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Glen’s SF East Bay Real Estate Market Update

September 30, 2016

 

“Next year, California’s housing market will be driven by tight housing supplies and the lowest housing affordability in six years,” said C.A.R. President Pat “Ziggy” Zicarelli. “The market will experience regional differences, with more affordable areas, such as the Inland Empire and Central Valley, outperforming the urban coastal centers, where high home prices and a limited availability of homes on the market will hamper sales. As a result, the Southern California and Central Valley regions will see moderate sales increases, while the San Francisco Bay Area will experience a decline as home buyers migrate to peripheral cities with more affordable options.”

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

  • Inventory remained roughly the same in the last 30 days but is still about 2.5 times more than what it was at the beginning of the year. Inventory is slightly greater than where we were last year at this time. Our monthly supply remains at 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 45 days), tells us that’s how many days it would take to sell the remaining number of homes we currently have available for sale in any given market.
  • The number of pendings, (homes that are in contract), has remained about the same. That’s slightly less than what we experienced during this time last year. The pending active ratio remains at 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 at a slightly lower level than we saw last year at this time, (1.14), and this may be an indication of moving towards a more “normal” or balanced market combined with the typical summer slowdown.
  • The percentage of homes “sitting” also remain about the same as last month. 45% of the homes listed now remain active for 30 days or longer, while 23% stayed on the market for 60 days or longer.
  • The “distressed” market, (foreclosures and short sales) are no longer much of a factor representing only 3.2% of the active listings and 2.6% of sales over the past 4 months.
  • Median Price recovery on a city by city is beginning to see a slight increase. This is typical as we approach Early Fall. 18 out of the 33 East Bay cities tracked are now at or above their median price “peak” levels with another 11 cities within 20%. That means that only 4 cities are still well below their peaks, falling into the 20% to 30% range.

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  • The month’s supply for the combined 38 city area remains at 45 days. Historically, a 2 to 3 months supply is considered normal in the San Francisco East Bay Area.

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  • Our inventory for the East Bay (the 38 cities tracked) slightly increased to 3,079 homes actively for sale. This is still well above the December 2012 low of 1,086 and slightly greater than last year at this time of 2,903. 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 about the same now at 3,228, slightly lower than where we were last year at this time of 3,281.

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  • Our Pending/Active Ratio is 1.05. Last year at this time it was 1.13. This is moving towards a more balanced or “normal.” (a ratio of 1 with an equal number of listings and pending sales).

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  • Sales are about the same as we saw in the last (4 month period) now at 9,545 for the 38 cities tracked. This is down 5.6% from what we saw last year at this time.
  • Sales over the last 4 months, on average, are 3.3% over the asking price for this area.

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Recent News

Silicon Valley, East Bay gain wealthy households while middle-income dwindles

By George Avalos, Bay Area News Group, October 3, 2016

In today’s Bay Area, what’s the dividing line between those who can make it and those who can’t? A new study suggests it’s a salary level that elsewhere might seem staggeringly high: $150,000 a year.

Silicon Valley and the East Bay are gaining upper-crust households, while middle- and low-income households are dwindling — indicating the region’s income gap is growing wider.

“The Bay Area is becoming like Manhattan West,” said Russell Hancock, chief executive officer of Joint Venture Silicon Valley, which on Monday released the report from its Institute for Regional Studies. “We are seeing many more wealthy people, highly compensated people, living in the Bay Area, and a disappearance of the middle-class segment.”

In the East Bay, the number of households with $150,000 or more in median income increased by 37,700, while those households with incomes below that threshold dwindled by 16,500. Joint Venture Silicon Valley derived the figures from a recently released nationwide set of statistics by the U.S. Census Bureau.

The economic divide in the Bay Area could imperil the region’s economic health, experts warned.

“Our community is not sustainable if we don’t have a healthy middle class and a healthy economy for middle- and low-income people,” said Emmett Carson, founding chief executive of Silicon Valley Community Foundation.

The shifts appear to be a combination of middle- and low-income residents leaving the region — and being displaced by upper-income households in some cases — and middle-income earners jumping into the upper-income bracket.

Rachel Massaro, vice president and senior research associate with Joint Venture Silicon Valley, agrees that middle-income families have enjoyed upward mobility. But she maintained that an even bigger factor is that people in middle-income groups became priced out of the expensive Bay Area and migrated to counties that border the region or to outlying areas such as Solano County or eastern Contra Costa County.

