Bay Area real estate bucks national housing market

Bay Area continues to run counter to national housing market

Those of us that have lived in the Bay Area for years know that this region has always been a little different than the rest of the country. And most of us are glad that’s so! The state of the housing market is one more example of the Bay Area running counter to national norms.

Anyone who watches the network news or reads a national publication can’t help but come away feeling that every housing market in the country is suffering equally, thanks to a glut of inventory and a lack of qualified homebuyers. And while that’s true in some outlying areas of the Bay, it’s generally incorrect in most of our region.

To the contrary, we continue to see growing demand by very serious buyers looking to purchase homes. And while some are scouring the landscape for bargain basement distressed properties, many are seeking good, well-maintained homes at fair prices. And there continues to be a very strong demand for properties in the middle and upper ends of the market, including million-dollar homes.

The real problem we’re facing here in the Bay Area isn’t a lack of buyers; it’s a lack of sellers. Many homeowners who would like to sell their homes have been sitting on the sidelines, still believing that the market is in the depths of a recession. They still fear that they will have to take drastic price cuts in order to sell.

I’m afraid that the news hasn’t gotten out to them that things have changed for the better over the past year or two. Sellers no longer must sell their properties at fire-sale prices to get buyers attention. In fact, fairly priced homes that are well maintained and in good neighborhoods are not only being sold fairly quickly these days, but in some cases with multiple offers.

What makes the Bay Area different from the rest of the country, which is still battling a very sluggish housing market? It starts with our strong economy.

As a result of vibrant high-tech, biotech and social media industries from Silicon Valley up the Peninsula to San Francisco, the Bay Area is home to some of the best-paid knowledge workers in the country. These are well-educated engineers, programmers, financiers, and other highly educated professionals with money to invest and a desire to own a home. Add to that the supporting cast of back-office and headquarters jobs that have been created by thriving tech companies over the years and it’s easy to understand why demand for the Bay Area’s limited housing has never been stronger.

Local Market Monitor, a national firm that analyzes housing markets for the banking industry, recently issued a three-year forecast of the best and worst housing markets in the country out of the 100 largest markets that it covers. Ranking second in the nation – the San Jose-Sunnyvale-Santa Clara housing market.

A story on the study in MarketWatch noted that home prices in Silicon Valley “are close to a bottom…and there’s already a good recovery underway in the job market, driven by high-tech manufacturing and technology services. Income levels are high, and population growth is slightly above average.”

During the housing boom (between 2002 and 2007), home prices rose 43% followed by a 21% drop, the report showed. “The San Jose recovery is clearly connected to the high-tech sector...and during the recession, 30,000 tech jobs were lost, but 16,000 have been regained since 2009. These are high-paying jobs that affect the housing market,” Local Market Monitor added.

While no one’s predicting an immediate return to the red-hot housing market of years ago, clearly things are looking up for much of the Bay Area.

For sellers who have been holding off listing their properties, I would strongly urge them to reconsider. Right now the math is in a reluctant seller’s favor. Interest rates remain near historic lows, the economy is gradually improving, and the Bay Area has more than its share of anxious buyers trying to purchase a home – but not enough homes to meet that demand.

The sum of these conditions mean that the balance between supply and demand is actually tipping in many homeowners’ favor, as hard as that is to believe after what we went through in recent years. This could very well be a surprisingly good time to sell a home, before everyone else catches on to the real story of the Bay Area housing market.

Hello Everyone,

Something is afoot! Or is it? Hard to tell anymore. Here's the evidence. You can decide for yourselves!

Tons of open escrows. Tons of closed escrows too. Low inventory of homes for sale. Much lower than last November or November of 2009.

City-by-City Report, out this week shows percentage in contract for 8 of 13 towns and cities covered increased, 2 remained virtually unchanged, and 3 decreased. Novato on top again, extending its lead, with 51.98% of listed units in contract on December 1. San Anselmo close behind at 50%, and Greenbrae third at 45%. Belvedere holding down the floor, with only 1 of 27 listed homes in contract, or 3.7%. Buyers with cash and a desire to live in Belvedere might do well to grab a local REALTOR and go shopping.

Single Family Residences (SFR)

SFR's overall at 36% in contract, up from 33% at last report. Homes under $1million up again, at 44.7% in contract compared to 42.4% last time. Homes in the $1million-$2million range also showed gains, going from 22% to 26.3% in contract over the two week period. $2million-$3million dollar range still struggling, and down over 2 points at 17.8% from last report's 20%. Still an improvement from several weeks ago when it was in the 12-16% range. Homes in the $3million and up range at 8.22% in contract, up modestly from 5.06% at last report. Units sold, YTD, at 1752, up 5.1% from this time last year (1667), but average SFR sold price at $997,404 compared to $1,039,445 a year ago. About half of that estimated to be price attrition, with the other half attributable to market mix. Average Days on Market for sold listings at 114, only slightly more than the year-ago figure of 111. Market Action Report, also out this week shows SFR Months Supply of Inventory in the County at 3.5 months- a very low number that compares to a bit over 6 months in each of the last two years. Inventory of homes for sale at 521 on 11.30.11 (vs. over 900 in November of 2010 per CB MarketQuest) also the lowest in over 24 months covered by the charts (inventory numbers on attached reports don't always directly compare to each other due to different methods of classifying homes in varying stages of the sales process).

Condominiums

Condo's overall at 49.66% in contract as of November 29, with condo's priced at under $1million hitting 50.53%. Year-to-date, 509 Condo units had sold as of Nov 29, compared to 437 a year ago, representing a 16.5% increase. Average sold price of $375,462 compares to the 2010 YTD figure of $400,231, while average DOM for sold listings was at 146 on Nov 29, compared to 136 at the same time last year. MSI for condo's even lower than for SFR's, at a 3.1 months. Compares to 7.1 last November, and 6.1 in Nov of 2009. (Please see notes above, under Single Family Residences, as they also apply to condo statistics)

Global economic turmoil continues to keep buyers on edge. Dramatic stock market fluctuations follow daily news of Euro crisis. One day's euphoria and market run-up quickly displaced by dysphoric programmed selling a day or so later. Fortunately the effect on our real estate market is largely peripheral. Regular folks are buying homes to live in and are getting great deals. A lot of people seem to be tired of living in the shadow of what might happen to the economy and are getting on with their lives. Quality homes placed on the market at reasonable prices are selling quickly and not infrequently with multiple offers. Want to know what your home is worth? Call a local REALTOR who knows your market.

More next time.

Sebastian