The supply of homes for sale in the Bay Area has been at or near historical lows in many communities, driving up prices for those relatively few properties on the market and sending many would-be buyers away disappointed. The dearth of inventory has resulted in slowing sales overall, but especially in the entry-level to mid-priced market.
But as the new year gets underway, agents are hopeful things could change soon. Many are hearing from potential clients that they’re thinking about selling, and a good number of homeowners are actually getting their properties ready to list as the spring selling season approaches.
Only time will tell if all this talk turns to action and homeowners do in fact decide to list their homes. But my guess is that those who have been on the fence about selling are reading news accounts of prices jumping sharply, and they want to be part of the action.
A fresh influx of listings couldn’t come at a better time. Extremely low inventory is holding back sales, as evidenced by the latest report from DataQuick, the La Jolla-based industry research firm. DataQuick announced this week that last month’s home sales in the Bay Area was the slowest December in six years, with analysts blaming the constrained supply of properties on the market.
Sales of new and existing single-family homes and condos in December were down 12.7 percent from the same period a year ago. The biggest decline was in Contra Costa and Marin counties, which both saw more than a 20 percent drop from last December.
But with the low inventory, buyers have been bidding up the prices of homes on the market, with the median price in the Bay Area last month soaring almost 24 percent from a year ago to $548,500. The biggest increases were in Alameda and San Mateo counties, which had a whopping 28 percent and 25 percent jump in prices, respectively.
One segment of the Bay Area market that continues to roll on is the Previews luxury market. We’re be announcing our Previews Luxury Housing Market reports next week to the media, but here’s a sneak preview:
- East Bay sales over $1 million surged 27 percent in December compared to a year ago;
- Marin County sales over $1.5 million were up 24 percent;
- San Francisco saw a nearly 21 percent increase in $2 million-plus sales in the fourth quarter;
- And Silicon Valley had an 8.9 percent rise in $1.5 million sales vs. last December.
Despite good sales figures in the luxury market, all segments of the Bay Area market could use more well-priced and well-appointed inventory. Buyers are out in droves and ready to purchase right now. So the question is: Are seller ready to join the party?
Below is a market-by-market report from our local offices:
North Bay – Throughout Marin County, it’s been a quiet start to January, but many agents are gearing up with new listings and eager buyers. They’re still seeing multiple offers, and the high end is very active. There is some evidence that the $3 million plus market will be better in 2014, according to our Mill Valley manager – one closing for $5,275,000 and another for $3,850,000. Another property went into escrow for $3,100,000. Our Novato manager says prices are increasing on luxury properties and agents are beginning to see more properties over $1 million selling. Activity is increasing in the office as agents get back to work after holidays. Expect to see several new listings in the coming month. Although December was a bit soft in Sonoma County, the county finished off the year with a 23% increase in median price. There is still a large number of buyers in the market. Open houses were very well attended in all price ranges with many of those buyers from out of town. San Rafael and San Anselmo agents are back to work as reflected in the overflowing Buy/Sell at the San Rafael office. Inventory is on the increase because the holidays are behind us. The overall Santa Rosa area market has been somewhat stagnant as there is little inventory for buyers to choose from. One open house over the holiday period attracted approximately 100 attendees. While homebuyers are looking, they are leaving homes on the market that need work. Turnkey homes that are priced well are receiving multiple offers and selling. The message to sellers is that it makes sense to get your house in order before going to market. The Previews market in Sonoma County is lacking fresh inventory, but agents are hopeful there is more new inventory to come. For those listings coming on, agents have already identified interested parties in advance of marketing. To support sellers, agents are holding off on pre-emptive offers to make sure they have full market exposure. Inventory in Sonoma County is at a record low with fewer than 500 available properties. Lots of chatter about new inventory in the spring market but not much right now, our Sebastopol manager reports.
San Francisco – All quiet after the holidays, our Lakeside office reports. Listing inventory is even lower than last year at this time. Our Market Street manager says that given the severely low inventory available over the holidays, it’s no surprise to see the number of sales decline for this period. However, buyers are back (did they ever go away?) as evidenced by the number of attendees at recent open houses, and they’re ready to buy. So where are the sellers? Those who are realistic and quick to the 2014 market will surely be rewarded with a fast sale due to the lack of competition. While it is still very quiet in the Sunset area because listing inventory level is extremely low, activity is starting to pick up – a good sign that hopefully more listings will come on the market. There is definitely more demand than supply in the current market.
