January 31, 2018 – Real Estate Market Numbers
By Glen Bell (510) 333-4460
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 began its’ normal trend of adding on new inventory. We increased our available housing inventory by 49%. 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 6.8%. We’re now sitting on an 18 day supply of homes. This makes for a very competitive market for many buyers that are starting to come back into the market.
- Our monthly supply is now 18 days. Last year, our months’ supply at this time was 21 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 18 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 new low level that I have not seen before. The pending active ratio decreased to 1.38. This compares to last year at the same time of 1.41. 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 decreased to 30% 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 lower than what we saw last year at this time with 43% of the homes listed remained active for 30 days or longer, while 30% 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.
- The month’s supply for the combined 38 city area is 18 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 21 days.
- Our inventory for the East Bay (the 39 cities tracked) is now at 1,294 homes actively for sale. This is below last year at this time of 1,383 or (6.8% 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 1,781, lower than where we were last year at this time of 1,945 or (9.2% lower) and at the lowest level that I’ve seen since keeping track, (2005).
- Our Pending/Active Ratio is 1.38. Last year at this time it was 1.41.
- Sales over the last 4 months, on average, are 3.6% over the asking price for this area, greater than what we saw last year at this time, 2.1%.
By Roland Li, SF Business Times, February 12, 2018
The Bay Area’s median home prices shot up 12 percent in January from the prior year amid a worsening housing shortage.
Single-family home inventory hit a three-year low, pushing the Bay Area’s median price for single-family homes and condos to $880,000, compared to around $774,000 in January 2016. The price was down slightly from November 2017’s all-time peak of of $910,350. San Francisco’s median price for homes and condos was $1.2 million.
Pacific Union, Terradatum Inc., the Multiple Listings Service and California Association of Realtors provided the data, which follows a report by Zillow(NASDAQ: Z) that said Bay Area inventory dropped 27 percent in the past year. The shortage is “approaching crisis levels in some of the nation’s hottest housing markets,” Zillow said.
The dearth of inventory, particularly for homes under $1 million, is pushing prices upwards, said Selma Hepp, chief economist for Pacific Union, the state’s largest non-franchise brokerage. In January, the number of home listings under $1 million plummeted 22 percent from the prior year to 4,871 listings. There were 3,061 homes over $1 million listed for sale. Homes between $2 million and $3 million shot up 42 percent.
“It was just such a drop, unlike anything we’ve seen before,” said Hepp. She also cited the new Republican tax cuts, which reduced the mortgage interest deduction from $1 million to $750,000. That makes it less attractive for people to buy new homes, which also translates to fewer people moving and selling their existing homes.
Hepp expects inventory to remain low as development continues to lag behind demand. She said promoting infill development, streamlining approvals and transit-oriented housing would help reduce prices. But the Bay Area will likely remain expensive as job growth and demand continues to be strong, she said.
Families on top make more than 10 times the salaries of those on the bottom
By MARISA KENDALL, Mercury News, February 16, 2018
The San Francisco and San Jose metro areas have two of the highest levels of income inequality in the country, according to a recent study — a dubious distinction that helps explain why it’s so hard for many to afford housing here.
In the San Francisco area, which includes San Francisco, San Mateo, Alameda, Contra Costa and Marin Counties, families on the high end of the income spectrum earn 11 times more than families on the low end — making it the third most unequal region in the U.S., according to a Brookings Institution analysis of data from 2016, released earlier this month.
The gaping gully between the area’s rich and poor shows that wealth generated from the booming high-tech industry isn’t trickling down to the rest of the population, Berube said. The discrepancy feeds into the region’s housing woes, partially explaining why home prices have shot up in recent years and landed out of reach for many local residents.
“When we’ve looked at these data in the past, there’s definitely a strong relationship between the income inequality in a city and the lack of affordable housing,” Berube said. “So as a city grows more unequal, its housing market grows more unequal too. It definitely makes it more difficult for people who are stuck on that low end to afford housing or to remain in that city.”
