Across the Bay Area, overpricing leads to much lower sales-price-to-original-list-price percentages and much longer days on market (of course), but also an approximate 5% - 9% drop in the average dollar per square foot value. (Which doesn't include expired/withdrawn listings that don't sell at all.) These numbers are generalities: details will vary between listings - price segment, how much they're overpriced, how soon and how much they reduce their prices.
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Executive Summary:
IPO expectations are already showing up in home sales activity, particularly in San Francisco and San Mateo
Sales of homes in San Francisco, San Mateo and Alameda have solidly exceeded last year – up 7 percent, 4 percent and 2 percent respectively year-over-year in April
Santa Clara, Wine Country and Contra Costa remain slower compared to last year
Homes priced between $1 million and $2 million continue to struggle, except in San Francisco and San Mateo, likely a result of tax reform changes and reduced state and local tax (SALT) and mortgage interest deductions
Nevertheless, sales of homes priced above $3 million have surged again, posting a 5 percent year-over-year increase, matching last year’s peaks
While growth in inventory of homes for sales is broad based, availability of homes priced above $3 million accelerated again to a 26 percent annual growth in April
While price growth remains flat in most regions, San Francisco median prices up 2 percent year-over-year in April
A 9 percent annual increase in homes under contract suggests buyers are back in droves, especially for homes priced over $3 million, up 44 percent year-over-year
A Goldilocks Economy is an economy that is neither too hot or cold, in other words, it sustains moderate economic growth and has low inflation, which allows a market-friendly monetary policy.
· Today’s national employment report from the U.S. Bureau of Labor Statistics once again outpaced expectations by posting a 263,000 increase in jobs added in April. The strong gain adds to the upward revisions of the two previous months, bringing the year-to-date monthly average to 205,000 jobs added, only slightly below the 223,000-monthly average in 2018.
U.S. home prices are expected to increase by 4.8 percent year over year by November 2019.
November home prices were up on an annual basis in the San Francisco and Los Angeles metropolitan areas by a respective 5.9 percent and 5.3 percent.
Prices appreciation for new homes is projected to slow in 2019 in all four major Bay Area housing markets, while new-home prices in Los Angeles are forecast to begin depreciating.
The median sales price for a single-family home in California was $591,460 in July, down from June’s all-time high but up by nearly 8 percent year over year.
The nine-county Bay Area ended July with the median sales price at $980,000, an annual increase of more than 10 percent.
Diminishing affordability in job centers helped drive double-digit percent year-over-year increases in sales activity in Contra Costa, Alameda, and Napa counties.
Executive Summary:
The Bay Area’s decline in home sales (including single-family and condominiums) improved in July, with only 3 percent less activity year over year after a 13 percent decline in June.
Compared with last summer (May through July), sales were slower in Santa Clara, Napa, Sonoma, Marin, and San Mateo counties.
Sales activity declined by 19 percent in Marin County and by 13 percent in Santa Clara County.
Sales of homes priced above $1 million — and especially those above $3 million — continued to fare better than they did last year.
Only Marin County saw a decline in sales of homes priced between $2 million and $3 million, down by 7 percent year over year.
Inventory finally improved, up by 2 percent, after 16 consecutive months of year-over-year declines.
Most Bay Area counties saw inventory improve in July.
Inventory above $1 million increased by 17 percent, mostly driven by more homes for sale in Santa Clara and San Mateo counties.
Only Sonoma and Napa counties gained inventory below $1 million, up by 17 percent and by 5 percent respectively
In contrast, San Francisco still lost inventory across all price ranges in July, declining by 14 percent. Contra Costa County saw inventory drop by 5 percent from July 2017.
Thirty-year, fixed-rate mortgages in 2018 have been rising at the fastest pace in 50 years and reached 4.66 percent for the week ended May 24 before dropping to 4.56 percent this week.
However, mortgage rates did not increase proportionally to the federal funds rate determined by the Federal Reserve because they are determined by longer-term economic factors beyond solely the influence of central banks and monetary policy.
Some Fed officials and economists believe that long-term structural factors — such as changes in demographics, a slowdown in productivity growth, and heightened demand for safe assets — will continue to keep the 10-year U.S. Treasuries, a proxy for U.S. fixed-rate mortgage rates, low going forward.
According to the Federal Reserve of San Francisco, the new normal for the natural rate of interest is around 2.5 percent, 2 percentage points below the long-term average, which puts mortgages rates at about 5 percent or slightly higher over time.
Shorter term, through the end of 2018, 30-year fixed rate mortgages are still expected to reach no more than 4.7 percent.
The Federal Open Market Committee has signaled that it would increase the federal funds rate at its June meetings. Markets have most likely already priced in the hike.