SF Peninsula – It’s been a slow start to the new year, according to our Burlingame offices, but the next 3-4 weeks should show a strong increase in inventory. There are currently numerous new listings in the preparation stage at prices from $2 mill to $15 mill. Pre-emptive offers are the success story in the new year. One Belmont property was just 24 hours on the market when a “too good to pass up” offer was accepted by the sellers. We are seeing numerous examples of buyers refusing to wait for the offer date and submitting an early offer, which is accepted. Several very well presented properties came to the market this week in the $900-1.2 mill. price range where waiting buyers stood outside during tour. Open homes have reported as many as 300 people on a Sunday open. Our Burlingame North manager notes that inventory is extremely low – possibly lower than last year at this time. But there are still are some very strong buyers who are bidding up prices and still some pent up demand. Agents are soliciting properties not on the market. In Menlo Park, the competition among agents to locate non-MLS properties or homeowners who might sell is creating an environment that is all consuming for the agents. Multi day phone calls and emails to big listing agents in all companies, agents driving around and looking for any kind of construction on a property. Even the whiff of a desirable property coming on will generate an unsolicited offer. A $2.95 million property became available in a B location in Atherton, attracting 6 offers and selling for $4 million and a 2-day close. This is historically low inventory for single-family homes in Palo Alto. The Redwood City-San Carlos market in general is extremely quiet with a very definite lack of inventory. Even though it is usually a slow market during the holidays this seems to be an extreme, according to our local manager. It is definitely time to convince any potential sellers that this is the time to have their home on the market. It’s still relative quiet in San Mateo, but activity is starting to pick up. There are two kinds of listings in Woodside – those that the agents price and those that the clients price. The only ones that sell in Woodside are the ones that the agents price. The other high-end listings sit as sellers will not lower their prices to market value. They don’t have to. MAYBE this will be the year that the agent price vector and the rising price vector will meet and make Woodside sell again. However, sellers have to find some buyers who don’t want urban settings or be close to public transportation.
East Bay – Still a bit slow in the Berkeley market. More houses coming on the market in the near future, but still feels very much like 2013. Extremely low inventory is reported in the Tri-City Areas with multiple offer situations and prices climbing higher. There lots of buyers out looking at open houses in the Oakland–Piedmont area, many of them unattached to agents. Currently there is a shortage of inventory in all price points, but agents are hoping that will change by March when there appears to be more homes coming to market. While the market slowed during the holidays in the Lamorinda area, buyers are now out in force. Open homes are heavily attended with 100+ people coming in to tour. Although there is a lot of open home activity, buyers seem to be waiting. Interest rates may be playing a key role in this. Inventory remains steady but low. In the Tri-Valley area, there are multiple offers on homes in most price points with inventory still low. However agents are hearing of coming listings that may help with inventory.
Silicon Valley – Our Cupertino manager says although the new year has started out slow in sales, on a positive note agents took quite a few new listings last week, so things should start perking up. Low inventory continues to be the story in the San Jose Almaden area, with slow sales. There are only 14 single-family homes for sale in Almaden. The San Jose Willow Glen market has picked up the pace even after a busy holiday season. Buyers are hungry for new listings, and they sell as quickly as they come on the market. Agents are seeing multiple offers with over asking price offers in ALL price points. Open house traffic has been jammed in this first full week of 2014. As we move into the new year, our local office will be tracking inventory week by week to monitor market conditions. It’s still too early to tell how our local inventory levels will impact the 2014 winter selling season. One thing is for sure: There is pent up buyer demand for all price points of single family homes and condo / townhouses.
South County – Most South County Realtors seem to be astounded as to the lack of inventory. This week there were only 51 active listings in all of Morgan Hill. The number is just a little better for Gilroy with 80 single-family homes and townhomes available for sale. Demand far exceeds supply. Agents seem to be working very hard to obtain listings—but the lack of inventory has certainly impacted the market. There are just fewer sales. It seems that it is time for agents to convince those sellers who are “sitting on the fence” to actually list their homes.
Santa Cruz County – The number of listings in the county is still down although not substantially over the same time last year – about 10%. Currently there are about 598 listings and 123 are under contract, so only about 350 active. The over a million segment represents 35% of the market, and this segment still only accounts for 10% of the closed sales. This statistic has been the same for quite some time. The unsold inventory index is about 4 months, which is still way below what is considered normal, and this has lasted for 20 consecutive months. The short sale and bank owned properties are only about 8% of the market, down from an all-time high of 45%, so the area is approaching a somewhat more normal market. Half of the sales are occurring in the more affordable areas of the county, San Lorenzo Valley and Watsonville, and 27 of the total sales were under $500,000. The upper end market is picking up, with lots of cash buyers looking and starting to purchase. The market is having trouble with the new FEMA regulations that were put into effect on October 1st. No one seemed to have had any information about the new regulations beforehand. FEMA is imposing a substantial increase in mandatory flood insurance policies for homes that are located in a flood plain, and this is determined by the degree of severity of the flood plane. An estimate on a required policy for a home in escrow for $1.8 million was $36,000 for a one-year term. The deal was cancelled along with other transactions because the cost of flood insurance is prohibitive. Cash deals where this is not required are really the only option the buyer has, and that’s not always going to be an acceptable solution for a buyer and creates an immediate red flag about the property. It’s a mess, our local manager says.
Monterey Peninsula – As of the new year, the upper end market has seen a couple of very nice closings in the Pebble Beach and Carmel, Carmel Highlands areas. An oceanfront lot that sold off MLS just above its list price was a great way to start the new year. There are several others that have gone into escrow this week and we look forward to strong start for 2014. It’s still the same story in this area: Buyers are actively looking but there is limited inventory to choose from.
That’s it for now. Have a great weekend!