By MARISA KENDALL, Mercury News, February 15, 2018
Bay Area home prices are out of reach for many middle-income families, but surely if you’re a highly prized engineer at Apple or Google you can afford a house here, right?
Not so fast.
These days even high-paid tech workers — the very people often blamed for driving up home prices — have to stretch to buy a house, according to a new study by Los Angeles-based real estate startup Open Listings. Techies do come closer to affording a pricey Silicon Valley home than teachers, service industry workers and scores of other workers. But home ownership may not be a given for them anymore, a shift that signals how the region’s explosive housing costs are shutting out even the prosperous.
“These highly paid, highly coveted people that are being recruited from all over the country or the world … they’re unable to afford the housing that’s available nearby,” said Open Listings CEO Judd Schoenholtz.
Software engineers at Bay Area tech companies including Apple, Google and Facebook would have to fork over more than 28 percent of their monthly salaries — a move frowned upon by financial experts — to pay for a home within a 20-minute commuting distance from their office, according to the study. The average software engineer at Apple, for example, makes $188,000 a year, and would have to spend 33 percent of his or her salary to afford a median-priced home in Cupertino, the study said. For software engineers at Reddit and Google, the mortgage and tax payments would total 32 percent of their income. Twitter engineers would have to fork over 30 percent, and Facebook engineers 29 percent.
Techies are unlikely to get much sympathy from other Bay Area workers struggling to make ends meet. Teachers, for example, who make a median salary of $72,340 a year, could afford just 0.4 percent of homes in San Francisco, according to an April study by Trulia.
But people whose mortgage payments exceed the recommended 28 percent of their income may have a hard time getting a home loan, Schoenholtz said. If they do get a loan, it may not be for the full amount of the price, which would force them to pony up more for a down payment. And for residents already paying high rent prices, saving up a standard 20 percent down payment is hard enough — not to mention a payment of 30 or 40 percent.
That means the dream of home ownership likely will elude some high-tech workers, which could hurt local companies’ abilities to recruit and retain employees, Schoenholtz said.
“If that’s not going to be attainable, I wonder what the long-term viability of these companies (is),” he said.
It’s an issue already on the radar of many Bay Area tech companies. Last month, more than 100 tech executives and venture capitalists signed a letter supporting a bill by Sen. Scott Wiener, D-San Francisco, that would make it easier to build dense housing near transit stations.“The lack of homebuilding in California imperils our ability to hire employees and grow our companies,” the leaders wrote. “We recognize that the housing shortage leads to displacement, crushing rent burdens, long commutes and environmental harm, and we want to be part of the solution.”
In Apple’s hometown of Cupertino, for example, Zillow estimates the median home value is $2.2 million — up more than 20 percent from a year ago.
Several companies are taking the matter into their own hands. Facebook is planning to build 1,500 homes on its expanded Willow Campus in Menlo Park, and Google is backing the development of nearly 10,000 homes as part of its new office development at North Bayshore, in Mountain View.
There are a few things locals aren’t willing to sacrifice to get more housing
By MARISA KENDALL, Mercury News, February 11, 2018
Fed up with soaring prices that are increasingly putting home ownership, or even a decent rental, out of reach, Bay Area residents overwhelmingly say they want more housing built, according to a new poll. But it better not make their commutes worse.
Residents said they support everything from new single family homes to housing for the homeless in their communities, tossing aside NIMBY concerns that sometimes throw a wrench in building plans. But there were limits to their enthusiasm. Respondents balked at building anything that would cut into the Bay Area’s cherished open spaces or funnel more people onto crowded local freeways and public transit, making their treks to work longer.
The responses, in a five-county poll conducted for the Silicon Valley Leadership Group and this news organization, left some housing advocates hopeful that public sentiment is shifting in favor of building more housing. But the survey also illustrates the hurdles the Bay Area faces in solving its housing shortage.
“I think as more people personally experience the crisis of the lack of affordable housing, we’re seeing public support gradually move upwards, including support for bringing new affordable housing into people’s own neighborhoods — which is a new trend in the 27 years I’ve been working in the field,” said Matt Schwartz, president and CEO of housing nonprofit California Housing Partnerships. “This feels like something different and new that is happening now.”
