Glen’s SF Bay Area Real Estate Market Update
December 31, 2016
Here are some highlights for the 38 East Bay Cities that I track:
- Inventory decreased 39% in the last 30 days and by 60% in the last 90 days. A dramatic drop off is typical for this time of year and we have seen this pattern occur over the past 4 years. Inventory levels are close to where we were at the beginning of the last year. Our monthly supply is now 18 days. As a reminder of what we mean by “months supply;” If no more homes come onto the market, and homes continue to sell at the same pace as they have been over the last 12 months, then the “months supply,” (in this case 18 days), tells us that’s how many days it would take to sell the remaining number of homes we currently have available for sale in any given market.
- The number of pendings, (homes that are in contract), has decreased 26% over the last 30 days and is less than what we experienced during this time last year by 14%. The pending active ratio increased to 1.73. 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 lower level than we saw last year at this time, (2.08). This will change in the coming months as we continue to move towards a more “normal” or balanced market for 2017.
- The percentage of homes “sitting” has increased from last month. 67% of the homes listed now remain active for 30 days or longer, while 42% stayed on the market for 60 days or longer. This is due more to a shortage of “fresh” new inventory coming onto the market. This is similar to where we were last year at this time.
- The “distressed” market, (foreclosures and short sales) are no longer much of a factor representing only .5% of the active listings and .2% 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 Winter. 15 out of the 33 East Bay cities tracked are now at or above their median price “peak” levels with another 14 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 has decreased from $650,000 to $620,000 over the last 4 months, also typical for this time of year.
- The month’s supply for the combined 38 city area remains at 18 days. Historically, a 2 to 3 months supply is considered normal in the San Francisco East Bay Area.
- Our inventory for the East Bay (the 38 cities tracked) decreased to 1,241 homes actively for sale. This is still above the December 2012 low of 1,086 and slightly greater than last year at this time of 1,191. 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 2,147, slightly lower than where we were last year at this time of 2,482.
- Our Pending/Active Ratio is 1.73. Last year at this time it was 2.08. 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 the new year.
- Sales have decreased from the last (4 month period) now at 8341 for the 38 cities tracked. This is up 1.6% from what we saw last year at this time.
- Sales over the last 4 months, on average, are 2.3% over the asking price for this area down slightly from last year’s 3.1%. This has come down over the past 4 months from 4.0%
Historical Median Price City by City Recovery
How much has the real estate market in your city recovered from their previous Peaks. The graph shows our recovery from each cities peak. As you can see, the most sought after cities have led the way. However, this is a slow process and as buyers become priced out of some of these markets, their interest spills over to the surrounding cities. They too begin to follow the trend up towards recovering.
By Judy Dutton, Realtor.com, January 11, 2017
New year, new home improvement projects? Whether you’re dying to update your kitchen, add a half-bath, or kick back on a brand-new deck, it pays off big-time knowing just what kind of return on investment your dream renovation might deliver. And you’re in luck, because Remodeling magazine has just released its annual Cost vs. Value report, which analyzes what you’ll pay for various upgrades—and how much you’ll recoup on that investment when you sell your home.
For this much-read report (which, by the way, is celebrating its 30th anniversary), researchers scrutinized 29 popular home improvements in 99 markets nationwide, polling contractors on how much they charge for these jobs as well as real estate agents on how much they think these features boost a home’s market price. From there, they divided each project’s upfront cost by the home’s resale value; the resulting percentage gives you a sense of how well each particular reno “investment” pays off.
There wasn’t a lot of change between the 2017 report and its 2016 predecessor, with most projects retaining their value.
But what is noteworthy is that the value of pricier projects rose significantly over last year, says Craig Webb, editor of Remodeling. He believes this indicates that the housing market is healthier and more bullish than ever.
“When the market is hot, Realtors® are more likely to give value to more expensive renovation projects, because they expect that the market will stay hot and people will pay the price,” he explains. “When the market is cool, Realtors tend to put less value on those big-dollar projects, because they have concerns about whether the house will get sold in any state.”
By Jonathan Smoke | Jan 13, 2017
Conventional wisdom in real estate holds that sellers should time the market to maximize their price. Why? Because home sales are extremely seasonal: They peak in spring and summer, when prices peak as well. That’s why in most markets, most years, the optimal time to list is in the spring, so that the maximum number of potential buyers view the home.
