After a year that saw severe shortages of homes for sale and spiraling prices in many areas, California’s housing market should experience increased inventory, moderating prices and a modest rise in home sales in 2015, according to a new report by the California Association of REALTORS® (CAR).
With more available homes for sale, the state’s housing market will see fewer investors and a return to “traditional home buyers” as home sales rise modestly and prices flatten out in 2015, the industry organization said in its report, which was released this week.
CAR is calling for a 5.8 percent rise in sales next year to 402,500 units, up from the projected 2014 sales figure of 380,500 homes. Sales in 2014 are expected to be down 8.2 percent from the 414,300 existing, single-family homes sold in 2013, due largely to inventory shortages and tight credit standards.
“Stringent underwriting guidelines and double-digit home price increases over the past two years have significantly impacted housing affordability in California, forcing some buyers to delay their home purchase,” said CAR President Kevin Brown. “However, next year, home price gains will slow, allowing would-be buyers who have been saving for a down payment to be in a better financial position to make a home purchase.”
CAR economists are forecasting that the California median home price will increase 5.2 percent to $478,700 in 2015, following a projected 11.8 percent increase in 2014 to $455,000. If that holds true it will be the slowest rate of price appreciation in four years, the organization said.
Although the Fed will likely end its quantitative easing program by the end of this year, “it has had minimal impact on interest rates, which should only inch up slightly and remain low throughout 2015,” CAR Chief Economist Leslie Appleton-Young. “This should help moderate the decline in housing affordability we saw occur over the past two years.”
But CAR stressed that California will continue to see a “bifurcated market,” with the San Francisco Bay Area outperforming other regions, thanks to a more vigorous job market and tighter housing supply.
Below is a market-by-market report from our local offices:
North Bay – Our Greenbrae manager says there has not been much change since the last report. Opens and closed sales are similar to the two prior weeks. We continue to see multiple offers, including 8 offers on a condo in Greenbrae (3 being all cash and substantially over the list price.) After a brisk August and September, both listings and sales are slowing in the Novato area as is typical for the fourth quarter/year end. Novato still has reasonable inventory and agents are doing a lot of open houses. Our local manager says the market is experiencing more price reductions and fewer multiple offers. Activity in Petaluma continues to be robust. Although multiple offers are still the norm they are not in the double digits. Open houses are well attended. One priced at $1,400,000 had 60 plus attendees and garnered multiple offers. Our San Rafael manager reports activity has noticeably slowed. Still multiple offers but not as active these last two weeks. Open house activity remains strong however. Our Santa Rosa Mission office manager says there are still some multiple offers on the best properties in high demand neighborhoods and on well-priced inventory, or first time buyer (entry level). In Southern Marin, unit sales are off by 10% to 20%. However, due to the luxury, the dollar volume is off only 5% to 10% and our average and median prices are rising. The Previews high-end market continues to sell quickly for the most desirable properties – well located, turnkey, well priced. For September there were 30 plus sales over $3 million and CB Southern Marin was involved in 12 of them.
San Francisco – Our San Francisco Lakeside office manager sees steady sales along with slightly more inventory. The committed buyer with a skillful agent continues to win the day even over other well-qualified buyers. According to our Lombard office manager, the single-family and condo inventory has leveled off and dipped a little after an encouraging post Labor Day surge. A slower week has just been followed by a frenzied one with 10 and 15 offers for most deals. However agents are still counseling sellers to be happy with their listing price. Our Sunset office manager notes that the majority of the ratified offers were in multiple offer situations but the number of offers has decreased. Most are just getting 2 to 4 offers. Open houses are still very well attended with 1st open house on new listing getting 100+ groups.
