All the ingredients for a red-hot housing market in the Bay Area are there – a robust economy, tech companies that are churning out high-paying jobs, very strong demand from well-qualified buyers, and home prices that are climbing at a healthy pace. The only thing that’s missing is enough homes for anxious buyers to purchase.  While inventory has edged up in some areas lately, it’s still way too low to satisfy buyer demand, and that’s clearly having an impact on sales.

Bay Area home sales last month – both new and existing units – were down 7.5 percent from the same period last year, according to DataQuick, the La Jolla-based real estate information firm.  Last month’s level were 17.4 percent below the May average dating back to 1988. The biggest sales decline in the Bay Area were in Sonoma County (down 28.2 percent) and Napa County (22.3 percent). San Francisco was the only county with a sales increase over last year.

At the same time, prices for those scarce listings have been steadily increasing.  According to the DataQuick report, the Bay Area’s median sale price hit $617,000 in May, up 18.9 percent from May 2013. We’ve certainly seen those price gains in many of our markets as homes continue to attract multiple offers and bids over the asking price, in many cases.

For those frustrated buyers, there’s reason for optimism, according to DataQuick analyst John Karevoll. “Virtually all the technical indicators are pointing in the direction of more market normalization,” he said, but admitted he is surprised it’s taking so long to get there.

“Right now we’re keeping an eye on prices,” Karevoll said. “While some of the Bay Area counties have already re-reached or passed their pre-recession price peaks, the region as a whole is on pace to reach that point later this summer.”

One segment of the market that is showing no signs of slowing is the Previews luxury market. We’ll be releasing our monthly luxury market reports in the coming days, but just to give you a quick glimpse: Silicon Valley sales over $1.5 million climbed 15.8 percent last month from a year ago and sales over $3 million were up 24%.

For the overall housing market to keep up with the luxury end, however, we’re going to have to see inventory come back to normal, healthy levels. Here’s hoping for a lot more listings across the board as the summer buying season gets into full swing in the weeks ahead!

North Bay – It was quieter last week with Father’s Day and graduations, according to our Greenbrae manager. Agents are still fighting for listings in Novato. Sales activity is on the rise this month. There have been more cancellations than normal with buyers getting into escrow and then thinking things through. In the San Rafael area, there has definitely been a slow down in activity with graduations, vacations, kids out of school, and Father’s Day. However, there are still multiple offers. Buyer activity in the luxury market is very active in Sonoma County. There is currently a lot of showing activity, however buyers are being cautious in entering into contract, our Santa Rosa manager reports. There is not the urgency that existed earlier in the season. The overall market is still very healthy with appropriately priced properties receiving multiple offers. This is especially true in the market between $300K and $900K. In Southern Marin, the $2 million plus market continues to pace twice the rate of last year. CB Southern Marin has listed several luxury Previews properties in the last two weeks – Belvedere for $5.5M and $5.2M, Tiburon for $8M and Mill Valley for $3.25M and $2.875M. Our local manager expects to see offers soon on these desirable properties. Overall, the market in Southern Marin peaked in April and has since leveled off. There continues to be strong activity, however with fewer multiple offers and fewer offers when receiving multiple offers. Offers continue to come in at 20% to 40% over list price in the most desirable locations, however prices are flat in less desirable areas.

San Francisco – Our Lakeside office manager says agents continue to struggle with low inventory. The inventory is lower than last year at this time, had no build up during the spring and is limiting the number of sales. Even with significant numbers of new condo properties becoming available for buyers they are being snatched up in record time. Some buyers are feeling discouraged, prices are moving up and yet sellers are not yet being coaxed to list their homes for sale. Our Lombard manager notes that there has been a slight decrease in sales, but definitely a decrease in the number of offers, with 3-4 being common. He says the peak of the frenzy was perhaps 6-7 weeks ago and many of those deals are now just closing (May’s stats showing about 76% of deals closing over asking). Asking prices have been almost “suggested starting prices.” But now they need more thought and careful strategy. With summer upon us, new listings are becoming even harder to find, according to our Market Street office manager. Those properties that are available are getting scooped up quickly – sometimes before the first brokers’ tour. And while many properties still receive multiple offers, a number are going into contract with a single buyer.

