California continues to deal with limited listing inventory, which is resulting in an increase in buyer interest, attendance to open houses and multiple buyer offers. The job growth and a strong stock market have made home buying a more achievable goal for many nationwide.
According to the National Association of Realtors® (NAR) Pending Home Sales Index, there was a 2.8 percent drop in contract activity for the West, causing the lowest pending home sales in the last 12 months.
“Despite a strong sales start for the year, the housing supply shortage in California continues to cast doubt on whether the sales momentum can be carried forward into the spring home buying season,” said Leslie Appleton-Young, senior vice president and chief economist for the CALIFORNIA ASSOCIATION OF REALTORS®. “The number of active listings has been on a downward trend for the past 20 months and has shown no signs of improvement. As we move into the spring home buying season, we should see a marginal increase in listings, which will be offset by a pickup in sales. The inventory level is not likely to get better in the upcoming months.”
What does this mean for sellers? Most homes that are reasonably priced tend to receive multiple offers and stay on the market for as short as one month, according to Lawrence Yun, NAR chief economist.
“Sales got off to a fantastic start in January, but last month’s retreat in contract signings indicates that activity will likely be choppy in coming months as buyers compete for the meager number of listings in their price range,” added Yun.
What does this mean for buyers? As limited listing inventory continues, homes will receive more buyer offers and stay on the market for shorter time periods. Buyers should come prepared with financing and ready to make a quick purchase decision.
Here’s what was happening in our local Northern California offices in early March:
East Bay – The East Bay region continues to display signs of a strong market with limited inventory. There have been a few more new listings coming on the market. Overall listings are still selling briskly and are receiving multiple offers.
Monterey County – The market continues to be a little on the soft side, but several agents are reporting that they are receiving calls for listing appointments that will be on the market very soon. Active properties in most cities are ranging from one- to three- months supply. Reasonably priced homes seem to sell more quickly due to the quantity of buyers and offers, and we expect to see even more buyers this month.
North Bay – Across the North Bay, we are experiencing an increase of activity in the last couple of weeks. Inventory is steady to slightly increasing and multiple offer situations seem to be on the rise again. Open houses have been very active and there are many buyers waiting for new inventory to come on the market. As of March 13th there were 74 single-family detached homes for sale in San Rafael, and of those, 32 are pending. The San Rafael market continues to be very strong and should remain strong well into late this year. Countywide, we are seeing a trend similar to the middle of summer 2016 with sold units above $1 million and the percentage of available listings above $1 million. Available listing inventory compared to the same period last year is up only 3.6 percent. Pending and sold units are up 42 percent and 28 percent, respectively for the same period. In Southern Marin, the luxury market is doing well. The manager of the Southern Marin office said the office closed a Tiburon property for $8,250,000 and put several multimillion dollars into escrow during the past two weeks. About 20 percent of the active market is listed over $3 million. However, only 5 percent of the sold properties are over $3 million. Only the most competitively priced and desirable luxury properties receive offers. The general market continues to have a limited supply to meet demand. However, the month supply of inventory has risen from 1.1 months in Dec. 2016 supply to 2.5 months as of March 16, 2017. This is definitely a seller’s market.
Placer County – Open houses continue to attract many buyers. Luxury sales for properties priced above $1 million are down slightly from 2016 luxury sales. For 2017, there have been 33 luxury properties sold as compared to 34 sold last year for the same period. The median sales price for luxury properties in 2017 thus far is $1,540,000, which is down 9 percent from the median sales price of $1,700,000 in 2016. The average sale price of luxury homes in year to date stands at $1,862,768 as compared to $2,609,244 in 2016 and is down almost 29 percent. Even with one of the largest snow level years in history, the 2017 real estate market in North Lake Tahoe and Truckee has begun the same as it did for the same period in 2016, which was a very solid year. There continues to be considerable activity in the market as many buyers and savvy investors are actively looking for homes.
Sacramento County – There is an abundance of inventory over $1 million, which makes this one of the few buyer’s markets in the state.
San Francisco – There is more inventory over $4 million showing a big increase in closings over the last few weeks. More than 75 percent of houses are selling over asking and surprisingly over 65 percent of condos are closing over asking, despite the condominium inventory being considerably higher year over year. Entry-level and fixer properties are still yielding the most traffic and offers. The luxury properties are seeing more price reductions, competition and lengthening days on market. As per usual, the number of homes available continues to increase as we enter the spring home selling season. We are still seeing multiple offers (as many as 13 during this period), and offers for well over the listing price. Open houses and broker tours continue to be well trafficked. However, we are also seeing buyer fatigue. Pricing is critical because even if a property is slightly over priced, the property will sit without offers.
SF Peninsula – In some areas, we are beginning to see multiple offers on properties that we have listed. Oceanfront homes are selling quickly if priced right. There are many cash purchases and quick closes. Despite the low inventory and high demand, there is extreme price sensitivity. Homes below $900,000 are selling quickly. Palo Alto and surrounding areas north and south tend to receive offers exceeding 20 percent of the listing price.
Santa Cruz County – Approximately half of the active inventory of single-family homes on the market have an asking price of over $1 million. There are 115 active single-family homes asking over $1 million and 17 are pending. The number of single-family homes active on the market in Santa Cruz County is currently 227, compared to 317 last year in March, which has created a competitive buying environment. There are a noteworthy number of all cash purchases, and we are seeing offers coming in on listings quickly as well as multiple offers on listings in the more affordable price range. In February we saw 97 sales, which is slightly up from February 2016, which had a total of 94 sales.
Silicon Valley – Activity is excellent but inventory levels are still low compared to buyer demand. Everything under $2.5 million sells quickly unless it is severely over-priced. Closing figures for the month of February reflected slow sales in January. Activity has, however, increased in March with more homes being listed to meet extraordinary buyer demand. With buyers facing the prospect of higher mortgage rates, the urgency to secure and close a property has increased significantly. South County agents are informing sellers that, if they are thinking about listing their homes, timing could not be better. The luxury market with homes priced over $4.5 million is steady but lacks offers. Typically we see an increase in inventory in the spring. However, we have already seen our inventory rebound faster than in years past, albeit slow. Many of the homes that had been lingering on the market have either gone off the market or have been sold. Currently, we have only a little more than one month’s worth of inventory in Los Altos. With such a limited number of homes available for sale, most homes are receiving multiple with a sales price over asking. The market in Mountain View is even hotter with barely two weeks’ worth of inventory. In short, the number of homes coming on the market for sale each week is on the rise in both the Los Altos and Mountain View markets. And although inventory is increasing, homes are still selling very fast. Reasonably priced homes coming on the market tend to sell in less than a week.
South County – There is still a shortage of inventory, especially in the under $500,000 market. We are seeing more interested buyers coming to the area, which means well-attended open houses. Most homes receive offers within a few days. Homes under $400,000 are seeing multiple offers. Over the last week we have seen an increase in listings, but finding homes for first-time buyers in the price point of $350,000 and below is a struggle. Most listings are seeing multiple offers and the majority of listings are going over asking price.
Market Watch is a bi-weekly column exploring the Northern California housing market. Click here to view past issues.