“There are people moving farther away from the Bay Area because they can’t afford to live here,” Massaro said. “People may be keeping their jobs and commuting in. That makes traffic a bigger problem.”

The shrinking middle class has comprised an array of ordinary jobs that Hancock calls community infrastructure employment.

“Teachers, police, chefs, retail clerks, firefighters, health care workers, nurses, office workers, those are all being displaced,” Hancock said.

Bay Area’s 10 most congested freeways (No. 3 is a surprise)

By GARY RICHARDS, Bay Area News Group, October 4, 2016

For just the second time in the two decades that Bay Area freeway congestion levels have been tracked, the morning commute from the East Bay across the Bay Bridge is not the worst. It’s in second place.

The new honor — if that’s the right phrase — goes to the afternoon slog out of San Francisco from Highway 101 to the Treasure Island portion of the Bay Bridge. That 6-mile stretch can take an hour to cover, according to the Metropolitan Transportation Commission annual report, issued Monday.

And the newest hot spot is a stunner: The morning trek from Interstate 680 in East San Jose to Interstate 280 in Cupertino was just another slow drive in 2014, ranking 20th. Last

History shows that in general anything that grows very fast and grows to be very high priced can’t sustain that indefinitely so at some point there will be a time when most people won’t be able to afford prices in expensive markets. Homeowners and potential homeowners would then look to move elsewhere. We haven’t hit that point yet. We are still seeing strong price growth in the expensive markets, but overall in the last few years, that rate has slowed down and we are starting to see other expensive markets over the last year it soared to No. 3.

Overall, the report, which was based on 2015 commute information, showed how widespread that nasty creep-and-crawl traffic has become.

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TOP 10 CONGESTED LOCATIONS 

  1. San Francisco/Bay Bridge, PM eastbound
    (from 101/80 to Treasure Island)
  1. East Bay/Bay Bridge/S.F., all day westbound
    (from Highway 4 in Contra Costa County to 101 in San Francisco)
  1. Interstates 680/280, AM southbound/northbound, Santa Clara County
    (from South Jackson Avenue in San Jose to Foothill Expressway)
  1. Highway 101, PM southbound, Santa Clara County
    (from North Fair Oaks Avenue to Oakland Road)
  1. Interstate 80, PM eastbound, Alameda County
    (from West Grand Avenue to Gilman Street)
  1. Interstate 880, AM southbound, Alameda/Santa Clara counties
    (from Highway 238 to Highway 237)
  1. Interstate 680, PM northbound, Alameda County
    (from Mission Boulevard to Calaveras Road)
  1. Highway 101, AM northbound, Santa Clara County
    (from Silver Creek Valley Road to North Fair Oaks Avenue)
  1. Interstate 880, PM northbound, Alameda County
    (from Mowry Avenue to A Street)
  1. Highway 101, PM northbound, San Mateo County
    (from Woodside Road to Hillsdale Avenue)

Source: Metropolitan Transportation Commission

The Real Estate Investors of Today and Tomorrow

By Kendall Baer, DSNews, October 5, 2016 

Recent findings  from a national survey of U.S. investors by Better Homes and Gardens Real Estate recently showed that confidence and intrigue in real estate investment ranks high, with 89 percent of U.S. investors showing interest in incorporating real estate into their investment strategies.

“To see consumer confidence of this magnitude is very promising,” said Sherry Chris, President and CEO, Better Homes and Gardens Real Estate “Through this research, we’ve discovered that a majority of investors, including Millennials, Gen Xers and Baby Boomers, believe real estate is the best way to diversify an investment portfolio.”

Nearly all of U.S. investors surveyed who have invested in real estate believe their decision has helped them achieve some form of financial success with 52 percent anticipating greater overall financial stability, 51 percent expecting greater long-term net worth, and 45 percent expecting greater monthly cash flow. Additionally, 94 percent of those who have invested in real estate are interested in making a future investment of this kind.

Broken down even further, 84 percent who have invested in real estate indicated that they will make another real estate investment and 2 in 5 plan to do so in less than a year.

For Millennial investors, 96 responded saying they are interested in making a real estate investment, showing greater interest than their Boomer counterparts at 83 percent. Likewise, Millennials are more drawn to personal real estate investments at 79 percent compared to those drawn to commercial investments at 49 percent.

“The aspiration to invest in real estate is there, yet it is up to real estate professionals to explain the fundamentals and help to serve as strategic sources throughout the process,” said Chris. “Our hope is that this research empowers our industry to provide the resources and develop the necessary information to accelerate this opportunity for both current and future real estate investors.”

