The California Association of REALTORS® (C.A.R.) has released its housing market forecast for 2017, calling for existing home sales in the Golden State to edge up 1.4 percent next year but home price increases to slow statewide. The trade organization sees continued low inventory and affordability constraints slowing market activity in 2017.
“Next year, California’s housing market will be driven by tight housing supplies and the lowest housing affordability in six years,” C.A.R. President Pat Zicarelli said in a statement. “The market will experience regional differences, with more affordable areas, such as the Inland Empire and the Central Valley, outperforming the urban coastal centers, where high home prices and a limited availability of homes on the market will hamper sales.”
As a result, C.A.R. said, the Central Valley and Southern California will see moderate sales increases while the Bay Area “will experience a decline as home buyers migrate to peripheral cities with more affordable options.”
The REALTOR® group called for a 4.3 percent median sale price increase statewide next year, which would bring the median price to $525,600, following a projected 6.2 percent increase in 2016. The gain would be the slowest in six years.
More locally, C.A.R. projected the Central Valley area will see a 2.2 percent increase in home sales next year as well as a 4.1 percent rise in the median price to $294,600, following an estimated 6.6 percent price rise in 2016.
Meanwhile, the trade organization called for a 5.6 percent drop in existing home sales in the Bay Area but a 6.4 percent increase in the median sale price to $833,600 in 2017, up from a projected $783,700 in 2016.
“With the California economy continuing to outperform the nation, the demand for housing will remain robust even with supply and affordability constraints still very much in evidence,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.
Below is a market-by-market report from our local Northern California offices (listed by alpha):
East Bay – The Berkeley real estate single-family home market continues to maintain both its strength and ascension within the Bay Area, according to our local manager. As of October 13, there are 47 houses listed for sale with 59 under contract. This represents an inventory supply of .79 months, which is one of the lowest figures in the past year. Combined with the continued historically low interest rates it represents a unique opportunity for both buyers and sellers, although competition is obviously fierce for available properties. The reality is slightly different for the small condo/townhome/duet market, where there are nine available properties and three under contract – representing a three-month inventory supply and a more equalized market between buyer and seller. It is important to note, however, that with such a small sample size (9) the metrics are more adept to stronger swings. More inventory is on the market in the East Bay, so more for the buyers to choose from. There still is a “house of the week” that a lot of buyers vie for, but other than that the number of offers are two to three, and in most instances not going over list price as dramatically as before. Open houses are well attended. Our Walnut Creek manager notes that a seasonal market shift toward a more balanced market is apparent, although mostly pronounced in the upper end. In Walnut Creek, active listings just outnumber pending sales at 107-98, still indicating a seller’s market, but not as frenzied as the spring and summer. Agents are seeing competitively priced homes still receiving multiple offers especially at price points below or just above $1 million, but homes priced at the top or above the top of the range of comparable sales are sitting and seeing price reductions. In the immediate surrounding areas, Pleasant Hill with slightly lower price points is still a very strong seller’s market with half as many active listings compared to pendings, at 26 active listings and 54 pendings. Conversely, Alamo with significantly higher price points has almost double the number of active listings as pendings at 41-21. Even in the upper end, values remain at record levels and competitively priced homes are still selling quickly at record or near record prices, and only those priced above their value are sitting and receiving price reductions.
El Dorado County – Listing inventory in El Dorado Hills continues to decrease and is at the lowest level since June, our local manager tells us. Sellers are beginning to delay going on the market until January. Agents are seeing multiple offers on homes in the mid-range (400k to 650k) and have seen some high-end homes ($1 million plus) that have been on the market for 8-10 months sell. She is still seeing many Bay Area buyers coming into the market and most buyers really want a lot for their money. Overall sales numbers are down about 3-5% from last year. The Placerville market has seemed to slow down a bit. Buyers are out there, just being more cautious about making offers.
