still deduct interest as long as the balance on the new loans is not bigger than the balance on the old one — in other words, if you’re not doing a cash-out refinance.)

In addition, the final bill repeals the itemized deduction for up to $100,000 in home-equity debt not used to buy or improve a home, including existing home-equity loans and lines of credit.

Starting next year, taxpayers who itemize can deduct a total of $10,000 in all state and local taxes combined. This includes state income and property taxes. Today, taxpayers who itemize can deduct all of their state and local taxes, unless they are in Alternative Minimum Tax, which disallows the deduction.

People who can afford to buy a home in the Bay Area could easily pay more than $10,000 a year in state and local income and property taxes combined. The tax on a newly purchased $1 million home would be more than $10,000 by itself.

In a win for homeowners, the final bill preserved the existing rules that apply to capital gains tax on a primary residence. Homeowners pay no tax on the first $250,000 of capital gains ($500,000 for married couples) as long as they have lived in the home as their primary residence for at least two of the past five years before the sale date. The Senate version of the bill would have changed that to five of the past eight years, but it was stricken from the final bill.

If the tax bill has an impact, it’s most likely to be on homes priced between $900,000 and $2 million, said Andrew LePage, a CoreLogic research analyst.

Above $2 million is speculation, but below $900,000, the loan amount with 20 percent down would be less than $750,000 and the interest would be fully deductible.

For each California county, LePage looked at what percent of home-purchase mortgages taken out in the first 11 months of 2017 exceeded $750,000. The counties with the largest shares were San Francisco (54.3 percent), San Mateo (51.5 percent), Marin (43.9 percent), Santa Clara

(40.2 percent), Alameda

(22.1 percent) and Contra Costa (16 percent). The average for all counties was 10.6 percent.

From this it’s clear that the tax bill could hit some counties harder than others. “We might be seeing a high point for the foreseeable future,” LePage said.

He added, however, that the Bay Area’s record high price posted in November could go still higher if there is a change in the market

mix. A median price is the point at which half of homes sold went for more and half went for less. If more sales in a particular month take place at the higher end of the market than in the previous month, this shift can cause the median price to go up even if prices overall have not changed.

Almost 40% of working adults in the Bay Area are ‘doubled up’ with roommates in order to afford rent

By Riley McDermid  –  San Francisco Business Times, Jan 8, 2018

Close to 40 percent of working adults in the Bay Area have a roommate in order to afford the region’s increasingly high rent, a study from housing site Zillowhas found, raising more questions about California’s housing crisis and the viability of living locally in the long term.

The East Bay Times has chronicled the stories of multiple renters at various income levels across the Bay Area, and all repeat the same theme: The housing stock they’ve found is limited, what is available is usually too expensive for them to afford on their own and many are enduring brutal commutes just to find places to live that are still within driving range of their jobs.

A separate study from housing tracker Apartment List found that rents across the area range from $2,550 for a two-bedroom in San Jose up to $3,080 for a two-bedroom in Walnut Creek to $4,910 for the same sized apartment in Cupertino. That high cost of rent and limited housing stock has forced many renters to add roommates to households to afford a place to live — and pushed many others to give up entirely on the dream of owning a home in the Bay Area, the paper reports.

‘[I feel] trapped,” Gabriel Rodarte, who grew up in San Jose, told the paper. “That’s where I’m at — I feel like I’m the working poor. It’s just ridiculous when you can’t afford to live in the place where you grew up.”

5 things a Californian should know now about rent control

By Matt Levin | Jan. 2, 2018 | CalMatters, DATA POINTSHOUSING

One way or another, two words are likely to dominate the complicated politics of California’s housing crisis in 2018: rent control.

Next week state lawmakers will hear a proposal from Assemblyman Richard Bloom, Democrat from Santa Monica, that would allow cities to dramatically restrict what landlords can charge tenants year-over-year. The bill couldn’t even get a hearing last year amid intense opposition from landlords.

But looming over legislators’ heads this time around is a potential ballot initiative supported by tenants’ rights groups that would do much of the same. If the bill stalls, experts say there’s a good chance you’ll see rent control on your November ballot.

What should your average Californian know about a rent control debate poised to gobble up so much political oxygen? Here are five key points:

1.  Under current state law, a wide swath of California’s housing stock can’t be placed under rent control.

Rent control or rent stabilization policies come in different shapes and sizes depending on the city you may find them in. Some place a hard cap on how much a landlord can raise rents year over year, others may be indexed to inflation. Currently 15 California cities have some form of rent control on the books, including major population centers like San Francisco, Los Angeles and Oakland.

But current state law prohibits any locality in California from imposing rent control on properties built after 1995. That’s the year the state passed the Costa-Hawkins Act, which also prohibited cities that already had rent control laws on their books from updating them for new properties. Thus in Los Angeles rent control only applies to buildings constructed before 1978, and in San Francisco, rent control only applies to buildings built before 1980.

Bay_Area_Rent_Control_Law

A bit of background: After some cities responded to tenants’ concerns about rising rents in the 1970s and 80s by adopting rent control ordinances, real estate interests first tried to stop them in the courts. Unsuccessful there, they focused on the Legislature. Bills to preempt local rent control would routinely pass the Assembly and then die in the Senate, held up by then-Senate President Pro Tem David Roberti, a West Hollywood Democrat. The year after he was termed out of office, Costa-Hawkins passed by a one-vote margin.

Both Bloom’s bill (as it is currently written) and the initiative would fully repeal Costa Hawkins, massively expanding the number of properties on which cities could impose rent control. That includes single-family homes, which Costa-Hawkins also excluded from rent control protections.

2. Most economists—left or right—think rent control is bad

Economists have a hard time agreeing on most things. But regardless of partisan leaning, most economists would say rent control is not great policy. Even prominent progressives like Paul Krugman have expressed opposition to it.

Rent control is quite literally the textbook example of a “price ceiling”– undergrad economics textbooks will often feature problem sets with questions about what’s wrong with rent control. The classic microeconomic downsides include killing the incentive to build more housing, causing landlords to neglect maintenance and repair, and inflated prices for non rent-controlled units. A poll of ideologically diverse economists found that only 2 percent agreed with the statement that rent control had had a positive impact on housing affordability in cities like New York and San Francisco.

3. Scholars in other fields are generally bigger fans. And if you took away rent control, the results could be disastrous for affordability.

Many urban planners and other scholars studying gentrification and displacement cite rent control as an effective policy to keep long-time residents in the communities in which they live and work. And because rent control has become so deeply embedded in the housing markets of some cities, taking it away—no matter how economically inefficient it may be–could spell disaster for current residents.

Rent_Control_Key

The Bay Area Council Economic Institute–a business-aligned policy think tank–ran a simulation of 20 policy changes that could improve or worsen housing affordability in San Francisco. The policy that would make things worst? Getting rid of rent control, which they found would plunge 16,000 households into an unaffordable housing situation.

4. One of the best studies of rent control shows that it primarily benefits older households at the expense of households without rent control

There actually aren’t a ton of empirical studies looking at how rent control plays out in practice. But a groundbreaking Stanford University study released last year on San Francisco’s rent control experience has shed new light on who wins and who loses from the policy.

Looking at a roughly 20-year span of proprietary rental and migration data, the study authors found that rent-controlled tenants age 40 or over saw average savings of nearly $120,000 from rent control; by contrast, younger rent-controlled tenants only saved an average of $40,000.

That’s because younger households were more likely to move out of rent-controlled apartments because of various life milestones—a new job, a new family, buying a house in the suburbs, etc.

5. The study also found that rent control paradoxically fueled gentrification, as landlords converted units to condos

The Stanford study also found that rent controlled buildings were 10 percent more likely to be converted to a condominium or some other type of non-rental property, as landlords searched for ways to evade the law. Those units being drawn off the market partly drove up rental prices for tenants searching for apartments in San Francisco. In this sense, the study authors argue, rent control paradoxically contributed to the well-publicized gentrification the city has experienced over the past few decades.

Keep_community_togther

While the study also found that rent-controlled tenants were more likely to stay in the city than tenants without rent control, the gap may not be as wide as you think. After 10 years, about 11 percent of tenants without rent control were living at the same San Francisco address. Tenants with rent control? Thirteen percent stayed put.

How to participate in the debate: The rent control bill will be heard by the Assembly Housing and Community Development Committee on Thursday, Jan. 11 at 9 a.m., and will include a public comment period. You can watch the hearing—which should be pretty lively as far as legislative hearings go—here.

Tax Reform Side-By-Side Comparison, Current Law to New Tax Law

 

I wanted to share an article that does a good job of introducing the new tax reform.

By Lee Reams, EA, TaxBuzz, December 18th, 2017

tax-reform-640-426

On Friday, December 22, 2017, the “Tax Cuts and Jobs Act” (H.R. 1) was signed into law by President Trump. Almost all of these provisions go into law January 1, 2018.

We have put together a side-by-side comparison of current law and the “Tax Cuts and Jobs Act” (H.R. 1) changes. There are numerous tax planning issues facing both individuals and business owners. Seek out a tax professional before making any decisions.

TAX CUTS AND JOBS ACT OF 2017

This table compares the predominate changes made by the “Tax Cuts and Jobs Act of 2017” to the tax law as it was during 2017 for individuals and small businesses.

2017 

TAX CUTS & JOBS ACT (2018)

Exemptions
$4,050 Suspended through 2025 (effectively repealed)
Standard Deductions
Single: $6,350

Head of household: $9,350

Married filing joint: $12,700

Add’l Elderly & Blind

Joint & Surviving Spouse: $1,250

Others: $1,550

Single: $12,000

Head of household: $18,000

Married filing joint: $ 24,000

Add’l Elderly & Blind

Joint & Surviving Spouse: $1,300

Others: $1,600

Itemized Deductions
Medical – Allowed in excess of 10% of AGI Retained for 2017 and 2018 with an AGI threshold of 7.5% regardless of age. Threshold increases to 10% after 2018. 7.5% threshold also applies for AMT purposes for ’17 and ’18.
Taxes – Property taxes, and state and local income taxes are deductible. Taxpayers can elect to deduct sales tax in lieu of state income tax. The deduction for taxes is retained but capped at $10,000 for the year. Foreign real property taxes may not be included. The Act prohibits claiming a 2017 itemized deduction on a pre-payment of income tax for 2018 or other future taxable year in order to avoid the dollar limitation applicable for taxable years beginning after 2017.
Home Mortgage Interest – Allows interest on $1M of acquisition debt on primary and second home and interest on $100K of home equity debt. Allows interest on $750K of acquisition debt on primary and secondary home.  Grandfathers interest on up to $1M of acquisition debt for loans prior to 12/15/2017. Repeals the deduction for home equity debt.
Charitable Contributions – Allows charitable contributions generally not exceeding 50% of a taxpayer’s AGI. Continues to allow charitable contributions and increases the 50% of AGI to 60%.  Bans charitable deduction for payments made in exchange for college athletic event seating rights. Also repeals certain substantiation exceptions.
Gambling Losses – Allows a deduction for gambling losses not exceeding gambling income. Continues to allow a deduction for gambling losses not to exceed the gambling income. Clarifies that “gambling losses” includes any deduction otherwise allowable in carrying on any wagering transaction.
Personal Casualty & Theft Losses – Casualty and theft losses are allowed to the extent each loss exceeds $100 and the sum of all losses for the year exceeds 10% of the taxpayer’s AGI. Suspends personal casualty losses through 2025, except for casualty losses attributable to a disaster declared by the President under Sec 401 of the Robert T Stafford Disaster Relief and Emergency Assistance Act.
Tier 2 Miscellaneous – Includes deductions for employee business expenses, tax preparation fees, investment expenses and certain casualty losses. Suspends all tier 2 (those subject to the 2% of AGI threshold) itemized deductions through 2025.
Phase-out of Itemized Deductions – Itemized deductions are phased out for higher income taxpayers. The phase-out is suspended through 2025.
Above-The-Line Deductions
Teachers’ Deduction – Allowed up to $250 (indexed) for classroom supplies and professional development courses. Continues to allow this deduction.
Moving Deduction & Reimbursements – Allows a deduction for moving expenses for a job related move where the commute is 50 miles further and the individual is employed for a certain length of time. Qualified moving expense reimbursements are excluded from the employee’s gross income. Deduction is suspended through 2025 except for military change of station.  Employer (other than military) reimbursement would be included as taxable wages.
Alimony – Allows the payer of alimony to claim an above-the-line deduction for qualified payments; recipient reports the income. For divorce agreements entered into after December 31, 2018 or existing agreements modified after that date that specifically include this amendment in the modification, alimony would no longer be deductible by the payer and would not be income to the recipient.
Performing Artists Expenses  – An employee with an AGI of $16,000 or less who receives $200 or more from each of two or more employers in the performing arts field can deduct their performing arts expenses that exceed 10% of AGI as an above-the-line deduction. Retained – The House Bill would have repealed this deduction but the conference agreement retains it in its current form.
Government Officials’ Expenses  – An official who is paid on a fee basis as an employee of a state or local government and who pays or incurs expenses with respect to that employment may claim the expenses as a deduction in calculating AGI.  Retained – The House Bill would have repealed this deduction but the conference agreement retains it in its current form.
Employee Fringe Benefits
Bicycle Commuting – Allows reimbursement of $20 per month as tax-free compensation Suspended through 2025
Employer Provided Housing – Allows an exclusion from income for the costs of housing provided an employee for the convenience of the employer Retained – The House Bill would have limited the excludable amount, but the conference agreement retains the exclusion in its current form.
Dependent Care Assistance – Allows an exclusion from gross income of up to $5,000 per year for employer provided dependent care assistance. Retained – The House Bill would have repealed the excludable amount, but the conference agreement retains the exclusion in its current form.
Adoption Assistance – An employee can exclude a maximum of $13,570 (2017) for qualified adoption expenses paid or reimbursed by an employer. The exclusion is phased out for higher-income taxpayers. Retained – The House Bill would have repealed the exclusion, but the conference agreement retains the exclusion in its current form.
Tax Rates
There are seven tax brackets: 10, 15, 25, 28, 33, 35 and 39.6%. There will continue to be seven tax brackets but at different rates and thresholds.  The rates are: 10, 12, 22, 24, 32, 35 and 37%
Identifying Shares Sold
Under current law a taxpayer who disposes of part of his shares in a corporation that were acquired at different times or for different prices is allowed to choose which shares are considered sold if they are adequately identified. The Senate version of the bill would have required using the first-in first-out (FIFO) method of selection for which shares were sold. However, the final bill does not include that requirement.
Child Tax Credit
Allows a credit of $1,000 per qualified child under the age of 17. The credit is reduced by $50 for each $1,000 the taxpayer’s modified gross income exceeds $75K for single taxpayers, $110K for married taxpayers filing joint and $55K for married taxpayers filing separate. Taxpayers are eligible for a refundable credit equal to 15% of earned income in excess of $3,000. There is also a special refundable computation when there are 3 or more qualifying children. Retains the “under age 17” requirement and increases the child tax credit to $2,000, with up to $1,400 being refundable per qualified child. The credit phases out for taxpayers with AGI over $200,000 ($400,000 if married joint). Thresholds are not inflation-indexed. Child must have a valid Social Security Number that is issued before the due date of the return to qualify for this credit.
Non-child Dependent Credit
No such provision Allows a $500 non-refundable credit for non-child dependents. Same phaseout rule as for Child Tax Credit.
Alternative Minimum Tax (AMT)
Individuals – 2017 Exemption amounts are $84,500 for married taxpayers filing jointly, $42,250 for married filing separate, and $54,300 for single and head of household.