Tyler Young is one of many Bay Area residents feeling the impact of the region’s housing crunch first-hand. The 31-year-old lawyer moved his family to Dublin from San Francisco in 2015 when his landlord decided to raise the monthly rent by $700, asking $5,000 for a two-bedroom apartment near AT&T Park. Now Young, his pregnant wife and 2-year-old son rent a condo in Dublin for $3,000 a month.
“I do think it’s a serious issue,” Young said of the housing shortage. That’s why he supports building housing of all types, including in his own neighborhood.
“I welcome as much development as can happen,” he said, “but I understand that there are people who don’t feel that way.”
Of the 900 registered voters surveyed, 64 percent said they favor building significant quantities of new housing, and 53 percent said they would support new construction even if it changed the character of their neighborhood. But fewer than half — 46 percent — were willing to sacrifice open space for new development, and just 30 percent said they would support new housing that brought more people onto local roads and transit systems, making their commutes worse.
When speaking generally, 89 percent of people supported both building more low-income housing and more housing for the homeless. A slightly smaller percentage would welcome those developments into the communities where they live and shop and where their kids go to school. Seventy-eight percent of respondents supported building low-income housing in their own neighborhood, and 69 percent supported building homeless housing in their neighborhood.
Those numbers seem high to Laura Foote Clark, executive director of the pro-development organization YIMBY Action, but she said that support won’t necessarily translate into more building permits. Saying you support housing in a survey is one thing, she said. It’s quite another to show up at city meetings or email local elected officials to voice that opinion.
“There’s two fundamental problems,” Clark said. “Those people are not necessarily aware of how to engage with government in order to express that point of view. And then the second big problem is housing takes place in a particular place. So everyone might be supportive of housing in general, and then when you propose a specific project, that general support sometimes wanes.”
an Francisco residents were more likely to back building housing of all types, including low-income and homeless housing, than their neighbors in surrounding counties. Respondents younger than 40 were more likely to favor development than their older counterparts. And 81 percent of apartment-dwellers supported building significant quantities of new housing in the Bay Area, compared to 59 percent of people living in single-family homes.
That’s not surprising, said Sydney Bennet, senior research associate at real estate website Apartment List. People renting apartments typically hope to buy a home one day, so they support new development that could lower home prices, she said. But homeowners, who worry about the value of their house falling or their neighborhood changing, have more to lose when new buildings go up.
“People who are homeowners and have lived in the same neighborhood longer may be more attached to that character,” Bennet said.
The opinions of renters are becoming increasingly important as home ownership falls out of reach for more people. The region’s proportion of renters grew by about 5 percent over the past decade, while the percentage of homeowners dropped in kind, according to a report by New York University’s Furman Center for Real Estate and Urban Policy.
Some Bay Area residents can’t afford even to rent, like 60-year-old Guadalupe Negrete, who has lived in San Jose her whole life. Since her husband’s death four years ago, Negrete, a former bank teller, has survived on widows benefits. After losing the home she owned and then bouncing from rental to rental, she’s spent the past 10 months living in her station wagon with her terrier, Bella.
“For a woman 60 years old, that’s not the greatest thing,” Negrete said. “I didn’t stay in San Jose 60 years to end up this way. This is ridiculous.”
About the poll: The poll of 900 registered voters in Alameda, Contra Costa, San Mateo, Santa Clara and San Francisco counties was conducted by J. Moore Methods Inc. Public Opinion Research for Silicon Valley Leadership Group and the Bay Area News Group. Silicon Valley Leadership Group provided funding for the poll with significant financial support from Facebook. The poll, conducted from Dec. 27 to Jan. 9, has a margin of error of +/- 3.3 percent.
By MARISA KENDALL, Mercury News, February 11, 2018
As more people are unable, or unwilling, to buy a home, many major destinations in the Bay Area and beyond are turning into cities of renters.
