August 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:


  • We typically hit the summer “lull” mid June when many buyers take a break and begin their vacation seasons once children are out of school. However, this summer seems to be slower than normal. In fact, as has been reported, June was the slowest for that month in four years in terms of sales. July was more of the same. There will be some concerns about August as well. There’s a 38.6% increase in inventory and a about a 14.3% drop in pendings compared to last year’s August numbers. This creates a pending ratio of .83, the lowest we’ve seen since January of 2011. This is also the 5th straight month this ratio has dropped, but more importantly the second month in a row that it falls under 1.00. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory with less pending) favors sellers. A number below 1 favors buyers. 75% of the cities I track now have a ratio of below 1.00. However, trends are usually determined based on at least a three month period or more. So, the jury may still be out on this one. I suspect that this summer’s sluggish start may be more than typical, in part due to a the normal summer “lull” coupled with a possible market change. We may be moving from a strong seller’s market towards a more normal and balanced market.
  • Many economists are predicting a recession in 2019 or 2020 and although the Real Estate Market will not be the trigger as it was in our last recession, it will be a factor. For many buyer’s there may be some opportunities to be realized, but keep in mind that for whatever modest corrections we may see, much of it may be offset by rising interest rates.
  • 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, we’ve increased our available housing inventory by 236% since the beginning of the year, now 38.6% higher than where we were last year at this time.
  • Our monthly supply is now 42 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 42 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 but see the article below, Is California facing a tax exodus? Thanks to Trump’s tax law, more may start to flee.” 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), decreased again. The pending active ratio decreased to .83, now at the lowest point we’ve seen since January of 2011. This compares to last year at the same time of 1.34. 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 42% of the homes listed now remaining active for 30 days or longer, while 17% have stayed on the market for 60 days or longer. This is similar to what we saw last year at this time with 42% of the homes listed remained active for 30 days or longer, while 21% 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.


  • The month’s supply for the combined 39 city area is 42 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 higher when compared to last year at this time, of 30 days.


  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,914 homes actively for sale. This is higher than last year, at this time, of 2,102 or (38.6% 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 decreased to 2,413, less than what we saw last year at this time of 2,816, or 14.3% lower.


  • Our Pending/Active Ratio is .83, now at the lowest level since January 2011. Last year at this time it was 1.34.
  • Sales over the last 3 months, on average, are 4.9% over the asking price for this area, higher to what we saw last year at this time, 4.3%.


Recent News


Bay Area’s runaway housing market taps the brakes. Will the lull last?

Market shifts prompts celebration from buyers, worry from sellers

By , Bay Area News Groups, September 16, 2018

When Sean Cook put his family’s San Jose home up for sale for more than $3 million this summer, he assumed it would fly off the shelf in a week or two. A similar house in his neighborhood took just three days to sell for $3.3 million in the spring.

But two months after Cook’s four-bedroom home in the desirable Willow Glen neighborhood hit the market, he still hasn’t received a single offer — even after he shaved $200,000 off the price last month. “Given the way the market has been,” he says, “you feel a wee bit disappointed.”

After a record-setting run-up, the Bay Area’s red-hot housing market appears to be cooling. “For sale” signs are lingering longer in homeowners’ front yards, and alerts of price reductions — sometimes for hundreds of thousands of dollars — are cropping up on Zillow. And an array of market data — including sale prices, inventory numbers and tallies of discounted listings — supports the notion that the market has shifted in some counties.

Local agents blame an increase in inventory, buyer fatigue, rising mortgage interest rates and over-eager sellers inflating their prices higher than even the region’s turbo-charged market can support.

Even at a cooler pace, the Bay Area’s market continues to generate a heat that would be described as scalding anywhere else in the country. But the recent slowdown has left sellers scratching their heads, and potential buyers breathing sighs of relief.

“This is a market shift of sorts,” said Oakland-based agent Kerri Naslund-Monday of Keller Williams Realty. “For the Bay Area it won’t be dramatic; it will just be a pause.”

Wannabe buyers, discouraged after getting outbid again and again, are pulling back, said Sean Manning, a San Jose-based real estate agent with Sereno Group.

“They kind of got fed up and threw their hands up in the air and said ‘OK, we’ve got to take a break here,’” Manning said.

An increase in inventory also is allowing buyers to be more selective. More homeowners — unaware that the market has cooled slightly, and excited by the high offers their neighbors scored in previous months — are deciding to list their own properties, Manning said.

In Oakland, for example, the number of single-family homes for sale last month jumped 18 percent over the year before, according to MLS data from the Bay East Association of Realtors. Meanwhile, the number of homes sold decreased 11 percent.


Agents say buyers aren’t willing to pay quite as much as they were several months ago. In Alameda County, 27 percent of homes sold for less than their asking price last month, up from 21 percent in August 2017, according to the Contra Costa Association of Realtors. Sixty-four percent sold for more than their asking price last month, down from 70 percent in August 2017.