The exemption phase-out thresholds are:

$160,900 for married taxpayers filing jointly, $80,450 for married filing separate, and $120,700 for single and head of household.

Retained, but the exemption amounts are increased to:

$109,400 for married taxpayers filing jointly, $54,700 for married filing separate, and $70,300 for single and head of household.

The exemption phase-out thresholds are increased to: $1 Million for married taxpayers filing jointly and $500K for others.

Corporate Repealed
Education Provisions
American Opportunity Credit (AOTC) – The AOTC provides a post-secondary education tax credit of up to $2,500 per year, per student for up to four years. 40% of the credit is refundable. The credit has a phase-out threshold of $160K for MFJ filers (no credit allowed for MFS) and $80K for others. Retained – The House Bill would have extended the credit to a fifth year, but the conference agreement retained the credit in its current form.
Lifetime Learning Credit (LLC) – LLC provides annual credit of up to $2,000 per family for post-secondary education. The credit has a phase-out threshold of $112K for MFJ filers (no credit allowed for MFS) and $56K for others. Retained – The House Bill would have repealed the LLC, but the conference agreement retains the credit in its current form.
Coverdell Education Accounts – An annual non-deductible contribution of up to $2,000 is permitted and with tax-free accumulation if distributions are used for grammar school and above education expenses. Retained – The House Bill would have barred any further contributions to Coverdells, but allowed a rollover to a Sec 529 plan. However, the conference agreement retains Coverdell accounts in their current form.
Sec 529 Plans – These accounts allow non-deductible contribution and provide for tax-free accumulation if distributions are used for post-secondary education expenses. Amended to allow tax-free distributions of up to $10K per year for grammar and high school education tuition and expenses.
Discharge of Student Loan Indebtedness – Excludes from income the discharge of debt where the discharge was contingent on the student working a specific period of time in certain professions and for certain employers. Modified to exclude income from the discharge of indebtedness due to death or permanent disability of the student.
Higher Education Interest – Allows an interest deduction of up to $2,500 for interest paid on post-secondary education loans. Retained – The House Bill would have repealed the higher education interest deduction, but the conference agreement retains the deduction in its current form.
Tuition Deduction – Allows an above-the-line deduction for tuition and related expenses in years before 2017. The amount of the deduction is limited by AGI and the maximum deduction for any year is $4,000. Retained – The House Bill would have repealed the tuition deduction, but the conference agreement retains the deduction in its current form. This means that the termination date of December 31, 2016 still applies, so this deduction would not be allowed for 2017 and later.
Employer Provided Education Assistance – An employer is permitted to provide tax-free employee fringe benefits up to $5,250 per year for an employee’s education. Retained – The House Bill would have repealed employer provided education assistance, but the conference agreement retains the assistance in its current form.
Exclusion of Qualified Tuition Reduction – Employees of educational institutions, their spouses and dependents may receive a nontaxable benefit of reduced tuition. Retained – The House Bill would have repealed the exclusion from income of tuition reductions, but the conference agreement retains the benefit in its current form.
Exclusion for Interest on U.S. Savings Bonds used for Higher Education Expenses – Interest earned on a qualified United States Series EE savings bond issued after 1989 is excludable from gross income to the extent the proceeds of the bond upon redemption are used to pay for higher education expenses. The exclusion is phased out for higher income taxpayers. Retained – The House Bill would have repealed the exclusion from income of U.S. savings bond interest used for higher education expenses, but the conference agreement retains the benefit in its current form.
Sec 529 – Able Account Rollovers Distributions after 2017 from 529 plans would be allowed to be rolled over to an ABLE account without penalty, provided that the ABLE account is owned by the designated beneficiary of that 529 account, or a member of the designated beneficiary’s family.
Home Sale Exclusion
Generally, where a taxpayer owns and uses a home as his principal residence for 2 out of the 5 years prior to its sale, the taxpayer can exclude up to $250,000 ($500,000 for a married couple) of profit from the sale. Both the Senate and House bills would have changed the qualifying period to 5 out of 8 years, and the House bill would have phased the exclusion out for higher income taxpayers.  The conference agreement retains the current law.
Roth Conversion Recharacterizations
Permits, within certain time limits, a Traditional to Roth IRA conversion to be undone. The Act repeals the special rule that allows IRA contributions to one type of IRA (either traditional or Roth) to be recharacterized as a contribution to the other type of IRA. Thus, for example, under the provision, a conversion contribution establishing a Roth IRA during a taxable year can no longer be recharacterized as a contribution to a traditional IRA (thereby unwinding the conversion).
Estate & Gift Taxes
$5.49 Million (2017) is exempt from gift and/or estate tax. This is in addition to the annual gift tax exclusion, which for 2017 is $14,000 per gift recipient. The exclusion is increased to $10 Million adjusted for inflation since 2011, which is estimated to be approximately $11.2 Million. The annual gift tax exclusion is retained. The House Bill would have repealed the estate tax for decedents dying in 2025 or later, but the conference agreement did not include this provision.
Entertainment Expenses
A taxpayer who can establish that entertainment expenses or meals are directly related to (or associated with) the active conduct of its trade or business, generally may deduct 50% of the expense.

 

No deduction is allowed for (1) an activity generally considered to be entertainment, amusement or recreation, (2) membership dues with respect to any club organized for business, pleasure, recreation or other social purposes, or (3) a facility or portion thereof used in connection with items (1) and (2). Also disallows a deduction for expenses associated with providing any qualified transportation fringe to the taxpayer’s employees. Employers may still deduct 50% of the food and beverage expenses associated with operating their trade or business (e.g., meals consumed by employees on work travel).
Tax Credits
Electric Vehicle Credit – Provides a non-refundable credit of up to $7,500 for the purchase of a qualified electric vehicle. Retained – the House Bill originally repealed this credit, but the credit is retained in the conference agreement.
Adoption Credit – Provides a credit of up to $13,570 for child under the age of 18 or a person physically or mentally incapable of self care. Retained – the House Bill originally repealed this credit, but the credit is retained in the conference agreement.
Sec 1031 Exchange
There is non-recognition of gain when taxpayers trade properties of like-kind that are used for business or investment. For exchanges completed after December 31, 2017, only real property will qualify for Sec 1031 treatment.
Real Estate Recovery Periods
Currently real property has a MACRS recovery period of 39 years for commercial property and 27.5 years for residential rental property. The Senate version would have shortened the recovery period for real property.  However, the conference agreement retains the 27.5 and 39-year recovery periods.
Net Operating Loss (NOL) Deduction
Generally, a NOL may be carried back 2 years and any remaining balance is then carried forward until used up or a maximum of 20 years unless the taxpayer elects to forego the carryback and carry the loss forward only. The 2-year carryback provision is generally repealed after 2017 except for certain farm losses.

Beginning after December 31, 2017, the NOL deduction is limited to 80% of taxable income (determined without regard to the NOL deduction) for losses arising in taxable years beginning after December 31, 2017.

Sec 179 Expensing
A taxpayer can elect to expense up to $510,000 of tangible business property, off the shelf software and certain qualified real property (generally leasehold improvements). The annual limit is reduced by $1 for every $1 over a $2,030,000 investment limit. The Sec 179 deduction for certain sport utility vehicles is capped at $25,000. For property placed in service after 2017: The annual expensing and investment threshold limits are increased to $1,000,000 and $2,500,000, respectively, with both subject to inflation indexing. SUV cap to be inflation-adjusted.

Definition of Sec 179 property expanded to include certain depreciable tangible personal property – e.g., beds and other furniture, refrigerators, ranges, and other equipment used in the living quarters of a lodging facility such as an apartment house, dormitory, or any other facility (or part of a facility) used predominantly to furnish lodging or in connection with furnishing lodging.

Expands the definition of qualified real property eligible for Sec 179 expensing to include any of the following improvements to nonresidential real property placed in service after the date such property was first placed in service: roofs; heating, ventilation, and air-conditioning property; fire protection and alarm systems; and security systems.

Unlimited Expensing
For 2017 current law allows 50% of the cost of eligible new property to be deducted with the balance of the cost depreciable. This is commonly termed “bonus” depreciation. The bonus rate is scheduled to decline to 40% for 2018, 30% for 2019 and 0% thereafter. Allows 100% unlimited expensing of tangible business assets (except structures) acquired after September 27, 2017 and through 2022. Applies when a taxpayer first uses the asset (does not need to be new).
“Luxury Auto” Depreciation Limit
Annual limits apply to passenger autos used for business on which depreciation is claimed. For vehicles placed in service in 2017 the limits are $3,160, $5,100, $3,050 and $1,875, respectively, for years 1, 2, 3, and 4 and later. If bonus depreciation is claimed, the first-year limitation is increased by an additional $8,000. For passenger autos placed in service after 2017 the maximum amount of allowable depreciation is increased to the following amounts if bonus depreciation is not claimed: $10,000 for the placed-in-service year, $16,000 for the 2nd year, $9,600 for the 3rd year, and $5,760 for the 4th and later years. Amounts will be indexed for inflation after 2018.
Listed Property
To claim a business deduction for certain types of property, referred to as listed property, enhanced substantiation requirements must be followed and deductions are only allowed if business use of the property is more than 50%. Computers have been included in this category. Computers and peripheral equipment placed in service after 2017 have been removed from the definition of listed property.
Deduction For Pass-Through Income
No such provision. The Act provides a 20% deduction for pass-through income, limited to the greater of (1) 50 percent of wage income or (2) 25% of wage income plus 2.5% of the cost of tangible depreciable property for qualifying businesses, including publicly traded partnerships, but not including certain service providers. The limitations (both caps and exclusions) do not apply to joint filer’s with income below $315K and ratably phases out between $315K and $415K, For other filers the threshold is $157K and phases out between $157K and $207K.
Excess Business Losses For Individuals
Losses, other than passive losses, were allowed, and if a net loss was the result, a NOL deduction was created and carried back 2 years and then forward 20 years until used up. A taxpayer other than a C corporation would not be allowed an “excess business loss.” Instead, the loss would be carried forward and treated as part of the taxpayer’s net operating loss (NOL) carryforward in subsequent taxable years.  Excess business loss for a taxable year is defined in the Act as the excess of the taxpayer’s aggregate deductions attributable to the taxpayer’s trades or businesses for that year, over the sum of the taxpayer’s aggregate gross income or gain for the year plus a “threshold amount” of $500,000 for married individuals filing jointly, or $250,000 for other individuals. The provision will apply after taking into account the passive activity loss rules.

Glen’s SF East Bay Area Real Estate Market Update, November 30, 2017

East_Bay_Banner

November 30, 2017 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

Zillow_10.17

 

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 and fall months fluctuating slightly up and down. We did see a decrease in the available housing inventory since last month. However, we are 24% below where we were last year at this time. That’s concerning considering last year was a very “tight” market. There was an 11.5% decrease in pendings compared to the previous month, (October). Our monthly supply is now 21 days. Last year, our months’ supply at this time was 30 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 21 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 in comparison to last month, but is still below where we were last year by 16.5%. The pending active ratio increased to 1.57. This compares to last year at the same time of 1.44. 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 48% of the homes listed now remaining active for 30 days or longer, while 26% 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.

Months_Supply

  • The month’s supply for the combined 38 city area is 21 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 30 days. However, this year the inventory level on the graph is shallower.

Actives_&_Pendings

  • Our inventory for the East Bay (the 38 cities tracked) is now at 1,547 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 2,028 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 2,433, but lower than where we were last year at this time of 2,911 or (16.5% lower).

Pendings_Active_Ratio

  • Our Pending/Active Ratio is 1.57. Last year at this time it was 1.44.

