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.

Glen's Numbers 5.31.18 Pg 2

Glen's Numbers 5.31.18 Pg 1

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

 

Leave a Reply

Your email address will not be published. Required fields are marked *