Some Fed officials urge caution in how fast it continues raising rates because of inflation expectations, the neutral policy rate, the flattening yield curve, room to grow business investment, and labor markets.
There are concerns that if the rate hikes are too aggressive, they could tip the U.S. economy into recession.
Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.
SAN JOSE, SAN FRANCISCO CONTINUE TO HAVE THE NATION’S MOST EQUITY-RICH HOMEOWNERS
As Pacific Union published in its first-quarter 2018 real estate report, single-family home prices in San Francisco and Silicon Valley posted substantial annual home price gains — 25.5 percent and 19.5 percent, respectively. And that type of appreciation means that the Bay Area’s two largest cities remain those with the most equity-rich homeowners in the country.
SAN FRANCISCO LOSES ITS STATUS AS HOTTEST U.S. REAL ESTATE MARKET IN APRIL
For the past couple of years, California cities have dominated realtor.com’s monthly list of the nation’s 20 hottest real estate markets, with San Francisco, San Jose, and Vallejo trading off the No. 1 spot. But that situation has changed as April ends, with a West Texas city claiming the title of America’s most in-demand housing market.
Realtor.com measures a real estate market’s heat level by the most listing views on its website and fastest pace of sales, and by those criteria, Midland, Texas is the nation’s hottest housing market in April. San Francisco, which had held the No. 1 position for the first three months of this year — as well as multiple months over the past few years — fell to No. 3.
Nationwide, May is the best month to sell a home for more than its value, with sellers receiving average premiums of 5.9 percent between 2011 and 2017.
In 85 percent of California markets, May, June, and July are the top months to sell a home.
April and May are the best months for sellers in the Bay Area, while Southern California sellers have the greatest chances of receiving premiums in June.
California homeowners who are considering selling increase their chances of receiving premiums if they put their properties on the market between May and July.
Millennials remain the most active U.S. homebuyers, though tight inventory conditions, strong price growth, student debt, and higher costs of living remain challenges to ownership for that generation.
The National Association of Realtors’ annual 2018 Home Buyer and Seller Generational Trendsstudy says that millennials accounted for 36 percent of purchases over the past year, a slight uptick from the previous survey and an all-time high. Defined as Americans under the age of 37, millennials have been the most active group of U.S. homebuyers for five straight years.
Millennial homebuyer activity in Bay Area job centers mirrors the national trend. According to a February analysis of Pacific Union data by Chief Economist Selma Hepp, buyers under the age of 35 accounted for 37 percent of transactions in San Francisco between August 2017 and January 2018, while millennials were responsible for 35 percent of purchases in Silicon Valley.
As millennials increasingly start families, they are gravitating toward more affordable suburban communities, which allow them to purchase larger homes. Fifty-two percent of millennials chose a home in the suburbs, and 85 percent of them bought single-family homes. Only 15 percent of millennials bought homes in urban areas, while an even smaller number (2 percent) opted for a condominium.
“While there is an overall trend among households young and old to migrate towards urban areas, the very low production of new condos means there are few affordable options for buyers – especially millennials,” NAR Chief Economist Lawrence Yun said.
Besides a lack of affordable starter homes, millennials must grapple with rising home prices and student-loan debt. NAR found that almost half of millennials are paying off student debt and carrying a median amount of $27,000. About one-quarter of Americans under the age of 37 said that saving for a down payment was the most difficult part of the homebuying process, and of those, 53 percent said that student loans delayed the savings process.
Millennials also face higher living costs than the generation before them, while wage growth for the demographic has been stagnant. According to a Freddie Mac analysis, between 2000 and 2016, young Americans’ expenditures increased by 36 percent. During that time period, home prices grew by 29 percent, while millennial per-capita incomes inched up by 1 percent.
A final finding from NAR’s report: When millennials are ready to purchase a home, 90 percent of them employ the services of a real estate professional, with help understanding the process cited as the primary benefit.
Although home prices should continue to increase for the rest of the decade, a bubble does not appear imminent nationwide, in California, or in the Bay Area.
That’s according to Arch MI’s latest Housing and Mortgage Market Review report, in which company analysts wrote “Home prices in the U.S. currently do not appear to be overvalued based on the historical relationship between home prices and incomes.” Before the housing crisis, U.S. home prices were 22 percent overvalued, then fell to levels that were 12 percent undervalued in 2012. Currently, Arch MI estimates that home prices are now 10 percent to 15 percent undervalued because of mortgage rates that remain near record lows.
The company does not foresee a housing bubble on the horizon across the U.S. or most cities. Warning signs of a housing-market bust — including too much buyer debt, inferior-quality loans, and overly rapid price appreciation — do not currently exist. The forecast echoes findings from a Freddie Mac report published last fall that also downplayed the possibility of another bubble.