In Santa Clara County last month, 25 percent of homes sold for less than their asking price, up from 19 percent in August 2017, according to MLSListings. Meanwhile, 68 percent of Santa Clara County homes sold above their asking price last month, down from 75 percent in August 2017.

That trend didn’t show up in San Francisco or San Mateo counties.

And more sellers — disappointed with a lack of interest in their properties — are offering discounts in an attempt to attract buyers. A recent Zillow report found that sellers in 9.5 percent of San Jose area listings slashed their prices in June, up from 7.2 percent a year ago. Rates of price cuts remained steady in the Oakland and San Francisco areas.

Janet Negrete, 37, has noticed the price cuts while browsing homes for sale online, but she’s not letting herself get too excited.

“It gives you some hope that maybe there will be a point where you can afford something,” she said. “But at the same time, you’re like ‘ahh I don’t think they’ll go down enough.”

Negrete, who rents an apartment in Santa Clara with her husband and two children, started trying to buy a home in 2011. She made at least seven offers — searching from Fremont to Concord to Gilroy, but kept getting outbid. Eventually, she gave up.

For 31-year-old Jasmine Porter, who recently started looking for a home to buy in Richmond, the price cuts are great news. She feels like she can take her time picking out her dream home, rather than rushing into a contract before prices climb any higher.

“It’s exciting,” Porter said, “because I was getting a little discouraged.”

The housing market is still extremely strong — it’s just not quite as strong as it once was, Manning said. He sold a house in San Jose this month for $1.36 million, after receiving three offers. Four months ago he sold the house next door — which was the same size — for $1.5 million, with eight offers.

The season likely is partly to blame. August is traditionally a slow month for real estate transactions, because few families want to buy a house so close to the start of the school year. But the recent slowdown feels like more than the usual summer slump, said Naslund-Monday.  And this summer has been slower than last summer, said San Mateo County-based realtor Debbie Wilhelm.

Median sale prices for single-family homes have been falling since March in Santa Clara County, according to MLSListings. Last year, prices didn’t start dropping until May. Meanwhile, homes spent a median 13 days on the market last month, marking the slowest sale time since January 2017.

Real estate agent Joel Garcia, who recently slashed the price of a house in Oakland — twice — said those price cuts are the first he’s made since 2009.

“It’s been sitting on the market for two months now,” Garcia said of the five-bedroom home, now priced at just under $1 million. “Normally it only takes a week, two weeks, and it’s gone.”

The seller tried to drum up interest by offering to cover the buyer’s closing costs — paying for the realtor and other transaction fees — but to no avail, Garcia said.

Diane Whitney, 55, put her San Jose condo up for sale in early July, hoping to cash out at the peak of the market and use her windfall to buy a cheaper home outright in Oregon or Washington. Two months later, after dropping the price $45,000, Whitney worries she missed the peak.

“I wasn’t prepared for it, I’ll be honest,” Whitney said, of the disappointing reception her home has received. “I’m revisiting why I’m moving, and what my feeling is.”

Four months ago, Whitney’s condo would have sold in days with multiple offers, said Mike Gaines, her real estate agent.

Whitney listed her two-bedroom condo for $735,000, and after seeing no offers, reduced the price to $690,000 at the end of August. But even with the discount, Whitney, who paid $115,000 for the home in a foreclosure sale 22 years ago, will walk away with a hefty profit.

Cook, the owner of the San Jose that’s been on the market for two months, is in a similar position — he and his wife paid $1.9 million in 2012 for the house now listed at $2.995 million.

“We’re still quite a healthy market,” said Jim Harrison, CEO of MLSListings. “It’s just instead of bringing 50 offers to the seller, it might be five now. It’s not quite the bidding war it was before.”

Bay Area real estate gains highest in country since recession

By LOUIS HANSEN, Bay Area News Group, September 13, 2018

If you bought a Bay Area home in 2012, pat yourself on the back.

You almost certainly doubled your investment, just by sleeping in your own bed.

Home values across the country have stepped up since the aftermath of the Great Recession a decade ago, but nowhere have values vaulted higher than in the Bay Area.

New research released Thursday by real estate website Trulia shows homes in the San Jose, Oakland and San Francisco metro areas have more than doubled in value since 2012.

The cities ranked three of the top four in the country for appreciation: San Jose (122 percent) led the way, followed by Las Vegas (114 percent), Oakland (108 percent) and San Francisco (101 percent). By comparison, the S&P 500 index during that stretch rose 87 percent.

Nationally, home values have grown 45 percent since 2012, when they hit bottom across the country.

“Things are considerably different in the Bay Area,” said Trulia housing economist Felipe Chacon, author of the report.