But we’re in an era in which conventional wisdom is becoming an ever-sketchier concept. So why should real estate be immune from all this topsy-turviness? This year, the conventional wisdom of buying and selling may need to change.
Inventory levels at the beginning of 2017 are at multiyear lows. Sellers now face very little competition.
Likewise, buyer demand is abnormally strong for the off-season. The climb in mortgage rates that started in October and accelerated in November and December has created a sense of urgency among buyers.
The new year is expected to bring more economic growth and even higher interest rates. And with consumer confidence at a 15-year high, buying competition is likely to get fierce.
Not everyone can move up their plans for the spring and summer; but even so, the months of winter and early spring will likely be much busier than usual. Therefore, sellers could benefit less from timing a spring listing for a summer sale this year.
But the most important reason to consider selling early this year is the same reason most people want to sell in the first place: so they can buy again. We estimate that more than 85% of sellers are planning to buy another home. The endgame is not necessarily getting the maximum price on the house being sold, but rather taking the best path to the next home.
When interest rates are moving up, waiting to sell could end up costing more than selling sooner and locking in today’s rates. Waiting to sell could also mean having to wait to buy when there are even fewer homes available.
The biggest challenge to growth in sales this winter and spring will most likely be inventory. That means that the market overall continues to favor sellers. But that won’t last forever. As rates continue to rise, higher financing costs will eventually dampen demand.
If you are thinking of selling and buying in 2017, the early bird may get the worm. And the best new nest.
The average Bay Area buyer must set aside almost two times their annual income to make 20% down payment
By Riley McDermid, SF Business Times, Januuary 13, 2017
If you want to buy a house in the Bay Area, be prepared to set aside the equivalent of twice your annual income in order to afford a 20 percent down payment on a home.
New data from housing site Zillow found this week that the average homebuyer the San Francisco metro area must fork over 180 percent of their income to put down that recommended 20 percent, in a market where the median price of a home is $824,600.
That adds up to a median down payment of $164,920, with the regional median annual income weighing in at $91,777.
Zillow arrived at the data after crunching their data for national home buying statistics. It found that only buyers in San Jose and Los Angeles must put down similar amounts to buy a home — a sharp contrast to the $38,500 median down payment expected nationally, where the median price of a home is $192,500.
“Saving enough cash for a down payment is a major barrier to homeownership, especially in expensive markets, where a 20 percent down payment can cost nearly $200,000,” Zillow Chief Marketing Officer Jeremy Wacksman said in a statement.
Homebuyers are also likely to find that 20 percent figure impossible to avoid, because putting that amount down qualifies you for the best mortgage rates. That’s become and increasing concern this year as global market wait for the Federal Reserve to enact an expected hike of historically low lending rates.
“While it’s possible to buy a house with a smaller down payment, 20 percent ensures the best rates. As important as it is to find a monthly payment you can afford, some buyers’ budgets will come down to the amount of cash they can bring to the table,” Wacksman said.
Zillow also found in its study that 25 percent of first-time homebuyers relay on gifts from family or friends for the cash they need to buy a house. One fifth of homebuyers surveyed said that a down payment is their number one concern.
by Zoe Eisenberg, RIS Media, December 29, 2016
So you’ve decided to put your home on the market. Congratulations! Hopefully, you’ve brought a rockin’ REALTOR® on board to help you list your spot, and together you’ve done your due diligence on what to ask for. As you start checking things off your to-do list, it’s also important to pay mind of what not to do. Below are a handful of things to get you started.
As you ready your home for sale, you may realize you will get a great return on your investment if you make a couple of changes. Updating the appliances or replacing that cracked cabinet in the bathroom are all great ideas. However, it’s important not to over-improve, or make improvements that are hyper-specific to your tastes. For example, not everyone wants a pimped out finished basement equipped with a wet bar and lifted stage for their rock and roll buds to jam out on. (Okay, everyone should want that.) What if your buyers are family oriented and want a basement space for their kids to play in? That rock-and-roll room may look to them like a huge project to un-do. Make any needed fixes to your space, but don’t go above and beyond—you may lose money doing so.
Over-decorating is just as bad as over-improving. You may love the look of lace and lavender, but your potential buyer may enter your home and cringe. When prepping for sale, neutralize your decorating scheme so it’s more universally palatable.
Don’t hang around.
