One of the big headwinds of the housing market nationwide has been the lack of first-time home buyers – millennials in particular. But the market got a bit of good news on that front last month as a surge in first-time buyers resulted in existing-home sales nationally rebounding strongly in September, according to the National Association of REALTORS® (NAR).
Total existing-home sales – single-family homes, townhomes, condominiums and co-ops – rose 3.2 percent to a seasonally adjusted annual rate of 5.47 million in September from 5.30 million in August. After last month’s gain, home sales are at their highest pace since June and are 0.6 percent above a year ago.
While the gains alone weren’t huge, what was interesting is that first-time buyers were primarily responsible for the increase. In fact, 34 percent of the purchases were by new buyers, the largest percentage in more than four years, according to NAR. All major regions saw an increase in closings last month, and distressed sales fell to a new low of 4 percent of the market.
The lack of inventory of homes on the market continues to be a challenge, according to Lawrence Yun, NAR chief economist.
“The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual because of the competition for the minimal amount of homes for sale,” Yun said in a news announcement.
“Most families and move-up buyers look to close before the new school year starts. Their diminishing presence from the market towards the end of summer created more opportunities for aspiring first-time homeowners to buy last month,” he added.
The median existing-home sale price nationwide for all housing types in September was $234,200, up 5.6 percent from September 2015 – the 55th consecutive month of year-over-year gains.
Total housing inventory at the end of September rose 1.5 percent to 2.04 million existing homes for sale, but is still 6.8 percent lower than a year ago and has now fallen year-over-year for 16 straight months.
“Inventory has been extremely tight all year and is unlikely to improve now that the seasonal decline in listings is about to kick in,” added Yun. “Unfortunately, there won’t be much relief from new home construction, which continues to be grossly inadequate in relation to demand.”
Below is a market-by-market report from our local Northern California offices (listed by alpha):
East Bay – With a little over two months left in 2016 the market in Berkeley and its surrounding neighborhoods continues to maintain its strength. There are 47 single-family homes listed for sale on the MLS and 53 under contract. This translates to an inventory supply .89 months. In comparison there are only eight condos or duets available for sale versus six under, an inventory supply of 1.33 months. There are only six houses for sale in Albany with eight under contract (.75 months) and 21 houses for sale in El Cerrito with 16 under contract (1.31 months). With economists noting a six-month supply as being an even marker between buyer and seller – these figures are indicative of a strong sellers’ market which is translating into a greater and greater median sale price of homes in the area. From 9/1/15 to 10/27/15 some 81 houses sold in Berkeley with a median sale price of $985,000. Conversely, the same time period this year shows us 70 houses sold with a median sale price of $1,115,500, a 12% increase. Real estate in the East Bay is maintaining both its growth and desirability. October has been surprisingly active in the San Ramon Valley, according to our Danville manager. Even with the upper end slowing down, one of our Blackhawk listings priced over $2 million went under contract. Our Oakland/Piedmont manager says open houses are still being well attended. There are fewer offer dates and most now are “offers as they come.” The last week or two there appears to be a lot of new buyers coming in to the market and listings have started to slow down with the main reason that the holidays are coming up. Agents and sellers are preparing properties for the new year already. There are still houses going considerably over asking but the number is far fewer than in the past months.
