A new report this week confirmed what we all suspected in the local real estate industry: The Bay Area’s luxury housing market is red hot.
Million-dollar home sales last quarter set a new record with 5,734 luxury homes selling during the April through June period, up from its previous high water mark of 5,699 in the second quarter of 2005, according to DataQuick, the La Jolla-based research firm. Statewide, there were more million-dollar sales last quarter than any period since the peak of the market in 2007.
Led by Hillsborough, the Bay Area boasted eight of the top 12 cities in California when it came to million-dollar home sales. Hillsborough recorded 144 luxury sales during the quarter, second only to Manhattan Beach with the highest price sale going for $12.9 million.
Other local cities at the top of the luxury list included San Jose, Cupertino, Fremont, Mill Valley, Danville, Menlo Park and Saratoga – all with more than 100 sales over $1 million during the second quarter of 2014.
Increased demand and steep appreciation in prices over the past year or two have driven up the number of luxury home sales, according to DataQuick analysts. Strong gains in the stock market and the booming tech sector probably haven’t hurt, either.
As our own Wendy McPherson, manager of the Menlo Park office, told the San Jose Mercury, home prices have been boosted “by the amount of money being pumped out by Silicon Valley and the international market, especially the offshore Asian buyer.”
The real estate market is still ruled by the law of supply and demand. And as long as there are so many well-heeled buyers in Silicon Valley, San Francisco and from overseas chasing a very limited inventory of homes on the market, the Bay Area’s luxury segment should continue to perform well.
Below is a market-by-market report from our local offices:
North Bay – There has been a steady flow of sales the past few weeks in Novato and some increase in listing activity, although still limited. Listings over $600k are sitting on the market longer as we move into August’s slower period. The best listings at all price points are moving if priced well. In the San Rafael area, market activity is slower than previous weeks. Many people are on vacation and school starts in a few weeks. Listing inventory has slowed a bit. Our Sebastopol manager says that it is Sonoma County Fair time, which always diminishes the number of attendees at open houses. Most of the opens homes this year have attracted double digit attendance. Nobody reported more than 5 attendees at this week’s open houses. We are seeing not only an increase in listings but also a willingness of sellers to entertain contingency offers. Previews properties continue to sell, especially after a price reduction or two. Our local office closed 4 sides this week and put 2 more into contract. Our Southern Marin office closed two properties for over $3 million this week. The luxury “Previews” market remains very strong for the most desirable properties. The overall market has hit the summer lull with vacations and families getting settled in for the new school year.
San Francisco – This is an unusually “typical” summer market, says our Lakeside office manager. The combination of agents on vacation, buyers on vacation, and kids on vacation sapping up energy of buyers who are not on vacation has slowed traffic at open houses and, though properties are continuing to sell at a good pace, the tempo is less frenetic that the spring. There are some great opportunities right now to purchase without multiple offers. Our Lombard office manager reports that lately just perfect properties priced right or total fixers (either end of the spectrum) are the only ones bringing large number of offers and way over. More of the market has cooled: whether summer slow-down, agent vacation, buyer frenzy-fatigue or any combination, hard to say. After a slight increase in overall inventory, this week brought a reduction in both homes and condos. Our Market Street office manager concurred that the SF market still seems to be in its usual summer doldrums. And while the sellers putting their properties on the market continue to be rewarded with strong prices, the number of multiple offer situations has definitely cooled a bit. More than half the offers ratified during this period were the result of a single offer, giving buyers an opportunity to prevail without having to compete against one another. But as we approach the end of July, activities appeared to be picking up a little, our Sunset manager says. Open houses are still very well attended. The number of multiple offers is decreasing and amount being offer is not as high as several months ago.
SF Peninsula – Our Burlingame manager says we seem to have picked up in activity this past week. More buyers are at our open houses and the number of sales has increased. There have also been some very attractive listings in Burlingame, as many as 13 new properties in one week. That’s something we haven’t seen in a long time. Is this a trend for the fall? Time will tell. Hillsborough currently has 44 active and 16 pending listings. This is a pretty low inventory level and is probably reflective of summer vacations wrapping up and families getting the kids ready to start school in mid- August. What happens after Labor Day with new listings will determine the fall market. Our Burlingame North manager adds that according to MLS in two popular locations, the average sales price has increased in Burlingame from $1,654,333 in 2013 to $1,818,286 in 2014Q2. The average sales price has increased in San Carlos from $1,260,076 in 2013 to $1,515,010 in 2014Q2. Average days on market have decreased in Burlingame from 25 days in 2013 to 17 days in 2014Q2 and in San Carlos from 17 days in 2013 to 12 days in 2014Q2. The Half Moon Bay market is steady. Inventory is still low. If prices are right, homes are selling quickly with multiple offers. Open houses are very active and many potential buyers are from out of town throughout Northern California, Southern California, and out of state. Our Menlo Park manager reports open houses and sales are all in slow motion compared to a few months back. Yet 75% of the deals this last week were multiples – even one over $3.5 mil. Number of overbids is also less than a few months ago too but speaks to vacation time for buyers. She expects a fairly robust fall. One agent just sold 5 homes to an Asian buyer in one week – between $1 million and $2 million. Inventory remains low in Palo Alto. Demand is high and multiple offers continue. Still almost all multiple offers in the Redwood City-San Carlos area, but the number of offers is down. Single-family homes, particularly in San Carlos, are selling well over the list price. The open houses, as few as there are, are still heavily attended. Some buyers are thinking they will “just wait it out,” but when buyers of get the home they are elated. Our Woodside-Portola Valley manager reports that there have been a couple of over $5 million sales this week that have been on the market for a while. Two big sales went to Asian buyers, which she says we’re seeing more of these days.