A quarter of the 100 largest U.S. cities saw renting — not owning a home — become the new norm over the past 10 years, according to a recent analysis of U.S. Census data by apartment search website RentCafe. It’s a stark change particularly evident in the Bay Area, where sky-high home prices make renting the only option for many. But experts say the shift also is driven by cultural changes that have made renting attractive to some millennials, who are rejecting being tied down to a mortgage, at least for now.
“There’s no nice way to put this. The idea of owning a home lost much of the charm that once made it a structural element of the American Dream,” RentCafe writer Balazs Szekely wrote in a blog post publishing the data.
s of 2016, Oakland ranked among the top 10 cities with the highest share of renters — 59 percent. San Francisco is another renter-majority city, with 56 percent of residents paying a landlord for housing.
Fremont saw a 31 percent increase in its share of renters between 2006 and 2016 — the sixth largest jump among cities studied. Less than a third of Fremont’s residents rented in 2006. By 2016, that jumped to 42 percent.
In San Jose, on the other hand, 58 percent of residents lived in a home they own.
The surge in renting is something Sydney Bennet, senior research associate at Apartment List, has noticed as well. It started after the housing bubble burst in 2008, and many people who had their homes foreclosed didn’t immediately go out and buy again, she said. Then a new generation graduated college in the recession without the savings to buy a house.
“And the shortage of affordable homes makes it so even once they do have some savings, it makes it hard to find a home, especially in the Bay Area,” Bennet added.
In San Jose, for example, it would take a single home buyer nearly 31 years to save for a down payment on a home, according to a new Zillow study that analyzed housing prices and Census income data. In San Francisco, it would take almost 28 years.
At the same time, cultural norms have shifted, making renting a more attractive option to millennials. There’s no longer a stigma around long-term renting, and renting gives residents flexibility that home ownership doesn’t, Bennet said. That’s not to say young people don’t ever want to buy a home.
“We’re finding that 80 percent of millennials do still want that,” Bennet said, “but I think there’s less pressure to do it quickly. I think you see more people still renting when they have kids, which may have been less common 10 or 15 years ago.”
But in the past year, home ownership appears to be on the rise again. The rate of U.S. residents who live in homes they own ticked up from 62.9 percent in the second quarter of 2016, to 63.9 percent in the third quarter of 2017 — the highest rate since 2014, according to Apartment List.
“Undoubtedly, the recession had a great impact on homeownership, and it’s hard not to agree if you look at the data from the last decade or so,” Szekely wrote. “However, it looks like it takes more to discourage Americans from buying a house than that.”
Cities of renters
More people are renting homes instead of buying in cities across the Bay Area.
Oakland — 59 percent of residents rented in 2016, up 12 percent from 10 years ago.
San Jose — 42 percent of residents rented, up 16 percent
Fremont — 42 percent of residents rented, up 31 percent.
Fresno — 52 percent of residents rented, up 8 percent
San Francisco — 56 percent of residents rented, up 4 percent.
Sacramento — 50 percent of residents rented, up 11 percent.
By GEORGE AVALOS, Bay Area News Group, February 8, 2018
Silicon Valley’s robust economy has added jobs for the last eight years in a row, but the region’s rising wages have failed to keep pace with skyrocketing home prices, a new economic study revealed Wednesday.
A population surge is underway in Silicon Valley, with a net gain of one person every 46 minutes — 32 people a day — but the huge housing and living costs are making life difficult for many, according to the Silicon Valley Index, released by Joint Venture Silicon Valley’s Institute for Regional Studies.
In 2017, Silicon Valley’s per capita personal income was $93,707, far higher than the California median of $56,374. But the 4.4 percent increase in the region’s incomes last year failed to keep pace with home prices, which soared 7.4 percent during 2017, the report stated.
Home prices have continued to rise even though multiple economic reports document that employment growth is slowing in Silicon Valley.
“Our spectacular success has somehow created a harsh environment,” Russell Hancock, president of Joint Venture Silicon Valley. “Housing is out of reach for all but a very few. Those who can’t afford it are living challenging lives, or commuting in from far-flung places. Most people don’t find transit options compelling, so we spend ghastly amounts of time in traffic.”
