Bay Area home sales were once again slowed by a severe shortage of properties for sale. A total of 4,376 new and existing houses and condos sold in the nine-county region in February, down 1.1 percent from January and down 10.9 percent from a year ago, according to CoreLogic DataQuick, the La Jolla-based research firm.
By now, the trend of lower inventory is all too familiar to agents and homebuyers alike. Buyers are ready willing and able to purchase properties, but sellers are by and large remaining on the sidelines. The San Francisco Chronicle reported that single-family home listings in San Mateo County in February were the lowest number for that month since at least 1998, when MLSListings Inc. started keeping track. Inventory was also at a record low in Santa Clara County in February.
Columnist Kathleen Pender cited that a host of factors are conspiring to keep inventory in the Bay Area at multi-year lows, including:
- Fear of buying. Homeowners are afraid of putting their homes on the market even if they want to move because they’re afraid they won’t be able to purchase another property in the Bay Area.
- Foreclosures drying up. Foreclosure sales accounted for 52 percent of Bay Area existing home sales at the peak of the housing crisis, but those sales have since plummeted to just 4.5 percent last month, the Chronicle noted.
- More homeowners renting rather than selling. Soaring rents in San Francisco, Silicon Valley and many other parts of the Bay Area, along with low interest rates, are incenting property owners to rent out their homes rather than sell them.
- Taxes on home sales. Some homeowners have held off selling for fear that they will be hit with big capital gains tax bills. Although the federal capital gains exclusion is $500,000 per couple, in pricier markets the gains on home sales may far exceed that threshold.
- Proposition 13. The law passed in 1978 discourages homeowners from moving because they could face a higher property tax bill. If they remain in their existing home their property taxes cannot go up more than 2 percent a year plus voter-approved bond measures.
So where do we go from here? Prices continue to climb all around the Bay, and as the Chronicle points out, at some point sale prices will be high enough that even the most hesitant sellers will decide to cash in and list their property.
Having been through a number of these cycles in the Bay Area over the years, I know that the local housing market always comes back into a better equilibrium between buyers and sellers eventually. The question in my mind is not if that will happen, but when.
Below is a market-by-market report from our local San Francisco Bay Area offices:
North Bay – New inventory in all communities in all price ranges in Marin are getting multiple offers, anywhere from 3 to 10, depending on pricing and popularity of neighborhood, our Greenbrae manager reports. Many are going 20 to 30% over list price. Similarly, the Previews luxury market continues to thrive with lack of inventory. Previews prices are still getting multiple offers, as there is so little from which to choose. Listings are increasing slowly in the Novato area. Sales have picked up noticeably over past 2 weeks, according to our local manager. Open houses are busy. There are fewer multiple offers in Northern Marin. A home listed in south Novato last year for $1 million relisted this spring at just over $800K and sold for $1 million with multiple offers. Less inventory equals higher prices. Activity is increasing in the San Rafael area. Our manager says it should be a brisk spring with many agents working on new listings and writing offers. Agents are starting to see a light at the end of the inventory tunnel, says our Santa Rosa Bicentennial office manager. Sellers who are overreaching on list price are having to reduce and sellers who price at or slightly below market are rewarded with multiple offers. Our Santa Rosa Mission office manager says it’s the same story as last month – multiple offers, new comps being created by cash buyers, ultra-competitive for buyers in all price points, sellers reluctant to list their homes because they are not sure if they’ll find a replacement. In Sebastopol, almost every offer is for more than asking by 10-20%. Many are cash offers. Open houses are attracting record numbers of lookers often over 100. West Sonoma County inventory is extremely limited and the competition is palpable. The Southern Marin market has amped up with more inventory. We see multiple offers on over 50% of sales under $2 million. 40% of the transactions are cash, our Southern Marin manager reports. The Previews luxury market continues to be strong and steady in the $2-5 million range. However, agents are seeing increased activity in the $5 million plus price range.
San Francisco – Agents and buyers are very active, according to our Lombard office manager. Closed prices continue to rise, as inventory remains stubbornly low. While California looks for rain, buyers look for available inventory, our Market Street manager muses. Both are in short supply. While Spring usually brings a seasonal bump in inventory in SF, this year agents continue to see far too few homes for way too many buyers. As a result, they continue to see available listings receiving multiple offers. And within those offers there is often a surprisingly high one that exceeds everyone’s expectations. It’s a great time to be a seller.
SF Peninsula – Our Burlingame manager says inventory is opening up ever so slightly but not enough to satisfy the buyer demand that we are seeing in all Peninsula towns. $200k -$400k over bids are commonplace with no end of the escalation in sight. There are only 25 active and 9 pending properties in Hillsborough. Our Menlo Park manager reports the local market seems to be reaching some sort of equilibrium. Sellers are asking higher prices now. If the last 3 comps sold for $1.5m, they are not happy to ask $1.3m. So the auction mentality is fading. We still see multiple offers but then numbers are slowing. Open houses are not quite so jammed, agents and their clients are very tired of the multiple offer game and are now starting to resist it by not getting involved in the first place. Instead they call the listing agent the next day to see what happened and see it they can get their client in the mix if the seller did not get what he wanted in the first round. Action is pretty good in Woodside but not booming, our manager reports. There are still more buyers than sellers but not in the very high end – over $10 million. However, our office did have 3 offers on a $20 million property last week.