SF Peninsula Burlingame inventory remains low as it has all year, according to our local manager. There are 16 active and 16 pending sales in Burlingame and 11 active and 13 pending sales in Millbrae. New listings come on the market and typically have about a 10-day cycle before they sell in multiple offers. Summer often results in a growth in inventory due to vacations, etc. That waiting pool of buyers is definitely out there and waiting for the next perfect home. There are 45 active and 17 pending sales in Hillsborough currently. The start of summer vacations has slowed new inventory coming on the market a bit. Sales however, continue at all price points from $2 mill. to $23 mill. Our Menlo Park manager still feels that the market is very robust (especially for this time of year). Some houses are sitting but even many B and C locations in Menlo Park are getting multiple offers. A $1,295,000 tear down had 19 offers and sold for $1.8 million. Some sellers are beginning to really ‘reach’ in their pricing, so that is curtailing the number of offers. Astonishing prices being paid for Palo Alto properties, according to our local manager. Multiple offers continue. All cash, no contingencies are the normal. Attendance at open houses in the Redwood City-San Carlos area, particularly first time opens, is still very strong. Listings are still receiving multiple offers but the number has certainly changed, our local manager reports. On average is it more like 3 or 4 as opposed to 6 to 10. A few of buyers have decided that they have been priced out of the market. In San Mateo, graduations, Fathers Day, etc., are distracting buyers, but our local manager expects activity to resume in the coming weeks. In Woodside and Portola Valley, agents are seeing some high end sales – over $5 million. There has been good open house attendance – not as busy as a month ago but still very robust.

East Bay – Our Berkeley manager says there has been a slow down across all price points. They saw only 1 offer on 5 of 6 pendings this week.  Buyer fatigue and summer slowdown are the main reasons for the changing market but open houses are still heavily attended, she notes, with 40-60 buyers per open house. In the Fremont area, there has been a slight decrease due to graduations and start of summer vacations. Our Oakland-Piedmont manager reports that available inventory has been inching up in most price ranges. As the inventory has crept up the number of offers received on properties has lessened across the board. There haven’t been double digits in a couple of weeks although the offers received have been very good. Open house activity is still brisk with the majority of buyers coming from San Francisco. The Lamorinda market has been steady in the past couple of weeks. Our Walnut Creek manager says prices within the higher end homes seem to be coming down some. Agents are not seeing as many go for over asking. Lower end homes are still going for over list. Buyers don’t want to compete as aggressively in multiple offer situations. Cash deals aren’t happening as much either.

Silicon Valley – The very best properties are getting lots of attention, reports our Cupertino manager. The next best properties are presenting some very good opportunities for astute buyers, she adds. Our Los Gatos manager says that prices in the 95030 zip code are up 29% from the same time last year. In the San Jose-Almaden area, the Previews luxury market remains steady but offers are going near list price. Overall, inventory is steady in Almaden along with sales. List prices are higher but agents are still seeing multiple offers. The sales prices on the multiple offer homes are going closer to list price but still over list. The local Willow Glen market continues to show strong buyer demand for select listings that continue to draw over asking multiple offers. Although the number of offers has subsided agents are typically seeing 1-3 offers per property. Listing inventory continues to stay on the lower end. The market is still a few units ahead of where it was last year at this time. A $5 million home that had been on and off the market over the years received a full price offer, our Saratoga manager reports. The sweet spot for upper end homes seems to be between $2.5-$3.5 million. Multiple offers still prevalent where schools are the driving force. Agents are seeing a slight tapering off where they are not.

South County – June is always a “transition month” for the Real Estate Market, our South County manager notes. Lots of listing and sales activity took place as spring approached, but June is traditionally a slow month. Graduations, school ending and the beginning of summer always impact the market. South County sales have slowed considerably from what they were in April and May. Though the listing inventory for both Gilroy and Morgan Hill has shown significant increases, actual purchases certainly are under what they were in previous months. Agents are reporting that buyers are attending open houses, but that the frenzy to make an offer is no longer present. Prices, however, continue to rise with many homes closing at or above list price.

Monterey Peninsula – The Previews luxury market on the Peninsula in the last two weeks has had three sales close in the upper end price point, and five ratified offers in the same period. The mid-level price point and under $1 million is seeing much more activity than as of late. There have been multiple offers on several properties in the last two weeks. This is a good sign that local buyers are getting ready for back to school and retirees moving to the area. Overall agents are seeing a steady increase in values and a flattening of units sold. The Monterey Peninsula continues to be one of the most desirable communities to live in, according to our local manager.