While the single-family investment and rental market continues to redefine its borders, the investment landscape offers opportunity for many in a volatile marketplace that has often been misunderstood and sometimes fragmented. Navigating this complex and dynamic terrain takes careful planning and strategic partnerships.

What Issues are Lurking Behind Rising Home Prices?

By Kendall Baer,  DSNews, October 4, 2016

Post-crisis housing market fundamentals have been on the side of what most analysts would consider strong for some time now, and housing prices are near or even past their pre-recession peaks in some markets.

With home prices nationwide having appreciated by 6.2 percent over-the-year in August and showing little signs of slowing, affordability is becoming a bigger problem, according to the CoreLogic Home Price Insights report for August 2016 released Tuesday.

The forecast calls for home prices to appreciate by another 0.4 percent from August to September and by 5.3 percent by August 2017, according to CoreLogic. The HPI Forecast is a projection of what home prices based on the CoreLogic HPI and other economic variables.

“Home prices are now just 6 percent below the nominal peak reached in April 2006,” said Dr. Frank Nothaft, chief economist for CoreLogic. “With prices forecasted to increase by 5 percent over the next year, prices will be back to their peak level in 2017.”

How much of a problem is affordability becoming in the face of continued strong home price appreciation?

“Housing values continue to rise briskly on stronger fundamental and investor-fueled demand, as well as lack of adequate supply,” said Anand Nallathambi, president and CEO of CoreLogic. “This continued price appreciation is contributing to a growing affordability crisis in many markets around the country.”

According to Dr, Richard Green, Director for the USC Lusk Center for Real Estate, “We are getting close to the 2006 peak for national house prices, and the most important positive resulting from this is more and more people have equity in their houses again. While it’s certainly positive that more people own homes worth more than their mortgage balances, the recovery in house prices has been uneven and prices remain well below their peaks in many parts of the United States. In fact, when adjusted for inflation, house prices are still nearly 20 percent lower than they were in 2006. It’s also important to note that, unlike the last time around, higher prices reflect higher rents and reflect an increasing affordability problem.”

This is what the San Francisco housing bubble bursting would look like, expert says 

by Riley McDermid, SF Bizjournal, September 29, 2016

San Francisco has the highest risk of any U.S. city of being in a bubble, according a report this week by UBS Group AG. The city is increasingly vulnerable to a pullback that could come from a number of factors, an author of the report says.

The UBS Housing Bubble Index Report 2016 declared the San Francisco housing market to be “overvalued” by crunching metrics that include home price-to-income ratio and changes in the mortgage-to-gross domestic product ratio. It then matched those scores up to historic norms in the area and found that the market is in danger of seeing a correction in residential real price appreciation, as well as a “normalizing” of sales prices.

UBS has joined a chorus of experts who are publicly worrying that the Bay Area, and San Francisco in particular, will see a residential real estate slowdown.

Other experts have chimed in recently on the city’s market outlook.

“In coastal California, and particularly in the Bay Area, we are faced with a paradoxical dilemma,” Selma Hepp, chief economist and vice president for business intelligence for Pacific Union, told the Business Times last week. Tackling “the housing affordability conundrum” will be the only realistic way to keep the Bay Area’s boom times going, Hepp said. What she meant is that we need to bring the price of housing down to keep talent in the region. That talent is crucial to companies continuing to thrive and expand here.

C.A.R. releases its 2017 California Housing Market Forecast

Home sales expected to edge up slightly in 2017, while prices post slowest gain in six years

LOS ANGELES (Sept. 29) – Following a dip in home sales in 2016, California’s housing market will post a nominal increase in 2017, as supply shortages and affordability constraints hamper market activity, according to the “2017 California Housing Market Forecast,” released today by the CALIFORNIA ASSOCIATION OF REALTORS ®’ (C.A.R.) .

“Next year, California’s housing market will be driven by tight housing supplies and the lowest housing affordability in six years,” said C.A.R. President Pat “Ziggy” Zicarelli. “The market will experience regional differences, with more affordable areas, such as the Inland Empire and Central Valley, outperforming the urban coastal centers, where high home prices and a limited availability of homes on the market will hamper sales. As a result, the Southern California and Central Valley regions will see moderate sales increases, while the San Francisco Bay Area will experience a decline as home buyers migrate to peripheral cities with more affordable options.”

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

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