Sales

 

  • Sales have decreased slightly from the last (4 month period) now at 8,981 for the 38 cities tracked. This is slightly higher than what we saw last year at this time (8,836).
  • 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 and fall 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, 2.8%.

Glen's Numbers pg 1

Glen's Numbers pg 2

 

Recent News

 

No housing bubble in sight — and other predictions for 2018

A real-estate site’s predictions for 2018 offer yet more disappointing news for would-be first-time homebuyers in California hoping that the New Year might bring some relief.

“The outlook for next year is rising prices, rising rates and rising property taxes,” said Redfin’s chief economist, Nela Richardson. “I wish I could have better news.”

Here is how Redfin’s housing market team predicts that the new year will shake out:

  • California exodus: Buyers in high-tax states such as California will move elsewhere if federal tax reform takes away deductions for state and local taxes — one of the more controversial aspects of the proposals pending in Congress. Redfin surveyed 900 homebuyers about this question last month; 37 percent of those from California said they would consider leaving the state as a result, compared to 33 percent nationally.
  • Waiting to sell: Proposed federal tax code changes relating to tax breaks and how long sellers must live in their homes to qualify — if passed — will make some people wait for another few years to list their homes, making the inventory shortage worse.
  • Urban suburbs: “Wealthier millennials” will drive the development of a new, denser kind of suburb with modest-sized homes built close to transit, complete with walkable neighborhoods, some urban amenities and good schools. But they won’t necessarily be affordable. Mountain View, where the median price for 2-bedroom home is over $1 million, was Redfin’s Bay Area example of an urban suburb. Regardless, Richardson says, far-flung, sprawling homes known to those who don’t live in them as “McMansions” are simply not what this generation wants.
  • Sellers market: Homes will sell even faster than they did this year, when nearly one in five sold within a week.
  • Mortgage rates will climb from below 4 percent to 4.3 percent or higher for a standard, 30-year loan. And because of high demand, home prices are expected to keep climbing, pushing the monthly payments 15 to 20 percent higher.
  • Housing bubble? Even in impossibly hot markets like the Bay Area, analysts aren’t seeing a bubble. They drew that conclusion partly because people are making larger down payments or paying all cash, and partly because sellers are getting their asking price — and then some. Richardson found that in cities such as Oakland, the average buyer has less debt relative to the value of their home — 80 percent — than they did in 2006, before that infamous bubble burst.
  • Roommates: More people will be doubling or tripling up to afford these skyrocketing rents and prices — a la the 1990s TV show “Friends,” Redfin predicts. Finding a compatible roommate of any age will get easier with real-estate startups like Nesterly, which matches younger renters with baby boomers, and CoBuy, which helps people go in on a house together. “We love the innovation,” Richardson quips in her report, “not to mention the new sitcom possibilities.”

Bay Area home prices rise by double digits year-over-year, again

By Kathleen Pender, SF Chronicle, December 6, 2017 

The median Bay Area home price rose 10.9 percent to $765,000 in October from the previous October, the third consecutive month it posted a double-digit year-over-year gain.

The October median price was up 2.6 percent from September but 1.3 percent below the region’s all-time high of $775,000 set in June 2017.

Those sales closed before the House introduced a bill on Nov. 2 that would strip away some tax benefits of homeownership. Many in the real estate and housing industry say that bill, which passed the House Nov. 16, and a somewhat different one that passed the Senate on Friday would bring down California home prices.

Still Climbing

In a press release, California Association of Realtors President Steve White called the House bill “a direct attack on California housing and homeownership. Eliminating the incentive for people to buy homes and raising taxes on hundreds of thousands of California homeowners only puts the American dream further out of reach.”

The big jump in Bay Area home prices last month was mainly a result of “low inventory, affordability constraints and market disruptions caused by the destructive and deadly North Bay wildfires that began in early October,” CoreLogic spokesman Andrew LePage said in a press release.

The impact of the fires and tax bills will be more strongly felt in coming months.

Both tax bills would eliminate the federal itemized deduction for state and local income or sales tax and limit the property tax deduction to $10,000 per year.

Under the House bill, homeowners could deduct interest on up to $500,000 in debt used to buy or improve a primary residence. Today they can deduct interest on up to $1 million in mortgage debt used to buy or improve a first and second home. That would not change under the Senate bill, but both bills would eliminate the deduction for up to $100,000 in home-equity debt not used to buy or improve a house.

Both would also extend the holding period needed to qualify for the capital gains tax exclusion — up to $500,000 for married couples and $250,000 for singles — break on a primary residence. House and Senate leaders are trying to reconcile those bills and hope to pass a final one by Christmas.

Will the GOP tax bill lower home prices in California?

An updated look at how the current tax overhaul plans will impact housing

By MARISA KENDALL, Bay Area News Group, December 4, 2017

As Republicans worked Monday to reconcile conflicting versions of their tax plans, a prominent group of realtors is warning that both the Senate and House proposals will slash home prices and values in California and beyond.

The proposed cuts to real estate-focused tax deductions could cause prices in the Golden State to drop between 8 and 12 percent, leading to a loss in home value of between $37,710 and $56,550 for the typical home owner, according to the National Association of Realtors, which continued to oppose the bills as Republicans moved closer to a final plan over the weekend.

While a price drop may sound like good news to Bay Area residents bemoaning the region’s soaring housing prices, the trade group says plummeting prices could bring new troubles — including a reluctance to sell that could further squeeze an already tight supply of homes. The strain is expected to be greatest in regions like the Bay Area, where home prices are already high.

“The tax incentives to own a home are baked into the overall value of homes in every state and territory across the country,” association president Elizabeth Mendenhall wrote in a news release over the weekend condeming the proposed tax overhaul. “When those incentives are nullified in the way this bill provides, our estimates show that home values stand to fall by an average of more than 10 percent, and even greater in high-cost areas.”

Affordable housing advocates also worry the tax overhaul will gut California’s efforts to house its low-income residents.

It’s not yet clear what the final tax plan will look like. Republicans still have plenty of work to do to iron out the differences between the House and Senate proposals. They reportedly expect to pass a final version before Christmas.

So how would the tax proposals affect our housing market?

One of the key provisions is the mortgage interest deduction — the tax break homeowners get for the interest paid on a mortgage. Under current law, homeowners can deduct interest on purchases of up to $1 million for a primary residence and one other home, plus an extra $100,000 for equity debt. The Senate bill would keep the former cap in place, but eliminate the equity debt deduction, Forbes reports. The House plan would grandfather in existing mortgages, but would cap new mortgages at $500,000. In addition,  homeowners would get no deductions for a secondary residence.

Halving that deduction cap could impact as many as half of Californians who have a mortgage, according to the National Association of Realtors. Last year 49 percent of housing units with a mortgage were worth more than $500,000. Homeowners who claimed the mortgage interest deduction saved an average of $3,070, the association said.

Another controversial housing-related item in the tax proposals is the capital gains provision. Under current law, homeowners can exclude up to $250,000 (or $500,000 for married couples) in capital gains on the profit from the sale of a home — if they have lived in the house for two of the last five years. Both the House and Senate proposals would change that — homeowners must have lived in the house for five of the past eight years to qualify for the savings.

Last year, 13 percent of homeowners in California had lived in their home for between two and four years, meaning they won’t be eligible for that tax exclusion, according to the National Association of Realtors. Some housing experts worry the GOP tax plans will encourage Bay Area homeowners to stay put instead of selling, exacerbating the region’s housing shortage.

Both the House and Senate tax plans would also cap the property tax deduction at $10,000.

A recent White House analysis of the tax proposals attempted to put homeowners’ fears at ease. Last month, researchers with the Council of Economic Advisers estimated a “muted” drop of less than 4 percent in housing prices as a result of proposed changes to the mortgage interest deduction. Meanwhile, the researchers wrote, the rate of home ownership may rise “modestly.” The researchers noted that while itemized tax deductions would be reduced under the proposals, the standard tax deduction would be increased.  The current standard deduction of $6,350 for single tax payers would jump to $12,000, and the deduction of $12,700 for married tax payers would jump to $24,000.

Bay Area accountant on tax reform: ‘It’s almost malpractice not to talk to clients about leaving California’

By Mark Calvey  –  San Francisco Business Times, Dec 7, 2017

Tax reform under consideration in Washington that would eliminate the deduction for state income taxes could spur more wealthy Californians to move to low-tax states.

California’s status as having one of the highest levies on income already makes a move out of state a frequent point of discussion between the wealthy and their financial advisers. But the loss of a federal deduction for state income taxes paid will only provide more evidence that high-income taxpayers could be better off moving to Texas or another state with less burdensome taxes, Edward Hanley, a principal at San Francisco accounting firm Shea Labagh Dobberstein, told the San Francisco Business Times.

Asked whether he’s had conversations with any of his clients about leaving the Golden State, Hanley responded, “Yes. All of them. It’s almost malpractice not to talk to clients about leaving California.”

Several of Hanley’s clients are looking at possible moves out of California when they retire in five to 10 years, with Washington state and Wyoming among the destinations often under consideration since the two states are among the seven with no income tax. (The other states with no income tax are Alaska, Florida, Nevada, South Dakota and Texas.)

Many of California’s wealthy own businesses or real estate, so they can save millions in taxes by moving to Texas or Florida before selling those assets.

Wealthy individuals, as with companies, are often more mobile than lawmakers realize.

Some California tax preparers say they’re having painful conversations with clients about how much more tax they’ll pay under tax law changes now under consideration.

Hanley said he’s advised many of his clients, who aren’t subject to the Alternative Minimum Tax, to be prepared to pay their California income and property taxes this month, rather than waiting till they are due next year, to avoid the risk that payments made next year for 2017 taxes owed become a non-deductible expense in 2018.

On Thursday, San Francisco-based Paragon Real Estate Group took a closer look at Census data tracking migration to and from California in 2016. The report highlighted that more California residents are moving to other states than other states’ residents are moving into California, although that can be hard to believe for Bay Area residents finding their favorite restaurants and roadways increasingly crowded.

Paragon noted that foreign immigration into California has more than offset state residents leaving for other states, so the Golden State’s population has been rising.

But President Trump’s efforts to stem immigration may “dramatically curtail foreign influx numbers into California and the Bay Area in 2017 and subsequent years,” Patrick Carlisle, chief market analyst at Paragon, said in his report on Bay Area demographics.

“Secondly, changes to the tax code currently contemplated by the Republican-dominated Congress — the deductibility of mortgage interest costs and local and state taxes in particular — would almost certainly make living in the Bay Area, which already has either the highest or close to highest cost of living in the country, more expensive for many residents, but also increase the cost difference in cost of living between it and other parts of the country,” Carlisle said. “This could exacerbate the outflow of companies and residents to lower-cost states.”

Carlisle says the outflow of residents breaks into two groups: Those relocating for jobs in lower-cost states and those moving after retiring, often cashing out of California’s pricey housing market to help make their golden years shine.

Fewer immigrants coming to California from other countries coupled with more people leaving the state “might have substantial ramifications for state and local economies and housing markets,” Carlisle warned.

Home prices nearly doubled in this surprising California city

Prices shot up 92 percent over the past five years

By MARISA KENDALL, Bay Area News Group, December 3, 2017 

As home prices skyrocket across the state, there’s one California city where they’ve shot up more than anywhere else in the U.S. — nearly doubling in the past five years.

No, it’s not San Francisco, San Jose or Oakland. It’s not even in the Bay Area.

It’s Stockton, the Central Valley community twice dubbed America’s “most miserable” city by Forbes Magazine because of its high rates of housing foreclosures, unemployment and violent crime.

The jump in home prices in Stockton and neighboring Lodi — up about 92 percent over the past five years — is dramatic evidence of the ripple effects of the Bay Area’s tight housing market and the increasingly out-of-reach cost of living here. As people flee San Francisco and Silicon Valley in search of cheaper housing — heading to places like Stockton, Oakland and Sacramento — prices in those second-tier markets are rising.

“There’s flight away from areas where it’s expensive, to areas where it’s relatively cheap,” said Andrew Leventis, deputy chief economist at the Federal Housing Finance Agency, which first noted Stockton’s dramatic rise. “It would be just incredibly improbable if that wasn’t driving up prices in the west by some magnitude.”

The federal agency analyzed housing markets in the country’s 100 largest metropolitan areas. Oakland came in second, boasting an 86 percent jump in prices, according to the report released this week. Sacramento, also a major destination for Bay Area expatriates, is number six, seeing its home prices climb 74 percent.

The San Francisco/South Bay area is high on the list too, coming in at number four with a 77 percent increase — far above the national average of 35 percent.

Cities where home prices are soaring

Of the country’s 100 largest metropolitan areas, these saw the biggest increases in home prices over the past five years:

  1. Stockton/Lodi — 91.94 percent
  2. Oakland/Hayward/Berkeley — 85.71 percent
  3. Las Vegas/Henderson/Paradise — 85.21 percent
  4. San Francisco/Redwood City/South San Francisco — 77.07 percent
  5. Seattle/Bellevue/Everett — 74.66 percent
  6. Sacramento/Roseville/Arden/Arcade — 74.03 percent
  7. North Port/Sarasota/Bradenton, Florida — 72.5 percent
  8. Riverside/San Bernardino/Ontario — 70.82 percent
  9. Cape Coral/Fort Myers, Florida — 70.1 percent
  10. West Palm Beach/Boca Raton/Delray Beach, Florida — 69.19 percent

Source: The Federal Housing Finance Agency 

 

Seasonal chill cools rents in hot Bay Area apartment market

By LOUIS HANSEN,  Bay Area News Group, December 1, 2017

Apartment prices in the Bay Area dipped last month, but renters, don’t breathe a sigh of relief — analysts expect prices to continue to climb in 2018.