The rocket fuel for rising Bay Area home values has been a mixture of booming job growth — more than 14 percent — and few building permits issued for new homes. Depending on the city, one new building permit was issued for every two to four new people moving into the area during the period. That’s far below the national average of roughly one permit for every 1.6 new residents.

The median sale price for a Bay Area home in August was $890,000 for the nine-county region, according to real estate data company CoreLogic. Sale prices have been on a record tear, climbing every month, year-over-over, since April 2012.

Homes in Santa Clara, San Mateo and San Francisco counties had median sale prices over $1.3 million in August.

Chacon believes the Bay Area’s population growth would have been even more rapid if not for the high cost of living driven by a dearth of new housing. He added that building permits had recently started to rise in the Bay Area, but still remain far below the national average.

The populations in San Jose, San Francisco and Oakland grew by between 5 and 6 percent, well behind fast-growing Austin, Texas (15 percent), Houston (11.5 percent), Dallas (10.9 percent) and Seattle (9.1 percent).

But while the growth in home values has been a boon for owners, the business community and some state lawmakers believe the shortage has reached a crisis. They are pushing for more permissive zoning and faster approvals for affordable housing.

he Silicon Valley Leadership Group has set housing as a top priority, and is supporting a campaign to pass a $4 billion bond aimed at creating affordable housing for low-income residents and veterans.

State lawmakers expect to introduce more bills in the coming session promoting higher density around transit hubs and more construction of affordable housing.

Is California facing a tax exodus? Thanks to Trump’s tax law, more may start to flee

By Mark Calvey, San Francisco Business Times, Aug 30, 2018, 

Naveen Jain, a 37-year-old entrepreneur and lifelong Bay Area resident, last month put his San Francisco home up for sale and moved to Nashville.

The reason was simple: taxes.

“Tennessee has no state income tax and generally has lower property taxes,” said Jain, who is co-founder of cryptocurrency startup Tari. “I was born in San Francisco and have lived in the Bay Area for over 30 years. It is deeply unfortunate that we cannot seem to figure out our chronic housing challenge and overall cost-of-living challenge.”

To be sure, from CEOs to entrepreneurs to middle-class families, a lot of people have grumbled for years about California’s heavy tax burden and high cost of living. Some have almost certainly left as a result.

What’s different now is this year’s federal tax legislation that caps the amount of state income tax and property taxes that can be deducted from the federal bill. It could hit this state’s high earners and owners of expensive properties particularly hard — and there are fears it will kick a California tax exodus into overdrive.

A tax exodus centered on the economically successful would have profound implications for the Bay Area, given the region’s dependence on its entrepreneurs, investors and other business leaders to fuel the region’s growth and job creation.

“The pace of departures in our social circle is accelerating,” Jain said. “The goal for any early stage startup is to not die before you are able to find product-market fit and scale to a point where you are sustainable or able to raise money.

“This is becoming harder and harder to do in Silicon Valley,” Jain said. “I believe the early-stage-startup ecosystem is at risk in Silicon Valley.”

‘Final Straw’

Even one of the most iconic figures of Bay Area business, Charles Schwab founder and Chairman Chuck Schwab, sees more people leaving California as a result of the tax changes, and not just at the upper end of the income scale.

“A lot of companies will be moving their people out of here, unless something happens,” Schwab told the Business Times after his company’s annual meeting in May. “They can move to Nevada or other places with a lower cost of living. That’s really important if you’re raising a family.”

Others are eager to see whether solid numbers reflect that a more upscale out-migration is actually underway. California saw an estimated net loss of almost 138,195 residents to other states in 2017, but that figure was more than offset by foreign immigration into California, according to the Census Bureau’s data on state-to-state migration. That’s a long-running trend involving California out-migration.

At this point, most evidence on who is now leaving California is largely anecdotal. Bay Area wealth managers, accountants and others say they expect the pace of relocations to rise as the full impact of the new tax law becomes apparent next spring.

“Some clients have moved out of California and others are considering a move to a lower-tax or no-tax state,” said Christine Leong, market manager for J.P. Morgan Private Bank in Northern California. While the limit on tax deductions “is certainly a factor, it’s arguably more of a final straw for some taxpayers as opposed to the sole reason for their move.”

The early adopters

But others see signs that a tax exodus is looming — or already underway.

Jeff Pera, regional managing partner for Northern California at the accounting firm Marcum, estimates that 20 percent of his California clients are considering moving out of state.

“I often have to dampen their appetite for moving,” said Pera. Marcum bought another firm in Texas last month, following clients who’d already moved there from California.

A U.S. Trust survey of business owners found that half the respondents want to sell their companies in the next three years. One way these business owners can save on taxes is to move out of California before selling.

Marcum’s Pera said some clients, whom he dubs “early adoptors,” are selling their Bay Area homes now and renting, believing that home prices will tumble when the full impact of lower federal subsidies for homeownership, especially in pricey urban areas, becomes more apparent next year.

Their concerns aren’t baseless.