The Valley’s median sale prices for homes are 2.1 times higher than they are statewide; apartment and home rental rates are 1.3 times higher; and child-care costs are 1.2 times higher, the report stated.
“Fewer than 34 percent of first-time homebuyers can afford a median-priced home in Silicon Valley, compared to 49 percent statewide,” the report stated.
ombined, Santa Clara and San Mateo counties added about 47,000 jobs in 2017. But that employment boom occurred as those two regions together launched 12,000 residential units, the report stated.
“We are falling further behind,” Hancock said in an interview. “Wages are not keeping pace with the growth in home prices. We are not building enough homes to keep pace with the jobs we are creating.”
Still, the pace of housing construction is picking up. The 12,000 residential units initiated in 2017 doubled the 6,000 that were launched in 2016, Hancock said.
“We are at the beginning of addressing the housing challenge,” said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. “A year ago, you couldn’t have said we were making this much progress. When you see all of the plans for more housing in downtown San Jose and north Mountain View and Santa Clara, I’m optimistic we are starting to get serious about the housing problems.”
As for commutes, Bay Area voters this year will determine the fate of a variety of transportation funding measures, which could help address the area’s traffic woes.
Meanwhile, the cost of doing business in the Bay Area hasn’t chased away the vast majority of tech companies in the region, including the industry’s leaders such as Google, Apple and Facebook, the report noted.
“Our well-established, iconic companies are choosing to stay, adding armies of talented people, investing in impressive facilities and remaking our landscape,” Hancock stated. “Unemployment is at a historic low. Median household income continues to grow, and it is outpacing inflation. Without question, Silicon Valley is still a hotbed.”
The Institute for Regional Studies defines Silicon Valley as Santa Clara County; San Mateo County; the Alameda County cities of Fremont, Newark and Union City; and the Santa Cruz County city of Scotts Valley.
“Silicon Valley continues to grow jobs at a rate anybody would envy,” Hancock wrote in an introduction to the report. “The tech sector is fueling our growth, and venture capitalists continue to invest in local innovators who in turn are generating patents at a dizzying pace.”
By Kevin Truong, SF Business Times, January 22, 2018
In possibly a bit of unwelcome news for prospective homebuyers, San Francisco comes up on top in a LendingTree ranking of the most competitive housing markets in the country.
The online lending exchange identified the financial elements that make buying a home difficult and used its database of 1.5 million mortgage loan requests to rank cities based on three factors: the share of buyers shopping for a mortgage before choosing a home, average down payment percentage and percentage of buyers who have prime credit. According to LendingTree’s report, these financial factors make it easier to compete with cash buyers and make more competitive offers.
San Francisco came in at number one with 60 percent of buyers shopping for a mortgage before identifying a house and 63 percent of buyers who have prime credit.
San Jose came in close behind its neighbor to the north with 59 percent of homebuyers shopping for a mortgage before finding a house and 64 percent of buyers who have prime credit. The average down payment for San Francisco buyers was 18 percent, with only San Jose’s 19 percent number higher.
“These markets so competitive because of the strength of the tech driven economies. The growth in high paying jobs and highly valued companies in the Bay Area has increased demand for housing substantially,” Tendayi Kapfidze, LendingTree’s chief economist, told the Business Times.
“The Bay Area has among the most restrictive building environments for new homes in the country, thus the increase in supply has lagged far behind the rising demand,” Kapfidze said. “As a result the market finds equilibrium by boosting prices and pushing some potential buyers out of the market. The remaining buyers are forced to stand out by increasing their attractiveness to sellers who have the discretion of who to sell to.”
Rounding out the top five most competitive housing markets in the country are Denver, San Diego and Ventura. The full ranking can be found here.
When it comes to actually purchasing a home in one of these markets, Kapfidze offered the advice of increasing your competitive standing on paper by having financing in place, building strong credit and putting down a larger down payment. Additionally, prospective homebuyers can limit their costs by shopping around for mortgages.