East Bay – Agents in Berkeley report the market is frustrating. Buyers are upset they have to bid so high to get a house. Properties that sold in the past month, close to BART, all went 30-40% over asking, our local manager says. Agents are working hard to focus on listings. No signs of slowing down. Once again multiple offers rule the day in the Oakland-Piedmont area unless it is preemptive or off market. Inventory is inching up but nowhere near what it needs to be to satisfy the multitude of buyers out there. The number of open houses is tripling from the last few weeks to this coming weekend. Lots of attendance at all open houses in all price points in all areas. The Lamorinda market has been steady. In the Pleasanton area, buyers’ biggest concern is that they can’t compete if they have a loan, our manager says. However, cash offers are approximately 15-20% of all the offers in the Tri-Valley, lower than the rest of the Bay Area. She advises buyers with loans to just write clean, ‘as-is’ offer to have a strong chance. The number of Tri-Valley homes that sold has decreased by 8% since this time last year. There just aren’t enough homes for all the motivated buyers out there. Average days on market is below 14 days for most homes that are priced at fair market value or lower.
Silicon Valley – There were 300 parties at a Santa Clara townhouse open house over the weekend, according to our Cupertino manager. People were begging the listing agent to represent them. The insanity persists, she laments. Our Los Altos manager says not enough inventory in any of the nearby cities for the depth of the many buyers wanting to live in these communities. Inventory is likely to really shrink this week as its Easter weekend, he expects. The Sunnyvale market under $2M is still hot, hot, hot with one house getting 20 offers. The Mountain View market under $3M and Los Altos market under $4m are just as hot. In Los Gatos, buyers continue to compete for properties due to the shortage of inventory. Almaden home sales in San Jose were down 5 compared to March 2014 but up 19 from February. The median sales price was up 12% from March of 2014 but only up 2.4% from last month, showing that prices are starting to flatten out. Agents are still seeing multiple offers but not as many. The Blossom Valley market has been hotter than Almaden due to the price level of homes. A total of 53 more homes sold this month compared to last month and the median sales price was up 7% from March 2014. Cambrian sales were down 4 from March 2014 and up 13 from last month. The median price from Cambrian stayed consistent between last month (up 12%) and March 2014 (up 13%), which shows that the Cambrian market is remaining steady. Willow Glen’s active listing inventory grew to a 2015 high of 54 units, but then dipped back down to low 40s. Active listing inventory is consumed within the week it hits the market for most homes. Sales activity hit a record high for the Willow Glen office for the past. Last year the hot market for Saratoga was under $3 million. This year it’s bumped up to $3.5m and below. Properties over this are also selling. Properties over $3.5 last year that couldn’t sell, came back on the market this year with a small price reduction and then sold for over list price.
South County – The South County market continues to rebound as sellers are realizing that they can obtain “top dollar” for their homes. March brought a significant increase in the number of homes listed by agents in both the Morgan Hill and Gilroy Offices. The good news for sellers is that they are obtaining offers almost as quickly as they list their homes—often significantly over their asking price. Agents are also reporting a marked increase in the number of “cash” offers accompanied by quick closes with few contingencies. The “upper-end” market (homes listed for over one million dollars) is also very strong. This week, a Morgan Hill agent sold two properties listed at $2,000,000 and $3,000,000, respectively. These transactions were all cash with a 20-day close. This increase in activity is a welcome change from very slow sales in both January and March.
Santa Cruz County – The inventory of single-family homes on the market is still down approximately 30% compared to 2014, creating a high demand and low supply marketplace. As a result of this, agents are seeing multiple offers on any property appropriately priced and in a desirable area. Mortgage rates are historically low, creating a large demand particularly in the affordable price range. The Previews market inventory is almost equal to last year at this time. There are more sales in this price range as compared to 2014, which is driving appreciation up.
Monterey Peninsula – The Monterey Peninsula market has experienced just over a 10% increase in unit sales and total dollars. The median sales price is up about 12% from the same time period last year. The Previews market is strong with several sales in the last 2 weeks in the Carmel, Pebble Beach and highway 68 corridor. In the Pacific Grove market there are only 10 properties available under $1 million and 11 over with 7 in escrow. The local weather continues to be the most desirable in the country, but agents are hoping for April showers, which should bring them May buyers.
Market Watch is a bi-weekly column by Coldwell Banker San Francisco Bay Area president Mike James. Click here to view past issues.