Your agent calls to let you know they will be bringing buyers by this afternoon. Great! You rally your whole family, Fluffy the dog included, to be waiting at the door with fresh baked cookies and big smiles. Right? Wrong. Buyers want to imagine themselves in your space, not be confronted by you in your space. Trust, it’s awkward for them to go about judging your home while you stand in the corner smiling like a maniac. Get out of the house, take the kids with you, and if you can’t leave for whatever reason, at least go sit in the backyard. (On the other hand, if you’re buying a home and not selling, then making it personal is the way to go, especially when writing your offer letter. Pull those heart strings!)
Don’t take things personal.
Real estate is a business, but buying and selling homes is very, very emotional. However, when selling your homes, try your very best not to take things personally. When a buyer lowballs you or says they will need to replace your prized 1970s vintage shag carpet with something “more modern,” try not to raise your hackles.
By Catey Hill, Market Watch, January 12, 2017
So-called “sale fails” are on the rise.
Deals to sell homes are falling through at a faster rate than they were a year ago, according to a report released Wednesday by real-estate site Trulia. which found that Indeed, “on an annual basis, the failure rate has nearly doubled to 3.9% in 2016, up from 2.1% in 2015,” the report revealed. The real estate site looked at all listings that were pulled for the first two months of each quarter from the fourth quarter of 2014 through the fourth quarter of 2016.
Home sale deals fail for three main reasons, said Felipe Chacon, a housing data analyst for Trulia:
1) A buyer can’t get financing.
2) The inspection turns up something bad.
3) The appraisal doesn’t match up to the sale price.
More first-time buyers — many of them young and with lower incomes — are attempting to buy a starter home now. First-time homebuyers made up 35% of sales in 2016 up from 32% in 2015, the National Association of Realtors found. And members of this group is more likely to have trouble getting financing, as they are typically not familiar with the process and may not bring as long of a credit history or as much equity to the table, says Chacon.
Don’t miss: Don’t be afraid to buy a fixer-upper in 2017
Plus, many baby boomers are putting their homes on the market as they downsize and prepare for retirement. These homes tend to be older and thus are more likely to have issues that an inspector will catch, the study concluded. Finally, with home prices climbing steadily, many sellers ask high sums — and many buyers agree to those sums. The problem is that an appraiser might not, and the sale fails.
Of course, most of the time, when a buyer and seller make a deal, it does go through. Sale fails represent just 4.3% of all listed properties. And certain kinds of homes (high-end newer homes, for example) are far less likely to end up in a failed deal than others. Furthermore, buyers whose sales do go through are more likely than in the past to be able to pay their mortgage, thanks to stricter lending guidelines since the Great Recession.
Industry expert: The only thing to fear in 2017 is fear itself, Housing market functioning at pre-crisis norms
BY Kelsey Ramírez, Housing Wire, January 11, 2017
The housing market is improving and in some areas, even back to pre-crisis levels. Now, one expert explains that the only thing to fear in 2017’s housing market is, well, fear itself.
Because of these numbers, one expert, OwnAmerica CEO Greg Rand, explained that there is nothing to fear headed into 2017. The exception, he stated, was that the change in administration is causing some consumers to hold off on making decisions related to home ownership, purchasing and investing.
“I’d have to say that disruption from Washington is the only thing that I could see on the horizon,” Rand said in an interview with HousingWire.
Rand also mentioned the Home Price Perception Index from Quicken Loans, which showed a gap of 1.33% between homeowners estimates of their home value and the appraised price. According to Rand, “When appraisers and homeowners are within two percentage points of agreement on value, that is amazingly good.”
Rand explained that the housing market is behaving normally, and that the market can expect to continue to see these numbers.
Rand joins many other experts in claiming 2017 will be a great year for housing.
“The biggest risk that we have is that somehow people begin to be convinced that the housing market is heading into negative territory when it’s not,” he said.
BY Riley McDermid, SF Business News, January 12, 2017
Oakland saw its number of home sales canceled at the last minute leap in 2016 from 3.9 to 8.5 percent, real estate site Trulia said this week, as more buyers struggled to seal the deal.
In a new report titled “Sale Fail,” Trulia looked at national data for home sales in 2016 and noted that nationally, sales have been failing at increasing rates, rising to 4.3 percent in the fourth quarter from 1.4 percent during the same period a year prior.
Many areas were immune to that trend — but the Bay Area, with its booming and competitive real estate markets, saw an uptick in buyers walking away from a sale at the last minute.