Rental market watchers noted slight declines in apartment prices in November, attributing it to routine seasonal swings in a month where fewer people are searching for housing.

The Bay Area remains home to the highest rental prices in the country, with San Francisco topping the charts with a median price of $3,050 per month for a two bedroom, according to rental website Apartment List. A typical two bedroom in San Jose listed for $2,550 in November, while a similar Oakland pad went for $2,170.

“Even when rents dip a little bit, they’re still more than twice the national average,” said Sydney Bennet, a researcher for Apartment List. Nationwide, apartment prices fell in two-thirds of the major cities last month, she said.

Prices fell month-to-month in San Jose, San Francisco and Oakland, but still have shown a net rise over the last year. Prices in the East Bay dropped 1.4 percent, while San Jose rents fell about 1 percent, according to Apartment List.

The hottest market this year has been Sacramento, as Bay Area residents flee high prices for more affordable housing. Rent prices have increased almost 10 percent in the last year. But Bay Area escapees can still find better deals in Sacramento, where the median price for a two bedroom was $1,190 a month.

“Jobs are a big factor for rent growth in the whole area,” Bennet said. Apartment List researchers expect prices to climb in 2018, she said.

Nationally, rents have risen about 2.7 percent in the last 12 months. California has led the way, averaging a 4.3 percent increase.

A report by real estate website Zumper also found dips in San Francisco, but monthly increases in San Jose and Oakland. The website tracks apartments in the U.S. and Canada.

Zumper analysts also are bullish on demand for Bay Area apartments, as new apartments are being built across the region. “I don’t think the tech market is going to slow down any time soon,” said spokeswoman Crystal Chen.

Looking for relief from Bay Area prices? Zumper found rents sliding in Pittsburgh, Pennsylvania, Durham, North Carolina, Buffalo, New York, and Milwaukee, Wisconsin, although a check of the weather forecast might be in order before moving.

These Real Estate Trends Will Be Game-Changers in 2018

By Cicely Wedgeworth | Realtor.com, Nov 29, 2017

We’re almost there: the long-awaited home stretch of 2017. And quite a year it’s been! Already, we can’t help imagining what developments next year might bring to the wild world of U.S. real estate. So we asked our realtor.com® data team to give us the inside scoop. The team sifted through historical real-estate data and other major economic indicators to come up with a realistic forecast of just what might be in store next year.

And it looks like a sea change is brewing.

From housing inventory to price appreciation to generational and regional shifts, these are the top trends that will shape, and reshape, real estate markets in 2018. Buckle up! It’s going to be quite a ride.

Game-changer no. 1: Supply finally catching up with demand

After three years of a crushing shortage of homes for sale, the realtor.com economics team is predicting that the shortfall will finally ease up in the second half of 2018.

“The majority of the year should be challenging for most buyers, but we do expect growth in inventory starting in the fall,” says Danielle Hale, chief economist for realtor.com.

That’s a potentially transformative development for many would-be buyers who’ve been frustrated in their search for a home that meets their needs—and their budget.

“Once we start to see inventory turn around, there is plenty of demand in the market,” Hale says.

Although for-sale housing inventory is expected to stay tight in the first quarter of the year,  reaching a 4% year-over-year decline in March, if it increases as predicted by fall, that will be the first net inventory gain since 2015. Markets such as BostonDetroit, and Nashville—all of which recently made it onto our monthly list of the nation’s hottest real estate markets—may see inventory recover first.

Bullish construction is the engine that’s turning this ship around, bringing new homes to the market and creating opportunity for people to trade up into new homes.

“It’s adding inventory instead of just shuffling people around in existing homes,” Hale says.

But those itching to buy a starter home may have to be patient for a while longer.

“We expect the relief to start in the upper tiers, and it will make its way down to the lower tiers,” Hale says. Specifically, most of the initial inventory growth will be in the mid- and upper-tier price ranges, $350,000 and up.

As the market eases, home prices are expected to slow to 3.2% growth year over year nationally. But again, it’s the higher-priced homes that will be appreciating less. And even slower appreciation still means that prices will continue to rise.

“Overall, prices are expected to increase, and we’re expecting to see more of that in lower-priced homes,” Hale says. “It will get a bit worse before it gets better for buyers of starter and midprice homes.”

Game-changer no. 2: Millennials starting to come into their own

The housing market in 2018 will continue to present challenges for millennials—sorry, all of that student loan debt isn’t just going to disappear—but there are some bright spots on the horizon for these millions of Americans.

Millennials seem to be having more success at taking out mortgages on homes at varying prices, and not just starter homes, Hale says.

“They’re at that point where they’re seeing their incomes grow, and that will help them take on bigger mortgages,” she says. That’s because of both the overall strong economy and their own career development.

And as the largest generation in U.S. history reaches that sweet spot in their 20s to 30s when they’re settling down and starting families, they’re particularly motivated to buy. Millennials could make up 43% of home buyers taking out a mortgage by the end of 2018, up from an estimated 40% in 2017, based on mortgage originations. That 3% uptick could translate into hundreds of thousands of additional new homes. As inventory starts to rebound in late 2018 and in years to come, first-time home buyers will likely make up an even larger share of the market.

They probably shouldn’t wait too long to buy, either—mortgage rates are expected to reach 5% by the end of 2018 due to stronger economic growth, inflationary pressure, and monetary policy normalization.

Game-changer no. 3: Southern homes selling like crazy

When it comes to home sales growth, bet on Southern cities to beat the national average in 2018. We’re especially looking at you, Tulsa, OKLittle Rock, ARDallas; and Charlotte, NC. Those markets are expected to see 6% growth or more, compared with 2.5% nationally.

The South has been luring corporations and individuals to its balmy cities with its low costs of real estate, and living in general. The resulting strong economic growth and strong household growth, combined with an accommodating attitude toward builders, is setting the stage for an accelerating boom in homeownership, Hale says.

As soon as there are more homes to sell, these places will be selling strong.

Game-changer no. 4: Tax reform (maybe)

The Republican Party’s proposed changes to the tax system could change everything—but with both the House and Senate versions in limbo, the jury is still out on this one.

If a version of tax reform does pass with the current provisions affecting real estate, Hale says she would expect to see fewer home sales and declining home prices. However, it would be the upper price tiers that would likely be affected the most, in areas with expensive homes and high taxes, such as coastal cities, especially in California.

 

Oakland’s housing pipeline gushes after years of drought

By Roland Li  –  San Francisco Business Times, Nov 30, 2017

For the first time in eight years, cranes have arrived in downtown Oakland.

Three residential highrises are under construction. Collectively, they will add over 1,000 new housing units to the city’s core, replacing an empty lot, a parking garage and small office building. Three more residential towers are approved and could break ground by next year. Another dozen are in the pipeline.

It’s the city’s biggest building boom in decades with over 3,600 units under construction. Although activity is primarily concentrated downtown, there are also projects moving forward in Temescal, West Oakland and East Oakland.

It’s a boom that took years of economic shifts to materialize after Oakland’s home prices and rents shot up. Those soaring prices made both wood-frame and concrete highrise construction profitable enough to attract new developers.

Carmel Partners is among those newcomers. Last month, Carmel started construction on a 634-unit tower that will be the city’s second-tallest building. It’s San Francisco-based Carmel’s first Oakland project and replaces a garage a block from the 12th Street BART station.

Dozens of other investors have come to Oakland for the first time: The Blackstone Group is funding over 400 new apartments developed by partner CityView that are under construction in the Broadway-Valdez district. Vancouver, Washington-based Holland Partner Group has two approved highrises in downtown Oakland.

Longtime builders are also still active in Oakland: Signature Development Group has started construction on the first market-rate building at Brooklyn Basin, the city’s largest master development with 3,100 waterfront units. SunCal also has approvals for 918 for-sale townhomes at the former Oak Knoll hospital site.

Madison Park Financial has a new plan for nearly 400 units in East Oakland, but the veteran Oakland developer has been pickier about additional deals.

Rising construction costs have been a barrier, as well as new impact fees and the cost of connection to water from East Bay Municipal Utility District, which can hit tens of thousands of dollars per new unit.

espite rising costs, bigger developers are able to get large projects underway. A block from the 19th Street BART station, Lennar Multifamily Communities and its contractor Build Group Inc. are laying the foundation of 1640 Broadway. The tower will have 254 apartments.

Previous owner Joe Hernon proposed the project in 2000, but never got it off the ground. In 2015, Lennar pursued the project.Being one of the first new towers was a challenge.

“A lot of investors want to see the proof of concept,” said Tyler Wood, Lennar Multifamily development director.

But there hadn’t been a new residential highrise built in Oakland since 100 Grand St. in 2009. Lennar looked at rents downtown and concluded it was viable to build tall.

“You kind of extrapolate — this is what’s happening in the city. It’s performing quite well. There should be an appetite,” said Wood.

Lennar is targeting rents in the low $4s per square foot, or over $3,000 per month for a 750-square foot unit. Pricing is higher than Oakland’s older highrises and less than rents in new San Francisco towers. Wood declined to disclose the project’s budget. Bay Area highrise projects typically cost over $500,000 per unit to build and design.

 

Go West: Projects are finally rising in long-neglected West Oakland

By Roland Li  –  San Francisco Business Times, Nov 30, 2017

Every weekday, hundreds of thousands of riders pass through West Oakland’s BART station on their way to San Francisco. Only a handful get off.

Despite the station’s central location, the neighborhood doesn’t have many jobs outside of the hulking U.S. post office and the adjacent Port of Oakland. It’s primarily a residential area, with single-family Victorians now selling for over $1 million.

That may change. Two massive development plans could replace parking lots next to the BART station with housing and office towers, along with new shops and plazas. Another half-dozen midrise housing projects are under construction or approved in West Oakland. It’s the boldest vision to transform the area since the 1950s and 1960s, when government-sponsored “urban renewal” devastated what was once a vibrant retail strip on the very same blocks. Homes, jazz clubs and restaurants were demolished to make way for BART, the post office and a new highway that bisected an established community.

The projects are still years away from becoming reality, but they’re evidence that developers are focusing on West Oakland as a place for high-density housing and office space, and that the city supports this push. Developers say the neighborhood’s central location in the BART system and abundance of empty lots make it a strong candidate for dense growth. The proposals are moving forward as Oakland’s rents have hit record highs of $1,930 per month for a one-bedroom and over $50 per square foot for Class A office space, according to brokerage data. That makes new highrise construction more financially viable, developers say.

 

Will the Oakland hills get 200 homes and a charter school? 

By Antoinette Siu  –  San Francisco Business Times, Nov 29, 2017

Developer The Pacific Cos. is proposing 200 affordable housing units and a charter school in the Oakland hills.

A shuttered Ace Hardware store currently sits on the site at Foothill Boulevard and 68th Avenue where Pacific Cos. wants to build the housing and a K-8 charter school for 550 students. Eagle, Idaho-based TPC has developed seven other charter schools throughout Arizona, California, Minnesota and Texas. TPC subsidiary Strategic Growth Partners is led by former Aspire Public SchoolsCEO James Wilcox.

TPC has completed more than 150 multifamily and charter school projects in the West, many of them in California. Mike Kelley, business developer at TPC, said the company is still identifying the tenant for the charter school. It’s possible two of Aspire’s current schools in the area will consolidate and move to the new space, he added.

The company just proposed a similar project with housing and a charter school in San Jose. It also sold an apartment community at 955 South First St. in San Jose earlier this year and built workforce housing at the Mayfair Court Apartments at 65 McCreery Ave. in San Jose.

The Oakland development would be 100 percent affordable: All units will have a rent cap at 60 percent of the area median income. Rents would be limited to $1,174 for a one-bedroom, $1,408 for a two-bedroom and $1,627 for a three-bedroom.

While still in the early stages, Oakland City Council member Desley Brookswelcomes the additional housing.

“There are no elevations, engineering or construction drawings; and there are approvals that still need to be obtained. That said, as with many jurisdictions, Oakland needs more housing,” Brooks said.

Construction would take about 16 months, said Kelley. Developing a school alongside housing has its advantages, he said. “By doing this co-location model, we get affordable housing. It’s very difficult to find housing for families and for teachers to live where they work,” Kelley said.

It’s also easier to finance building both at the same time, he said, without having to ask for a lot of subsidies from the city of Oakland. “By bringing them together, leveraging the different sources individually, it allows for something like this to happen,” Kelley said.

 

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

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

East_Bay_Banner

Glen’s SF East Bay Area Real Estate Market Update

October 31, 2017

Zillow_Statistics

 

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.

Months_Supply

 

  • 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.

Active_&_Pendings

  • 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).

Pending_Active_Ratio

  • 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

  • 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%.

Glen's_Numbers_Pg_1

Glen's_Numbers_Pg_2

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.

What's_New_Tax_Plan

 

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.

Anther_Leap

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   jazzlines@sbcglobal.net

Glen’s SF East Bay Area Real Estate Market Update, September 30, 2017

East_Bay_Banner

Glen’s Numbers: SF East Bay Area Real Estate Market

September 30, 2017   By Glen Bell   (510) 333-4460

Zillow_August_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 more uneven course. We did see a modest increase in the available housing inventory since last month. However, we are still well below where we were last year at this time by 24%. That’s concerning considering last year was a very “tight” market. Pendings were steady with little change from August. Our monthly supply is now 33 days. Last year, our months’ supply at this time was 45 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), remained relatively even in comparison to last month, but is still below where we were last year by 12.3%. The pending active ratio decreased to 1.21. This compares to last year at the same time of 1.05. 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 slightly higher than last year at this time, (1.05).
  • The percentage of homes “sitting” has decreased slightly with 37% of the homes listed now remaining active for 30 days or longer, while 19% 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.
  • 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 remains at $700,000 over the last 4 months, up from last year at $645,000, an 8.5% increase.

