Bay Area continues to run counter to national housing market
Those of us that have lived in the Bay Area for years know that this region has always been a little different than the rest of the country. And most of us are glad that’s so! The state of the housing market is one more example of the Bay Area running counter to national norms.
Anyone who watches the network news or reads a national publication can’t help but come away feeling that every housing market in the country is suffering equally, thanks to a glut of inventory and a lack of qualified homebuyers. And while that’s true in some outlying areas of the Bay, it’s generally incorrect in most of our region.
To the contrary, we continue to see growing demand by very serious buyers looking to purchase homes. And while some are scouring the landscape for bargain basement distressed properties, many are seeking good, well-maintained homes at fair prices. And there continues to be a very strong demand for properties in the middle and upper ends of the market, including million-dollar homes.
The real problem we’re facing here in the Bay Area isn’t a lack of buyers; it’s a lack of sellers. Many homeowners who would like to sell their homes have been sitting on the sidelines, still believing that the market is in the depths of a recession. They still fear that they will have to take drastic price cuts in order to sell.
I’m afraid that the news hasn’t gotten out to them that things have changed for the better over the past year or two. Sellers no longer must sell their properties at fire-sale prices to get buyers attention. In fact, fairly priced homes that are well maintained and in good neighborhoods are not only being sold fairly quickly these days, but in some cases with multiple offers.
What makes the Bay Area different from the rest of the country, which is still battling a very sluggish housing market? It starts with our strong economy.
As a result of vibrant high-tech, biotech and social media industries from Silicon Valley up the Peninsula to San Francisco, the Bay Area is home to some of the best-paid knowledge workers in the country. These are well-educated engineers, programmers, financiers, and other highly educated professionals with money to invest and a desire to own a home. Add to that the supporting cast of back-office and headquarters jobs that have been created by thriving tech companies over the years and it’s easy to understand why demand for the Bay Area’s limited housing has never been stronger.
Local Market Monitor, a national firm that analyzes housing markets for the banking industry, recently issued a three-year forecast of the best and worst housing markets in the country out of the 100 largest markets that it covers. Ranking second in the nation – the San Jose-Sunnyvale-Santa Clara housing market.
A story on the study in MarketWatch noted that home prices in Silicon Valley “are close to a bottom…and there’s already a good recovery underway in the job market, driven by high-tech manufacturing and technology services. Income levels are high, and population growth is slightly above average.”
During the housing boom (between 2002 and 2007), home prices rose 43% followed by a 21% drop, the report showed. “The San Jose recovery is clearly connected to the high-tech sector...and during the recession, 30,000 tech jobs were lost, but 16,000 have been regained since 2009. These are high-paying jobs that affect the housing market,” Local Market Monitor added.
While no one’s predicting an immediate return to the red-hot housing market of years ago, clearly things are looking up for much of the Bay Area.
For sellers who have been holding off listing their properties, I would strongly urge them to reconsider. Right now the math is in a reluctant seller’s favor. Interest rates remain near historic lows, the economy is gradually improving, and the Bay Area has more than its share of anxious buyers trying to purchase a home – but not enough homes to meet that demand.
The sum of these conditions mean that the balance between supply and demand is actually tipping in many homeowners’ favor, as hard as that is to believe after what we went through in recent years. This could very well be a surprisingly good time to sell a home, before everyone else catches on to the real story of the Bay Area housing market.
Below is a market-by-market report from our local offices:
North Bay – There seems to be an excitement and energy in the air, with large numbers of potential buyers attending Sunday open houses, our Southern Marin office reports. Homes that have been sitting from last year are getting offers. Sales activity and inventory are both increasing again. And there have been 10 ratified offers in local market of late.Our Greenbrae manager says sales activity and inventory have been steady recently with five ratified offers in the past couple of weeks. In Northern Marin, both sales activity and inventory levels have declined in recent weeks. Our Northern Marin office reports two ratified offers recently. The big challenge for Santa Rosa agents is a lack of inventory in the local market. Inventory levels in the under-$500k price range at the end of December were less than 1.5 months’ worth of homes. In the $1M plus category the inventory levels are high. REO and short sales activity are still having a significant impact, putting downward pressure on prices. Many agents have a good number of qualified buyers they are working with and are just looking for good inventory to sell. In Sebastopol, inventory is also down but sales activity is increasing. Agents are seeing big crowds at open houses.