San Francisco-based Trulia said there were a few common factors in why sales might fall apart during the end of the process. Two common themes? First-time homebuyers and older homes.
“First-time homebuyers have made up 35 percent of sales in 2016 up from 32 percent in 2015, and this is just among successful transactions, according to the National Association of Realtors. Not only are first-time homebuyers unfamiliar with the process, they face unique hurdles,” Trulia notes.
“They don’t bring equity or a credit history from a previous home. Their finances face additional scrutiny. And for those seeking an FHA loan for down payment, there are restrictions on type of home and its amenities.”
Older homes also are much more likely to see their sales fail: As the age of a property increases, so do the chances that it could see a difficult sale. That would particularly hurt areas like Oakland, where white hot real estate markets have pushed even the oldest housing stock onto the market in a bid to find inventory.
“As homes age, the fail rate increases steadily, with homes that are around 50 years old having the highest failed sale rates (i.e. homes built in early 1960s), then declining, in a less uniform manner, as the year built approaches 1900,” Trulia says.
by Louise Phillips , RESMedia, January 6, 2017
The new year is upon us and with it comes new factors which can and will affect real estate throughout the year. Here, New York Power Broker Louise Phillips Forbes of Halstead Property makes her predictions for what real estate will look like on a national scale in 2017, and how you can make the most of it. Keep an eye on the following:
- Increased interest rates will be a game-changer.
While interest rates are still some of the lowest they’ve been in years, they are increasing and will be a motivating factor for buyers early in the first quarter, especially since 95 percent of first-time homebuyers are dependent on financing. Expect them to act quickly and lock-in reasonable long-term loans enabling them to make long-term buys.
- The market is not in decline; it is re-setting.
Nationwide, home prices are forecast to slow to 3.9 percent growth year-over-year, from an estimated 4.9 percent in 2016. The biggest shift will occur in the ultra-luxury market, especially in urban environments with a massive construction boom, where the highly accelerated and unsustainable growth for the past five years lead to inflated asking prices and declining absorption rates. As a result, New York City in particular—a national leader in the housing market—is experiencing a very efficient re-setting of the high-end luxury sector, with values down 25- 40 percent to more realistic prices, establishing a growth pattern that is more in line historically.
- Millennials and baby boomers will dominate again.
These two dominant demographics will power demand for the next 10 years. Both generations are approaching life changes that traditionally motivate people to buy or sell a home. These life-defining changes include: marriage, having children, retiring and becomingempty-nesters. As such, the baby boomers could boost the market with double transactions as both buyers and sellers. Most of them are already homeowners, so they will be looking to sell and downsize to a smaller home, lowering their cost of living to maximize ease of retirement. Baby boomers have the potential to make up 30 percent of buyers in 2017, and being less dependent on financing gives them an advantage to be more successful with closings. Millennials, on the other hand, are more likely to finance and thereby more susceptible to increased interest rates, but they are still expected to make up 33 percent of buyers in the new year.
- The Midwest is the new frontier.
Due to escalating rents and inflated home prices in the coastal cities, millennials are drawn to the Midwestern markets because they have a lower cost of living coupled with tremendous job growth. Midwestern cities claimed 42 percent of the millennial purchase market share in 2016, much higher than the U.S. average of 38 percent.
There is strong affordability in 15 of the 19 largest Midwestern markets, so this trend is expected to continue even as interest rates increase. Strong local economies and population growth will fuel the appeal of these hot markets, so keep your eye on: Columbus, Ohio; Omaha, Neb.; Des Moines, Iowa; Grand Rapids, Mich.; Minneapolis, Minn.; and Colorado Springs, Colo.
- Foreign buyers expand their borders beyond coastal cities.
Whileinternational buyersstill look to New York City, Los Angeles, Miami and San Francisco real estate as a safe haven for their money, escalating price per square foot numbers—an average of $2,400-plus in Manhattan—are pushing them to look in other metropolitan areas nationwide. Cities like Nashville, Tenn.; Charlotte, N.C.; Columbus, Ohio; Chicago, Dallas and Austin, Texas are rapidly grabbing foreign buyers because prices are lower and they can get a better return on investment. Their primary interests are long-term growth opportunities, a luxury lifestyle and security. Moving forward, prime coastal locations will remain strong but the trend of international buyers expanding their searches and taking a serious look at new locations will continue to accelerate.
- Consumer confidence will boost home sales.
