There is no doubt that prices in California continue to be among the highest in the nation, buoyed by steady demand and a healthy economy. A recent report delivered a dose of good news, however, showing that rising wages and seasonal price declines have helped to stabilize California’s housing affordability.
According to the CALIFORNIA ASSOCIATION OF REALTORS® Traditional Housing Affordability Index, 31 percent of homebuyers could afford to purchase a median-priced, existing single-family home in California during the last three months of 2016, which is the same percentage as in the third quarter of 2016 and up slightly from 30 percent in the fourth quarter of 2015.
The fourth quarter of 2016 was the 15th consecutive quarter that California’s housing affordability index has been below 40 percent. The index peak of 56 percent was registered in the third quarter of 2012.
What does this translate to in terms of dollars? Homebuyers in California needed to earn a minimum annual income of $100,800 to qualify for the purchase of a $511,360 statewide median-priced, existing single-family home during the last three-month period in 2016. The homebuyer’s monthly mortgage payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,520, if a 20 percent down payment was made and with an effective composite interest rate of 3.91 percent.
Eight out of 29 counties tracked by the index experienced an improvement in housing affordability in the fourth quarter compared to third quarter 2016. Those counties that saw improved housing affordability are Contra Costa, Marin, Napa, Los Angeles, Ventura, Monterey, Santa Barbara and Madera.
The following 10 counties, however, experienced a decline in affordability quarter-over-quarter: San Francisco, Sonoma, Orange County, Riverside, San Bernardino, Santa Cruz, Kern, Kings, Merced, and San Joaquin. The remaining 11 counties – Alameda, San Mateo, Santa Clara, Solano, San Diego, San Luis Obispo, Fresno, Placer, Sacramento, Stanislaus, and Tulare – were unchanged.
The least affordable areas in the state in the fourth quarter included San Francisco County, where 13 percent of homebuyers could afford to purchase a median-priced existing single-family home, followed by San Mateo County at 15 percent and Santa Cruz County at 17 percent.
Affordability remains a concern not just in Northern California but in other parts of the country as well. In a recent survey by the National Association of Realtors®, Aspiring Home Buyers Profile, affordability was identified as the main hurdle for consumers who wanted to be a homeowner.
Here’s what was happening in our local Northern California offices in early February:
East Bay – Even though it is still early in the year, the East Bay region continues to display signs of a strong market with limited inventory. In Berkeley, there were only 27 homes available for sale in mid-February compared to 25 under contract, and there was about a month’s worth of inventory, shares the Berkeley office manager. In Albany, six homes were active listings while five were under contract and the community had 1.2 month’s supply, he said. El Cerrito, Richmond and Oakland had less than a month’s worth of inventory. El Cerrito had 11 active listings and 14 properties under contact, while Richmond had 75 active listings and 97 homes under contract. Oakland had 201 active listings and 244 under contract.
Monterey County – The month of January saw a healthy level of sales activity. One sales associate had nine sale sides, and several other sales associates had two to four sales each, leading to a 43 percent increase in unit sales. Sales volume was up 39 percent year-over-year. February pending sales “look promising,” according to the manager of the Monterey Peninsula offices.
North Bay – The supply of available listings is still relatively low in most communities but there appeared to be some pick up in new listings in parts of the region in early February. The managers of the Greenbrae, San Rafael and Santa Rosa Bicentennial offices noted that inventory is on the rise. In Marin County, there were 210 available properties up from 190, while listings priced under $1 million climbed to 55 from 45 and there were 16 properties priced under $750,000, up from eight, said the Greenbrae office manager. However, she also shared that multiple offer situations are occurring, with many offers eliminating inspection and financing contingencies. The Southern Marin office manager also reports that “multiple offers are becoming the norm again” for properties priced under $1 million and often for homes priced between $1 million and $2 million. Meanwhile, sales activity has been flat in northern Marin County, with sellers waiting for the weather to improve, according to the Novato office manager. With so few homes to sell in the local area, sales associates have been traveling to other counties to assist buyer clients in their searches for new homes. The San Rafael manager noted there were many new listings in the office over the last week. This is the first jump in office inventory since the first of the year, he said. There were 72 active properties for sale in San Rafael, however only 38 of those are single-family homes, with the rest being condos or townhomes with some properties under contract. The San Rafael office had seven ratified offers. The median price for active single-family listings in San Rafael is $1,212,500 with an average price per square foot of $588. With the anticipation of the arrival of spring, buyers are swarming open houses and sellers are getting their homes ready for sale, he added. However, the Santa Rosa Bicentennial office manager shared that there are a good number of homeowners who are holding off on putting their homes on the market until they find another home to move into, which means that some move-up buyers aren’t able to find a property to purchase. Meanwhile, the condominium market is very competitive, with sellers enjoying a big advantage in some parts of the region. The Santa Rosa Mission office manager, for example, said condo sales are up by 60 percent and pending sales are up 25 percent. The number of single-family home sales and listings is about the same as a year earlier, he added. As for the luxury market, the Santa Rosa Bicentennial office manager said the lower end of that sector is seeing “good buyer activity with multiple offers on correctly priced homes,” while the properties priced over $2 million are experiencing slower activity and more selectivity among buyers. The Previews market is gaining momentum, according to the Southern Marin office manager, with four new luxury sales in the price range of $3 million to $5 million in the office during the past two weeks. The Santa Rosa Mission office also reported gains in Previews, pointing to a 30 percent increase in pending sales activity but also about 30 percent more available listings in this market segment.