Months_Supply

  • The month’s supply for the combined 38 city area is 33 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 45 days. However, this year the inventory level on the graph is shallower.

Actives_&_Pendings

  • Our inventory for the East Bay (the 38 cities tracked) is now at 2,340 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 3,079 or (24% 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 remained relatively flat at 2,832, but lower than where we were last year at this time of 3,228 or (12.3% lower).

Pending_to_active_ratio

  • Our Pending/Active Ratio is 1.21. Last year at this time it was 1.05. 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 summer and fall.

Sales

  • Sales have decreased slightly from the last (4 month period) now at 9,607 for the 38 cities tracked. This is slightly higher than what we saw last year at this time (99,412).
  • 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.
  • Sales over the last 4 months, on average, are 4.1% over the asking price for this area, greater than what we saw last year’s at this time, 3.3%.

 

 

Glen's Number Pg 1

Glen's Numbers Page 2

 

 

Recent News

 

S.F. real estate is the most ‘overvalued’ in the U.S., according to banking giant

By Emily Landes, SFGate, October 6, 2017

Don’t call it a bubble. San Francisco’s real estate market is merely “overvalued,” according to a new report from UBS.

The financial services firm’s annual Global Real Estate Bubble Index says that, even amid rising prices, the relatively high incomes in San Francisco make buying a home here “relatively feasible.”

However, San Francisco is still the most overvalued city in the U.S., according to the report, which points out that prices here have outpaced the nation as a whole by 260 percent over the last 40 years. Los Angeles was a close second. But other expensive American cities, like New York and Boston, were deemed “fair-valued,” while Chicago continues to be “under valued,” the only financial center on the list to get that designation.

UBS says Toronto is at the greatest risk of a housing bubble, followed by Stockholm, Munich, Sydney and Vancouver. Amsterdam also joined the bubble club, after being merely overvalued in 2016. “Real house prices of those metropolises within the bubble-risk zone have climbed by almost 50 percent on average since 2011,” according to the report. “In the other financial centers we looked at, prices have risen by roughly 15 percent. This gap is grossly out of proportion to the differences in local economic growth and inflation rates.”

Brown signs housing bills: ‘It was a big challenge, and we’ve risen to it’

By John Wildermuth, SF Chronicle, September 29, 2017 

Surrounded by a crowd of Democratic mayors and legislators Friday morning, Gov. Jerry Brown signed a wide-ranging package of 15 bills designed to bring some relief to the statewide housing crisis.

Enthusiastic housing advocates and business leaders also joined the governor for the outdoor bill-signing ceremony in a pocket park at Hunters View, a new mixed-income housing development on the hills of Bayview-Hunters Point in San Francisco.

“This is the biggest bill-signing I’ve ever seen, and it’s because it deals with something as basic as shelter,” the governor said. “It was a big challenge, and we’ve risen to it this year.”

But the governor also stressed that many of the problems the new bills are designed to ease were caused by the same local and state officials now cheering the improvements.

Things like tough zoning restrictions, requirements for clean air and green energy, multiple rules for construction and a variety of other laws dealing with housing are all good things in themselves, he said. But they combine to build up red tape that can make it harder to build affordable housing, he argued.

“All these rules were passed by people like you, and they’re all good stuff,” Brown said. “But I’ve always said too many goods can create a bad.”

But that didn’t dampen the excitement of people delighted to see the state recognizing the need for dramatic measures to deal with the state’s growing housing problems.

“There is no corner of the state that doesn’t need affordable housing,” said Tim Frank, director of the Center for Affordable Neighborhoods in Berkeley. “There’s no silver bullet to deal with the state’s housing crisis, but this is a big first step.”

The Legislature passed the 15 bills in the housing package on the last day of the session two weeks ago.

One of those bills, SB2 by state Sen. Toni Atkins, D-San Diego, creates a permanent source of funding for affordable housing.

The permanent funding is estimated to generate $200 million to $300 million a year through a $75 to $225 recording fee on real estate documents and some property transactions, not including home sales. Most of the money goes to local governments to build housing, make existing housing more affordable and create permanent or temporary shelters.

The bill was a priority for advocates who said the state needed to create a permanent source of funding to begin to replace $1 billion a year in lost redevelopment agency money.

A Public Policy Institute of California survey released Wednesday found that less than half of adults support the fee, though 64 percent of those polled said they favor building more housing in their cities.

Voters will decide next year whether to approve a housing bond. SB3, by state Sen. Jim Beall, D-San Jose, will ask voters to approve $4 billion in general obligation bonds to build rental housing for low-income families and to fund other existing housing programs. The bond will set aside $1 billion for the state’s veteran home-loan program, which would otherwise run out of money in 2018.

Among the other bills signed was SB35 by Wiener, which pushes reluctant cities into approving housing projects. Dozens of cities opposed the measure, arguing that it undermined local land use decisions.

SB167, by Sen. Nancy Skinner, D-Berkeley, will make it harder for local governments to deny housing projects.

AB1505, by Assemblyman Richard Bloom, D-Santa Monica, will allow local governments to require developers to set aside a certain percentage of affordable rental units in new construction.

Realty group fears Trump tax reform would hurt California homebuyers

By GEORGE AVALOS, Bay Area News Group, September 29, 2017

California’s largest group of realty agents has warned that a Republican tax-reform proposal would erode the attractiveness of buying a house in the Golden State — but economists pointed out Thursday that these effects could also cause a dip in home prices that have skyrocketed.

California Realtors Association President Geoff McIntosh suggested the Republican plan to eliminate state and local tax deductions, such as property taxes, could hurt California and its housing market.

“The average California homebuyer could end up paying $3,000 more a year in taxes under the proposal,” McIntosh said in an emailed statement.

Only homebuyers who choose to itemize deductions would be affected if the reform plan strips away their ability to deduct property taxes on their federal returns.

Even if the tax reforms are approved and ultimately make home buying less attractive, that could also bring potential benefits for buyers, some economists said Thursday.

“There are several variables, but it would reduce home prices,” said Fred Foldvary, a lecturer in economics at San Jose State University. “Right now, home prices are propped up by implicit subsidies, such as deductions for mortgage interest, property taxes, and other tax benefits. All of these puff up the value of residential real estate.”

Experts said it all comes down to the basic rules that govern economics.

“It’s supply and demand,” said Annette Nellen, a professor of accounting and taxation at San Jose State University. “If the demand for housing drops, the prices of homes could drop.”

The negative impacts from lost tax deductions, however, would primarily affect those in higher income-tax brackets, Nellen said.

Christopher Thornberg, a founding partner and economist with Beacon Economics, agreed that home prices could drop. Yet he questioned how noticeable the decline might be, considering how dramatically home prices have risen in California, especially in the hyper-expensive Bay Area.

“The drop in home prices as a result of the loss of the property-tax deduction would be 0.5 percent,” Thornberg estimated. “You have to put that in the regular context of a market where home prices are going up very rapidly.”

Home prices have been rising in the Bay Area, depending on the region, at anywhere from 7 percent a year to about 15 percent a year. That means any tax-reform fallout that might tend to reduce home prices could be tough to notice, Thornberg said.

Over the 12 months that ended in August, the median price for all Bay Area home sales, new and resale, rose 11.6 percent, according to Irvine-based CoreLogic, a real estate data and analytics company.

“The tax reform proposed by the Republican leadership will eliminate the incentive for people to buy homes, shrink the middle class, and raise taxes on hundreds of thousands of California homeowners,” McIntosh said. “Any change that would make home buying less attractive will be detrimental to the housing industry and the nation’s economy.”

President Donald Trump and Republican legislative leaders, however, believe the tax reforms and cuts would spur the nation’s economy, help create jobs, slash corporate taxes and make it easier for businesses to undertake investments.

A portrait of housing NIMBY-ism in California

By KATY MURPHY, Bay Area News Group, September 28, 2017

As poll after poll finds that housing costs are driving Californians to pack up and move, a new survey paints a detailed portrait of the anti-growth mindset that has been widely blamed for the short supply of homes underlying the problem.

What the survey found surprised veteran pollster Mark Baldassare: Nearly two-thirds of adults in California — and 70 percent in the Bay Area — favor building in their cities to meet the need.

“Obviously we asked this question because Californians are so often associated with NIMBY-ism, Not in My Backyard, but maybe because we’re at such a crisis point with housing costs that so many people recognize that it’s a problem — and for so many people it is a problem for them,” said Baldassare, president and CEO of the nonpartisan Public Policy Institute of California, the San Francisco-based nonprofit that conducted the poll.

But some Californians are more willing than others to accept that new housing development down the road: Renters were far more likely than homeowners to favor growth — 73 percent versus 55 percent. The poll also found sharp political, economic and racial divides. Republicans, for instance, were more likely to oppose new local development than support it.

While the majority of white Californians — 53 percent — said they were in favor of more housing, they were less likely than any other racial or ethnic group to get behind local building. A similar difference surfaced between Californians over and under 55, with younger residents showing stronger support. And middle-income and affluent residents were less likely to approve of local development than the poor.

The statewide survey asked Californians about everything from single-payer health care to fears about a North Korean strike to immigration issues. But it also delved deeply into the affordable-housing crisis gripping the state and NIMBYism in California, finding that 49 percent of Bay Area residents and 44 percent of Californians statewide had “seriously” considered moving because of their housing costs. The poll also asked people of various regions, ages, household incomes, racial and political backgrounds whether they favor more housing in their neighborhoods to meet the need.

Tellingly, only 2 percent of those surveyed responded that the housing supply in their communities was adequate, and 64 percent of adults and 59 percent of likely voters said they would support building more homes.

Sonja Trauss, a San Francisco resident who last year co-founded the political nonprofit YIMBY (Yes In My Backyard) Action to promote housing density, noted that higher income, white and older residents are more likely to be homeowners — and therefore feel less urgency about new development than renters like her.

“It makes perfect sense,” she said. “If you’re a homeowner, you already have housing security. No one can make you move. More housing doesn’t benefit you. You already start out with `Why do I need this?’

“This is why we have such a skewed process for building housing and we don’t build enough,” she added. “Homeowners are the people who write letters and make phone calls and show up at council meetings. And they’re the ones that run for office.”

Such frustrations spurred lawmakers this year to pass a number of bills to coax or force cities and counties to build their share of housing, in some cases adding teeth to existing law.

But Maureen Gilbert, a retired teacher who has lived in North San Jose for 25 years, said she has the opposite criticism of her city officials: She feels they are too eager to build without properly accommodating the influx of new residents. She said traffic is miserable, even on the side streets near her condominium — and it seems that every patch of open space is being gobbled up by developers.

“I understand that there is a need for housing,” she said, “but it so disrupting the communities in which this high-rise development is happening.”

Report: To cut housing prices 10 percent, California needs 20 percent more units

By Peter Fimrite, SF Chronicle, September 27, 2017

It could take decades and cost billions to build enough housing to make even a modest dent in home prices in the Bay Area and across the state, a team of economists reported Wednesday.

The quarterly UCLA Anderson Forecast casts doubt upon efforts in San Francisco and surrounding communities to lower the cost of living, suggesting that investments far beyond what is contemplated would be needed to stop folks from paying exorbitant prices for wallpapered shoeboxes within a scooter’s distance of San Francisco Bay.

Jerry Nickelsburg, director of the UCLA forecast team, said it would take 20 percent more housing to achieve a 10 percent reduction in prices. Such a reduction throughout California would bring costs down roughly to 2014 levels, he said, citing figures provided by the Legislative Analyst’s Office.

An increase of 20 percent would, by all accounts, be a daunting task. Starting in 1980, it took 30 years for Los Angeles and San Francisco to increase housing stock that much, according to a study by the legislative analyst.

California needs to build 180,000 units of housing a year to keep up with demand, but falls 80,000 units short, according to Gov. Jerry Brown’s housing department. Catching up to the demand, the department said, would cost an additional $26 billion.

“In California, we are building 100,000 new homes for the whole state,” Nickelsburg said. “So, to make a significant dent requires a very large commitment by the state to build lots of housing.”

The issue has beleaguered Bay Area politicians and residents as housing shortages have pushed median prices of homes into seven figures in many areas and added gridlock to the roads as workers are pushed farther from their jobs. Surveys show that wide majorities of Bay Area residents view affordable housing as one of the region’s most critical issues.

A poll by the UC Berkeley Institute of Governmental Studies found that 51 percent of Bay Area voters have considered leaving the area as a result of rising housing costs.

Brown declared in his recent budget summary that about half of all California households are spending more than 30 percent of their income on housing costs, while nearly one-third — about 1.7 million households — are spending more than 50 percent.

A central problem is that building housing that meets affordability standards costs an average of $332,000 per unit, with San Francisco construction costs soaring well above the norm, topping out at $591,000 per unit.

Gov. Brown is now deciding whether to sign 15 bills passed by the state legislature that seek to spur affordable housing development, address homelessness and tackle rising housing costs.

In his report, Nickelsburg looked at what Sacramento is doing to mitigate the crisis and concluded that current legislative action “will not do much to alleviate the high cost of living in California in the near term.”

To fill the gap, he said, cities will have to target construction for certain segments of society, as San Francisco did recently when it committed a plot of land and $44 million in public funds toward building affordable housing for teachers.

