The Bay Area’s luxury housing market, which has been soaring for the past year or more, is finally showing some signs of leveling off as summer rolls on. While there are no indications that the high-end market is reversing course, even a move back to a more normal balanced market could provide welcome relief for frustrated buyers in this very competitive marketplace.
San Francisco’s luxury home prices were flat in the second quarter of 2016 while a continuing shortage of homes listed for sale led to a sales decline compared to a year ago, according to a recent market report by Coldwell Banker Residential Brokerage. The report is based on Multiple Listing Service data of all homes that sold for more than $2 million during the last quarter in San Francisco.
The median sale price in the city was $2.8 million, up from $2.7 million in the first quarter of this year but exactly the same as a year ago. Sales of luxury homes fell once again in the latest quarter compared to the same period last year. There were 211 transactions in the second quarter of 2016, down 14.9 percent from the 248 sales a year ago.
Other recent Coldwell Banker Residential Brokerage luxury market reports showed similar stories elsewhere in the Bay Area:
- East Bay luxury sales and prices (over $1.5 million) were both relatively flat in June from year-ago levels. A total of 182 luxury homes changed hands, down 1.6 percent from June 2015. The median sale price was up 1.6 percent from a year ago, reaching $1,778,000. June’s median sale price was down fractionally from May, when it stood at $1.78 million.
- Silicon Valley’s luxury housing market (over $2 million) saw home sales off slightly and the median sale price down fractionally compared to the same month a year ago. A total of 158 luxury properties changed hands in June, down 4.8 percent from June 2015. June’s sales total was also off from May, when it stood at 173 units. The median sale price dipped less than 1 percent from the same month last year to $2,597,500.
- Marin County was the exception in June. There were 92 luxury sales (over $1.5 million), up 15 percent from the 80 transactions in June 2015. Meanwhile, the median sale price dipped to $1,957,500, a 6.6 percent decline from a year ago. Last month’s median price was also down from May’s $2.3 million price.
Reports from our offices show a little more inventory coming on the market and homes taking a while longer to sell, especially if they aren’t in move-in condition, in the best locations, or priced appropriately. Buyers are becoming more selective, and properties that sell with a large number of multiple offers is the exception instead of the rule these days.
But make no mistake: The Bay Area’s luxury housing market – like the overall market – remains quite strong and healthy. And in fact, it is still a seller’s market in many communities. But more recently the pendulum has started swinging back towards a more balanced market between buyers and sellers.
We’ll see if this trends continues in the weeks and months ahead. But if it does, it’s not bad news at all. A more balanced housing market would be much healthier and sustainable for the market over the long run. And that can only be good for buyers and sellers.
Below is a market-by-market report from our local offices:
North Bay – Our Greenbrae manager says statistics show there are more listings versus same month a year ago with fewer sales. However, our office had 38 new open sales the past two weeks in what is traditionally a seasonable slower time for sales activity. Well priced homes in good areas are still receiving multiple offers, just not quite as many as earlier this year. Obvious signs of slowing down as higher-end luxury properties are on the market far longer than $1.5 million and below. That said, agents are often finding the sellers of these properties are the least open to negotiating and are very set on price. Our Santa Rosa manager reports the late summer slow-down is in effect. This often happens as the County Fair approaches and last chance vacations are taken before school starts. July property sales were down almost 23% from July of 2015 and year-to-date sales are down over 8% from the same period last year. July median price was up almost 4% over July of last year while inventory dropped over 25% from July of 2015. The Previews market remains steady with a little over 10 months of inventory. Median price in July was up 5.4% from July of 2015. Our Southern Marin manager reports the general market is selling slower. But accurately priced, well located and turnkey properties are selling fast and often with multiple offers. He expects many new listings after Labor Day. The Previews luxury market has leveled off with increased inventory and a slower pace of sales. In Marin, 11 out of 91 properties listed above $3 Million are under contract or 12%.
San Francisco – Traffic and interest remain high, but the number of offers are quite reduced, our Lombard office manager reports. Single family homes under $2m are still closing over asking, usually with 2-5 offers. Over half of condo sales now are at or under asking. Lots of agents are away. Already there’s a sense that there will be a listing surge post-Labor Day. Our Market Street office manager says San Francisco continues its summer doldrums with fewer listings and sales. Still, savvy buyers are still making deals happen. For instance, a couple of properties ratified offers with buyers after they’d been temporarily withdrawn from the market (the happy seller didn’t have to re-market, and the happy buyer didn’t have to compete). The rebalancing of the market is resulting in some properties that sit, and others needing to make price corrections. Even so, there remains those exceptional properties that are well-priced and well-presented that continue to receive multiple offers.
