The housing recovery here in the Bay Area and across the country remains solidly on track, according to a variety of industry reports. But a handful of economic headwinds, from higher interest rates to steadily rising home prices, pose challenges as the fall home selling season kicks off.
A recent article in the New York Times noted that homebuilders are moving forward with construction, sellers are finding plenty of eager buyers and even overly cautious mortgage lenders are finally opening up the purse strings and making more loans these days.
Pent up demand from consumers coupled with a lack of inventory of homes on the market have driven prices up 12.4 percent between July 2012 and July 2013, according to the recent Standard & Poor’s Case/Shiller Home Price Index of the nation’s 20 largest metro areas.
But higher prices and rising rates could cool the red-hot housing market a bit, some economists told The Times.
Mortgage interest rates jumped from 3.4 percent for a 30-year fixed-rate loan earlier this year to about 4.5 percent in recent weeks, as the Federal Reserve signaled its intention to begin tapering the bond-buying program that has kept rates artificially low.
Rising rates could be responsible for pending home sales dipping in July and August, according to the National Association of Realtors, although sale contacts for existing homes last month remained above 2012 levels.
The good news for buyers is that rates dropped back down to 4.32 percent this week, according to Freddie Mac, as the Fed decided not to begin tapering its bond purchases – at least for now.
Here in the Bay Area, we just released our monthly luxury housing market reports and all regions saw strong year-over-year gains while posting seasonal declines from July to August.
Just a few of the highlights:
- There were 172 luxury sales over $1.5 million in Silicon Valley in August, a 47 percent surge in sales compared to a year ago. There were also 80 sales over $2 million, up from 46 last August. The median sale price edged up 1 percent to $1,917,500.
- Marin luxury sales over $1 million climbed even more, jumping 57 percent last month to 118 units. And the number of multi-million-dollar sales tripled during that period. The median price edged up 3.2 percent.
- Finally, East Bay luxury sales over $1 million set the pace for the Bay Area, spiking 74 percent to 273 transactions in August. The median sale price, however, dipped 3.5 percent from a year ago.
Anecdotally, we’ve seen the overall market slow just slightly although it remains very healthy – just not as crazy of a sellers’ market as it was a couple of months ago. Well-priced homes are still selling in a timely fashion and there continues to be cases of multiple offers, just not as many offers and not way over the asking price.
More listings are gradually coming on the market and that’s giving buyers more to choose from. And they have a little more time to make their decisions instead of being forced to fight it out with a dozen other bidders for a handful of properties, as we saw earlier in the year. That’s not necessarily bad; it feels like a healthier, more sustainable market.
We’ll report out in the next few weeks on San Francisco’s third-quarter luxury market and have a better idea of how the rest of the Bay is doing as we begin the fall home selling season. Stay tuned.
Below is a market-by-market report from our local offices: