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

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

Zillow_August_2017

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

 

  • Following a dramatic 60% drop at the end of last year, inventory began its usual seasonal trend upward. Typically, we see a steady increase on a month by month basis to occur before finally peaking in September. This year has taken a more uneven course. We did see a modest increase in the available housing inventory since last month. However, we are still well below where we were last year at this time by 24%. That’s concerning considering last year was a very “tight” market. Pendings were steady with little change from August. Our monthly supply is now 33 days. Last year, our months’ supply at this time was 45 days. As a reminder of what we mean by “months’ supply;” If no more homes come onto the market, and homes continue to sell at the same pace as they have been over the last 12 months, then the “months supply,” (in this case 30 days), tells us that’s how many days it would take to sell the remaining number of homes we currently have available for sale in any given market.
  • The number of pendings, (homes that are in contract), remained relatively even in comparison to last month, but is still below where we were last year by 12.3%. The pending active ratio decreased to 1.21. This compares to last year at the same time of 1.05. This supply and demand ratio signals whether we’re in a sellers’ or buyers’ market. Typically, a number well above 1, (more inventory with less pending) favors sellers. A number below 1 favors buyers. This is slightly higher than last year at this time, (1.05).
  • The percentage of homes “sitting” has decreased slightly with 37% of the homes listed now remaining active for 30 days or longer, while 19% stayed on the market for 60 days or longer. This is lower than what we saw last year at this time.
  • The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market with only .02% of the active listings and .02% of sales over the past 4 months.
  • Median Price recovery on a city by city is beginning to see a slight increase. 17 out of the 33 East Bay cities tracked are now at or above their median price “peak” levels with another 12 cities within 20%. That means that only 4 cities are still well below their peaks, falling into the 20% to 30% range. The Median Price for the East Bay remains at $700,000 over the last 4 months, up from last year at $645,000, an 8.5% increase.

Months_Supply

  • The month’s supply for the combined 38 city area is 33 days. Historically, a 2 to 3 months supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern that we’ve seen over the past four years. However, we are well below supplies levels compared to last year at this time, of 45 days. However, this year the inventory level on the graph is shallower.

Actives_&_Pendings

  • Our inventory for the East Bay (the 38 cities tracked) is now at 2,340 homes actively for sale. This is still above the December 2012 low of 1,086 and well less than last year at this time of 3,079 or (24% lower). We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales remained relatively flat at 2,832, but lower than where we were last year at this time of 3,228 or (12.3% lower).

Pending_to_active_ratio

  • Our Pending/Active Ratio is 1.21. Last year at this time it was 1.05. This will be moving towards a more balanced or “normal.” (a ratio of 1 with an equal number of listings and pending sales) as we continue into summer and fall.

Sales

  • Sales have decreased slightly from the last (4 month period) now at 9,607 for the 38 cities tracked. This is slightly higher than what we saw last year at this time (99,412).
  • The one factor that has changed this year is that we had a very late start to the spring season due to the heavy amount of rain received compared to very little in the preceding 3 years. The rains more than likely delayed many sellers from putting their homes up for sale early. They simply got a late start because they couldn’t work on the exterior of their homes during this time. Also, on average, homes are closing in fewer days than before. It seems that inventory is still being gobbled up but at a slightly faster pace than is being replenished.
  • Sales over the last 4 months, on average, are 4.1% over the asking price for this area, greater than what we saw last year’s at this time, 3.3%.

 

 

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Recent News

 

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

By Emily Landes, SFGate, October 6, 2017

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

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

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

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

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

By John Wildermuth, SF Chronicle, September 29, 2017 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Realty group fears Trump tax reform would hurt California homebuyers

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A portrait of housing NIMBY-ism in California

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

By Peter Fimrite, SF Chronicle, September 27, 2017

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How sky-high housing costs make California the poorest state

By Matt Levin, CALMatters, September 27, 2017

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

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

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

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

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

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

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

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

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

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

The result?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here are the 10 worst commutes designated by the MTC:

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

 

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

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