“If one takes the position that affordable housing in San Francisco is not going to happen anytime soon — and I think that is accurate — then the political decision has to be made that there are certain individuals, because of their characteristics or employment, who you want to provide access to housing,” Nickelsburg said.

Another way to lower prices would be to expand the area in which people can live and still reasonably commute to work. One way to do that, he said, would be to hurry and build the long-planned bullet train between San Francisco and Los Angeles.

“The way to look at this is that the demand for housing in the Bay Area is not just people living in the Bay Area, but all of the people in California, the United States and internationally who want to live in the Bay Area,” he said. “You need to build a large number of new homes in the Bay Area to drive down the price in any significant way.”

How sky-high housing costs make California the poorest state

By Matt Levin, CALMatters, September 27, 2017

California leads the nation once again in a statistic no state wants to boast about.

When the cost of living is factored in, the Golden State has the highest poverty rate in the country. More than 20 percent of its residents struggle to make ends meet, according to recently released Census figures. That’s nearly 8 million people.

Unfortunately for Californians, this year’s poverty numbers are not an aberration. The Census began releasing state-by-state results for its “supplemental poverty measure” in 2011, in an attempt to improve upon the outdated and heavily criticized official poverty statistics.

In the less sophisticated “official” measure, a family of four in San Francisco or Los Angeles or San Diego faces exactly the same poverty threshold—$24,339 annually—as a family in rural Mississippi. That’s despite the fact that you can rent a three-bedroom, two-bathroom 1,200-square-foot house in Horn Lake, Mississippi, for the same price ($850 a month) as half a living room in the Bay Area.

California has been the poorest state in the nation under the vastly more sophisticated “supplemental” poverty measure since the alternative statistic was created (Mississippi is poorest under the old measure). It’s not even really that close: Florida has the second highest rate, at 18.7 percent.

Part of the reason California tops the list year after year is a byproduct of how the supplemental poverty measure is calculated. It’s a three-year moving average, so year-over-year changes can’t swing a state’s poverty rate one way or another all that much.

The Census uses data dating to 2011 to calculate the cost of living, so even the improved poverty rate could be underestimating how big a drain housing has been on California’s poor. The biggest jumps in housing costs—like those we’ve seen in Sacramento and other mid-size California cities in recent years—typically apply to a relatively small percentage of renters finding new apartments. But ask any California renter whether they’d rather be paying 2011 rents or 2017 rents, and they’ll ask you for the keys to the DeLorean as soon as possible.

What exactly is the role of housing in California’s poverty problem? There are a couple ways to answer that question, none perfectly satisfactory.

One method: What would poverty look like if everyone in California had cheaper rents?

Researchers at the the Public Policy Institute of California, which has developed its own California-specific alternative poverty measure, tried to simulate an answer to that question. Researchers there ran a model of the state’s poverty rate with every Californian bearing a cost of living similar to that in Fresno County, where a family of four making about $25,000 would not be considered poor.

The result?

The overall poverty rate drops dramatically (from about 21 percent to 14 percent), with nearly 2.4 million Californians lifted above the poverty line. The effect is most pronounced among children, who are disproportionately likely to live in higher-cost regions of the state. The child poverty rate drops nearly 8 percentage points—about 717,000 kids—once the cost of living is lowered.

Relocating every poor family in the state to Fresno is, well, not a practical policy consideration. And housing subsidies for low-income families currently make only a small dent in the poverty rate, at least compared to some other safety-net programs.

(Advocates for the poor argue that’s a great reason to dramatically expanding housing subsidies).

New poll shows 65% of Bay Area respondents think housing affordability is a ‘serious problem’ — and half of Californians have mulled a move

By Riley McDermid, SF Business News, Sep 20, 2017

A new poll from UC Berkeley has found that 65 percent of Bay Area respondents rank housing affordability as an “extremely serious” problem facing the region right now, while over half of Californians surveyed told pollsters they’ve considered moving elsewhere.

The study from UC Berkeley’s Institute of Governmental Studies polled 1,200 California registered voters throughout the state from Aug. 27 to Sept. 5 in both English and Spanish. It found that 56 percent of respondents had considered moving from their current location — and one in four of those said they’d mulled moving out of California entirely.

More locally, 65 percent of respondents from the Bay Area said they believe housing affordability is an extremely serious problem, with 63 percent of local respondents saying they support some form of rent control implemented. That number climbed to 68 percent when asked of Los Angeles-located residents.

Perhaps most telling for the state’s future? Most of the respondents who said they’d considered moving either locally or out of state are renters between the ages of 30 and 39, an age group considered prime contenders for buying homes and raising families.

The poll also finds early backing for a multi-billion-dollar statewide bond that has been proposed for the November 2018 general election ballot to help finance the construction of more low-income housing in California,” UC Berkeley said in a statement. “When asked how they would vote if such a bond were to appear on next year’s ballot, 51% say they would favor the bond, while 27 percent would be opposed. Another 22 percent were undecided.”

It’s not your imagination: Bay Area congestion has gotten even worse

By Riley McDermid, SF Business News, Sep 20, 2017

Traffic congestion on the Bay Area’s freeways surged 10 percent last year, a new report from the Metropolitan Transportation Commission (MTC) released this week has found.

The MTC found that about one third of the worst congestion, defined as time spent in traffic going at or under 35 miles per hour, is happening in Alameda County. Overall, weekday traffic congestion has leapt 80 percent in the Bay Area since 2010, the agency said, and almost all of it is related to commuting issues region wide.

“Eight of the top 10 most crowded commutes are routes to or from the Bay Bridge or Silicon Valley,“ MTC Chair and Rohnert Park Mayor Jake Mackenziesaid in a statement. “The good news is that this shows the continuing strength of the South Bay and San Francisco job markets. The bad news is that it shows how hard it is to balance where the region’s job centers are located and where comparatively affordable housing can be found.”

Here are the 10 worst commutes designated by the MTC:

  1. Northbound U.S. 101 and eastbound Interstate 80 from the I-280 interchange in San Francisco to the Bay Bridge’s Yerba Buena Island Tunnel
  2. Westbound I-80 from State Route 4 in Hercules to Fremont Street in San Francisco
  3. Southbound U.S. 101 from Mountain View to San Jose
  4. Northbound I-680 from the South Mission Boulevard/State Route 262 interchange in Fremont to Andrade Road in Sunol
  5. Northbound I-880 from Mowry Avenue in Fremont to Winton Avenue in Hayward
  6. Southbound I-280 from Foothill Expressway in Los Altos to downtown San Jose
  7. Eastbound I-80 from West Grand Avenue in Oakland to Gilman Street in Berkeley
  8. Northbound I-680 from San Ramon to Pleasant Hill
  9. Eastbound State Route 24 from Oakland to Walnut Creek
  10. State Route 4 from Morello Avenue in Martinez to Port Chicago Highway in Concord

 

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

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

August 31, 2017 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

Zillow_July_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. However, for the first time since 2012, we saw a very small decrease in our inventory during the late spring and summer months, April through August, with a decrease of 5.5%. Last year we had a 26.8% increase over the same time period. This probably is in part due to an increase in sales but without the normal replenishment of inventory through added listings. Pendings went down for the third month in a row, by 7.3% for June through August (unusual for this time of year) but obviously due to the tight inventory levels. Inventory levels are 30.6% less than what we experienced last year at this time. Our monthly supply is now 30 days. Last year, our months supply at this time was 45 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), has decreased 4.4% over the last 30 days and is less than what we experienced during this time last year by 12.5%. The pending active ratio decreased to 1.34. This compares to last year for the same time of 1.06.. 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 slightly higher than last year at this time, (1.34). 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 increased slightly with 42% of the homes listed now remaining active for 30 days or longer, while 21% stayed on the market for 60 days or longer. This is about what we saw last year at this time. Normally with such tight inventories, we would think that just the opposite would be true, that less homes would be sitting especially with an increase in sales. Perhaps, buyers are being more selective and homes are also still being snapped up at a quicker pace than last year. The same houses may be sitting but with such a tight inventory they became a greater percentage of what’s left.

 

  • 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.

 

  • 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 remains at $700,000 over the last 4 months, up from last year at $645,000, an 8.5% increase.

Months_Supply

  • 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 45 days.

Actives_&_Pendings

 

  • Our inventory for the East Bay (the 38 cities tracked) is now at 2,102 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 3,029 or (30.6% 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 2,816, also lower than where we were last year at this time of 3,218 or (12.5% lower).

Pending_Active_Ratio

  • Our Pending/Active Ratio is 1.34. Last year at this time it was 1.06. 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 summer and fall.

Sales

  • Sales have increased dramatically from the last (4 month period) now at 9,896 for the 38 cities tracked. This is slightly higher than what we saw last year at this time (9.541).
  • 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 over in fewer days than before. It seems that inventory is still being gobbled up but at a slightly faster pace than being replenished.

 

  • Sales over the last 4 months, on average, are 4.3% over the asking price for this area, slightly greater than what we saw last year’s at this time, 4.0%.

Numbers_Page_1

Numbers_Page_2

Recent News

 

Bay Area housing shortage worsens

July sales mark lowest in years as prices jump

By Kathleen Pender,  San Francisco Chronicle, August 30, 2017

The Bay Area housing shortage showed no signs of abating in July, as the number of homes sold fell by 17.3 percent from June and by 2.6 percent from July of last year, according to a CoreLogic report released Wednesday.

Sales typically fall from June to July as house hunters and real estate agents head off on vacation, but the average drop-off since 1988 has been only 6 percent. The number of homes sold last month was the lowest for a July since 2011. CoreLogic attributed the sharp slowdown to “a tight inventory and waning affordability.”

Near_a_Ceiling

Meanwhile, the median price paid for a home in the nine-county region last month was $758,000, down 1.6 percent from a record $770,500 in June, but up 9.1 percent year over year. The report includes new and existing single-family dwellings and condos.

Vacations also cause prices to dip from June to July; the long-run average is a 0.2 percent decline. For buyers, the slightly larger-than-average price decline last month will provide little solace.

Only 21 percent of households in the Bay Area could afford a median-priced home in the second quarter, according to the California Association of Realtors’ affordability index. That’s down from 25 percent in the first quarter. The index estimates the percentage of households that have the minimum income needed to buy an existing, median-priced single-family home with a 20 percent down payment at prevailing mortgage rates. It does not include condos, which tend to be cheaper than single-family homes.

Vacations also cause prices to dip from June to July; the long-run average is a 0.2 percent decline. For buyers, the slightly larger-than-average price decline last month will provide little solace.

By the association’s reckoning, a Bay Area buyer would need $179,390 in annual income to buy the median-priced home.

Home prices are soaring because the region’s supply of new housing is not keeping up with demand, which is fueled largely by job growth, especially in high-paying technology jobs.

However, even at tech companies, most employees are not making enough to buy a median-priced home, Katie Ferrick, director of community affairs at LinkedIn, said at a housing conference in San Francisco last week sponsored by the Center for California Real Estate and Bay Area Council. At LinkedIn, the “vast majority” of workers are not making $179,000, she said.

The state’s least-affordable county is San Francisco, where only 12 percent of households could afford the median-priced home in the second quarter. But it has been worse. In 2005, when incomes were lower and mortgage rates higher, the index was 8 to 9 percent. Its recent high was 29 percent in early 2012.

Finding an entry-level home in the city is getting nearly impossible, according to a study out this week by the San Francisco Association of Realtors.

Last month, there were only 140 homes and condos in the city listed at less than $758,000, it said. In July 2014, there were 367 homes listed below $758,000. Over those three years, the average household income for a family of four in San Francisco rose 15.7 percent, but the median home and condo price rose 25 percent.

“The most competitive price point is the single-family home under $1.5 million,” said Drew Wilkerson, an agent with Vanguard Properties. Last week, he filmed an episode of the HGTV show “House Hunters” with a couple searching in that price range in San Francisco.

His clients had written three previous offers before buying a three-bedroom, 1.5-bath place in Merced Heights for $1,090,000. The couple, who have two young children, both work full-time, but not in tech. Like many first-time buyers, they got help with the down payment from parents, Wilkerson said.

One of the homes they visited was 415 Amazon Ave. in the Excelsior district. The home has two bedrooms, two baths and 1,155 square feet. It’s listed at $899,000. Traffic at two open houses last weekend “was absolutely constant,” said listing agent James Belisle, also with Vanguard. On Sunday, “there were 10 people waiting to get in at 2 o’clock.”

Most of the housing — both rental and for sale — being built in the Bay Area is either below-market rate or high end. People who earn too much to qualify for the former and too little to afford the latter are often forced into “mega commuting” or “driving till you qualify,” Carol Galante, faculty director at UC Berkeley’s Terner Center for Housing Innovation, said at last week’s conference.

A package of bills aimed at easing the state’s housing shortage could come up for a vote in Sacramento this week. But none is aimed at what Galante calls the “missing middle.”

One would create a new recording fee on certain real estate documents to fund low-income and affordable housing. One would ask voters to approve $4 billion in bonds, mainly for low-income rental housing but also for the state’s veteran home loan program, which could help middle-income vets, Galante said.

The third “basically requires that localities streamline their development-approvals process for communities that aren’t meeting their regional needs formula,” Galante said in an interview. This could open the door for some middle-income housing, but it applies to a very limited range of projects.

Galante said middle-income buyers and renters don’t have the same type of advocacy groups that champion low-income housing.

Of course, any new housing — high or low end, for sale or rent — eventually will relieve pressure on middle-income buyers.

Galante and other speakers at the conference said the state should do more to overcome the barriers to development erected at the local level, such as utility and impact fees.