“It’s clear that the way we view our home will change over the next few years. Buying a bigger house won’t reduce your taxes,” said Diane Kennedy, an accountant with US TaxAid Services in Sparks, Nev., who has several Bay Area clients. An estimated 80 percent of Americans will no longer itemize deductions, meaning that deductions for mortgage interest, property taxes and charitable deductions will be irrelevant for them, Kennedy writes in her new book, “Taxmageddon 2018: How to Brace for the Trump Tax Plan.”

Even the California Association of Realtors is warning today’s Bay Area home buyers that they may see a drag on prices appreciating over the next four to five years as the market absorbs the tax changes.

Moody’s Analytics predicts that Bay Area counties will see less appreciation than if the tax overhaul had not been approved, ranging from 3.6 percent less price appreciation in San Mateo and Alameda counties to 5.8 percent less in Contra Costa County. Those percentages translate into some rather hefty sums, given the Bay Area’s high home prices.

In addition, many Bay Area residents will hit the $10,000 cap on the deduction for state and local taxes with their property-tax bill alone. Presumably, these residents are also paying taxes on their substantial incomes needed to pay those property taxes.

Almost 25 percent of residential taxpayers in San Francisco and San Mateo counties have property-tax bills exceeding $10,000, according to a report by Attom Data Solutions. It’s almost 35 percent in Marin County and nearly 29 percent in Santa Clara.

The full impact on these taxpayers will not be evident until next year as they file their taxes.

The full impact on these taxpayers will not be evident until next year as they file their taxes.

“There’s going to be a rude awakening next spring,” predicted Vanessa Bergmark, owner and president of Red Oak Realty in Oakland.

Goodbye, California. Hello, Arizona

Those selling homes in the Bay Area might be among the growing number of Californians that are shopping for houses in Nevada and Arizona.

“We’re seeing more Californians looking to buy in Incline Village, Nev.,” said Peg Augustus, an agent with Incline Village Real Estate Experts. “Another change that we’re seeing this year is that more people from California are shopping for a primary residence rather than a second home.”

In Arizona, Rod Cullum, CEO of Scottsdale-based Cullum Homes, said he’s also seeing more Californians this year, with more of them actually buying. He saw a similar lift in California buyers following the state’s 2012 tax hike on big earners.

Adding to a prospective tax exodus is the fact that high earners are often the decision makers on where their job, or their company, will be located.

Marcum’s Pera said his clients are often owners of private companies that have long been courted by other cities and states, often willing to pay generous incentives for the jobs these business owners will bring with them.

But it’s senior executives, including chief executives, who may feel the most pain, given how much of their income is taxed as ordinary income, with far fewer deductions than before the tax overhaul.

Some see these executives placing pressure on their employers to move them, and sometimes the entire company, out of state. Such talk is likely to escalate during next year’s tax season.

Accountants express little hope that California will respond by easing the tax burden on its wealthiest residents.

Steve Mayer, founder and managing partner of the San Francisco accounting firm SD Mayer & Associates, relayed a conversation he had with a California legislator on what steps the state might take to lighten the tax burden on wealthy Californians.

“He didn’t seem to understand the question. I asked three times, without getting an answer,” Mayer said.

Other accountants are even more blunt.

“California lawmakers are going to drive this bus until the wheels fly off and it goes over a cliff,” said EisnerAmper’s Bleeg.

Bay Area home prices dip below record as summer slowdown takes hold

Kathleen Pender, SF Chronicle, Aug 31, 2018

The median Bay Area home price fell from June to July but was still up double digits over last year, according to a CoreLogic report issued Friday.

The median price paid for a new or existing Bay Area home or condo in July was $850,000, down 2.9 percent from June but up 11.4 percent from July 2017, the property data company said. All nine counties showed annual price increases, ranging from 4.2 percent in Sonoma to 17.1 percent in Santa Clara, which has been this year’s appreciation leader. The median price in Santa Clara County has outpaced the Bay Area average every month since October, often by a wide margin.


It’s not unusual for home sales and prices to dip from June to July, as buyers and agents get tied up with graduations and then vacations. But some agents, at least in the pricier parts of the Bay Area, say this summer seemed slower than last year and wonder whether rising interest rates, less-favorable tax laws and the affordability crunch are finally taking their toll. “We are all having discussions about whether this is a typical summer slowdown or is this an indicator of something to come,” said Mary Ann Montano, a Coldwell Banker Realtor in San Francisco.

The number of homes sold in July fell to 7,547, down 10.2 percent from June and 0.3 percent from 2017. These are home sales that closed in July. Many went into escrow in June or even May. Some agents say the market cooled considerably in July and August.

“July was really slow compared to last year,” said Denise Liew, an agent with Sotheby’s International Realty who was showing a newly constructed house in San Mateo, one of two built into a steep hillside.