North Bay – There is less traffic on Sunday open houses, and much fewer homes are receiving multiple offers, says our Greenbrae manager. Some offers are coming in below list price. Our Santa Rosa Mission office manager notes there seems to have been a little uptick in market activity the past two weeks, although that does not necessarily make a trend. The market otherwise seems to be in typical seasonal winding down to the holidays, what he would expect. In the Previews luxury market, there is 20% more inventory on market this time of year compared to same time period 2015. Our Southern Marin manager reports that sales picked up 42% from August to September for a post Labor Day market bump. Inventory also increased and the local market now has a 2.7 month supply of inventory, the highest level in 15 months. The Previews luxury market is still active but at a slower pace. However, over 20% of listings over $2 million are under contract.
Monterey Peninsula – The month of September saw our local office sales volume finish up 8% and unit sales down 6% for an overall average sales price of $1,200,000. The market has definitely slowed a bit but the buyers are still looking for that “great deal” of the year, according to our local manager. Sellers are feeling the resistance with longer days on market eventually leading to a price adjustment. Our office just closed escrow on a $6.5 million sale, so the smart money is still looking for that special Carmel vacation home.
Placer County – Average days on market for a home in Auburn before selling has gone from 23 days to 40 days, our local manager reports. The market is still low on inventory with multiple offers on more than 50% of listings. Open houses are busy and agents are busy. Appraisals are taking longer and coming in below purchase price, she says. More cancellations than in the past months due to appraisal, home inspection and lack of disclosure. Interestingly, buyers from San Jose are making up a large part of the buyer pool.
Sacramento County – Elk Grove inventory and sales activity are decreasing, but multiple offers still are occurring under the lower $300,000’s price point. Here are two examples of market conditions: one particular home in Elk Grove priced at $299,000 had over 1,600 hits and the open house had over 30 people on the weekend and it likely will sell over asking price; another home listed $799,900 in Laguna on the Lake had 80 open house visitors over the weekend, multiple interested buyers and there has been an offer on the property in a little over one week. Average sales price for September was just over $379,000, up 3% from August and up 9% over last 12 months. West Sacramento-Yolo County inventory and sales are decreasing. Average sales price for September was just over $349,000, up 9% from last year. Average open house traffic in Folsom has ranged from four to 12 per open house. Our Sacramento-Fair Oaks manager reports it’s a bifurcated market – brisk up to $400,000, not so over that price point. Overall, the fundamental trends we have been seeing all year remain solidly in place as we enter the traditionally slower sales season. Pent-up demand remains substantial as buyers seek to get a home under contract while rates remain so low. The Previews luxury market is slower with fewer offers and more negotiating when an offer does come in. Our Sacramento Metro manager says activity has picked up after Labor Day in the primary marketplace.
San Francisco – The San Francisco market continues to move forward consistently, according to our Lakeside manager. Our Lombard manager says he’s seeing the highest inventory and monthly supply of single-family homes and condos for the year; fixers and entry-level homes are bringing the most traffic. Pricing is very critical as stale listings are lingering. Buyers are getting a little pickier and less likely to go aggressively over asking. Our Market Street office manager also has seen the number of listings on the market at the highest level in a long time. The issue seems to be that sellers are listing their homes too high, and buyers are no longer rushing to purchase, he says. As a result, more properties are sitting or doing price adjustments. As before, turn-key single-family houses (especially at the entry level) are receiving the most attention, while condos seem to have lost some of their luster due to the large number of them currently available. With all that, agents do continue to see multiple offers on well-priced desirable properties.
San Francisco Peninsula – Homes in the Half Moon Bay area are on the market longer than previous months, according to our local manager. There are a lot more price reductions on the active listings and agents are seeing some multiple offers once price is reduced. Our Palo Alto manager says it’s quiet in the market. He’s not sure if it is a correction or seasonal shift with inventory and activity. Our Redwood City manager also notes a shift in the market. Inventory is still low and there are still lots of qualified buyers but their time frames are changing. Buyers are taking their time in making offers and many of them do not want to be in a multiple offer situation. Fewer of the buyers are willing to offer over list price. Open houses are still well attended. Our San Mateo manager reports listings are building up. There is more inventory hitting the market from Coldwell Banker and in general, he says.