SF Peninsula – After a sluggish first half of the month sales have increased, according to our Burlingame manager. Menlo Park area open house activity is spotty. The well located and well-priced homes are still very active. Both stagers and inspectors are backed up with jobs for August for listings in September. The Palo Alto area market is shifting, says our local manager. It could be seasonal and elections could play into it. The number of offers are down, buyers are backing out before submitting offers, and they do not want to compete with over bids. According to our Redwood City manager, this is a very slow time for the market. Many people, agents and clients are on vacation. Not as much activity at open houses with the exception of one of our listings in Daly City that had at least 100+ through on the weekend. There still is a lack of inventory. Our San Mateo office reports a spike of orders over the past two weeks in the Previews luxury market. Woodside and Portola Valley are very quiet. Open houses are slow and clients and agents still out of town.
East Bay – The Berkeley office has seen a number of listings added to its inventory in the past few weeks. As of today, there are only 40 houses available for sale while 56 are under contract. This incredibly low inventory supply (.71 months) continues to fuel the price increases in the area. Our Castro Valley manager says prices are softening. Market down almost 8% over this time last year. Sellers are not happy, adding that they are in the first phase of grief – denial. Our Oakland/Piedmont office manager reports open houses are still filled with buyers anywhere from 40+ to over 100 in a day. It is more the rule to get 2 – 4 offers and have the home go over asking, but there are anomalies like a 2-BR home in the Bella Vista neighborhood of Oakland that garnered 17 offers. Inventory has been rising and buyers are jumping out of the market, but there are always more to replace them that are looking to the East Bay for a housing alternative to San Francisco and the Peninsula. The luxury market has slowed. The homes are still selling but the marketing time has increased. Our Pleasanton manager says the constrained inventory trend continues in Alameda County with the number of single family home sales in July down 25.2% from July 2015. The average sales price is up 7.2% at $898,094 from July 2015. Dublin sales are down 37.1% but prices are up 9.2% from July 2015. Buyers find new construction as a viable option. Pleasanton and Livermore show sales down slightly. Prices decreased 2.4% for Pleasanton to $1,161,287 but are up 10.2% for Livermore at $859,649. There is a lot of agent activity in the market as Sellers begin to prepare their home for market. We may see an early up-tick in listing inventory, earlier than the usual post-Labor Day increase.
Silicon Valley – Open houses are more sparsely attended than before, reports our Cupertino manager. Contingent offers even have a chance. The market has definitely shifted in favor of the buyers. Our Los Altos manager says there are signs of seasonal adjustments with an increase in inventory as the summer vacation season comes to a close and school reopens next week. He is anticipating a spike in new inventory coming on the market and will have a direct impact on those homes that have been “lingering” on the market. He suspects to see additional price reductions on homes with higher than average DOMs. He still categorizes the market as robust and is seeing strong activity on properties in move in condition and priced to sell, resulting in multiple offers that typically achieve a sale price that is over asking sale. He expects any increase of home listings will be absorbed quickly as our market is still strong. The luxury market over $3.5 million is steady but flat. There continues to be high demand for properties in Los Gatos under $2 million. The market over $2 million is softening and agents are even starting to see some price reductions in the over $2 million market. Our San Jose Almaden manager says it’s more of the same with inventory increasing and less units being sold compared to the same time last year. We’re still seeing multiple offers but not as many offers per listing and prices coming in closer to list price than way over list. Available inventory for Santa Clara County is at the same number as September of 2014. Our San Jose Main office manager notes that the market is stabilizing as both sales and new listings are on a little slower pace. Sellers must be cautious when pricing homes and not price over market. Days on market is starting to creep up as some sellers priced their homes too high and buyers are not interested. We are seeing more homes withdrawing from the market. With interest rates still at record lows, buyers are taking advantage of the homes priced right. As the summer ends and families sneak in the last of summer vacations combined with school starting in the next few weeks the market activity could begin to slow down for the next 3-6 weeks. Willow Glen active listing inventory has been on the rise the last two weeks and is near 100 active units, another high water mark for the year. The market has picked up some steam with busy open house traffic with lots of new inventory for buyers to look through. Homes well priced are selling quickly typically within the first week on being on the market. After the first week of open house offers are being reviewed with multiple offers on most homes. The pre-emptive offer is back as aggressive agents try to get an offer in front of a seller prior to the review date or open house weekend. No dog days of summer slowdown is in sight for the month of August, our local manager says.
Monterey Peninsula – July office sales reflected a 12% increase in dollar sales along with an 18% increase in average sale price but a 9% decrease in unit sales. That seems to be a reflection of the local market; buyers are holding back on jumping into the market, but are paying a premium for prime location and condition. Sellers are still hesitant to list for fear of not finding their replacement property or the empty nesters downsizing now that the kids are out of the house. The local fire that started in rural Big Sur has now grown to over 45,000 acres with over 50 homes destroyed, including one of our listings. There is a moratorium on new insurance policies in the 93923 zip code until the fire is contained. The moratorium could have an effect on sales if there is no homeowner insurance being issued. “Car Week” is just around the corner, and agents look forward to our usual influx of car enthusiast.
Market Watch is a bi-weekly column by Coldwell Banker San Francisco Bay Area president Mike James. Click here to view past issues.