CoreLogic analyst Andrew LePage said it’s not unusual to see prices slip back after hitting a peak. The Bay Area median set a record of $875,000 in May and June. “Last year, the median hit a new high of $775,000 in June and then remained below that level until rising to a 2017 peak of $784,000 in November,” he said in a press release. “The 11.4 percent year-over-year increase in last month’s median marked the lowest annual growth in 11 months and was a further sign of eroding affordability.”

Although spring is the busiest season for real estate, new listings typically rise after Labor Day as sellers try to take advantage of a short burst of activity that lasts until mid-November, when things slow down for the holidays. “Come October we will have a better indicator” of where the market is going, Montano said.

Zillow Report: A Buyer’s Market in 2020?

By RISMedia Staff, August 29, 2018

In a recent survey conducted by Zillow with Pulsenomics LLC, over 100 real estate economists and industry experts shared their predictions about the U.S. housing market in relation to buyer or seller leanings.

While annual home-value appreciation was faster in 2018 than 2017, inventory shortages over the past 42 consecutive months have created a market environment that favors sellers. However, recent data suggests buyers and sellers may soon be switching roles. Price reductions are becoming more commonplace with home value growth slowing down in over half of the largest U.S. metros.

A large group of survey respondents (43 percent) believe buyers will control the market in 2020. The shift may be sluggish, however, as appreciation even in slowed markets is above historic averages, signaling that the sellers’ market may endure for a short while longer. In fact, U.S. home values are expected to increase 5.9 percent in 2018.

“For the past several years, home sellers held all the cards at the negotiating table, fielding multiple offers while buyers faced stiff competition and a fast-moving market,” said Zillow Senior Economist Aaron Terrazas in a statement. “Conditions are starting to show signs of easing up, but the effects of years of limited construction still linger. Inventory is still falling on an annual basis, and home values are growing well above their historic pace. Although these trends are starting to lose their edge, it is far too soon to call it a buyer’s market.”

“While ongoing supply constraints are reinforcing the floor on home prices right now, the experts’ forecasts still imply the joists will start to crack sometime next year, and result in sub-three percent annual home-value appreciation in 2020 and beyond,” said Pulsenomics® Founder Terry Loebs, who noted that another indicator from the latest survey is consistent with a shifting market. “For the first time, a majority of the experts said that there is downside risk to their long-term outlook for home values nationally––and they outnumber experts who assigned upside risk to their forecasts by more than a three-to-one ratio.”

June Case-Shiller Results and July Forecast: Shifting Winds

By Aaron Terrazas, Zillow, Aug. 28, 2018

It’s hard not to notice the winds beginning to shift in the housing market. But those changes have yet to reach the point where they’ve fully transitioned from home buyer headwinds into tailwinds, and likely won’t until at least the end of the decade.

Still, the signs of change are here: The U.S. National Case-Shiller Home Price Index climbed 6.2 percent in June from a year earlier, slightly slower than the 6.4 percent annual growth recorded in May. June prices rose 0.3 percent from May – slightly below expectations.

And annual home price appreciation was slower in June than in May in 14 of the 20 cities in Case-Shiller’s 20-City Composite Index. Las Vegas, Seattle and San Francisco continued to report the highest year-over-year gains at 13 percent, 12.8 percent and 10.7 percent, respectively.

But the slowdown, and the changes it brings, will be gradual. Inventory, when it begins to rise, will be coming up from incredibly low levels. Home value growth remains well above historic norms, even as it slows in some markets – and that rapid growth still makes saving an adequate down payment a challenge for many buyers. And while sellers are seemingly more open to cutting their initial asking price than in recent months, that trend is more prominent at the upper end of the market where there is more selection.

Buyers at the lower end of the market, including many first-time buyers and buyers of limited means, will still face intense competition and a fast-moving, difficult environment. The truth is, we aren’t witnessing a rapid shift in market power, but rather a slowly unfolding evolution in which things are changing from extremely competitive for buyers to only somewhat competitive.

Sellers, for now and for the foreseeable future, are still in control in this market.

Housing Predictions Ahead: REALTORS® Chief Economist Provides Market Insights

By RISMedia Staff, August 29, 2018

Nearly a decade after the Great Recession, Lawrence Yun, chief economist for the National Association of REALTORS® (NAR), says concerns that the housing market has peaked and is headed toward another slowdown are purely speculative, regardless of recent sales declines in some regions.

What’s in store for the future? Markets should slow down; however, this is due in part to insufficient supply and swiftly rising home prices instead of weak buyer demand. Yun predicts existing-home sales will drop 1 percent to 5.46 million in 2018 (down from 5.51 million in 2017). Home price growth, however, should remain strong, increasing an estimated 5 percent nationwide. And with an anticipated hike in inventory supply come 2019, home sales should stay afloat—existing home sales are predicted to rise 2 percent with home prices estimated to increase by 3.5 percent, according to Yun.