SF Peninsula – The fall market is in full swing in Burlingame with some very attractive homes coming on the market in the last 2 weeks, according to our local manager. East side Burlingame has now topped the $2 million point with a recent sale. Open homes are well attended and buyers are looking to be in their new home for Thanksgiving. There are 19 active and 24 pending sales in Burlingame. Millbrae has 22 active and 14 pending sales. These cities both have more inventory than we have seen active at one time all year. There are currently 40 active and 7 pending sales in Hillsborough. This reflects the lowest inventory we have seen in some time. It’s also interesting to note that there are only 5 active listings under $3 million and 5 active listings under $4 million. Hillsborough continues to offer beautiful homes on minimum half-acre lots with quality schools and the ideal mid location between San Francisco and Silicon Valley. Our Burlingame North office manager notes that inventory is getting even tighter than last year at this time. The number of single family, condo and townhouse listings in the MLS was relatively consistent in the first half of 2014 compared to the first half of 2013. But listings in the second half of this year so far are down roughly 9%. There are still multiple offers with 3-4 offers being a common amount. On rare occasions there can be a much higher number of offers. Conversely, in some markets at certain price points, there are offer dates set and then no offers appear. Apparently those situations are due to over-zealous pricing and, in a measurable amount, result in price reductions. Inventory is still low, but steady, according to our Half Moon Bay manager. There are still multiple offers for the lower priced homes. Market seemed to be slowing down. The best-located properties seem to have an endless supply of buyers – locals and foreign – according to our Menlo Park manager. It’s a brisk market not only in Palo Alto but mid-Peninsula, our Palo Alto manager reports. Agents are getting an unexpected number of multiple offers and higher sales prices in areas where it is not the norm. In Redwood City-San Carlos area, there still are multiple offers but fewer of them and the actual sale price is much closer to the list price. It was a quiet week in the country, our Woodside Portola Valley manager says, and open houses were slower too.
East Bay – The market is starting to slow, observes our Berkeley manager. Buyer fatigue may be the reason. Open houses are still well attended, between 50-175 groups, but on offer date only 1-3 offers received. However, prices still rising. A buyer offered on a duplex in Oakland listed at $1.395m. Offered at $1.65m and was not close to high offer. Sold for $1.9m. The market in the San Ramon Valley has definitely slowed down, our Danville manager reports. Inventory has decreased steadily over the past month and so have new pending sales. Agents still see multiple offers on “pretty houses on pretty streets” but we are also seeing more price reductions and withdrawn/cancelled listings. Buyers are not being as aggressive in making offers that are over asking, according to our Walnut Creek office manager. They are definitely realizing that sellers don’t have as much of an advantage these days. Sellers are willing to make more concessions because they are really motivated to sell.
Silicon Valley – Our Cupertino manager says there are fewer offers per property, but things are still getting nicely bid up. Open houses are very busy. Inventory is down 33% year over year in Los Gatos. This time last year there were 103 homes available for sale compared to 77 now. We are seeing a decrease in listings in the Almaden area of San Jose, while Blossom Valley and Santa Teresa are holding steady, increasing slightly, according to our Almaden office manager. There aren’t as many multiple offers and homes are staying on the market a little longer than back in the spring.
South County – In conversations with local title officers, lenders and agents, our local manager says it is clear that the South County market has slowed considerably from just several months ago. Though the San Jose market remains robust, South County properties seem to be lingering on the market for a longer time. Even well priced, beautifully presented homes are not garnering offers as quickly as they did at the beginning of the year. South County has always been a good alternative for those buyers priced out of the market in Silicon Valley. It is evident, though, that many buyers are hesitant to take on the longer commute from South Valley and so they continue to make offers on higher priced homes to the North.
Santa Cruz County – The condo market is hot right now in the Santa Cruz area as the single family residential market has leveled off. The Previews luxury market is stable and we continue to see beach properties going pending. Negotiations are a little more involved but most transactions seem to close.
Monterey Peninsula – The local market finished the month of September with a sizable increase in total sales dollars but a decline in unit sales. Our local manager has noticed a slowing trend over all but with the recent sale of two $10 million dollar plus properties in the market the smart money is still buying. There has been a 26% increase in our median sale price our listing, much higher than the local trend of 15% September vs. August 2014. The fall is some of the best weather, and hopefully that will continue spurring purchases and new clients to the area. Inventory is still very light with about a five-month supply within the county and even less in some markets. Agents are pushing for new listings to get them through the 4th quarter and into the New Year.