Home prices all across the country are bouncing back sharply from their recessionary lows. In fact, the latest S&P/Case-Shiller report found prices in major cities were up nearly 11 percent in March from the same period in 2012, the biggest year-over-year increase since April 2006.
NPR’s All Things Considered, in its report on the rise in home prices, said that while this is obviously good news for homeowners, there’s still a long way to get back to the market’s peak prices of the mid-2000s. But as it turns out, a number of Bay Area cities have already bounced all the way back and are setting new price highs.
The strongest price gains have come in San Francisco and the Peninsula, where a severe shortage of listings and a great number of ardent buyers have pushed prices past previous records. In addition to San Francisco, Palo Alto, Cupertino, Menlo Park and Burlingame have all surpassed their 2007 highs.
The biggest increase was in Palo Alto, where the median sale price is up an astounding 35 percent from their previous peak in 2007 peak to stand at $1.9 million year to date. The average sale price is also up 30 percent and now exceeds $2.1 million.
Other cities saw sizeable jumps as well:
- Cupertino’s median price is up 19.2 percent from its previous high to $1,252,000;
- Burlingame’s median price is up 16 percent to $1,466,808 and its average is up nearly 12 percent;
- San Francisco’s median is up 6.1 percent to $849,000 and its average is up 10.2 percent; and
- Menlo Park’s median is up 7 percent to $1,337,500 and its average price is up 5.6 percent.
I’ve included some of the charts below.
Nationally, some of the biggest gains in prices over the past year, according to S&P/Case-Shiller, were in the hardest hit cities like Phoenix (up 22.5 percent) and Las Vegas (up 20.6 percent). But San Francisco also saw a 22.2 percent spike over the past year, according to the report.
As NPR noted, this latest news follows many other signs in recent months that the housing sector is indeed on the rise again. And once again, it seems the Bay Area is leading the way on this strong housing recovery.
This week saw some upward movement in interest rates amidst concerns that the Federal Reserve will taper its purchases of mortgage-backed securities and Treasuries in the coming months. Homebuyer’s purchasing power is already challenged by this high-demand low-inventory market in the Bay Area. Continued increase in interest rates could make things that much more difficult for Buyers to find the right home in the neighborhood of their choice at a price they can afford.
Below is a market-by-market report from our local offices:
North Bay – No changes in the Marin market, according to our Central and Southern Marin manager. Buyers are still stacked up four (or more) deep. Still not as much inventory as we’d like. Cautioning sellers NOT to sell off market – they could be leaving money on the table as the market is still hot with multiple offers. More inventory over the past few weeks, but still being absorbed quickly by Marin buyers. There is no price limit to buyer demand (multi-million dollar homes are selling as fast as the under $500,000 range – if any of those exist anymore). There is also a seemingly endless supply of “all-cash” buyers who are keeping the market hopping. Investors are outbidding first-time buyers, but those first-time buyers are getting sick of that and are stepping up big time. The Sebastopol market is red hot. It still is in need of inventory and motivated sellers. Many well-priced properties are selling 10-20% above asking while overpriced listings continue to languish. Some agents feel the market may be a little “frothy” due to the lack of inventory and the competition for what little inventory there is. Cash remains king in all price ranges.
San Francisco – Our Lakeside office manager says agents are beginning to have a few more listings that over time may reduce the pressure on buyers a little. As of now, we’re still seeing mostly multiple offers and often with remarkable and surprising seller-pleasing results. As we’ve grown accustomed to, all the transactions that got ratified by our Market Street office during the past couple of weeks did so against multiple offers. However, while one listing received 17 offers, the vast majority only received only 2 or 3. Looking down the road, we anticipate the listing inventory to decrease as SF hits its usual summer slowdown. Open houses are extremely busy, our Sunset office manager notes. One new listing had over 100 groups in 2 hours on their first open house. It’s the same story with every agent – we need more inventory. Multiple offers are still the norm in all price ranges.