“Over the past 10 years, prudent policy reforms and consumer protections have strengthened lending standards and eliminated loose credit, as evidenced by the higher than normal credit scores of those who are able to obtain a mortgage and near record-low defaults and foreclosures, which contributed to the last recession. Today, even as mortgage rates begin to increase and home sales decline in some markets, the most significant challenges facing the housing market stem from insufficient inventory and accompanying unsustainable home price increases,” said Yun in a statement.

Low inventory levels, which have fallen for three consecutive years, along with bidding wars, are prevalent across the country. And while homebuilding has jumped 7.2 percent year-to-date to July, Yun says new construction is sorely needed to continue filling the gap. Carefully considered policy decisions should help alleviate the shortage.

“The answer is to encourage builders to increase supply, and there is a good probability for solid home sales growth once the supply issue is addressed,” Yun said. “Additional inventory will also help contain rapid home price growth and open up the market to perspective homebuyers who are consequently—and increasingly—being priced out. In the end, slower price growth is healthier price growth.”

“Rising material costs and labor shortages do not help builders to be excited about business,” added Yun. “But the lumber tariff is a pure, unforced policy error that raises costs and limits job creations and more home building.”

The Oakland We Knew is Not Going to Remain’: Massive Building Boom Tears Through City

By, TNJ Staff, August 16, 2018

Sleek new condos rise up amid the graffiti-covered warehouses, artist’s studios and homeless encampments of West Oakland. Construction cranes dot the downtown skyline, and scaffolding-shrouded towers march down Broadway into Temescal.

An extraordinary residential building boom is shaking up Oakland, part of a transformation sweeping the Bay Area as market forces and political initiative combine to address the region’s desperate housing crisis.

“The city is being radically reconfigured — the whole Bay Area is,” said urban geography expert and UC Berkeley professor emeritus Richard Walker. “The Oakland we knew is not going to remain.”

The change is particularly stark in Oakland, where developers and investors began clamoring to build after decades of dismissing the city as dangerous and crime-ridden. Oakland has permitted a staggering 9,710 new homes since 2016, more than twice as many as during the prior nine years. But the construction of those new dwellings — creating hip, trendy neighborhoods for newcomers while pricing out old-timers — is exacerbating the divide between the city’s haves and have-nots.

Other cities are struggling with the same tensions.

In East Palo Alto, long thought of as the blue-collar cousin to ritzy Palo Alto, the median sale price of a home has risen 80 percent since 2015, according to Zillow. In parts of downtown San Jose, low-income residents fear the proposed Google campus of 20,000 employees will price them out. And in San Francisco, an influx of tech companies and their workers has helped push rents into the stratosphere, driving some residents to Oakland in search of cheaper housing — which in turn inflates rents in the East Bay city.

Adam Kleinberg, who moved from San Francisco eight years ago in search of cheaper housing, has enjoyed watching his new town change around him.

“The moment I moved here, the nightlife downtown started to take off,” said 47-year-old Kleinberg, who runs an advertising agency in San Francisco and owns a home in the Oakland Hills. “No one goes to the city anymore, because there’s so much going on in Oakland. It’s definitely becoming hipper and cooler.”

The building boom is altering Oakland’s skyline, ushering in a new wave of high-rise apartment buildings. Towers in the works include a 33-story building at Broadway and 17th Street, a 40-story building at 1314 Franklin St., and a 23-story building on Webster Street. Construction crews broke ground in May on the 24-story Skylyne at Temescal tower next to the MacArthur BART station.

Those developers have a big incentive to build — Oakland rents have spiked nearly 25 percent since 2015, according to RentCafe, and home prices have jumped almost 40 percent, according to Zillow. But as projects are completed, supply should go up and prices could come down.

“Over the next three years we’re finally going to see more balance between tenants and landlords, because there’s going to be so much more supply coming online,” said Michael Ghielmetti, president of Signature Development Group and Oakland director of city planning and research association SPUR.

Cities throughout the Bay Area are struggling to keep up with the demand to live here, and to make up for years of failing to build enough housing, but the amount of construction they are willing or able to approve varies widely. Oakland permitted 4,284 new homes in 2017, up from 2,121 in 2016. San Jose permitted 2,712 new homes in the 2016-2017 fiscal year, down from a five-year high of 4,724 in the 2013-2014 fiscal year. San Francisco permitted 6,731 new homes last year, a 20-year high.

But permitting is just the first step — projects a city approves may not get built right away, or ever, if the developer runs out of funds or faces other delays. To keep pace with the demand in Oakland, developers need to build an average of 2,125 homes a year for the next eight years, according to a 2017 report by the city’s Housing Cabinet. As of July 31, there were 884 homes completed so far this year.