North Bay – The Previews® luxury market has slowed considerably with 54 properties available over $4 million and only 4 pending in Marin County, reports our Greenbrae manager. The properties still receiving good offers and sometimes multiple are in the under $1 million range. The lack of inventory in that range continues as we move closer to the holidays. Agents are seeing more price reductions and negotiating over inspection repairs than we have all year. The feeling is people are holding off listing their homes due to the upcoming election. Our Novato manager reports sales are steady but listing activity has slowed. Inventory is still challenging and limited. Agents saw less than a dozen new homes com on Novato tour this week. In the luxury market, one million-dollar home in Novato received six offers. According to our Santa Rosa Bicentennial office manager, there has been an uptick in activity in the last few weeks. Multiple offers on properly priced homes are on the rise again. September’s inventory was at 2.2 month’s supply, which was a 9% rise from the August levels, but still 16% below last year at this time. Total property sales are running 5.5% behind last year, but if inventory continues to rise the market may be able to close that gap. Open home reports vary anywhere from 20 to 60 visitors in a three hour period so buyers are still very active. The inventory of properties over $1,500,000 sits at 8.5 month’s supply. There has been a downward trend for the year as properties are being bought faster than they are replaced. Our Santa Rosa Mission office manager sees unique market conditions with still limited inventory, a declining number of offers and buyer price fatigue. Our Sebastopol manager says listings are down 30% from this time last year but sales are up 20%, which means inventory is slim to none. Properties are noticeably priced more aggressively than last month. Sellers are more realistic on pricing strategy. Most-asked question agents get from clients: Will the election affect the housing market? The Southern Marin market is steady with about 40% of the total inventory under contract for all of Marin and 30% under contract in Southern Marin, where the average listing is much higher. Agents are seeing fewer multiple offers and overbids. The luxury market has slowed down as expected, however sales are still occurring. Some 12% of the inventory over $3 million is under contract and almost 20% of the inventory over $2 million is under contract.
Placer County – There are a few more homes on the market in the Auburn area and sales are about the same, according to our Auburn manager. Agents are still having issues with appraisals either taking longer or coming in under purchase price per contract. They’re also watching the timeframes more closely and giving “Notices to Perform” due to the number of multiple and back-up offers. As an office, some of the Auburn agents are now door knocking and this seems to be paying off with leads. Also the open houses are busy and many of those coming into the open houses are from the Bay Area. Agents are also seeing a nice number of leads coming in from the Customer Engagement Team. Little change in the luxury segment of the market, except the Previews® homes in this area are selling at considerably less than original list price. Our Roseville-Granite Bay manager says the month of October has seen a decline in new listings, while sales have remained steady. Pricing has also remained constant. The average sales price has been relatively even compared to last month and October of last year. There is no indication that the decline in new listings is trending in that direction as it is too early to tell. There are plenty of market forces to point to: election, slowing into the holiday stretch, economic concerns, possibility of rising rates etc., but overall none of those potential influences has been a positive or negative driver in the market over the past two months. There is some push back on price from the buyers and resistance to lowering prices from the sellers, which points to a potential market shift on the horizon.
Sacramento County – Our Sacramento Fair Oaks manager reports there still is a lack of inventory in the $400,000 and below price points with many multiple offers. $750,000 and above continues to be soft. The Sacramento Metro manager agrees, noting that the primary market has continued to be busy.
San Francisco – Change is in the air and it may be the uncertainty created by the general election environment, our Lakeside manager says. The market is proceeding but with caution. Our Lombard manager notes the number of condo and home sales doubled last week, bringing the month’s supply back to normal - a much higher inventory than a year ago. Again, homes continue selling over asking while at least half of condos are trading at or under asking. Broker and open traffic remain robust, but the number of eventual offers are significantly reduced YOY. Proper pricing is more critical than ever.
San Francisco Peninsula – Some buyers in the Half Moon Bay area express the uncertainty about the state of economy, housing market, and the interest rate depending on the election result, our local manager notes. Some are hesitant to make the decision to purchase at this time and are willing to wait until election is over. There is still a high demand for the oceanfront/ocean view Previews® luxury properties on the coast. One of the oceanfront properties listed on the coast for $6.875 million sold in 18 days. Other ocean view previews properties are selling with multiple offers once the original list price is reduced. Inventory is extremely low in Palo Alto and neighboring towns. Buyers are indicating more interest after the election. Our Redwood City office had a single-family, 5 bedroom, 3 bath home in San Carlos that came on the market at $2,050,000. It received 11 offers (10 written and one oral) and sold for approximately $650,000 over list. Most of our properties are still getting multiple offers but usually only two or three. Open house attendance seems to have slowed down but agents are finding that if the property remains on the market for a couple of weeks there are “serious” buyers that are attending the open houses.