SF Peninsula — Peninsula wide, the inventory problem continues with a waiting pool of buyers snapping up every listing within days of coming on the market. One Burlingame property was won in a multiple offer with an all cash offer and closing in 8 days. List price was $1,895,000, sale price 2,240,000. And, by the way, it was a complete “fixer-upper!” Although multiple offers are the norm, the number of offers seems generally to be smaller than last month. This may be due to the usual slowdown over Memorial Day and Graduation time, also an up-tick in interest rates. There are currently 63 active and 20 pending sales in Hillsborough. This reflects a slight increase in inventory while at the same time the pending sales are increasing as well. Sales and listings are brisk on the coast with more substantial overbids on the listings due to the Peninsula buyers coming to the coast as they see less competition in the home buying process. The “core” markets in the most desirable parts of Menlo Park are still hot. Multiple offers still abound and competition is ferocious for the heart of Menlo Park. Teardowns are $2.2 mil for an 11,000 square foot lot. Menlo Park has been the least international area in the entire Peninsula and is now seeing foreign money come in. First time opens in these core areas are still seeing 50 to 75 groups. As we are beginning to see some rate creep, our local manager suspects buyers will stay in the market for the summer months. The Palo Alto market is slowing down as far as the number of offers on a property, but prices continue to increase. Attendance at open houses in the San Carlos-Redwood City area is incredible. There is an amazing buyer demand in all price ranges. One San Carlos property listed at $700,000 that was a true “fixer” had 11 offers and went considerably over asking. Another Redwood City property listed at $579,000 but in very good condition had 12 offers and also went considerably over asking. Sales remain strong in Woodside and Portola Valley up to about the $3.5 million mark. Agents typically work a broader area to keep the sales coming – the Redwood City and San Carlos markets continue to be very strong (especially San Carlos) due to the schools. Prices have taken a quantum leap there – literally, the $700k to $800k house of eight months ago is now $1.1 to $1.2 mil in the prime areas.
East Bay – CAR’s chief economist, Leslie Appleton-Young, confirmed in a speech in Berkeley this week what we all already know: The economy is improving, consumer confidence is up, REO’s and Short Sales are declining, there is not enough inventory (down 40-70% in some areas), multiple offers abound, 35-70% of buyers are bringing in all cash and inventory remains at 1-2 months’ supply. In spite of the rising interest rates over the last 30+ days that are sending some buyers to the sidelines, open house activity in the Oakland-Piedmont area is still strong with more than 100 people attending one Sunday open house. All but two ratified deals were multiple offers ranging from three in the Previews price point to a single-family fixer with 48 offers. The Lamorinda market is still very active but seems to have slowed ever so slightly. Buyers may be taking a little longer to submit offers as interest rates have inched up a bit. Multiple offers continue, as does strong attendance at open homes.
Silicon Valley – Our Cupertino manager says the local market maybe is not quite as wild as the past few weeks, but still crazy. Renters who are having trouble finding rentals in Los Gatos are now pursuing their options to purchase homes in the local area. Not much change in the San Jose Almaden area: inventory is increasing, albeit at a slow pace. In the Willow Glen area, it has been kind of a paradox couple of weeks. Agents have seen inventory shrink in all the local markets in and around the Willow Glen area, however the buyer side sales are up. We are seeing the playing field slightly balance for all those pent-up buyers. They are backing off on the skyrocketing over bids and some properties are only receiving one or two offers at or near asking price. There was a slight lull the last two weeks with families preparing for the end of school / graduation season. The Saratoga market is gaining momentum, our local manager reports.
South County – The seasonal slowdown for the summer has started in South Santa Clara County, as well as San Benito County. It is finally a great time for buyers to have the ability to shop for a house and while multiple offers are still prevalent with every new listing, it has not been the feeding frenzy. The average list to sale price ratio for the last year has been 104%. The luxury market is moving as well with a new pending sale in Gilroy over $5M. There are no active REO’s in all of San Benito County and short sales are few as well. All in all the market seems to be stabilizing. The Morgan Hill office toured seven new listings (taken within the last few days). The South County Broker tour (Morgan Hill, Gilroy and San Martin) had 18 new listings. As the inventory is clearly increasing, multiple offers are still common. These multiple offers also include no contingency for appraisal and many are written as cash offers. This multiple offer phenomenon, however, seems to be limited to properties with list prices under $1 million. Homes listed above a million are still moving slowly.
Santa Cruz County – The inventory levels remain low as we move into the summer months. Year over year, the total number of listings is down approximately 22% with 624 homes currently listed. This is the fewest number of listings on the market since 2005. This is impacting the total number of sales with fewer homes to choose from there are fewer sales occurring. In May there were 143 closed SFR home sales in the County. The unsold inventory index is about 4.4 months and continues to be way below normal. All of this is driving prices higher starting at the lower end and moving upward. The median price for May was $640,000, which represents a higher price point than we have seen for quite some time. Short sales and Bank Owned properties represent less than 20% of the local market, 26% of the sales are under $500,000 and 15% are over $1,000,000.