Santa Cruz County – Demand in the Santa Cruz area has stayed very strong in the “affordable” to middle price ranges with a steady number of active listings changing to pending status. There is a noticeable decrease in the number of offers received on appropriately priced properties, however the market is still very good for both buyers and sellers, according to our local manager. The high-end properties listed for sale in Santa Cruz County are experiencing longer days on market, tougher negotiations and less activity. The number of transactions over $1 million has decreased in recent weeks, and pricing strategy is more critical when marketing a property in this price range.
Silicon Valley – It has been a relatively quiet two weeks, according to our Cupertino manager. Open house traffic is steady. Our Los Altos manager sees continued signs of seasonal adjustments, although inventory is low as summer comes to a close and we move into fall. New inventory has slowed of late. This lack of inventory has had a direct impact on those homes which had been “lingering” on the market and agents have seen additional price reductions on homes with higher than average DOMs. Sellers are still wishing to “test the market” by bringing their homes on at higher prices than previous sales and pendings. However, this pricing strategy has proved to be risky, given that many buyers’ expectations are that they will still need to offer over the asking. As a result of this type of pricing strategy agents are seeing a “self-fulfilling prophecy” with these homes having little to no activity. These homes end up stagnant and linger on the market, eventually having to lower their price to generate activity. To the contrary, there has been strong activity with properties in move-in condition and priced to sell. These homes are still receiving multiple offers that typically achieve a sales price that is over asking. This was the case with one of our recent listings, which had 24 offers. In short, we have experienced a slowdown of homes coming on the market over the recent weeks. And those that are coming on, when priced to induce offers, are being absorbed quickly. The Los Gatos market under $2.5 million continues to be extremely competitive. The market over $2.5 million is a tad slower but great properties over $2.5 continue to sell. The San Jose Almaden market had an average number of sales for the month with 40, which is down from 44 in August and flat with the 39 sold in 2015. Prices were up with the median sales price at $1,320,000 for the month, up 7.8% from the previous month and 3.5% higher than the previous year. Blossom Valley had a strong month in units sold with 94 closings, up from 88 last month and 86 last year. The median home price of $751,250, up 4% from last month and last year at this time. Cambrian had a big jump from last month with 86 closings, 20 more than August and four more than 2015. The median sales price was $937,500, up 3.9% from last month but down 1% from September of 2015. Santa Teresa had a lower number of units sold at 27, down six from last month and down 13 units from September of 2015. The median sales price of $750,000, down 4.5% from last month but up a whopping 11% from September of last year. Willow Glen got a surge of new listing inventory this past week, going from the low 60’s count to 83 active listings. Agents are reporting slower traffic at open houses, particularly if the property has been on the market more than 2 weeks. However, some properties are still selling quickly with multiple offers, but typically the offers are at or just slightly above the list price.
South County – A strong indicator of the changing market is the number of price reductions that are announced at the weekly broker tours by listing agents, notes our local manager. Each week, agents attending the tours are hearing the same scenario, “price reduced, price reduced, price reduced.” This phenomenon runs through all price ranges, but is especially pronounced with “upper-end” South County properties — those listed over $1 million. Entry-level homes priced in the $600,000 to $700,000 range are still garnering offers as demand remains high for his price point. It is very evident that the market is changing from a strong seller’s market to one where buyers have more choices and can be more discriminating in their decision to purchase. At the beginning of this year, the low listing inventory and high demand left buyers with few options but to offer over full price for the few homes that were available. That has certainly changed within the last several months.
Tahoe & Truckee – The last two weeks of September saw another great period of sales in the Tahoe-Truckee area with 96 properties sold, which tied the single highest two-week period of sales in August of this year. Of the 96 properties sold this period, 17 were sold at a price above $1 million. Luxury sales for properties priced above $1 million are up significantly – 67% from 2015 luxury sales. For 2016, there have been 229 luxury properties sold as compared to 137 sold last year for the same period. The median sales price for luxury properties in 2016 thus far is $1,650,000, which is identical to the median sales price of $1,650,000 in 2015. However, the average sale price of luxury homes in 2016 stands at $2,379,811 as compared to $2,331,693 in 2015 and is up 2%.
Market Watch is a bi-weekly column by Coldwell Banker San Francisco Bay Area and Sacramento-Tahoe president Mike James exploring the local Northern California housing markets. Click here to view past issues.