San Francisco – There has been no New Year’s listing surge as yet, according to our San Francisco Lombard office manager. Agents are in need of inventory at all levels. One fixer-upper brought 10 offers, he said. The Market Street office says it is still waiting for a surge of new listing inventory after the holidays. There continues to be a shortage of listing inventory and a pent up buyer demand for new property. Well priced, or even slightly underpriced, listings are seeing multiple bids regularly. Open house traffic is very busy, and there are a lot of new homebuyers out there, particularly first time buyers, who are unaccompanied by agents. Listing agents are encouraging sellers to refrain from waiting for the usual spring season and asking owners to get their homes ready to sell now. Our Sunset office manager reports a very slow start for the first two weeks of the year. Open houses are still very active with many buyers looking but lack of inventory is hurting sales activity. Finally, the San Francisco Van Ness office says the market has been fairly steady at the beginning of 2012 with 14 ratified offers, two of which were multiple offers.
SF Peninsula— There’s been a slight movement forward in the local market, according to our Burlingame North office manager. The South Bay activity should be prompting activity up the Peninsula, but many people are still on the sidelines waiting for more positive news, which is starting to emerge slowly. Across the hills, our Half Moon Bay manager said it has been a good beginning to 2012. There is more activity in all segments of the market and agents say that sellers are pricing their homes more realistically for today’s market. There has been a fair amount of 'underground' work going on - deals being teed up and will be completed zoom – according to our Menlo Park manager. In Palo Alto, our local office reports that the market has started the year extremely slow. Extremely low inventory is taking its toll on sales, not only in Palo Alto but the surrounding areas as well. Portola Valley’s manager also reports low inventory and slower sales activity. In Redwood City, our local office says serious buyers are attending open houses and agents are seeing more multiple offers. Our San Mateo manager says agents have noticed very healthy turnouts for open houses in the area. The local inventory is fresh and getting plenty of interest/offers.
East Bay – Both sales activity and inventory levels are starting to pick up, our Castro Valley office reports. The office has had 15 open houses in the past couple of weeks. In Fremont, our local manager says there have been 16 ratified offers of late, two of which were multiple, although he reports activity easing. Overall inventory in Livermore is at 12 month low with 152 listings. Over 81% of the pending sales to date in Livermore were listed at or below $500,000 and 43% of the new pending sales in Livermore were distressed sales. Our local manager says the market needs more good listings. The Oakland/Piedmont market is picking up in all price points. Buyers coming into open houses are fully approved and ready to buy the right home for them. Inventory is low so some of the listings that have been on the market for a while are now going into contract. Agents, buyers, and sellers are very optimistic about 2012. Our Orinda manager says the Lamorinda market is holding steady with 14 ratified offers, four of which were multiple offer situations. Inventory still remains low in Pleasanton, but the outlook is positive. With interest rates at an all-time low, buyers are eager to buy homes. Agents just need more homes on the market. Our Walnut Creek manager says prices are still flat. There has been lots of traffic in open homes, but some buyers are still thinking they can wait for better prices. Nonetheless, new listings are selling quickly –most with multiple offers – as inventory remains low.
Silicon Valley – Our Los Gatos office continues to be optimistic about the outlook for 2012. There have been 25 ratified offers in recent weeks, six of which were multiple offer situations. Inventory continues to be very low in the local market. The agents are searching everywhere for more inventory to sell. The beginning of the year started with an increase in accepted offers, according to our San Jose Willow Glen manager. His office has seen 15 ratified offers in recent weeks. Similarly, the San Jose Almaden office reports an increase in both inventory and sales activity with 17 ratified offers, most of which were multiple offers. Energy is picking up significantly in the Saratoga area after a slow start to the year. Agents are active and working their new pipeline. Our local manager is anticipating strong inventory growth over the next few weeks.
South County – South County is experiencing a huge drop off in inventory. Gilroy inventory is hovering below 90 homes. As a result, we are seeing a surge of buyer interest with almost every transaction having multiple offers. Our Gilroy office held its first Open House Extravaganza recently, with great success. Most open houses were attended double the average number of attendees at a normal open house. Sales are off to a fast-paced start for January – not the norm. There is an old saying in real estate—“the market doesn’t really pick up until after the Super Bowl.” Morgan Hill and Gilroy agents alike are reporting, however, that despite “49er Fever”—attendance at open houses was somewhat remarkable the past couple of weeks. Buyer interest is certainly high and with the dwindling inventory, buyers are finding fewer homes from which to choose. The average sales price in 2011 for homes sold by the Morgan Hill office was $458,000, down from $475,000 the previous year. The softening of prices coupled with great interest rates certainly reiterate why this is an excellent time to buy. Because of the low inventory, however, buyers are finding that they need to make a quick decision when a well-priced home that shows well comes on the market.