In 2016, Oakland Mayor Libby Schaaf promised to build 17,000 new housing units in the next eight years — 28 percent would be subsidized, low-income housing — and preserve another 17,000 existing homes as low-income rentals. So far, Oakland is on track to meet its overall goal, but is falling short in its affordable housing mandate. Of the 6,982 new units under construction as of July 31, less than 6 percent were reserved for low-income residents.

Oakland officials say they have to work harder to find money for affordable housing. In 2011, the state axed redevelopment agencies, depriving Oakland of about $37 million a year in affordable housing funds, said Housing and Community Development Director Michele Byrd.

The city has found new sources of funding — including a real estate fee approved by state legislators last year, affordable housing bonds and an affordable housing impact fee that took effect in Oakland in 2016 — but has yet to come up with a “cash cow” to replace redevelopment agency funds, Byrd said. The city also has expanded its focus to include buying existing buildings and keeping them affordable, working with organizations like Oakland Community Land Trust, in addition to building new units.

Oakland needs affordable housing now perhaps more than ever, as high prices push more families out of their homes and onto the streets. Last year there were 2,761 homeless people counted in Oakland, up more than 25 percent from 2015, according to EveryOne Home’s point-in-time survey.

“I go from a block where there are tents lining the sidewalk, to a block where there are Teslas and Mercedes lining the sidewalk,” said Osha Neumann, a staff attorney with the East Bay Community Law Center. “It’s almost like we’re dividing into two species. And it’s increasingly difficult for people to move from the streets, from the bottom, anywhere up away from there.”

While some people worry their neighborhoods are changing too quickly, others fret the city’s building boom will slow down before it can make a dent in the housing shortage. As construction costs soar, some builders already are hitting the brakes. Three years ago, it cost about $350,000 per unit to build a residential project in downtown Oakland, said real estate developer John Protopappas, president and CEO of Madison Park Financial Corporation. Now it’s closer to $585,000. And impact fees — the amount developers of market-rate units pay toward Oakland’s affordable housing budget — are rising. Developers of multi-family buildings paid $7,000 per downtown unit in 2016, which rose to $13,000 last year and jumped to $24,000 in July.

Meanwhile, though rents are still high, the speed at which they are increasing has slowed. That discrepancy can leave developers struggling to make their buildings profitable.

“We are putting projects on hold,” Protopappas said. “We’re not taking on any additional debt. We’re being very cautious.”

Other developers say they’re doing the same, which could jeopardize the mayor’s goal of 17,000 new units.

“It’s probably going to be closer to 6-7,000 units,” Protopappas said.

That creates more unknowns for Oakland residents who find themselves at the mercy of the housing market, the construction industry, the city’s Planning and Building Department, and other factors outside their control.

Editorial: Prop. 10 would exacerbate California’s housing crisis

East Bay Times Editorial, August 25, 2018

Rents in California, especially the Bay Area, are soaring. Decent housing is unaffordable for far too many.

But the solution is to build more housing, not restrict rents. That’s why voters should reject Proposition 10 on the Nov. 6 ballot.

The initiative would lift state limitations on local rent control laws, allowing cities to impose restrictions on more housing. That’s the last thing we need. It would only make the situation worse.

Rent control is a feel-good idea. A quick fix to a complicated problem. But it is  very effective at protecting poor or vulnerable tenants. And, more significantly, rent control discourages new rental home construction, the very thing we need to ease the state’s housing crisis.

Most economists agree that rent control reduces the quality and quantity of housing. “The analysis of rent control is among the best-understood issues in all of economics and — among economists, anyway — one of the least controversial,” liberal economist and New York Times columnist Paul Krugman wrote in 2000. It’s just as true today.

It’s politically easy to demonize developers. But that won’t make them build more housing – and they certainly won’t if we cap future rents and, in turn, devalue the units they’re considering building.

The solution is not to impose price controls, which is exactly what rent control is. The solution is to encourage development so that supply can meet demand.

“Rent is high in California because the state does not have enough housing for everyone who wants to live here,” the state’s Legislative Analyst’s Office wrote when reviewing Prop. 10. “People who want to live here must compete for housing, which increases rents.”

The problem is only getting worse: From 2007 to 2017, only 24.7 housing permits were filed for every 100 new residents in California — much lower than the U.S. average of 43.1 permits, according to Next 10, a non-partisan group that studies the state’s future. To increase supply, we must streamline the application process and control permitting costs to incentivize new construction. Instead, Proposition 10 would chase away developers.

To understand how the measure would work, first consider the current limits on rent control in California. Currently, at least 17 cities, including 10 in the Bay Area, have some form of rent control.

But California has a two-tier system. Under the state’s Costa-Hawkins Rental Housing Act, local governments can only apply rent controls to multi-unit apartment buildings constructed before Feb. 1, 1995. And they must allow landlords of those older buildings to reset rents to market rates for new tenants.