Because Proposition 13 limits property tax increases, local governments put much of the cost of providing services on developers, which discourages new housing. The state also should consider creating incentives for housing by redistributing sales and property taxes and transportation dollars for communities that are meeting their goals, she said.

Are we headed for another housing collapse?

By Pamela Gwyn Kripke, New York Post, September 2, 2017

When an average $1 million home goes on the market in Santa Clara, Calif., it can reel in 20 offers. Quickly, and without batting an eye.

“As long as high-tech companies keep bringing people here from all over the world and paying them, high prices will continue,” says Brett Burns, a broker with San Jose-based Climb Real Estate. “If Google uprooted and set up shop in Texas, maybe that would make a big splash, but I don’t see a plateau as long as demand keeps getting fed.”

Median home prices across the nation have been increasing with gusto, though perhaps not at levels as staggering as San Jose’s median price tag of $1,183,400. In the second quarter of 2017, prices jumped by 6.2 percent compared with the same period in 2016 to an average cost of $258,300, according to the National Association of Realtors. While trends diverge profoundly from place to place — for all sorts of economic, geographical and lifestyle reasons — a good many of the nation’s metropolitan locales have experienced record appreciation. Coupled with inventory that is 9 percent lower than it was in 2016 and income that has not kept up with prices, the natural post-recession question arises.

One decade after the biggest housing collapse in America’s history led to a global recession, could we be facing another crisis?

“Not happening,” says Burns, adding that the 2007 housing crash “was based on lending practices which have since been cleaned up.”

Many industry experts agree. The subprime mortgages that targeted borrowers with less-than-perfect credit and led to financial turmoil 10 years ago do not play a role in today’s real estate market.

“When you talk about a bubble, you think of people being really exhilarated and excited and prices going way up. We don’t see that now,” says Annie Cion Gruenberger, who has been a New York City broker with Warburg Reality for 28 years. “We have a very positive market, but a targeted market of smart buyers.” So, what do high price tags and low supply mean, if not economic catastrophe?”

The 2007 collapse spooked home builders so much, they didn’t want to build anything but high-end properties. That drove up house prices and made it harder for people to buy starter homes.
Meanwhile, the market was split into two halves: Places such as Las Vegas, where development was overstretched and unsustainable, and which is still struggling to bounce back; and places such as Portland, Ore., and Silicon Valley, where NIMBY regulations limit how much construction can happen, meaning fewer homes available to buy. As a result, there’s a real lack of housing where the jobs are.

While cities such as Seattle, Denver, San Francisco and Austin show double-digit spikes in house prices, cities such as South Bend, Ind., Baton Rouge, La., and Atlantic City report dwindling numbers. On average, 87 percent of the 150 housing markets tracked by NAR experienced rising prices in 2016, up from an average of 75 percent in 2014.

In areas that were hard hit by the housing bubble, current market trends vary, and not all of the data is rosy. In Tampa, Fla., thousands of homes have been lost to foreclosure during the past decade. Today, the city appears to be recovering. It has the fourth-highest population growth in the country, adding 61,000 residents last year, according to the US Census. Tampa’s July unemployment rate was 4.1, reports the Bureau of Labor Statistics, and the median house price is $244,500, which is just about the national average.

In the extreme case, there is Vegas, which suffered the highest foreclosure rate in the country following the housing crash. Though sales and prices have been edging back, thousands of people are still reeling. Those who borrowed against their homes or bought at the height of the market may not see a return on their initial investment. Some still owe more than their homes are worth, 15 to 20 percent by some estimates. Add to the mix a 6.4 unemployment rate and low-selling homes owned by investors, and a full recovery seems a tall order.

Tightest_Markets

In total, about 64 percent of Americans own their own homes, compared with 68 percent a decade ago. “I feel very fortunate to be able to afford our house,” says first-time buyer Greg Johnson, 30, of the property he and his wife, Molly Blank, 28, recently purchased in Seattle, where he works at a nonprofit bioscience research organization and she works at the University of Washington, Seattle. “We both really enjoy where we work and would rather not have to change our employers and work for a big company, or live in a different city, to be able to afford a house.”

One problem prospective buyers face is that there aren’t enough houses out there for everyone who wants one. (Among these home seekers are the so-called “Boomerang Buyers” who are getting back into the market after post-recession trepidation.) This low housing stock drives prices up. In some cities, prices, even at the low end of a market where inventory is most scarce, are unaffordable for first-time buyers. (In the higher end of the market, there are houses to sell.)

Thirty-two percent of home sales today are going to maiden purchasers, compared to 40 percent, historically, says the NAR. Typically, this buyer is 32, earns $72,000 and pays $182,500 for a home. A two-income couple pays $208,500, on average.

In certain areas, potential young homeowners, even with such salaries, have to forego equity and continue to rent. But in places such as San Jose, first-time buyers have enough money to buy even overvalued property in the lower swath.

“The job market is now good for millennials,” says Ken Fears, NAR’s Director of Regional Economics and Housing Finance. “Competing with investors for homes at a low price point is easier. Some millennials have access to credit and to inventory, and mortgage rates are low. It’s improved, but not great.”

Seattle, like San Jose and numerous other Northern California cities, draws this age group to its high-paying high-tech jobs. “They want to live close to downtown where their offices are, and first-time buyers can do that. They can afford $700,000 to $1 million on a starter home,” says Heather Dolin, broker with Seattle- based Windermere Real Estate. But competition for these homes is fierce, with just under a month’s supply of inventory available in the metro area. “Three to six months is considered a balanced market,” says Dolin.

It would seem that the way to stability, then, simply requires more homes for people to buy. But houses are not a typical commodity. New ones can’t be produced from scratch, quickly and inexpensively, on an assembly line. Old ones can’t be made available when the market wants them to be. There are many reasons why inventory is low, most of which can’t be changed.

Most_Expensive_Markets

NAR’s Fears points to a number of trends: First, homeowners are staying in place longer, limiting the number of existing homes for sale. Low unemployment rates are keeping them from leaving town in search of work. High home prices are inspiring them to remodel rather than relocate within their communities, if they want a different kind of house. First-time buyers who can afford it might buy a home that can accommodate two kids instead of one, precluding a move a couple years after their purchase. Grandparents are staying put to live near their kids, rather than fly off to retirement far away.

Second, new construction is still springing back from the 2008 recession. Home builders have had a hard time keeping up with population growth since then, in most cities. “There was a high cost for dealing with regulation, a high lumber tax on Canadian framing lumber, a decline in the labor pool,” says Fears. But the construction industry has shown signs of life. In July, according to US Census Bureau and Department of Housing and Urban Development data, housing completions were 8.2 percent higher than they were one year ago, though 6.2 percent lower than they were in June.

Even when they do build, developers are restricted by urban planning and geography, in certain states more than others. In Portland, Ore., cities are required by state law to form an urban growth boundary around its perimeter, controlling expansion onto farm and forest lands.

“Since about 2009, a lot of areas inside the boundary have been dormant,” says Victor Bulbes, broker with Keller Williams. “Builders have been reluctant to get back in the game.”

The Portland metro area, like other Western cities, is popular, with a record low 4 percent unemployment rate and stable population growth. Since 2010, the city has grown 8.3 percent, according to US Census data.

Lifestyle preference also drives the market.

In Denver, where the number of available houses has plummeted in the last seven years from 12,000 to 2,000 and median prices grow by around 9 percent annually, most people want to live in the urban core, says David Schlichter, Denver-based broker with Keller Williams’ The Schlichter Team.

“There is definitely plenty of land here, at the base of the mountains, next to the foothills. There is some development in the outskirts, but where people want to be, in the city, there is only finite space.”

From 2012 to 2015, with the exception of 2014, Denver experienced double digit price appreciation.
“It will taper off,” says Schlichter. “You can’t have that in perpetuity because at some point, another city becomes more attractive. Now, there are way more people moving here than leaving. Each week, I get a call from someone from the Bay Area who is fed up. Here, houses are half the price. To them, this is paradise.”

Still, lingering fears from the past housing bubble and a present-day crisis in London, where astronomical prices mean young buyers are entirely locked out of the property ladder, are stoking concerns that market growth in the US could one day become unsustainable.

In March, William Poole, a senior fellow at the Cato Institute, wrote a column for cnn.com, pointing to concerns about the country’s two biggest mortgage lenders, Fannie Mae and Freddie Mac. “In Freddie’s 2016 Annual Report, the agency says 36 percent of its obligations are ‘credit enhanced,’ meaning they carry mortgage insurance of one sort or another, which is typically used for weaker mortgages,” Poole wrote. “If these weak subprime mortgages begin to fail in large numbers, so also will the insuring companies.”

Jonathan Miller, a real-estate analyst at Miller Samuel, is unmoved by such arguments. He says the average buyer today has an average credit score “well above 700. They are some of the highest average credit scores in history.” He added that any subprime failures would be offset by the quality of most American borrowers being “unusually high.”

For now, Schlichter in Seattle agrees. “Barring some calamitous event, I don’t feel that our local economy is threatened to the point that a bubble is about to burst,” he says, then added: “But we have a highly unpredictable president, and everything could change with a tweet.”

California’s housing crisis – it’s even worse than you think

By THE DAILY BREEZE & MATT LEVIN, CALMATTERS – Mercury News, August 28, 2017

Half the state’s households struggle to afford the roof over their heads. Homeownership-once a staple of the California dream – is at its lowest rate since World War II. Nearly 70 percent of poor Californians see the majority of their paychecks go immediately to escalating rents.

This month, state lawmakers are debating a long-delayed housing package. Here’s what you need to know about the scope of one of California’s most vexing issues:

Just how hard is it to buy a home in California?

Hard. Really hard. Both compared to how hard it is in other states, and how hard it was for previous generations of Californians to buy homes.

While it’s always been more expensive to be a homeowner in California, the gap between us and the rest of the country has grown into a chasm. The median California home is now priced 2.5 times higher than the median national home. As of 2015, the typical California home costs $437,000, easily beating the likes of Massachusetts or New York (only Hawaii had more expensive houses).

Despite relatively low mortgage rates, exploding housing prices have caused California’s homeownership rate to dip significantly. Just over half of California households own their homes-the third lowest rate in the country, and the lowest rate within the state since World War II.

It’s not just housing prices that are affecting homeownership rates. Studies have found that student debt loads, rising income inequality and changing housing preferences among younger Californians are also at play.

Rents didn’t dip during the recession, and now are soaring

Rental costs across the state are some of the highest in the country. While listed housing prices dipped dramatically in the wake of the Great Recession, rents in California remained relatively stable before soaring in recent years in hot markets.

Across the state, the median rental price for a two-bedroom apartment is about $2,400, the third highest in the country. But statewide figures water down how absurd the situation is getting in urban coastal markets, where the vast majority of Californians live. The median rent for a two-bedroom apartment in San Francisco reached more than $4,000 this year.

“It may cost more to live here, but they pay you more”

That’s somewhat true – median earnings for Californians are higher than the national average, and are significantly higher in certain regions like the Bay Area with tremendously pricey costs of living.

But on average, income over the past two decades has not kept pace with escalating rents

The problem here is not just housing. Income inequality and wage stagnation in California also hinder low and moderate-income households’ ability to pay for a home.

But in certain markets, even extremely high incomes aren’t enough to blunt the cost of housing. In San Jose, where the current median income is nearly $100,000, renters can still expect to pay 40 percent of their monthly income on rent, according to an analysis by the real estate data firm Zillow.

Cities are being gentrified – as is the entire state

It’s difficult to measure things like “gentrification” and “displacement”-when the arrival of higher-income, higher-educated residents in a community results in the expulsion of longtime lower-income residents. But there’s little question change is happening rapidly across many California cities.

Researchers at UC Berkeley found that more than half of low-income households in the Bay Area are at risk of, or already experiencing, gentrification. It’s not just lower-income communities bleeding households-higher-income neighborhoods are losing their lower-income members as well. And in places like the Boyle Heights neighborhood of Los Angeles, gentrification protests have exposed escalating tensions between longtime Latino residents and new, predominantly white arrivals.

Where are these low-income people going? Increasingly, out of state.

From 2000 to 2015, the state lost nearly 800,000 residents with incomes near or below the poverty line. Nearly three-quarters of those who left California since 2007 made less than $50,000 annually. The leading destination for California’s poor? Texas.

Rising rents are causing more homelessness

Housing costs are just one factor in the complex tangle of reasons people become homeless. California actually has fewer people experiencing homeless now than it did a decade ago. But there’s little question rising rents are linked to more Californians living in cars, shelters, and on the streets-especially in the greater L.A. area.

While the vast majority of states saw a dip in their homeless population between 2015 and 2016, California saw an increase of about 2,400 people, according to statistics compiled by the U.S. Department of Housing and Urban Development. California accounts for about 12 percent of the nation’s population, but more than 20 percent of the nation’s homeless live here.

Recent numbers from Los Angeles County, where the number of people experiencing homelessness grew 30 percent over the past two years, have prompted cries for more eviction protections and rent control. Zillow recently estimated that a 5 percent increase in rent would result in an additional 2,000 homeless Los Angelinos. In 2016 rents grew an average of 4 percent there.

Millennials, mom and dad, and avocado toast

Nearly a decade removed from the depths of the Great Recession, and 38 percent of California’s 18 to 34-year-olds still live with their parents, according to U.S. Census data. That’s roughly 3.6 million people-more than the entire population of Chicago.

Again, housing costs are not the only thing keeping junior from moving out. Student debt loads, disappearing labor markets, and delaying marriage are also contributing to the trend. We’ve seen no thorough analysis yet on how California’s abundant avocado toast supply may be keeping millennials confined to their nests.