East Bay – The market under $1 million is very active, our Berkeley manager reports. There are 30-100 buyers through open houses every week. One property received 22 offers and went 21% over asking. Another property received 3 offers and went 22% over asking – both houses in the $750k-800k list price range. Buyers are very unpredictable and are feeling exhausted. All cash is not good enough, she says; no contingency offers are getting the house. Most Previews luxury properties are still receiving multiple offers and are selling for 10-25% over asking. In Danville area, more homes are selling with contracts contingent on the sale of another house. That’s a good trend for buyers, according to our local manager. In the Oakland-Piedmont area, the number of listings available on the broker’s tour this week is smaller than it has been the last few months, so it looks like it is slowing up in August just like it did last year. Having said that the number of buyers at open homes has not gone down. In fact the ratio of disclosure packets handed out to the number of offers received has ticked up (most likely due to the lessening number of available properties). We were seeing that about 30% of the # of listing packets out would result in offers but over the last couple of weeks it has risen to 40 – 45% ratio. Properties, with few exceptions are going a considerable amount over asking. The Lamorinda market has been steady. In the Walnut Creek area, an attractive listing that is staged and priced right may get a couple of offers. Otherwise most listings are overpriced and agents see more and more price reductions. Buyers are out there looking and not feeling that sense of urgency. Definitely feeling the summertime slump, our local manager notes.
Silicon Valley – In Cupertino, our local manager reports that things seemed a bit quieter recently, but activity has picked up again this week. The number of offers in a multiple offer situation has definitely diminished, but prices are getting bid up almost as much as ever. Townhouses in the $800K+ range are particularly hot right now. Lack of inventory continues to drive the Los Gatos area market as buyers continue to gobble up new listings. Inventory is down in the San Jose Almaden area from 2 weeks ago but up in Blossom Valley and Santa Teresa. Agents are still seeing multiple offers but mainly in Almaden and Cambrian. The local Willow Glen market is currently best described as steady. Inventory is not growing, just staying at a steady level. Sales are just steady. Most homes are staying on the market for longer periods of time. Most are not getting multiple offers and most are not getting asking price; agents are seeing slightly under asking price offers. Often agents are setting an offer review date with no offers being submitted on that date. The under-$3 million market in Saratoga is a sellers market. Over $3 million it needs to be special or perceived as a good value or it is a buyers market. Multiple offers still the norm for properties with the desirable schools. Most sellers subscribe to the marketing idea of under pricing the home and allow it to be bid up. Those who do not subscribe to this “eBay” method find their homes sitting on the market and needing to do a price reduction to garner an offer.
South County – The South County Real Estate market continues to offer potential buyers more choices than in many other areas, our local manager believes. The diversity of the types of properties available coupled with a wide spectrum of price ranges makes the South County a good place for buyers to find their perfect home. Listing inventory has grown over the last several months and between Gilroy and Morgan Hill there are over 250 homes currently listed for sale. Offerings include homes on acreage with beautiful horse facilities to moderately priced townhomes and condos. Homes in South County can certainly meet buyer demand, no matter what type of home a buyer is looking for. New developments are also adding to the mix with prices ranging from over $1,000,000 to single family homes listed for about $500,000. There is a myriad of choices, which makes this area so attractive to potential buyers.
Santa Cruz County – The luxury market in the Santa Cruz area is showing signs of being quite healthy with sales remaining steady. In the overall market, the demand is keeping pace with the supply as we have seen just a very small increase in inventory for single-family homes. Prices continue to go up at what seems to be a healthy rate, with a significant amount of ‘move up buyers’ taking advantage of a healthy market and great interest rates.
Monterey Peninsula – Agents are preparing for “Car Week” with ads and open houses for the area’s biggest week of the year, August 12-17th. The week will bring some of the wealthiest individuals in the world to this area to partake in the car events and shop for real estate while they are here. The Previews market has been a little slow as of late but it seems to be the calm before the storm. There have been reports of the international buyers looking at properties in Pebble Beach. Compared to Bay area prices, this market is still a relative bargain when it comes to an estate home in Pebble Beach or a beach cottage in Carmel. Now is the time to buy before the market really heats up with oversees money, our local manager says. The mid-level market around the $900,000-$1,500,000 million price point is getting a lot of attention with move up buyers and people new to the area. Floor calls and walk in traffic seems to be steady, in fact last Friday an agent who was on floor duty covering for somebody else received a call for an agent to come out to list their house. She happily prepared the listing docs and was at the home at 4:30 and walked out with a $3 million new listing. That’s the excitement of real estate, you never know when an opportunity will arise!