Prop. 10 would do away with those restrictions. Cities would have free rein to expand price controls to all types of units, including those built before 1995, and to limit how much landlords could increase rents for new tenants.

discourage new construction,” the state Legislative Analyst’s Office wrote in 2016, when the ballot initiative was being contemplated.

In other words, it would not fix the state’s housing crisis; it would exacerbate it.

Taxes on a home can be confusing: Here’s how to keep them straight

Kathleen Pender , SF Chronicle, Sep. 1, 2018

In response to my Aug. 19 column on the California law that lets parents transfer homes to their children without a property tax reassessment, several readers asked questions similar to this one from Hal Louchheim.

“If parents transfer their home to a child, she can keep the current assessed value and annual property tax. That transfer can be while the parents are living or in their will. If the transfer is an inheritance and the child keeps the low property tax base, does the child still get the stepped-up basis and avoid a substantial capital gain when the home is eventually sold? In other words, if parents give their home as an inheritance, can the child achieve BOTH the continued low property tax, and the stepped-up basis?”

The answer is yes, as long as the property is transferred upon the parent’s death, said David Hellman, a San Rafael estate-planning attorney. If it’s transferred while the parent is alive, the child gets the property tax break but loses the step-up in basis, missing out on an enormous tax break for highly appreciated homes.

It’s worth elaborating on this because people often mix up the terms “property tax base” and “cost basis,” and property taxes with income taxes. They are entirely separate systems.

It helps to remember that property taxes are governed by state law. Cost basis, capital gains and the step-up in basis are part of the income tax system. Knowing how they each work could save homeowners a pile of money.

In California, your property tax base — also called your assessment — is generally what you paid for your house, plus an inflation factor not to exceed 2 percent a year, plus the value of major improvements. Normally when property changes hands in California, it’s reassessed at current market value. This can cause a sharp jump in property taxes, because home prices in California have generally gone up way more than 2 percent a year over long periods.

Proposition 58, the state law I wrote about previously, lets parents and children transfer a primary residence — and a generous amount of other property — between each other without triggering a property-tax reassessment. The transfer can be by gift, sale or When you die with appreciated assets including a home, their cost basis is raised or “stepped up” to their market value on your date of death. Your children or other heirs inherit the assets with their new, stepped-up cost basis, which wipes out the tax on the appreciation that occurred during your lifetime. If your heirs sold these assets immediately, they would owe little or no capital gains tax.

Unlike the property tax break, this capital gains tax break is bestowed only on inherited property. If you give your home to a child while you are still alive, your child takes over your cost basis and loses the chance for it to be stepped up.

Some parents put their child on title as a joint owner while they are still alive, mainly to keep the home out of probate when they die. This “is generally a bad idea,” said Terri Lyders, an estate planning specialist with Fidelity Investments in Burlingame.

If you put your child on title as a 50 percent owner, when you die, your half of the home will be stepped up, but your child’s half will not.

This tax break is most commonly claimed when a parent dies and leaves a home to a child or children, but parents can also transfer the home while they’re still alive without triggering a reassessment. The child can later transfer the inherited home, and its low property tax base, to the next generation.

Under the income tax system, the cost basis in your home — assuming you’ve never rented it out — is generally what you paid for it, plus the cost of major improvements. (Don’t confuse it with the property tax base.)

If you sell your home for more than its cost basis, the profit is taxed as a capital gain. If you have used the home as your primary residence for at least two of the past five years ending on the sale date, the first $250,000 in capital gains, or $500,000 for married couples, is tax free.

If you hold onto your home until death, your heirs could get an even bigger capital gains tax break.

Also, “if the child has creditor problems or hits someone and gets sued, her half of the house is now subject to her creditors,” Lyders said.

If you give your child all or part of the home while alive, you will have to file a gift-tax return for the value that exceeds the annual gift tax exclusion. (This exclusion lets any person give $15,000 to an unlimited number of other people each year without gift-tax ramifications). You probably won’t owe gift tax on the home’s value, but it will be subtracted from your combined lifetime gift and estate tax exemption, which is $11.18 million for any person who dies in 2018, or $22.36 million for a couple. (People receiving gifts usually are not subject to gift tax.)

Lyders notes that if a married couple owns a home together as community property and one spouse dies, the entire house is stepped up to the date of death value. When the surviving spouse dies, it’s stepped up again.

Several readers asked how many times you can use the $250,000/$500,000 capital gains tax exclusion on a primary residence. There is no limit, as long as you have lived in the home at least two of the past five years. Hypothetically, you could use it as often as every two years.

There is an exception if you bought the house as part of a 1031 exchange, a federal law that lets you defer the tax due on the sale of business or investment property if you reinvest the proceeds in another property. “If the house is acquired through a 1031 exchange and you convert rental property to a primary residence, then you still have to live in it two of the last five years, but also own it for the last five years,” Hellman said.

If you give a home to your kids, your kids can use this exclusion if they meet the primary-residence requirement.


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

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