It’s a statewide problem

The extremes of the state’s housing crisis are concentrated in the Bay Area and greater Los Angeles, but the challenge is truly statewide. A widely-cited reportby the consulting firm McKinsey Global Institute found that in every metropolitan area in the state-from Fresno to Palmdale to Salinas-at least 30 percent of residents could not afford local rents.

The intense pressures of housing costs in coastal urban centers are spilling into inland cities. While San Diego, San Francisco and L.A. top the list of toughest rental markets in the country, cities like Sacramento and Riverside recently have experienced the largest year-over-year increases.

The housing crisis has major repercussions for the economy

Big business is also feeling the pinch of California’s housing crisis.

The McKinsey Global Institute found that housing shortages cost the economy between $143 billion and $233 billion annually, not taking into account second-order costs to health, education and the environment. Much of that is due to households spending too much of their incomes on the rent or mortgage and not enough on consumer goods.

Even the attractive salaries and lavish perks of Silicon Valley struggle to overcome the local housing market, as young tech talent flees to the relatively inexpensive climes of Austin or Portland. Nearly 60 percent of Los Angeles companies in a recent University of Southern California survey said the region’s high cost of living was affecting employee retention.

It won’t be getting better anytime soon

The state estimates that it needs to build 180,000 homes annually just to keep up with projected population growth and keep prices from escalating further out of control.

Unfortunately, for the past 10 years, the state has averaged less than half of that. In no year during that span did California crack the 100,000 barrier.

There’s fierce debate over how long it takes low-income residents to benefit from the construction of new market-rate housing – a renter on the wait list for housing vouchers won’t take much comfort in the luxury condos being built in downtown Oakland or Los Angeles. While California faces an affordable housing gap at nearly all but the highest income levels, the low-income housing shortage is most severe.

According to the nonpartisan Legislative Analyst’s Office, helping just the 1.7 million poorest Californians afford homes would cost $15 to $30 billion a year. The Los Angeles Times estimated that the three marquee bills considered by lawmakers this month would provide less than 25 percent of that total.

This is an excerpt of the project “Californians: Here’s why your housing costs are so high.” For the full report, go to calmatters.org. CALmatters is a nonprofit, nonpartisan media venture explaining California policies and politics.

If GOP scales back the mortgage interest deduction, Californians would be hit hardest

By Jim Puzzanghera, Los Angeles Times, August 27, 2017

C.A.R. Summary:

For decades, the home mortgage interest deduction has been one of the most sacred of cows in the U.S. tax code. Now, Republicans crafting legislation to overhaul the federal tax system and cut rates are considering placing new limits on the home mortgage interest deduction. And thousands of Californians could feel the pain.

Making sense of the story:

  • Homeowners now are allowed to deduct interest paid on as much as $1 million of mortgage debt. Congressional Republicans and White House officials are looking at reducing the limit to $500,000, which would lead to billions of dollars more in federal revenue every year.
  • Homeowners still would be able to deduct interest on the first $500,000 of a mortgage, but would lose the deduction for interest paid on any amount above that level.
  • Most Americans would not be affected by such a change, either because they own their homes outright, their mortgages are less than $500,000, or they don’t have enough deductions to file an itemized tax return.
  • But in states with high earners and pricey real estate, reducing the mortgage interest deduction would force hundreds of thousands of homeowners to pay more taxes.
  • The California Association of REALTORS® estimates if Congress were to move forward with a cap on the mortgage interest deduction for loan amounts up to $500,000, a quarter of California’s home sales would be impacted, and those home buyers would end up paying more in taxes. And for those in Southern California, nearly one-third would be affected.

Why 83 percent of Bay Area renters say they plan to leave

By Riley McDermid, SF Business News, August 21, 2017

A new study has found that 83 percent of Bay Area renters say they plan to leave the region, with two-thirds of those saying the high cost of living here will be the factor that pushes them out.

The study, conducted by housing site Apartment List, polled 24,000 renters in 50 metropolitan areas nationwide.

“Often, young, educated workers flock to these expensive metros to work for a few years after college or graduate school, but don’t plan to settle down permanently,” the survey found. “Additionally, the rising cost of living may be putting additional pressure on renters to move out of coastal metros.”

That cost of living remains a particularly intense factor in the Bay Area, where 63 percent of renters polled said it would be the main thing to spark their move elsewhere. After that, 13 percent cited the area’s jobs as a reason to leave, while only 10 percent said the commute time would be a reason to move out of the Bay Area.

The study underscores a number of similar findings, including a 2016 poll by the Bay Area Council that found that more than a third of Bay Area residents said they are planning to leave the region, as skyrocketing housing costs, terrible commutes and an increasingly high cost of living make the area very difficult to afford.

Overall, the poll painted a gloomy picture for the Bay Area, with 22 percent of those who answered saying high housing costs are their biggest concern, followed by traffic at 17 percent and cost of living at 9 percent.

 

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

 

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

July 31, 2017 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

Zillow_June_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 continues its’ seasonal trend upward. However, for the first time since 2012, we saw a very small increase in our inventory from April through July, only a modest 11%. Last year we had a 36% increase over the same time period. Pendings went down for the second month in a row, by 7% for June & July (unusual for this time of year) but obviously due to the tight inventory levels. Expecting to follow the trends we saw in the previous 3 years, we anticipate a gradual increase on a month by month basis through summer to occur before finally peaking in the fall months. Inventory levels are 24% less than what we experienced last year at this time. Our monthly supply is now 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 36 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 decreased 3.1% over the last 30 days but is less than what we experienced during this time last year by 14.4%. The pending active ratio decreased to 1.19. 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 slightly higher than last year at this time, (1.04). 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 increased slightly with 37% of the homes listed now remaining active for 30 days or longer, while 17% stayed on the market for 60 days or longer. This is about 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.
  • 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 is $700,000 over the last 4 months, up from last year at $650,000, a 7.7% increase.

Months_Supply_7.31.17

  • The month’s supply for the combined 38 city area is 36 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, 48 days.

Actives_&_Pendings

  • Our inventory for the East Bay (the 38 cities tracked) is now at 2,474 homes actively for sale. This is still above the December 2012 low of 1,086 and less than last year at this time of 3,243 or (24% 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 2,944, lower than where we were last year at this time of 3,368 or (13% lower).

Pending_Active_Ratio

 

  • Our Pending/Active Ratio is 1.19. Last year at this time it was 1.04. 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 summer and fall.

Sales

  • Sales have increased dramatically from the last (4 month period) now at 9,243 for the 38 cities tracked. This is close to what we saw last year at this time (9.217).
  • 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.
  • Sales over the last 4 months, on average, are 4.5% over the asking price for this area, about what we saw last year’s at this time, 4.4%.

Glen's_Numbers_Pg_1

Glen's_Numbers_Pg_2

Recent News

 

Developer aims high for 1,000-unit apartment project in West Oakland

By Blanca Torres, SF Business News, July 28, 2017

Developer Panoramic Interests revised its design for a 3-acre site near the West Oakland BART station to include 1,031 units of “family-size” housing.

The firm originally conceived of more than 1,400 units for 500 Kirkman St., but cut out one-bedrooms and left only two studios to make room for larger two- to five-bedroom units.

“This site will appeal to much larger households because of its proximity in every direction to job centers in the Bay Area,” said Patrick Kennedy, head of Panoramic Interests.

The apartments make use of every square foot without any empty corridors, Kennedy said.

The result is that the building can accommodate more units at a more affordable cost. Rents are estimated to start around $2,500 for a two-bedroom and around $3,500 for a four-bedroom.

“The driving force behind almost all the design decisions is how to provide affordable unsubsidized housing,” Kennedy said. “The greatest unmet need in the Bay Area is entry-level urban housing. There’s a lot of luxury housing being built, but not much for the highly touted missing middle.”

The developer also stripped the amenities down to the bare minimum. That means no gyms, pet spas or chef’s kitchens.

Instead, the complex will feature two parks and two alleys that Kennedy said will function as open-air living rooms with space for eating and gathering. The project will also have about 15,000 square feet of retail and 32,000 square feet of commercial space for small businesses.

Also missing from the design: parking. The site will only have seven spaces for car-sharing and deliveries.

“We think price is the best amenity,” Kennedy said. “We want our residents to participate in the civic life in Oakland and just have an affordable place to live so they can stay in Oakland.”

Exclusive: West Coast landlord proposes tower near Oakland’s Jack London Square

By Roland Li, SF Business News, August 4, 2017

One of the country’s largest landlords is expanding in Oakland with plans for a 294-unit residential tower in the Jack London Square district.

Essex Property Trust (NYSE: ESS) and partner Swenson Builders have proposed the 16-story tower at 412 Madison St., three blocks from the Lake Merritt BARTstation.

“Oakland’s proximity to San Francisco is highly desirable,” said Michael Schall, CEO of Essex. “Given the BART linkage … owning in Oakland is a good thing.”

Schall said it was too early to say whether the project will be rental or condos. There’s no finalized budget.

“It’s one of the great urban areas in the Bay Area,” said Ryan of Oakland. “We certainly want to be part of the resurgence there.”

He said that the developers are in contract to buy the 27,844-square-foot property from the metal recycling operator, Lakeside Junk Dealers Inc. The existing recycling plant will be closed and demolished to make way for the project.

C.A.R. Market Data – Historical County Median Price Graph

CAR_Alameda_Median_Price_Graph_June_2017

Alameda is currently showing a median price on single family homes for June 2017 of $900,00. This is in contrast to the previous low in January of 2012 of $395, 850. That is a whopping 125% gain during that time period.

CAR_Contra_Csta_Median_Price_Graph__June_2017

Contra Costa is currently showing a median price on single family homes for June 2017 of $660,000. This is in contrast to the previous low in January of 2015 of $442,440. That is a whopping 49% gain during that time period.

CAR_Affordability_Index

CAR_Affordabity_Index_Bay_Area

All in the Family: Multigenerational Living Makes a Comeback

By Christine Romero| Realtor.com | Aug 2, 2017

It was the cycle that defined American life for decades. People got married, bought a house, and started a family. The kids grew up, left the nest, and didn’t come back. The empty nesters then downsized to a smaller place to enjoy their golden years. Their kids eventually started families of their own, and bought their own homes. And so it went. Instead of the circle of life within a household, it was more like a straight line.

But in recent years, the line has begun curving again. This entrenched societal pattern is becoming upended in favor of a mode of living that harks back to an earlier era.

Fueled by economic and cultural factors, a growing number of people are moving back in with their folks, or opening their homes to their aged parents. It’s a large-scale change making its impact felt in all corners of the real estate market—and American life itself.

Nearly 1 in 5 Americans is now living in a multigenerational household—a household with two or more adult generations, or grandparents living with grandchildren—a level that hasn’t been seen in the U.S. since 1950. About 60.6 million adults, or 19% of the population, were residing with their family in 2014, according to the Pew Research Center’s analysis of census data, up from 57 million in 2012.

Rising home prices, staggering child care expenses, college debt, longer life expectancies, and the growth of ethnic communities in which extended families traditionally live together are all fueling this shift. And as people become accustomed to this style of living, it’s altering the way they buy and build their homes, and how they plan for the future.

The percentage of people residing in multigenerational homes peaked around 1950, when 21% of households had such an arrangement. But in raw numbers it amounted to only 32.2 million people—a far cry from today’s 60 million-plus.

Data suggest that multigenerational living is more prevalent among Asian (28%), Hispanic (25%),  and African-American (25%) families, while U.S. whites have fewer multigenerational homes (15%).

Continued demographic shifts in the U.S. mean this trend isn’t going anywhere but up. In Asia and Latin America, multigenerational living is widely accepted. For example, an estimated 30% of urban Indian families and 60% of rural Indian families live in multigenerational households, according to a report by the International Longevity Centre Global Alliance. In the U.S., immigrants from those areas are more likely to live in multigenerational households.

Mapped: Check out the pipeline of Bay Area development projects planned near BART

By Emily Fancher, SF Business News, August 1, 2017,

Traffic is choking the Bay Area.

So as the region’s workers suffer through punishing commutes on snarled roads, developers are turning to transit-oriented development as a solution.

More than 100 projects throughout the Bay Area are planned on top of, next to or within blocks of a BART station. These projects — residential, office and retail developments on both private and public land — can command a premium. Despite developers’ enthusiasm and increasing demand, many of these projects have been stuck for years with little movement, as detailed in this week’s cover story.

We’ve mapped nearly every project that’s in concept, proposed, approved or has broken ground within a half-mile of an existing or under construction BARTstation.

The map doesn’t include projects within a half-mile of San Francisco’s BARTstations. Those can be found here by scrolling to the maps at the bottom of the page.

To check out all out coverage of transit-oriented development in this week’s Commercial Real Estate Quarterly focus, click here.

Projects_Map

How Oakland housing developers are avoiding escalating fees

By Roland Li, SF Business News, Aug 7, 2017,

A surge of building permits were filed for large Oakland housing projects in May and June, as developers avoided the escalation of impact fees in July.

Multifamily fees in zone one, which includes downtown and parts of north Oakland, rose from $5,500 per unit to $11,500 per unit on July 1. Projects that filed building permits before then pay the lower fee. The fee will increase to $23,000 per multifamily unit in July 2018, where they will remain pending further legislation. Fees in zone two and three, which include West, East and North Oakland, are lower.

Zack Wasserman, a land use attorney at Wendel Rosen, said the permit activity was a sign of strength for Oakland’s housing market, which is in the midst of a historic boom with more than 3,000 units under construction.

“The momentum is continuing,” said Wasserman. However, he says there may be a “slowdown” next year as more housing is delivered, which could dampen rent growth, and fees increase again.

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