November 9, 2013
by Rick Turley
President, Coldwell Banker, San Francisco Bay Area
Economists Calling For Continued Improvement in Housing Market in 2014
By most measures, 2013 was a banner year for the Bay Area housing market. Sales continued to rebound, especially in the upper end of the market. The median sale price overall climbed 15-25 percent from a year ago, depending on the city. In many communities, there weren't nearly enough good listings to go around, often resulting in multiple offers – sometimes a dozen or more – and bidding over the asking price.
So what do we do for an encore? According to the California Association of Realtors in its new 2014 housing market forecast, we're likely to see continued improvement next year – albeit not at the frothy levels we witnessed in 2013. The association is calling for a 3.2 percent sales gain statewide next year and a 6 percent boost in the median sale price.
“We’ve seen a marked improvement in housing market conditions in a year with the distressed market shrinking from one in three sales a year ago to less than one in five in recent months, thanks primarily to sharp gains in home prices,” said CAR. Vice President and Chief Economist Leslie Appleton-Young.
CAR economists are predicting that inventory levels will rise in the coming year. They say that steadily improving home prices will mean more homeowners who previously were "underwater" in their mortgage will now be in a position to sell their property, thus increasing the inventory of listings.
This would be welcome news for potential homebuyers who all too often left frustrated in 2013 by losing out in multiple offer situations. As inventory levels rise and the pendulum swings back to a more balanced market between buyers and sellers, buyers who have been on the sidelines may finally be rewarded for their patience.
"As the economy enters the fourth year of a modest recovery, we expect to see a strong demand for homeownership, as buyers who may have been competing with investors and facing an extreme shortage of available housing return from the sidelines,” CAR President Don Faught said.
As much as sellers enjoyed the soaring prices and multiple offers of 2013, we simply can't sustain those heady conditions for long if we hope to maintain a healthy housing market over the long run. A more balanced market in 2014 would make for a Happy New Year for both buyers and sellers!
Speaking of celebrations, this week we celebrated a very special addition to our Coldwell Banker Residential Brokerage family: The sales associates, managers and staff from 10 Frank Howard Allen offices in the North Bay have joined our team and we couldn't be more excited. Frank Howard Allen has been one of the leading brokerages in the North Bay for many years with a long, proud history and a tradition of excellent service to clients and to the community. The sales team is simply outstanding – true professionals in every sense of the word. By bringing these two incredible teams together- we have an unmatched combination of outstanding professional agents and unparalleled resources and networks to best serve our Buyers and Sellers. Here's to a bright future together!
Below is a market-by-market report from our local offices:
North Bay –Despite a seasonal slowdown, activity in southern and central Marin has remained strong. Open houses were well attended in October and the beginning of November. There are definitely buyers out there, but they will not buy just anything. Our agents are advising their sellers to be as true to market value as possible as those over-priced listings end up getting far less than they could have in the long run. Mill Valley showed some market resilience with strong buyer demand resulting in more multiple offer situations. Corte Madera, larkspur, Greenbrae and san Rafael are all holding steady with new open escrows. We do caution buyers and sellers to be prepared for a more stringent lending environment and allow for a little more time in their financing contingencies as the slightest hiccups can result in delays and stressful deals. Still some buyers want to be aggressive and make their offers shine, so they are setting standard contingency removal dates and hoping for the best.
Sonoma County Inventory levels have continued to decrease thus supporting a further increase in the median sales price from the prior year of 20%. The Median sale price for properties sold above $1 million increased 16% over the same time period. The market showed new signs of life after the uncertainties we experienced in early October due to the government shut down. The Santa Rosa office had an increase in dollar volume of properties going under contract of approx. 25 % from October 2012. The average sales price of properties going under contract increased approximately 50% over the same time period. In addition, Foreclosed properties sold in Sonoma County fell below 10% for the first time in at least 5 years. It seems the inventory “clean-up” necessary due to the financial meltdown is close to being complete. This bodes well for sellers as their homes will not be competing with the generally lower priced inventory owned by the banks.
Demand for homes for sale continues in Petaluma and out paces the amount of properties available. We are still seeing multiple offers. Open homes well attended with many buyers from out of the area. Out of state and International buyers are more present in our marketplace. We had five “walk-in” Buyers this week. Sonoma County continues to be an internationally recognized destination for wine, and now with the new Casino just opening, even more people around the Bay Area will be exposed to the beauty of Sonoma County living.
The local market has been slow and steady, our Sebastopol office reports. There still are more buyers for Previews Properties and not enough sellers. There has been an uptick in second home buyers many of whom are starting their search now knowing they may not find what they are looking for until after the new year. The extreme lack of inventory is putting upward pressure on prices resulting in many, if not most, homes selling at or above asking price. Many sellers are not looking at offers until a certain date in the future in anticipation of getting multiple offers.