Using data from the third quarter of last year, Arch MI’s Risk Index puts only three states at moderate risk for price deprecation by the end of 2019: Alaska, North Dakota, and Wyoming. California is one of 41 states that the company’s metric rates as minimal risk, with just a 3 percent chance of prices falling over the next two years. Golden State home prices increased by 7.9 percent year over year in the third quarter of 2017.
All 12 twelve California metropolitan areas for which Arch MI estimates risk are rated as minimal. The chances of price deceleration in San Jose, Oakland, and Los Angeles is 2 percent, while the likelihood of a decline in San Francisco is 3 percent. Year over year, third-quarter home prices grew by 8.5 percent in Oakland and Los Angeles, 6.8 percent in San Jose, and 6.4 percent in San Francisco.
Nationwide, the company expects home price appreciation of 2 percent to 6 percent over the next couple of years due to buyer demand that will continue to exceed tight supply conditions. Strong job growth and the aforementioned low mortgage rates should also fuel price gains.
Other housing predictions found in Arch MI’s report: the recent tax changes will impact high-priced markets like California the most; affordability will continue to deteriorate due to rising interest rates and home prices; and fewer homeowners will decide to move.
Executive Summary:
Bay Area tech heavyweights not only create innovative products that change the world, they also provide their employees with an overwhelming sense of satisfaction.
That’s according to job portal Indeed’s list of the 15 top tech companies to work for in 2018, based on nearly 18 million employer reviews on its website. Perhaps not surprisingly, 11 of those tech firms are headquartered in the Bay Area — the vast majority in Silicon Valley.
HOME PRICES HIT NEW PEAKS IN TWO-THIRDS OF U.S. REAL ESTATE MARKETS
More than 90 percent of U.S. housing markets saw annual price growth in the fourth quarter, with the San Jose metropolitan area leading the country for appreciation.
That’s according to the National Association of Realtors’ latest quarterly report, which puts the median sales price for an existing U.S. single-family home at $247,800 in the fourth quarter, up 5.3 percent on an annual basis. Prices rose year over year in 92 percent of measured markets, and 64 percent reached new all-time highs in the fourth quarter.
While high-paying and plentiful tech jobs are fueling buyer demand for Silicon Valley homes, the fact that the region’s public schools consistently rank among the best in the state is also a big draw for families.
That’s according to Niche.com’s annual rankings of the best public-school districts in California. The company gauges school quality using 10 criteria — including academics, teachers, extracurricular activities, and sports — then assigns each school district a grade. Niche.com also factors in parent and student reviews on its website when ranking school districts.
As in last year’s rankings, three Silicon Valley school districts are at the head of the class, all receiving overall A-plus grades.
In what will come as little surprise to anyone who regularly follows Bay Area real estate, four local communities rank among the most expensive real estate markets in the country this year.
That’s according to Forbes’ annual list of America’s most expensive ZIP codes, which uses a 90-day rolling average for the period ended Oct. 27 and includes both single-family homes and condominiums. Atherton‘s 94027 is once again the nation’s most expensive place in the U.S. to buy a home, with a median sales price of $9,686,154. The San Mateo County city had held that title for several years running before losing it to Manalapan, Florida last year, which took the No. 2 spot on this year’s list.
Pacific Union held its fourth annual Real Estate and Economic Forecast in partnership with John Burns Real Estate Consulting to project Bay Area activity through 2020. Below are some key, high-level takeaways from the live event. To watch the full one-hour presentation, click here.
A lack of homes for sale is the Achilles’ heel of Bay Area housing markets. Industry experts and economists have consistently discussed falling inventory levels since 2012, when most of the region’s distressed inventory was absorbed. Since then, inventory levels, while fluctuating, have been on an almost constant decline. Over the last year, the monthly year-over-year supply decrease averaged 7 percent in the Bay Area. More importantly, affordable homes are disappearing at double that rate.
The first half of the year ended on a strong note for Bay Area housing markets, with 2 percent more sales in the first six months of the year when compared with last year. The East Bay saw the largest increase in sales activity, up 4 percent, while San Francisco followed with a 3 percent increase. San Francisco’s improving housing market conditions are particularly encouraging given the lull that the city faced last year.
Pacific Union’s recent second-quarter real estate reports showed that Bay Area housing markets are sizzling again, and buyers are facing tough competition. Overall in the Bay Area, 6 in 10 homes sold over the asking price in the second quarter, while in Alameda and San Mateo counties, almost 8 in 10 homes sold over the asking price. Naturally, some price ranges were in greater demand than others. For example, in the East Bay, competition increased for homes priced up to $2 million but cooled off for higher-priced homes.
Sellers hoping for a speedy sale should seriously consider staging their homes, a process that most real estate professionals believe helps a buyer better visualize the property as their own. That’s true here in the Bay Area, where staged homes not only sell nearly twice as fast but receive more offers and command higher prices.