Santa Cruz County – The supply of homes on the market in the Santa Cruz area has steadily decreased for about a month now. Our local manager is seeing a supply level around 350 active single-family residences in the county. Demand is fairly strong with well-priced properties in sought after communities still receiving multiple offers. Pricing requires careful consideration in the mid-level price ranges for a property to receive an offer or offers within 8-14 days. The supply of condos and townhomes has actually increased slightly for a month, bringing opportunity for entry level buyers. Luxury home sales in Santa Cruz have softened a little bit in the last 30 days or so. Supply is in a relatively average range for this time of year but demand has adjusted from its peak earlier this year. Buyers have become more discretionary and it has become critical that Previews® luxury properties are priced appropriately to create the perception of a property being a good value. Our offices are about to close several transactions including one beach house over $5 million as well as a handful of other Previews® transactions at this time.
Silicon Valley – Our Cupertino manager says the local market is definitely slowing down, which is to be expected for this time of year. Only the most desirable properties are getting lots of multiple offers. There are definitely some excellent buyer opportunities for those limited down payment buyers who might not have had a chance previously. In Los Altos, our local manager sees continued signs of seasonal adjustments with low inventory. This lack of inventory has had a direct impact on those homes which had been “lingering” on the market. Agents have seen an increase in price reductions on homes resulting in a higher than average DOMs. The luxury market (homes priced over $3.5M) is steady but flat – with days on market and inventory going higher – and frenzy bidding or multiple offers being the exception as opposed to the rule. Inventory in the Los Gatos area continues to be anemic as buyers compete to find homes to purchase. There have been some recent strong sales in the Previews® luxury market. Our San Jose Almaden manager says he’s still seeing multiple offers on most deals but with contingencies. There was only one deal that had 0 contingencies. Some were even sale of property contingencies. The market is slowing down as far as listings coming to the market (holiday season). The Almaden market had an average sales price of $1,400,000, up 7% from last month and 9% from last year in October. Blossom Valley had an average sales price of $723,000, up 2.5% from last month and 7.5% from October 2015. Cambrian’s average sales price was $949,000, down 4% from last month and flat for the previous year in October. Santa Teresa has an average sales price of $726,000, down 3% from both last month and October 2015. Our San Jose Main office manager says overall inventory in the county continues to decline as the “Holiday Season” quickly approaches and sellers wait to list until 2017 or take their homes off the market. Despite less inventory, prices are remaining stable as fewer buyers are making offers and fewer bidding wars are seen. Interest rates remain low and buyers still out number sellers, however they are cautious and tend to wait a few days before making an offer. Smart sellers who are pricing their homes at or even 3-5% below market value are getting all the traffic, however need to be a little more “buyer friendly.” Contingent offers are more accepted today as sellers have fewer offers to sort through and can’t be as demanding as they were 6-8 months ago. Willow Glen active listing inventory has continued to contract the past few weeks, our local manager notes. Inventory has dipped into the low 70’s from a mid-80’s count just a few weeks ago. Open house traffic has picked up a bit. Agents are reporting buyers are out there, but just being more selective. With inventory expected to decrease as we move closer into the holiday season it might be competitive again for buyers looking to pull the trigger. This past week our office posted more buyer side transactions than in the previous weeks. Active listings in Saratoga are up by 6 properties from last year at this time, 62 active today vs. 56 active a year ago. The Previews® luxury market in Saratoga is staying steady. Our office had four new construction properties on the market priced from $2.65-$3.55 million. Three are in contract and the fourth is about to be in contract. All have gone over the list price, with two being all cash offers. All of them have been on the market for less than 14 days.
South County – The South County real estate market is well on its way to becoming balanced and somewhat normal. Gone are the frustrating days (for buyers) of very low inventory and very high demand. Qualified buyers now have many more options in almost every price range, reports our local manager. This “balancing” of the market is also requiring sellers to list their homes at more realistic prices so that they can even garner a reasonable offer. At least in South County, multiple (over asking) offers are a rarity—and most sales are coming in at or below asking price.
Tahoe & Truckee – The first two weeks of October was another encouraging two-week period of sales in the Tahoe/Truckee area with 74 properties sold, which is the third highest two-week period this year. Of the 74 properties sold this period, 15 were sold at a price above $1 million with one sale above $11 million. Luxury sales are up 67% year over year.
Market Watch is a bi-weekly column by Coldwell Banker San Francisco Bay Area and Sacramento-Tahoe president Mike James exploring the local Northern California housing markets. Click here to view past issues.