San Francisco –Buyers are remaining energetic and determined in the face of multiple offers on more than half the listings, according to our Lakeside office manager. Sellers are working hard to extract every last dime from the sale of their homes. Pricing is key. One home came on the market at a good value, received only one offer (over the asking) but not high enough for the Seller to accept. They then had a price reduction to a great value, received multiple offers and sold for more than the original offer. Our Market Street manager says the general feeling among the agents is that things are slowing down a bit as we head toward the holiday season. Even so, every property that ratified this period was part of a multiple offer situation (from 2 to 7 offers). While the frenzy has subsided a bit, prices are holding steady. Our offices in Pacific Heights and the Marina are seeing steady sales levels, cautioning that sound pricing is key to get good results quickly. Multiple offers are still occurring, but as usual, the higher end seeing fewer of them. There are still some amazing cash deals coming together in the luxury market over $5 million.
SF Peninsula–There are fewer properties coming to the market in the upper end as people begin to plan for the Holiday season, according to our Burlingame manager. Every listing that came on the market in Burlingame this week was very beautiful, staged to perfection and priced to sell. There are still multiple offers on many properties. This is reflective of the continuing tight inventory on the Peninsula. Our Menlo Park managers reports the local market is as hot as ever – skimpy inventory and aggressive buyers. Companies holding their IPOs in the U.S. this year have posted an average 30% gain in share price, according to Dealogic. Between the IPOs, Chinese buyers moving money out of their country and investing here, and very confident builders buying up any land they can find, it is a land rush, our manager says. The holiday season seems to have started early in the Palo Alto market area this year. There has been extremely low inventory while demand is strong. Due to lack of inventory in the Redwood City-San Carlos area, when a Previews Property comes on the market it sells quickly, usually with multiple offers. A property listed on a very desirable street in Belmont had over 150 people through on the weekend. It's in need of updating but expected to receive several offers due to the location. Desirable properties are selling well over the list price. A few of our buyers have been priced out of the market but most of them are hanging in there. Our San Mateo manager says falling inventory is having an effect on sales. Buyers are still active, but not quite as rapid as they have been. There have been a number of high-end homes for sale actively or “under the radar," our Woodside manager reports. Big sales in Atherton are taking center stage.
East Bay –Our Berkeley managers says most everyone noticed a slight slowdown in September and then increased activity in October. We’ll see what November brings, especially before the holidays and before the rains finally arrive. Agents there are still receiving 2-5 offers on properties that have found the right price level. Surprisingly, the Albany market has slowed a bit. Our Castro Valley manager notes that the local market seems calm and somewhat normal. Local inventory has dropped by 24% month over month, our Fremont manager reports, and agents are still seeing multiple offers on all prices ranges in the Tri-City area. In the Pleasanton-Livermore area, homes in certain neighborhoods and price points are getting multiple offers with single-family homes getting more activity.
Silicon Valley –In the Los Gatos area, buyer competition remains heavy in anticipation of being home for the holidays. Our San Jose-Almaden manager says sales are steady although buyers are not getting into contract as quickly as pre-October. Meanwhile, the Willow Glen manager reports there has been a seasonal decline in the number of new listings coming to the market. However, agents continue to get quality listings from their inventory into contract. This shows a continued demand from the buyer side and that buyers are still actively pursuing a purchase. Open house traffic has been steady for all our listings on the market. Our Saratoga office had a couple of sales north of $2 million this week. Interesting fact though: offers were made only after the list prices were reduced. Seems there are numerous buyers out there waiting and watching. Once they felt the home was a “value” they made offers, and multiple offers at that.
South County –The market in South County is showing early signs of a “seasonal adjustment.” Both listings and sales are down considerably from the beginning of the year. Though agents are reporting attendance at their open houses remains constant, it is evident that buyers are not making quick purchase decisions. As interest rates are once again more favorable, those buyers who are in contract on entry-level homes continue to favor FHA financing. At the higher-end market, properties are closing with cash buyers. So the dichotomy remains—purchases are being made with minimum down payments or are closing with all cash. The traditional purchase with a 20% down payment seems to be the rarity.
Monterey Peninsula –The last two weeks has brought a great amount of new listings and closings. Notable is the $6,995,000 Pebble Beach listing with wide-open ocean views. Another new listing, a $9,500,000 ocean front property in the Carmel Highlands, is sure to make an out of area buyer happy for a new residence. A Pebble Beach ocean front lot went into escrow for an undisclosed purchase price. An agent that has been working on and off with a buyer for three years has just closed escrow on a $2.2 million Carmel purchase just in time for their anniversary. There have been multiple sales in the $2 million plus range within the last 2 weeks. The under $1 million price point is holding its own, but still very competitive with multiple offers and buyers. This first-time homebuyer category and the trade up buyer category continue to be a challenge in this market with inventory and competing with cash buyers.