Placer County – Sales associates are busy but there is a need for additional inventory. Almost all properties attract at least two offers and as many as 12 offers, according to the Auburn sales office manager. If the home is priced under $500,000, even if it is not in the best condition, it will get multiple offers, she said.
Sacramento County – The market is displaying signs of health, with slight increases in inventory and sales holding steady. In the Sacramento Fair Oaks office, several listings priced over $750,000 have been taken, but the manager notes that they are experiencing a buyer’s market in that price range. Still, he described the lower end of the market as “hot.” The office’s sales in January were 29 percent higher than the same month last year. There were 21 properties under contract in that office, while the Sacramento Sierra Oaks office had 23 ratified offers.
San Francisco – Open houses and broker tours in the region are drawing large crowds, particularly for properties that are priced well and in good condition. Inventory, overall is restricted. Entry-level homes, fixer-uppers and well-priced homes are selling briskly, with multiple offers and properties selling for over the asking price, said the San Francisco Lombard office manager. An Outer Sunset home listed at $749,000 generated 16 offers with at least three offers over $1 million, he said. On the other hand, condos are seeing more price reductions with the majority selling at or below asking price, and the luxury market is seeing slow activity, he shared. “Multiple offers remain the order of the day even though we’ve seen a good number of properties need (price) reductions to generate interest — mainly in the higher price ranges,” said the San Francisco Market office manager.
SF Peninsula – There appeared to be some slight improvement in inventory but overall the region is still dealing with a very tight supply of available for-sale properties. Open house activity seems to be very brisk, drawing a lot of buyer traffic. Properties located in desirable areas and “priced right” are receiving multiple offers, shared the San Carlos office manager. Homes priced under $2 million are selling quickly, said the manager of the Menlo Park and Woodside/Portola Valley offices.
Santa Cruz County – Buyer demand in Santa Cruz County appears to be strong. There were 118 sales in January compared to 96 sales during the same month in 2016. Also, the active listing inventory grew, with 115 homes hitting the market last month, compared to 106 a year earlier. Additionally, the number of Previews homes coming on the market is starting to pick up. In January, 36 Previews listings hit the market and 32 were sold. It will likely take a few months to build the inventory with the demand being as high as it has been, explained the manager of the Santa Cruz offices.
Silicon Valley – Some communities in Silicon Valley are seeing an uptick in listings and sales. Countywide, there was a jump in inventory compared to the previous two-week period, but overall there is not sufficient supply. Prices in some communities are also on the rise month-over-month and year-over-year. The San Jose Almaden office manager reported that Cambrian had the biggest price jump with the average sales price increasing 10.5 percent from January 2017 and 9 percent from February 2016. The average sales price in that community thus far into February is $1,002,000. The average sales price for Santa Teresa is $757,000, which is up 1 percent from February 2016. Almaden and Blossom Valley average sales prices are on the rise compared to a year earlier. Almaden’s average sales price is $1,427,000 (5 percent gain) and Blossom Valley’s average sales price is $728,000 (6.5 percent increase). The San Jose Main office manager explained that there are more multiple offer situations and the sale price to list price ratio is starting to increase. Open house traffic is heavy, with most homes going under contract after just one weekend of open houses, and the area is experiencing “pre-emptive offer” listings or “coming soon” listings which are generating aggressive offers that are well over list price, according to the San Jose Willow Glen office manager.
South County – Listing inventory remains low, but more homes in all price ranges were being listed in South County during the last two weeks, providing more options for potential buyers. Sales associates were also reporting an increase in open house attendance. It has not been uncommon for 30 to 40 individuals to attend an open house, especially for listings priced correctly and located in desirable neighborhoods, according to the Gilroy and Morgan Hill office manager. There are still signs that the region is in a seller’s market.
Market Watch is a bi-weekly column exploring the Northern California housing market. Click here to view past issues.