With the anticipation of stronger economic and wage growth in 2017, home sales could exceed 6.3 million transactions, a significant increase from 2016. The GDP growth is forecast to be 2.1 percent with a 2.5 percent increase in the consumer price index, while unemployment is expected to decline to 4.7 percent by the end of 2017.
Furthermore, the record-breaking rise and powerful performance of the stock market post-election has fueled confidence and given people the assurance they need to loosen their purse strings. Folks who were hesitant to spend money during a tumultuous and uncertain election year are now ready to put their money to use.
- Lack of inventory spurs fast-moving markets. Buyers should be prepared.
Inventory is currently down an average of 11 percent in the top 100 metropolitan markets nationwide, but with interest rates on the rise, prices may go down slightly. A slowdown in home price appreciation could motivate more property owners to sell, easing some of the inventory crunch. Regardless, in a competitive market, buyers need to be prepared and able to act quickly when they find Home Sweet Home. Build your team early on and don’t lose out on a property because of some unnecessary mistakes that occurred simply because you weren’t organized. Your team should include a real estate attorney, mortgage lender, real estate broker, appraiser and inspector (if necessary).
The five hottest San Francisco metro neighborhood housing markets have one major surprising thing in common – they’re all in Oakland.
Real estate website Zillow determined the hottest Bay Area housing markets based on its Zillow Home Value Forecast, which predicts the change in value for properties in the neighborhood over the next year.
Next up is St. Elizabeth, in the middle of Oakland’s Fruitvale district, which is named after the St. Elizabeth Church on 34th Avenue. Zillow estimates home values to increase by 7.4 percent over the next year.
No. 3 is Highland, a small East Oakland neighborhood bordered by San Leandro St. in the West, 22nd Ave. in the South and International Blvd. in the East. Zillow foresees home value growing by 7.3 percent in the area.
Columbia Gardens was the fourth neighborhood on Zillow’s list. Situated in the city’s Elmhurst District, the neighborhood has 7.2 percent forecasted home value growth for 2017.
Rounding out the top five neighborhoods is Lockwood-Tevis, another East Oakland neighborhood, where Zillow projects home prices to jump up 6.7 percent over the next 12 months.
So why Oakland and not San Francisco?
“One reason Oakland has so many hot neighborhoods right now is that San Francisco is so expensive,” said Svenja Gudell, Zillow chief economist. “Oakland is the much-cheaper sibling, right next door. It’s easy to get to San Francisco from Oakland, so a lot of people are probably looking to Oakland for affordability.”
San Francisco itself – while remaining as a very desirable housing market under measures like total home sales and property time on the market – has very little room for value growth due to already sky-high prices.
These benefits have transferred over to businesses and nonprofits that are jumping across the Bay into the city.
“When you look at the competitive cost advantage of Oakland, it’s easy to see why business is moving in,” said Bill Keller, the CEO of Oakland-based Community Bank of The Bay. “With all these new jobs coming in, it’s natural that the real estate values will follow. It’s frankly one of the best deals out there right now.”
By RICHARD SCHEININ, Mercury News, January 6, 2017
In two-thirds of the nation’s busiest housing markets, it’s more affordable to buy a house than to rent.
But in the Bay Area, that’s hardly the case.
Given the rapid appreciation of home prices here, it’s still a better deal to rent in eight of the region’s nine counties — even with the shocking increases in rents over the past few years. Only in Contra Costa County — where homes remain relatively affordable, especially in inland areas — is it more affordable to buy than rent.
Those are the conclusions of a new report that draws on 2016 fair-market rent data from the U.S. Department of Housing and Urban Development and wage data from the U.S. Bureau of Labor Statistics, along with public records for home sales in 540 U.S. counties. The report does not consider long-term financial advantages of home ownership, only what it takes to cross the first hurdle and simply buy a house.
“Home prices have become so high so quickly in the Bay Area that renting has become a better option,” said Daren Blomquist, senior vice president of Irvine-based Attom Data Solutions, which analyzed the numbers and wrote the report. “That’s not to say that renting is affordable, but it’s become a more affordable option in most of the Bay Area counties.”
On top of this, Blomquist added a bleak prediction: “With the prospect of rising interest rates, buying a home is going to become even less affordable than it has been, and I think that’s going to tilt the balance in favor of rent for a lot of people. In the Bay Area, the equation already is favoring renting. But rising interest rates will even further accelerate that trend.”
In fact, rents lately have begun to level off around the Bay Area.